<PAGE> 1
As Filed with the Securities and Exchange Commission on October 27, 1998
Registration Nos. 333-59745 and 811-08895
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. 1 /X/
--
Post-Effective Amendment No. / /
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /X/
ING FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
18 Campus Blvd., Suite 200
Newtown Square, PA 19073
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 221-3780
Steven R. Howard, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable after
the effective date of the Registration Statement.
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to / / One (date) pursuant to
paragraph (b) paragraph (b)
/ / 60 days after filing pursuant to / / One (date) pursuant to
paragraph (a)(1) paragraph (a)(1)
/ / 75 days after filing pursuant to / / On (date) pursuant to
paragraph (a)(2) paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par
value $0.001.
---------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
Total Pages: ____
Exhibit Index: ____
<PAGE> 3
ING FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
N-1A Item No. Location
- ------------- --------
Part A Prospectus Caption
- ------ ------------------
Item 1. Cover Page .............................. Cover Page
Item 2. Synopsis ................................ Fund Expenses: Fee Table
Item 3. Condensed Financial
Information ............................. Not Applicable
Item 4. General Description of
Registrant .............................. The Funds; The Investment
Policies and Practices of
the Funds; Description of
Securities and Investment
Practices
Item 5. Management of the Fund .................. Management of the Funds;
Purchase of Fund Shares;
Other Information
Item 5A. Management's Discussion of Fund
Performance ............................. Not Applicable
Item 6. Capital Stock and Other
Securities .............................. Dividends, Distributions
and Tax Matters;
Other Information
Item 7. Purchase of Securities
Being Offered ........................... Fund Share Valuation;
Pricing of Fund Shares;
Purchase of Fund Shares;
Exchange of Fund Shares
Item 8. Redemption or Repurchase ................ Redemption of Fund Shares
Item 9. Legal Proceedings ....................... Not Applicable
<PAGE> 4
2
Part B Statement of Additional
- ------ Information Caption
-----------------------
Item 10. Cover Page...................... Cover Page
Item 11. Table of Contents............... Table of Contents
Item 12. General Information
and History.................... Not Applicable
Item 13. Investment Objective and
Policies....................... Investment Policies;
Investment Restrictions
Item 14. Management of the Registrant.... Management
Item 15. Control Persons and
Principal Holders of
Securities..................... Management
Item 16. Investment Advisory and
Other Services................. Management; Other
Information: Custodian,
Transfer Agent and Dividend
Disbursing Agent; Independent
Accountants
Item 17. Brokerage Allocation............ Portfolio Transactions
Item 18. Capital Stock and Other
Securities..................... Other Information:
Capitalization; Voting Rights
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.................. Purchase of Fund Shares
(Part A); Additional Purchase
and Redemption Information;
Redemption of Fund Shares
(Part A); Determination of Net
Asset Value
Item 20. Tax Status...................... Dividends, Distributions, and
Tax Matters (Part A); Taxation
(Part B)
Item 21. Underwriters.................... Management
Item 22. Calculation of Performance
Data........................... Other Information: Yield and
Performance Information
<PAGE> 5
3
Item 23. Financial Statements ............................. No Annual Report is
available since the
Funds have not
commenced
operations. Initial
Balance Sheet is
provided as an
attachment
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE> 6
DRAFT
ING FUNDS TRUST
-----------
PROSPECTUS
OCTOBER 30, 1998
-----------
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
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ING FUNDS TRUST
ING Fund Services Co., LLC
P.O. Box 9690
Providence, RI 02940-9690
General & Account Information:
1-877-INFO-ING
ING MUTUAL FUNDS MANAGEMENT CO. LLC--Investment Manager
("IMFC" or the "Manager")
ING FUNDS DISTRIBUTOR, INC.--Distributor and Principal Underwriter
("IFD" or the "Distributor")
This prospectus describes thirteen funds (each, a "Fund" or,
collectively, the "Funds"), managed by ING Mutual Funds Management Co. LLC, a
Delaware limited liability company. The Manager has delegated certain of its
investment advisory activities to Sub-Advisers described herein (the
"Sub-Advisers"). The Manager and its Sub-Advisers are wholly-owned subsidiaries
of ING Group N.V. ("ING Group"). The Funds and their investment objectives are:
Each of the ING Large Cap Growth Fund, ING Mid Cap Growth Fund, ING
Small Cap Growth Fund, ING International Equity Fund, ING Emerging Markets
Equity Fund, ING European Equity Fund, ING Focus Fund, ING Global Brand Names
Fund and ING Global Information Technology Fund seeks to provide investors with
long-term capital appreciation.
Each of the ING Growth and Income Fund, the ING Balanced Fund and
the ING Global Real Estate Fund seeks to provide investors with high total
return.
The ING Tax Efficient Equity Fund seeks to provide taxable investors
with a high total return on an after-tax basis.
There can be no assurance that the Funds' investment objectives will
be achieved.
Shares of the Funds are sold to the public by the Distributor as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
The Funds are separate investment funds of ING Funds Trust (the "Trust"), a
Delaware business trust and registered management investment company.
Investments in shares of the Funds involve risks, including loss of principal.
The Trust also offers the following money market ("Money Market Funds") and
fixed income funds ("Fixed Income Funds") under separate prospectuses:
<PAGE> 8
Money Market Funds
ING U.S. Treasury Money Market Fund
ING Money Market Fund
Fixed Income Funds
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Bond Fund
ING Mortgage Income Fund
ING Federal Tax-Exempt Bond Fund
Each Fund offers four different classes of shares--Class A shares,
Class B shares, Class C shares and Class X shares. The different classes of
shares represent investments in the same portfolio of securities but are subject
to different sales charges and expenses. These alternatives permit investors to
choose the most beneficial method of purchasing shares given the amount of the
purchase, the length of time the investor expects to hold shares, and other
circumstances. When you purchase shares of the Funds, be sure to specify the
class of shares of the Fund(s) you wish to purchase. If you do not choose, your
investment will be made in the Class A shares. See "Purchase of Fund Shares."
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY AND MAY INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL. THE NET ASSET VALUE OF THE FUNDS WILL FLUCTUATE FROM TIME TO TIME.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Funds and should be read and
retained for information about each Fund.
A Statement of Additional Information (the "SAI"), dated October 30,
1998, containing additional and more detailed information about the Funds, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
telephone number printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 30, 1998
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
HIGHLIGHTS...................................................................... 2
FUND EXPENSES................................................................... 8
THE FUNDS....................................................................... 17
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.............................. 17
MANAGEMENT OF THE FUNDS......................................................... 21
FUND SHARE VALUATION............................................................ 33
PRICING OF FUND SHARES.......................................................... 33
MINIMUM PURCHASE REQUIREMENTS................................................... 34
PURCHASE OF FUND SHARES......................................................... 34
PURCHASE PLANS.................................................................. 35
INDIVIDUAL RETIREMENT ACCOUNTS.................................................. 43
OPTIONAL BENEFITS............................................................... 43
REDEMPTION OF FUND SHARES....................................................... 43
EXCHANGE OF FUND SHARES......................................................... 47
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................ 49
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.............................. 52
RISKS OF INVESTING IN THE FUNDS................................................. 63
OTHER INFORMATION............................................................... 68
</TABLE>
i
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HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes thirteen funds managed by IMFC. Each Fund has
a distinct investment objective and policies. There can be no assurance that
any Fund will achieve its investment objective.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
The Funds:
ING Mid Cap Growth Fund. The ING Mid Cap Growth Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of large companies (i.e., companies with market capitalizations of
more than $1 billion at the time of acquisition).
ING Growth and Income Fund. The ING Growth and Income Fund seeks to
provide investors with total return. Under normal market conditions, the Fund
will invest at least 65% of its total assets in equity securities. As a general
matter, the Fund expects these investments to earn income.
ING Mid Cap Growth Fund. The ING Mid Cap Growth Fund seeks
to provide investors with long-term capital appreciation. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of medium-sized companies (i.e., companies with market
capitalizations falling within the Russell Mid Cap Index at the time of
acquisition).
ING Small Cap Growth Fund. The ING Small Cap Growth Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the equity
securities of smaller companies (i.e., companies with market capitalizations
falling within the Russell 2500 Index at the time of acquisition).
ING Balanced Fund. The ING Balanced Fund seeks to provide investors
with high total return. The Fund primarily invests in a combination of mid
and large capitalization equity securities, intermediate-maturity fixed income
securities and money market instruments. The average maturity of the fixed
income securities in the Fund will, under normal circumstances, be approximately
five years, although this will vary with changing market conditions.
ING Global Brand Names Fund. The ING Global Brand Names Fund is a
non-diversified fund that seeks to provide investors with long-term capital
appreciation. Under normal conditions, the Fund will invest at least 65% of its
total assets in the common stocks of companies located throughout the world,
which, in the Sub-Advisers opinion, have well recognized franchises, an
international presence and derive most of their revenues from sales of consumer
goods. The companies in which the Fund invests either have leading market
positions or, in the Sub- Advisers opinion have the potential to achieve
leading market positions in the foreseeable future.
<PAGE> 11
ING International Equity Fund. The ING International Equity Fund seeks
to provide investors with long-term capital appreciation. Under normal
circumstances, the Fund will invest at least 65% of its total assets in
equity securities of issuers organized or having a majority of their assets in
or deriving a majority of their operating income in at least seven different
countries, outside of the United States.
ING Emerging Markets Equity Fund. The ING Emerging Markets Equity Fund
seeks to provide investors with long-term capital appreciation. Under normal
market conditions, the Fund will invest at least 65% of its total assets in the
equity securities of emerging market issuers. Under normal conditions, the Fund
will maintain investments in at least seven emerging market countries and
will not invest more than 25% of its total assets in any one emerging market
country. For these purposes, the Fund defines an emerging market country as any
country the economy and market of which the World Bank or the United Nations
considers to be emerging or developing or any country determined by the
Sub-Adviser to have emerging economics or developing markets. The Fund considers
emerging market issuers to be companies the securities of which are
principally traded in the capital markets of emerging market countries that
derive at least 50% of their total revenue from either goods produced or
services rendered in emerging market countries, regardless of where the
securities of such companies are principally traded; or that are organized under
the laws of and have a principal office in an emerging market country.
ING European Equity Fund. The ING European Equity Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the Fund will invest at least 65% of its total assets in the equity securities
of European issuers. The Funds Sub-Adviser considers European issuers to be
companies the securities of which are principally traded in the European capital
markets; that derive at least 50% of their total revenue from either goods
produced or services rendered in countries located in Europe, regardless of
where the securities of such companies are principally traded; or that are
organized under the laws of and have a principal office in a European country.
ING Tax Efficient Equity Fund. The ING Tax Efficient Equity Fund seeks
to provide taxable investors with total return on an after-tax basis. In
attempting to achieve its investment objective, the Fund under normal
circumstances will invest at least 80% of its net assets in a widely diversified
portfolio of equity securities and instruments whose returns depend upon stock
market prices and will manage its portfolio in a manner that will defer the
realization of accrued capital gains and minimize dividend income. The Fund may
invest up to 10% of its total assets in non-U.S. securities.
ING Focus Fund. The ING Focus Fund is a non-diversified fund that
seeks long-term capital appreciation. Under normal conditions, the Fund will
invest in a non-diversified portfolio of 30 to 40 equity securities. The
Sub-Adviser seeks dominant growth companies capitalizing on significant
fundamental change and aims to purchase them at the "right price". The
Sub-Adviser generates themes and ideas by looking for early signs of change in
industries or companies, monitoring industries that drive change in other
industries and following proven management teams with a talent for value
creation. After confirming the investment thesis through analysis, the
Sub-Adviser identifies a field of potential winners and manages risk by
selecting only those candidates that it deems to have the highest probability of
success with moderate risk.
ING Global Information Technology Fund. The ING Global Information
Technology Fund seeks to provide investors with long-term capital appreciation.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the common stocks of technology companies. For these purposes, the
Fund
3
<PAGE> 12
defines technology companies as those companies with primary business operations
in either the information technology, hardware and software industries, or
related consulting and services industries.
ING Global Real Estate Fund. The ING Global Real Estate Fund is a
non-diversified Fund that seeks to provide investors with high total return.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of issuers located throughout the world that are
principally engaged in the real estate industry.
All Funds
All Funds may also use various investment strategies and techniques
when a Sub-Adviser determines that such use is appropriate in an effort to meet
the Fund's objective. For additional information concerning the investment
policies, practices and risk consideration of the Funds, see "The Investment
Policies and Practices of the Funds" and "Risks of Investing in the Funds" in
this Prospectus.
RISKS OF INVESTING IN THE FUNDS
General. The price per share of each Fund will fluctuate with changes
in value of the investments held by such Fund. Additionally, there can be no
assurance that the Funds will achieve their investment objectives or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of investment products.
Equity Securities. Investments in equity securities in general are
subject to market risks that may cause their prices to fluctuate over time. The
value of convertible equity securities is also affected by prevailing interest
rates, the credit quality of the issuer and any call provisions.
Investments in mid- and small-capitalization companies involve greater
risk than is customarily associated with larger, more established companies due
to the greater business risks of small size, limited markets and financial
resources, narrow product lines and the frequent lack of depth of management.
The securities of smaller companies are often traded over-the-counter and may
not be traded in volumes typical on a national securities exchange.
Consequently, the securities of smaller companies may have limited market
stability and may be subject to more abrupt or erratic market movements than
securities of larger, more established growth companies or the market averages
in general.
Investment in issuers that are principally engaged in real estate,
including Real Estate Investment Trusts ("REITs"), may subject a Fund to risks
similar to those associated with the direct ownership of real estate (in
addition to securities market risks). These companies are sensitive to factors
such as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, supply and demand, and the management
skill and creditworthiness of the issuer. REITs may also be affected by tax and
regulatory requirements.
Fixed Income Securities. The market value of a Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Securities with longer
maturities are subject to greater fluctuations in value than securities with
shorter maturities.
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Risks of Techniques Involving Leverage. Utilization of leveraging
involves special risks and may involve speculative investment techniques.
Certain Funds may borrow for other than temporary or emergency purposes, lend
their securities, enter reverse repurchase agreements, and purchase securities
on a when issued or forward commitment basis and engage in dollar roll
transactions. Each of these transactions involve the use of "leverage" when cash
made available to the Fund through the investment technique is used to make
additional portfolio investments.
The risks of leverage include a higher volatility of the net asset
value of a Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. The risks of leverage may be considered speculative.
Foreign Securities. Investments in securities of issuers in any foreign
country involve special risk considerations not typically associated with
investing in U.S. companies. These risks are often heightened for investments in
developing or emerging markets.
Non-diversified investment companies. The ING Global Brand Names Fund,
the ING Focus Fund and the ING Global Real Estate Fund are classified as
non-diversified investment companies under the Investment Company Act of 1940
(the "1940 Act"), which means that each Fund is not limited by the 1940 Act in
the proportion of its assets that it may invest in the obligations of a single
issuer. The investment of a large percentage of a Fund's assets in the
securities of a small number of issuers may cause that Fund's share price to
fluctuate more than that of a diversified investment company.
Concentration. The ING Global Information Technology Fund and ING
Global Real Estate Fund "concentrate" (for purposes of the 1940 Act) their
assets in securities related to a particular sector or industry. As a result,
each Fund may be subject to greater market fluctuation than a fund which has
securities representing a broader range of investment alternatives.
For additional information concerning the risks of investing in the
Funds, see "Risks of Investing in the Funds" in this Prospectus.
MANAGEMENT OF THE FUNDS
As Manager of the Funds, IMFC has overall responsibility, subject to
the supervision of the Board of Trustees, for engaging the Sub-Advisers and
for monitoring and evaluating the management of the assets of each Fund by the
Sub- Adviser. IMFC also provides certain administrative services necessary for
the Funds' operations. Pursuant to a Management Agreement, the Trust
currently pays the Manager for its services a monthly fee at an annual rate. See
"Fund Expenses--Fee Table" and "Management of the Trust--The Manager" in this
Prospectus. All of the Sub-Advisers are indirect subsidiaries of ING Group and
are affiliates of each other, the Manager and Distributor.
Baring Asset Management, Inc. ("BAM") serves as Sub-Adviser to the ING
Mid Cap Growth Fund and ING Small Cap Growth Fund and as co-Subadviser to ING
International Equity Fund and ING Emerging Markets Equity Fund. Furman Selz
Capital Management LLC ("FSCM") serves as Sub-Adviser to the ING Mid Cap Growth
Fund, ING Balanced Fund and ING Focus Fund. ING Investment Management LLC,
("IIM") serves as co-Sub-Adviser to ING Growth and Income Fund. ING Investment
5
<PAGE> 14
Management Advisors B.V. ("IIMA") serves as Sub-Adviser to the ING European
Equity Fund, ING Global Brand Names Fund, ING Global Information Technology Fund
and ING Global Real Estate Fund and serves as co-Sub-Adviser to the ING Growth
and Income Fund. Delta Asset Management ("DELTA"), a division of FSCM, serves as
Sub-Adviser to the ING Tax Efficient Equity Fund. Baring International
Investment Limited ("BIIL") and Baring International Investment (Far East)
Limited ("BIFL") serve along with BAM as co-Sub-Advisers to the ING
International Equity Fund and the ING Emerging Markets Equity Fund. BAM, BIIL,
BIFL, FSCM, DELTA, IIMA and IIM may be referred to herein individually as a
"Sub-Adviser" and collectively as the "Sub-Advisers." For their services, the
Sub-Advisers receive a fee based on the respective Fund's average day net
assets. See "Management of the Funds--The Sub-Advisers" in this Prospectus.
The Sub-Advisers have full investment discretion and make all
determinations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities consistent with the investment
objectives, policies, and restrictions for such Fund. The Sub-Advisers are
compensated by the Manager (and not the Trust).
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated
for certain of its distribution-related expenses. ING Fund Services LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Funds
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting and other services. ING Fund Services
has hired DST Systems, Inc. ("DST") to act as the Funds' transfer agent and fund
accounting agent.
CLASSES OF SHARES
The Funds offer investors a choice among multiple classes of shares
with different sales charges and expenses. In selecting which class of shares
to purchase, you should consider, among other things, the length of time you
expect to hold your investment, the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted above, whether you qualify for any reduction or waiver of any applicable
sales charge (e.g., if you are exempt from the sales charge, you must invest in
Class A shares), the various exchange privileges among the different classes of
shares and the fact that Class B and X shares automatically convert to Class A
shares after eight years.
Class A Shares. Generally, an investor who purchases Class A shares
pays a 5.75% sales charge at the time of purchase. As a result, Class A shares
are not subject to any charges when they are redeemed (except for sales at net
asset value in excess of $1 million which may be subject to a contingent
deferred sales charge). The initial sales charge may be reduced or waived for
certain purchases. Class A shares are also subject to an annual Rule 12b-1 fee
of up to 0.50% of average daily net assets attributable to Class A shares. This
fee is lower than the other classes having Rule 12b-1 fees and therefore Class A
shares have lower expenses and pay higher dividends. See "Purchase of Fund
Shares--Class A Shares."
Class B Shares. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge ("CDSC") of 5.00%
if redeemed within one year of purchase, with declining charges for redemptions
thereafter up to six years after purchase. Class B shares are also subject to a
higher annual Rule 12b-1 fee than Class A shares--up to 0.75% of the Fund's
average daily net assets attributable to Class B shares. However, after eight
years, Class B shares automatically will be converted to Class A shares at no
charge to the investor, resulting in a lower Rule 12b-1 fee thereafter. Class B
shares provide the benefit of
6
<PAGE> 15
putting all dollars to work from the time of investment, but will have a higher
expense ratio and pay lower dividends than Class A shares due to the higher Rule
12b-1 fee. See "Purchase of Fund Shares--Class B and X Shares."
Class C Shares. Class C shares are sold without an initial sales
charge and are subject to a higher annual Rule 12b-1 fee than the Class A
shares--up to 0.75% of the Fund's average daily net assets attributable to
Class C shares. Class C shares provide the benefit of putting all dollars to
work from the time of investment, but will have a higher expense ratio and pay
lower dividends than Class A shares due to the higher Rule 12b-1 fee. While
Class C shares do not convert to Class A shares, they are subject to a lower
CDSC (1.00%) and do not have to be held for as long a time (one year) as Class B
or X shares to avoid paying a CDSC. See "Purchase of Fund Shares--Class C
Shares."
Class X Shares. Class X shares are sold without an initial sales
charge. In addition, investors purchasing Class X shares will receive, as a
bonus, additional shares having a value equal to 2.50% of the amount invested
("Bonus Shares"). The Distributor has undertaken to pay for Bonus Shares as part
of its services to the Funds. Shares purchased by the reinvestment of dividends
or capital gains distributions are not eligible for Bonus Shares. Class X shares
are subject to a contingent deferred sales charge of 5.00% if redeemed within
one year, with declining charges for redemptions thereafter up to six years
after purchase. Class X shares are also subject to a higher annual Rule 12b-1
fee than Class A shares--0.75% of the Fund's average daily net assets
attributable to Class X shares. However, after eight years, Class X shares
automatically will be converted to Class A shares at no charge to the investor,
resulting in a lower Rule 12b-1 fee thereafter. Class X shares provide the
benefit of putting all dollars to work from the time of investment, but will
have a higher expense ratio and pay lower dividends than Class A shares due to
the higher Rule 12b-1 fee. See "Purchase of Fund Shares--Class B and X
Shares." Class X shares are currently only offered to certain Qualified
purchasers (including, but not limited to, IRAs, Roth IRAs, Education IRAs, SEP
IRAs, SIMPLE IRAs and 403(b)(7) plans).
Each Class of shares is also subject to shareholder servicing fees
of up to 0.25% of average daily net assets and sub-transfer agency fees of up to
0.25% of average daily net assets attributable to such shares. See "Management
of the Fund--Shareholder Servicing Plan and Sub-Transfer Agency Plan."
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<PAGE> 16
FUND EXPENSES
The purpose of the following table is to assist the shareholder in
understanding the various costs and expenses that an investor in each Fund will
bear, either directly or indirectly. Each Fund's costs and expenses are based
upon estimates of the Fund's operating expenses for the Fund's first fiscal
year:
FEE TABLE
<TABLE>
<CAPTION>
ING Large Cap Growth Fund ING Growth & Income Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred Sales NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING EXPENSES
(after waivers)*** 1.29% 1.94% 1.94% 1.94% 1.29% 1.94% 1.94% 1.94%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 0.75% for each Fund. 12b-1 Fees (before waivers) for Class A
shares would be 0.50% for each Fund. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) for each Fund would
be 2.25% for Class A shares and 2.50% for Class B, C and X shares
respectively.
8
<PAGE> 17
9
<PAGE> 18
FEE TABLE
<TABLE>
<CAPTION>
ING Mid Cap Growth Fund ING Small Cap Growth Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Sales Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES
(after waivers)*** 1.35% 2.00% 2.00% 2.00% 1.35% 2.00% 2.00% 2.00%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2%, and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 1.00% for each Fund. 12b-1 Fees (before waivers) for Class A
shares would be 0.50% for each Fund. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) for each Fund would
be 2.50% for Class A shares and 2.75% for Class B, C and X shares.
10
<PAGE> 19
FEE TABLE
<TABLE>
<CAPTION>
ING Balanced Fund ING Global Brand Names Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Sales Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING
EXPENSE
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.20% 0.20% 0.20% 0.20% 0.25% 0.25% 0.25% 0.25%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.74% 0.74% 0.74% 0.74% 0.93% 0.93% 0.93% 0.93%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES
(after waivers)*** 1.29% 1.94% 1.94% 1.94% 1.53% 2.18% 2.18% 2.18%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2%, and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
for ING Balanced Fund and ING Global Brand Names Fund would be 0.80%
and 1.00% respectively. 12b-1 Fees (before waivers) for Class A shares
would be 0.50% for each Fund. The fee waivers reflected in the table
are voluntary and may be modified or terminated at any time without the
Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
11
<PAGE> 20
*** Total Portfolio Operating Expenses (before waivers) would be 2.29% for
Class A shares and 2.54% for Class B, C and X shares of the ING
Balanced Fund and 2.68% for Class A shares and 2.93% for Class B, C and
X shares of the ING Global Brand Names Fund.
FEE TABLE
<TABLE>
<CAPTION>
ING International Equity Fund ING Emerging Markets Equity Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Sales Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.93% 0.93% 0.93% 0.93% 1.04% 1.04% 1.04% 1.04%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES
(after waivers)*** 1.59% 2.24% 2.24% 2.24% 1.70% 2.35% 2.35% 2.35%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 1.25% for each Fund. 12b-1 Fees (before waivers) for Class A
shares would be 0.50% for each Fund. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
12
<PAGE> 21
*** Total Portfolio Operating Expenses (before waivers) would be 2.93% for
Class A shares and 3.18% for Class B, C and X shares of the ING
International Equity Fund and 3.04% for Class A shares and 3.29% for
Class B, C and X shares of the ING Emerging Markets Equity Fund.
13
<PAGE> 22
FEE TABLE
<TABLE>
<CAPTION>
ING European Equity Fund ING Tax Efficient Equity Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Sales Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING
EXPENSE
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.29% 0.29% 0.29% 0.29% 0.20% 0.20% 0.20% 0.20%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.98% 0.98% 0.98% 0.98% 0.75% 0.75% 0.75% 0.75%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES
(after waivers)*** 1.61% 2.26% 2.26% 2.26% 1.30% 1.95% 1.95% 1.95%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
for the ING European Equity Fund and the ING Tax Efficient Equity Fund
would be 1.15% and 0.80%, respectively. 12b-1 Fees (before waivers) for
Class A shares would be 0.50% for each Fund. The fee waivers reflected
in the table are voluntary and may be modified or terminated at any
time without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 2.88% for
Class A shares and 3.13% for Class B, C and X shares of the ING
European Equity Fund and 2.30% for Class A shares and 2.55% for Class
B, C and X shares of the ING Tax Efficient Equity Fund.
14
<PAGE> 23
FEE TABLE
<TABLE>
<CAPTION>
ING Focus Fund ING Global Information Technology Fund
---------------------------------------------- ----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2) Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred Sales NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average net
assets)
Management Fees (after waivers)* 0.25% 0.25% 0.25% 0.25% 0.31% 0.31% 0.31% 0.31%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75% 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.75% 0.75% 0.75% 0.75% 0.93% 0.93% 0.93% 0.93%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING EXPENSES
(after waivers)*** 1.35% 2.00% 2.00% 2.00% 1.59% 2.24% 2.24% 2.24%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2%, and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
for the ING Focus Fund and ING Global Information Technology Fund would
be 1.00% and 1.25%, respectively. 12b-1 Fees (before waivers) for Class
A shares would be 0.50% for each Fund. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 2.50% for
Class A shares and 2.75% for Class B, C and X shares of the ING Focus
Fund and 2.93% for Class A shares and 3.18% for Class B, C and X shares
of the ING Global Information Technology Fund.
15
<PAGE> 24
FEE TABLE
<TABLE>
<CAPTION>
ING Global Real Estate Fund
----------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on 5.75% NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred Sales NONE 5.00% 1.00% 5.00%
Load (as a percentage of
redemption proceeds)
ANNUAL FUND OPERATING
EXPENSE
(as a percentage of average net assets)
Management Fees (after waivers)* 0.31% 0.31% 0.31% 0.31%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25% 0.25%
Other Expenses** 0.93% 0.93% 0.93% 0.93%
---- ---- ---- ----
TOTAL PORTFOLIO OPERATING EXPENSES
(after waivers)*** 1.59% 2.24% 2.24% 2.24%
==== ==== ==== ====
</TABLE>
- --------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or the original amount invested for redemption occurring in years one
through six, respectively. No CDSC is charged after the sixth year. The
CDSC is not imposed on the amount of any increase in your account over
the initial amount invested. If you purchase Class C shares, you do not
pay an initial sales charge but you may incur a CDSC if you redeem some
or all of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 1.25%. 12b-1 Fees (before waivers) for Class A shares would be
0.50%. The fee waivers reflected in the table are voluntary and may be
modified or terminated at any time without the Fund's consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 2.93% for
Class A shares and 3.18% for Class B, C and X shares.
16
<PAGE> 25
EXPENSE EXAMPLES:
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Large Cap Growth Fund 1 Year 3 Years 1 Year 3 Years
- ------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 70 $ 96 $ 70 $ 96
Class B Shares $ 70 $101 $ 20 $ 61
Class C Shares $ 30 $ 61 $ 20 $ 61
Class X Shares*** $ 70 $103 $ 20 $ 63
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Growth and Income Fund 1 Year 3 Years 1 Year 3 Years
- -------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 70 $ 96 $ 70 $ 96
Class B Shares $ 70 $101 $ 20 $ 61
Class C Shares $ 30 $ 61 $ 20 $ 61
Class X Shares*** $ 70 $103 $ 20 $ 63
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Mid Cap Growth Fund 1 Year 3 Years 1 Year 3 Years
- ----------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 71 $ 98 $ 71 $ 98
Class B Shares $ 71 $103 $ 21 $ 63
Class C Shares $ 31 $ 63 $ 21 $ 63
Class X Shares*** $ 71 $105 $ 21 $ 65
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Small Cap Growth Fund 1 Year 3 Years 1 Year 3 Years
- ------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 71 $ 98 $ 71 $ 98
Class B Shares $ 71 $103 $ 21 $ 63
Class C Shares $ 31 $ 63 $ 21 $ 63
Class X Shares*** $ 71 $105 $ 21 $ 65
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Balanced Fund 1 Year 3 Years 1 Year 3 Years
- ----------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 70 $ 96 $ 70 $ 96
Class B Shares $ 70 $101 $ 20 $ 61
Class C Shares $ 30 $ 61 $ 20 $ 61
Class X Shares*** $ 70 $103 $ 20 $ 63
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Global Brand Names Fund 1 Year 3 Years 1 Year 3 Years
- --------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 72 $103 $ 72 $103
Class B Shares $ 72 $109 $ 22 $ 69
Class C Shares $ 32 $ 69 $ 22 $ 69
Class X Shares*** $ 73 $110 $ 23 $ 70
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING International Equity Fund 1 Year 3 Years 1 Year 3 Years
- ----------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 73 $105 $ 73 $105
Class B Shares $ 73 $111 $ 23 $ 71
Class C Shares $ 33 $ 71 $ 23 $ 71
Class X Shares*** $ 74 $112 $ 24 $ 72
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Emerging Markets Equity Fund 1 Year 3 Years 1 Year 3 Years
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 73 $107 $ 73 $107
Class B Shares $ 74 $113 $ 24 $ 73
Class C Shares $ 34 $ 73 $ 24 $ 73
Class X Shares*** $ 74 $114 $ 24 $ 74
</TABLE>
*Full Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and full redemption of your
shares at the end of each period shown.
**No Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and no redemption of your
shares at the end of each period shown.
*** Expense examples for purchase of Class X shares of the Funds reflect the
shareholder's receipt of additional "bonus shares." For a discussion of the
issuance of "bonus shares," see this Prospectus under "Purchase of Fund
Shares--Class X Shares."
The above tables are provided to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as an
investor in the Fund(s). THE EXAMPLES PROVIDED SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF THE FUNDS' PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5%
ANNUAL RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN THAT IS GREATER OR LESS THAN 5%.
17
<PAGE> 26
EXPENSE EXAMPLES:
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING European Equity Fund 1 Year 3 Years 1 Year 3 Years
- ------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 73 $106 $ 73 $106
Class B Shares $ 73 $111 $ 23 $ 71
Class C Shares $ 33 $ 71 $ 23 $ 71
Class X Shares*** $ 74 $113 $ 24 $ 73
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Tax Efficient Equity Fund 1 Year 3 Years 1 Year 3 Years
- ---------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 70 $ 97 $ 70 $ 97
Class B Shares $ 70 $102 $ 20 $ 62
Class C Shares $ 30 $ 62 $ 20 $ 62
Class X Shares*** $ 70 $103 $ 20 $ 63
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Focus Fund 1 Year 3 Years 1 Year 3 Years
- -------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 71 $ 98 $ 71 $ 98
Class B Shares $ 71 $103 $ 21 $ 63
Class C Shares $ 31 $ 63 $ 21 $ 63
Class X Shares*** $ 71 $105 $ 21 $ 65
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Global Information Technology Fund 1 Year 3 Years 1 Year 3 Years
- -------------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 73 $105 $ 73 $105
Class B Shares $ 73 $111 $ 23 $ 71
Class C Shares $ 33 $ 71 $ 23 $ 71
Class X Shares*** $ 74 $112 $ 24 $ 72
</TABLE>
<TABLE>
<CAPTION>
Full Redemption* No Redemption**
-------------------- --------------------
ING Global Real Estate Fund 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C>
Class A Shares $ 73 $105 $ 73 $105
Class B Shares $ 73 $111 $ 23 $ 71
Class C Shares $ 33 $ 71 $ 23 $ 71
Class X Shares*** $ 74 $112 $ 24 $ 72
</TABLE>
*Full Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and full redemption of your
shares at the end of each period shown.
**No Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and no redemption of your
shares at the end of each period shown.
***Expense examples for purchase of Class X shares of the Funds reflect the
shareholder's receipt of additional "bonus shares." For a discussion of the
issuance of "bonus shares," see this Prospectus under "Purchase of Fund
Shares--Class X Shares."
The above tables are provided to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as an
investor in the Fund(s). THE EXAMPLES PROVIDED SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF THE FUNDS' PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5%
ANNUAL RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN THAT IS GREATER OR LESS THAN 5%.
18
<PAGE> 27
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as
a mutual fund. The Funds are portfolios of a Delaware business trust organized
under the laws of the State of Delaware as an open-end management investment
company on July 30, 1998. The Trust's Board of Trustees oversees the overall
management of the Funds and elects the officers of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The "Investment Restrictions" section of the
SAI contains specific investment restrictions (the "Investment Restrictions")
which govern each Fund's investments. The Investment Restrictions and each
Fund's investment objective are fundamental policies which may not be changed
without a majority vote of shareholders of the affected Fund. Except for the
objectives and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental, and may therefore be changed by the Board of Trustees
without shareholder approval.
ING Mid Cap Growth Fund. The ING Mid Cap Growth Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
large companies (i.e., companies with market capitalizations of more than $1
billion at the time of acquisition) which, in the Sub-Adviser's opinion, possess
growth potential.
ING Growth and Income Fund. The ING Growth and Income Fund seeks to
provide investors with long-term total return. Under normal market conditions,
the Fund intends to invest at least 65% of its total assets in equity
securities. As a general matter, the Fund expects these investments to earn
income.
ING Mid Cap Growth Fund. The ING Mid Cap Growth Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
issuers with market capitalizations falling within the Russell Mid Cap Index at
the time of acquisition. Such companies are typically well established but have
not reached full maturity, and may offer significant growth potential. The
Sub-Adviser will seek to identify companies which, in its opinion, will
experience growing earnings and strong price appreciation relative to the
Russell Mid Cap Growth Index.
ING Small Cap Growth Fund. The ING Small Cap Growth Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the equity
securities of smaller companies (i.e., companies with market capitalizations
falling within the Russell 2500 at the time of acquisition).
ING Balanced Fund. The ING Balanced Fund seeks to provide investors
with high total return. The Fund primarily invests in a combination of mid and
large capitalization equity securities, intermediate-maturity fixed income
securities and money market instruments. Under normal market conditions, the
Fund will invest at least 25% of its total assets in fixed income senior
securities. The average maturity of the fixed income securities in the Fund
will, under normal circumstances, be approximately five years, although this
will vary with changing market conditions.
19
<PAGE> 28
ING Global Brand Names Fund. The ING Global Brand Names Fund is a
non-diversified fund that seeks to provide investors with long-term capital
appreciation. Under normal conditions, the Fund will invest at least 65% of its
total assets globally in the common stock of companies located throughout the
world, which in the Sub-Adviser's opinion, have a well recognized franchise, an
international presence and derive most of their revenues from sales of consumer
goods. The companies in which the Fund invests either have leading market
positions, or in the Sub-Adviser's opinion, have the potential to achieve
leading market positions in the foreseeable future.
ING International Equity Fund. The ING International Equity Fund seeks
to provide investors with long-term capital appreciation. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of issuers organized or having a majority of their assets in or
deriving a majority of their operating income in at least seven different
countries, outside of the United States. The Fund will invest in a broad range
of equity securities. The Fund may purchase securities in any foreign country,
developed or underdeveloped, or emerging market countries. The Fund will not
invest more than 15% of its total assets in emerging market countries. With
respect to certain countries, investments by an investment company may only be
made through investments in closed-end investment companies that in turn are
authorized to invest in the securities of such countries. See "Description of
Securities and Investment Practices--Closed-End Investment Companies."
ING Emerging Markets Equity Fund. The ING Emerging Markets Equity Fund
seeks to provide investors with long-term capital appreciation. Under normal
market conditions, the Fund will invest at least 65% of its total assets in the
equity securities of emerging market issuers. Under normal conditions, the Fund
will maintain investments in at least seven emerging market countries and will
not invest more than 25% of its total assets in any one emerging market country.
For these purposes, the Fund defines an emerging market country as any country
the economy and market of which the World Bank or the United Nations considers
to be emerging or developing or any country determined by the Sub-Adviser to
have emerging economies or developing markets. The Fund's Sub-Adviser considers
emerging market issuers to be companies the securities of which are principally
traded in the capital markets of emerging market countries; that derive at least
50% of their total revenue from either goods produced or services rendered in
emerging market countries, regardless of where the securities of such companies
are principally traded; or that are organized under the laws of and have a
principal office in an emerging market country. With respect to certain
countries, investments by an investment company may only be made through
investments in closed-end investment companies that in turn are authorized to
invest in the securities of such countries. See "Description of Securities and
Investment Practices--Closed-End Investment Companies."
ING European Equity Fund. The ING European Equity Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the Fund will invest at least 65% of its total assets in the equity securities
of European issuers. The Fund's Sub-Adviser considers European issuers to be
companies the securities of which are principally traded in the European capital
markets; that derive at least 50% of their total revenue from either goods
produced or services rendered in countries located in Europe, regardless of
where the securities of such companies are principally traded; or that are
organized under the laws of and have a principal office in a European country.
ING Tax Efficient Equity Fund. The ING Tax Efficient Equity Fund seeks
to provide taxable investors with a high total return on an after-tax basis. In
attempting to achieve its investment objective, the Fund under normal
circumstances will invest at least 80% of its net assets in a widely diversified
portfolio of equity securities and
20
<PAGE> 29
instruments whose returns depend upon stock market prices and will manage its
portfolio in a manner that will defer the realization of accrued capital gains
and minimize dividend income. An emphasis will be placed on lower-dividend or
non-dividend paying common stocks of companies which the Sub-Adviser believes to
have superior appreciation potential. The Fund may invest up to 10% of its total
assets in foreign securities.
The Fund is managed to provide high after-tax returns. Therefore, it
may not provide as high a return before taxes as other funds, and as a result
may not be suitable for investors who are not subject to current income tax
(e.g., those investing through a tax-deferred retirement account, such as an IRA
or a 401(k) Plan).
ING Focus Fund. The Fund is a non-diversified fund that seeks long-term
capital appreciation. Under normal conditions, the Fund will invest in a non-
diversified portfolio of 30 to 40 equity securities.
The Sub-Adviser seeks dominant growth companies capitalizing on
significant fundamental change and aims to purchase them at the "right price".
The Sub-Adviser generates themes and ideas by looking for early signs of change
in industries or companies, monitoring industries that drive change in other
industries and following proven management teams with a talent for value
creation. After confirming the investment thesis through analysis, the
Sub-Adviser identifies a field of potential winners and manages risk by
selecting only those candidates that it deems to have the highest probability of
success with moderate risk.
ING Global Information Technology Fund. The ING Global Information
Technology Fund seeks to provide investors with long-term capital appreciation.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the common stocks of information technology companies. For these
purposes, the Fund defines information technology companies as those companies
with primary business operations in either the information technology, hardware
and software industries, on related consulting and services industries.
The Sub-Adviser believes that because of rapid advances in information
technology and science, investment in companies with business operations in
these areas will offer substantial opportunities for long-term capital
appreciation. Of course, swings in investor psychology or significant trading by
large institutional investors can result in significant price fluctuations and
stock price declines.
The information technology area has exhibited and continues to
demonstrate rapid growth, both through increasing demand for existing products
and services and the broadening of the technology market. In general, the stocks
of large capitalized companies that are well established in the information
technology market can be expected to grow with the market and will frequently be
found in the Fund's portfolio. The expansion of other technology and science
areas, however, also provides a favorable environment for investment. The
Fund's investment policy is not limited to any minimum capitalization
requirement and the Fund may hold securities without regard to the
capitalization of the issuer. Generally, the Sub-Adviser's overall stock
selection for the Fund will be based on an assessment of the company's
fundamental prospects. The Sub-Adviser anticipates, however, that a portion of
the Fund's holdings will be invested in newly issued securities being sold in
the secondary market.
ING Global Real Estate Fund. The ING Global Real Estate Fund is a
non-diversified Fund that seeks to provide investors with long-term total return
and income as a secondary consideration. Under normal market conditions, the
Fund will invest at least 65% of its total assets in the equity securities of
issuers located
21
<PAGE> 30
throughout the world that are principally engaged in the real estate industry.
In selecting investments for the Fund, the Fund's Sub-Adviser will select
companies whose business it is to own, operate, develop and/or manage real
estate.
All Funds
There can be no assurance that any Fund will achieve its investment
objectives.
While the Funds will invest primarily in investments that are
consistent with its name, the Funds may invest any remaining assets in fixed
income securities, money market securities, certificates of deposit, bankers'
acceptances and commercial paper or in equity securities that the applicable
Fund's Sub-Adviser believes are appropriate in light of the Fund's investment
objective.
For purposes of this Prospectus, equity securities include common
stock, preferred stock, warrants or rights to subscribe to common stock and, in
general, any security that is convertible into or exchangeable for common stock.
Each Fund, except ING Mid Cap Growth, ING International Equity, ING
Emerging Markets Equity and ING Focus Fund, will only purchase fixed income
securities that are rated investment grade, i.e., rated at least BBB by Standard
& Poor's Rating Group ("S&P") or Baa by Moody's Investor Services ("Moody's"),
or have an equivalent rating from another NRSRO, or if unrated, are determined
to be of comparable quality by the Sub-Adviser. The ING Mid Cap Growth Fund and
the ING Focus Fund, will only purchase fixed income securities that are rated A
or better by S&P or Moody's or have an equivalent rating from another NRSRO, or
if unrated, are determined to be of comparable quality by the applicable
Sub-Adviser. The ING International Equity Fund will only purchase fixed income
securities that are rated at least AA+ by S&P or Aa-2 by Moody's, or have an
equivalent rating from another NRSRO, or if unrated, are determined to be of
comparable quality by the Sub-Adviser. The ING Emerging Markets Equity Fund may
invest in fixed income securities that are rated below investment grade. See the
SAI for a description of the bond ratings.
Money market securities, certificates of deposit, banker's acceptance
and commercial paper purchased by the Funds must be rated in one of the two top
rating categories by an NRSRO or, if not rated, determined to be of comparable
quality by the Fund's Sub-Adviser.
All Funds may use various investment strategies and techniques when the
Sub-Adviser determines that such use is appropriate in an effort to meet a
Fund's investment objective including: purchasing and writing "covered" put and
call equity options; purchasing and selling stock index; interest rate, and
other futures contracts; purchasing options on stock index futures contracts and
futures contracts based upon other financial instruments; entering into foreign
currency transactions and options and forward contracts on foreign currencies;
entering into repurchase agreements or reverse repurchase agreements; investing
up to 15% of net assets in illiquid securities; and lending portfolio securities
to brokers, dealers, banks, or other recognized institutional borrowers of
securities.
In order to meet liquidity needs or for temporary defensive purposes,
each Fund may invest up to 100% of its assets in fixed income securities, money
market securities, certificates of deposit, bankers' acceptances, commercial
paper or in equity securities which in the Sub-Adviser's opinion are more
22
<PAGE> 31
conservative than the types of securities that the Fund typically invests in. To
the extent the Funds are engaged in temporary defensive investments, a Fund will
not be pursuing its investment objective.
The SEC currently requires a Fund to invest at least 65% of its total
assets in investments that are consistent with its name (i.e., The ING Large Cap
Growth Fund must invest at least 65% of its total assets in large capitalization
issuers). To the extent the SEC increases the percentage of a Fund's assets that
must be invested in investments that are consistent with its name, each Fund
reserves the right to change, without shareholder approval, the percentage
required to be invested by the Fund from 65% of total assets to the percentage
required by the SEC or to change the name of the Fund.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
The types of securities and investment practices used by the funds are
described in greater detail at "DESCRIPTION OF SECURITIES AND INVESTMENT
PRACTICES."
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Board of Trustees. Additional information about the Trustees, as well as
the Funds' executive officers, may be found in the SAI under the heading
"MANAGEMENT--Trustees and Officers."
THE MANAGER: ING MUTUAL FUNDS MANAGEMENT CO. LLC
IMFC, 18 Campus Boulevard, Suite 200, Newtown Square, PA 19073, serves
as the manager of the Funds pursuant to a Management Agreement with the Trust.
IMFC was formed on September 8, 1998, as a Delaware limited liability company
and is a wholly-owned subsidiary of ING Group. IMFC is registered with the SEC
as an investment adviser. IMFC has no prior experience as an investment adviser
to an investment company.
Under the Management Agreement, IMFC has overall responsibility,
subject to the supervision of the Board of Trustees, for engaging Sub-Advisers
and for monitoring and evaluating the management of the assets of each Fund by
the Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Advisers on a periodic basis, and will consider their performance
records with respect to the investment objectives and policies of each Fund.
IMFC also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
transfer agent, custodian, independent accountants and legal counsel; (ii)
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
(iii) preparation of proxy statements and shareholder reports for the Funds;
(iv) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' Officers and Board of
Trustees; and (v) furnishing office space and certain facilities required for
conducting the business of the Funds.
Pursuant to the Management Agreement, the Manager is authorized to
exercise full investment discretion and make all determinations with respect to
the investment of a Fund's assets and the purchase and sale of portfolio
securities for one or more Funds in the event that at any time no Sub-Adviser is
engaged to manage the assets of
23
<PAGE> 32
a Fund. The Management Agreement may be terminated without penalty by the vote
of the Board of Trustees or the shareholders of the Fund, or by the Manager,
upon 60 days' written notice by the Board and will terminate automatically if
assigned as that term is described in the 1940 Act.
The Trust pays the Manager for its services under the Management
Agreement a fee, payable monthly, based on the average daily net assets of each
Fund at the following annual rates:
<TABLE>
<CAPTION>
Management
Fund: Fee
- ----- ---
<S> <C>
ING Large Cap Growth Fund 0.75%
ING Growth and Income Fund 0.75%
ING Mid Cap Growth Fund 1.00%
ING Small Cap Growth Fund 1.00%
ING Balanced Fund 0.80%
ING Global Brand Names Fund 1.00%
ING International Equity Fund 1.25%
ING Emerging Markets Equity Fund 1.25%
ING European Equity Fund 1.15%
ING Tax Efficient Equity Fund 0.80%
ING Focus Fund 1.00%
ING Global Real Estate Fund 1.00%
ING Global Information Technology Fund 1.25%
</TABLE>
THE SUB-ADVISERS:
The Manager has entered into Sub-Advisory Agreements with the
Sub-Advisers. Under the Agreements, the Sub-Advisers have full investment
discretion and make all determinations with respect to the investment of a
Fund's assets and the purchase and sale of portfolio securities and other
investments. The Sub-Advisory Agreement may be terminated without penalty by the
Manager, the Board of Trustees or the shareholders of a Fund, or by the
Sub-Adviser, on 60 days' written notice by any party to a Sub-Advisory Agreement
and will terminate automatically if assigned as that term is described in the
1940 Act. Each of the Sub-Advisers is an affiliate of the Manager. The Manager
reserves the right to terminate a Sub-Advisory Agreement with a Fund's
Sub-Adviser and either manage the assets itself or appoint another affiliated
Sub-Adviser without shareholder approval.
Baring Asset Management, Inc. The Manager has retained BAM, a
Massachusetts corporation, located at 125 High Street, Boston, MA 02110 to act
as sub-adviser to the ING Large Cap Growth Fund and
24
<PAGE> 33
ING Small Cap Growth Fund. BAM is registered under the Investment Advisers Act
of 1940 and provides investment management services to clients located around
the world. BAM is a wholly-owned subsidiary of Baring Asset Management Holdings
Limited ("BAMHL"). BAMHL, a global company registered in England and Wales, is
the parent of the world-wide group of investment management companies that
operate under the collective name Baring Asset Management (the "BAM Group").
BAMHL is a wholly-owned indirect subsidiary of ING Group a publicly traded
company based in the Netherlands with worldwide insurance and banking
subsidiaries and is affiliated with the Manager.
The BAM Group provides global investment management services and
maintains major investment offices in Boston, London, Hong Kong and Tokyo, and
together with its predecessor corporation was founded in 1762. The BAM Group
provides advisory services to institutional investors, offshore investment
companies, insurance companies and private clients. As of December 31, 1997, the
BAM Group managed approximately $36.1 billion of assets.
The ING Large Cap Growth Fund and the ING Small Cap Growth Fund are
managed by a team of 12 investment professionals led by Mr. William Braman. Mr.
Braman has been an investment professional with BAM since 1982 and has 21 years
of investment experience. The team has an average of 19 years investment
experience.
Pursuant to the Sub-Advisory Agreements, the Manager (not the Trust)
pays BAM a monthly fee based on the average daily net assets of the ING Large
Cap Growth Fund and ING Small Cap Growth Fund at the annual rate of 0.375% and
0.50%, respectively.
The figures below show past performance of BAM in managing accounts
with investment objectives, policies, styles and techniques substantially
similar though not identical to those of the ING Large Cap Growth Fund and ING
Small Cap Growth Fund. The table shows the total returns for a composite of the
actual performance of large cap growth accounts managed by BAM for various
periods ended September 30, 1998, as adjusted for the projected annual expenses
for the ING Large Cap Growth Fund and ING Small Cap Growth Funds' Class A, Class
B, Class C and Class X shares during their initial fiscal period as set forth in
the Fee Table in this Prospectus. The performance is not necessarily
representative of the past performance of the above referenced team or any
individual of the team. Information presented is based on performance data
provided by BAM. The past performance does not represent the ING Large Cap
Growth Fund and ING Small Cap Growth Funds' performance, as each is newly
organized and has no performance record of its own. Included for comparison
purposes are performance figures of the S&P 500 Index and the Russell 2500
Growth, each an unmanaged market index. The performance shown below is
calculated in accordance with Association for Investment Management and Research
("AIMR").
The composites are made up of unregistered accounts that are not
subject to diversification and other requirements that apply to mutual funds
under applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING Large Cap Growth Fund and ING
Small Cap Growth Fund may vary in some respects. The information should not be
considered a prediction of the future performance of the ING Large Cap Growth
Fund and ING Small Cap Growth Fund. The actual performance may be higher or
lower than that shown.
25
<PAGE> 34
Annualized Rates of Return for
Periods Ending September 30, 1998
Large Cap Growth Composite
<TABLE>
<CAPTION>
BAM S&P 500 Index
---------------------------------------------- -------------
Class A Class B Class C Class X
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1 Year 7.66% 8.53% 12.53% 11.37% 9.15%
3 Years 23.15% 24.01% 24.87% 25.05% 22.73%
5 Years 17.93% 18.42% 18.62% 19.01% 19.99%
10 Years 17.91% 18.04% 17.90% 18.33% 17.29%
</TABLE>
<TABLE>
<CAPTION>
Small Cap Growth Composite Index
- -------------------------- -----
Russell 2500
Class A Class B Class C Class X Growth
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
1 - Year -31.77% -31.77% -28.89% -30.06% -24.34%
3 Years -6.33% -6.38% -5.10% -5.61% 3.39%
5 Years 1.04% 1.20% 1.58% 1.72% 7.99%
10 Years 11.19% 11.29% 11.29% 11.57% 11.13%
</TABLE>
The Manager has also retained BAM as a co-Sub-Adviser to the ING
International Equity Fund and ING Emerging Markets Equity Fund. BAM will
co-sub-advise the Funds along with two of its affiliates, Baring International
Investment Limited and Baring International Investment (Far East) Limited. BIIL
is located at 155 Bishopsgate, London, England EC2M 3XY. BIFL is located at
19/F Edinburgh Tower, 15 Queens Road, The Landmark Central, Hong Kong. BIIL and
BIFL are registered under the Investment Advisor's Act of 1940 and provide
investment management services to clients located around the world. Like BAM,
each is a wholly-owned subsidiary of BAHML.
The ING International Equity Fund is managed by a team of six
investment professionals led by Messrs. James Williams and William Haze in
conjunction with the regional equity teams of the other named Sub- Advisers. The
average experience of the team is 23 years. Mr. Williams has been an investment
professional with BIIL and its affiliates since 1975 and has 25 years of
investment experience. Mr. Haze has been an investment professional with BIIL
since 1992 and has 18 years of investment experience.
The ING Emerging Markets Equity Fund is managed by a team of 32
investment professionals led by Ms. Nancy Curtin in conjunction with the
regional equity teams of the other named Sub-Adviser. Ms. Curtin has been an
investment professional with BIIL since 1992 and has 14 years of investment
experience.
26
<PAGE> 35
Pursuant to the Sub-Advisory Agreements, the Manager (not the Trust)
pays to the co-Sub-Advisers a monthly fee based on the average daily net assets
of the International Equity Fund and Emerging Markets Equity Fund at the annual
rate of 0.625% and 0.625%.
The figures below show past performance of the co-Sub-Advisers in
managing accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING International
Equity Fund. The performance is not necessarily representative of the past
performance of the above referenced teams or any individual of the teams.
Information presented is based on performance data provided by the
co-Sub-Advisers. The past performance does not represent the ING International
Equity Fund's performance, as it is newly organized and has no performance
record of its own. The table shows the total returns for a composite of the
actual performance of international equity accounts managed by the
co-Sub-Advisers for various periods ended September 30, 1998, as adjusted for
the projected annual expenses for the ING International Equity Fund's Class A,
Class B, Class C and Class X shares during their initial fiscal period as set
forth in the Fee Table in this Prospectus. Included for comparison purposes are
performance figures of the MSCI EAFE Index, an unmanaged market index. The
performance shown below is calculated in accordance with AIMR.
The composites are made up of unregistered accounts that are not
subject to diversification and other requirements that apply to mutual funds
under applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING International Equity Fund may
vary in some respects. The information should not be considered a prediction of
the future performance of the ING International Equity Fund. The actual
performance may be higher or lower than that shown.
Annualized Rates of Return for
Periods Ending September 30, 1998
International Equity Composite
<TABLE>
<CAPTION>
MCSI EAFE Index
-------------------------------------------- --------------
Class A Class B Class C Class X
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1 Year -10.56% -10.45% -6.68% -8.21% -8.08%
3 Years 4.65% 4.86% 6.06% 5.76% 4.05%
5 Years 6.84% 7.13% 7.43% 7.67% 5.65%
10 Years 7.91% 8.00% 7.87% 8.27% 5.41%
</TABLE>
27
<PAGE> 36
ING Investment Management Advisors B.V. The Manager has retained IIMA
located at Schenkkade 65, 2595 AS The Hague, to act as Sub-Adviser to the ING
Global Brand Names Fund, ING European Equity Fund, and ING Global Information
Technology Fund and ING Global Real Estate Fund. IIMA is registered under the
Investment Advisers Act of 1940. IIMA is a company organized to manage
investments and provide investment advice on a world-wide basis to entities
affiliated with ING Group. IIMA operates under the collective management of ING
Investment Management which has investments under management of $22 billion at
September 30, 1998. The following investment advisory professionals work within
ING Investment Management and are officers of IIMA.
Herman Kleeven is responsible for the day-to-day operations of the ING
Global Brand Names Fund. Mr. Kleeven has been employed by IIMA and its
affiliates since 1997 and has investment experience of six years. Before joining
IIMA, Mr. Kleeven was a portfolio manager for Robeco Group, Rotterdam, The
Netherlands.
The ING European Equity Fund is managed by a team of eight investment
professionals led by Adrian van Tiggelen. The average experience of the team is
7 years. Mr. van Tiggelen has been employed by IIMA and its affiliates since
1989 and has nine years of investment experience.
Guy Uding is responsible for the day-to-day operations of the ING
Global Information Technology Fund. Mr. Uding has been employed by IIMA and its
affiliates since 1995 and has three years of investment experience.
The ING Global Real Estate Fund is managed by 3 investment
professionals led by Michael Lipsch. Michael Lipch has been
_________________________.
Pursuant to the Sub-Advisory Agreements, the Manager (not the Trust)
pays to IIMA a monthly fee based on the average daily net assets of the
applicable Fund at the following annual rates:
28
<PAGE> 37
<TABLE>
<CAPTION>
Fund Investment Sub Advisory Fee
- ---- ---------------------------
<S> <C>
ING Global Brand Names Fund 0.500%
ING European Equity Fund 0.575%
ING Global Information 0.625%
Technology Fund
ING Global Real Estate Fund 0.500%
</TABLE>
The figures below show past performance of IIMA in managing two pooled
accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING European Equity
Fund and ING Global Information Technology Fund. The performance is not
necessarily representative of the past performance of the above-referenced teams
or any individuals of the teams. Information presented is based on performance
data provided by IIMA. The past performance does not represent the ING European
Equity Fund or ING Global Information Technology Fund's performance, as each is
newly organized and has no performance record of its own. The table shows the
actual total returns for these pooled accounts, one with a European equity
mandate and one with an information technology mandate managed by IIMA for
various periods ended September 30, 1998, as adjusted for the projected annual
expenses for the ING European Equity Fund and ING Global Information Technology
Funds' Class A, Class B, Class C and Class X shares during their initial fiscal
period as set forth in the Fee Table in this Prospectus. Included for comparison
purposes are performance figures of the FT Europe and Goldman Sachs Technology
Industry Composite Index, respectively, each an unmanaged market index.
The pooled accounts are not U.S. registered investment companies and
are not subject to diversification and other requirements that apply to mutual
funds under applicable securities, tax and other laws that, if applicable, may
have adversely affected performance. As a result, portfolio management
strategies used on the pooled accounts and those used on the ING European Equity
Fund and ING Global Information Technology Fund may vary in some respects. The
information should not be considered a prediction of the future performance of
the ING European Equity Fund and the ING Global Information Technology Fund. The
actual performance may be higher or lower than that shown.
Annualized Rates of Return for
Periods Ending September 30, 1998
European Equity Pooled Account
<TABLE>
<CAPTION>
IIMA
--------------------
Class A Class B Class C Class X FT
------- ------- ------- ------- Europe
Index
-----
<S> <C> <C> <C> <C> <C>
1 Year -2.25% -1.95% 2.05% 0.62% 2.02%
</TABLE>
29
<PAGE> 38
European Equity Pooled Account
<TABLE>
<CAPTION>
IIMA
--------------------
Class A Class B Class C Class X FT
------- ------- ------- ------- Europe
Index
-----
<S> <C> <C> <C> <C> <C>
3 Years 24.09% 24.98% 25.83% 26.03% 26.18%
5 Years 17.02% 17.49% 17.70% 18.08% 18.28%
Since Inception (1/31/93) 19.36% 19.82% 19.89% 20.34% 19.23%
</TABLE>
Global Information Technology Pooled Account
<TABLE>
<CAPTION>
IIMA Goldman Sachs
-------------------------- Technology
Industry
Class A Class B Class C Class X Composite Index
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
1 Year 0.22% 0.66% 4.66% 3.30% [7.23%]
Since Inception (3/27/97) 55.07% 58.29% 60.37% 60.95% [54.67%]
</TABLE>
The Adviser has also retained IIMA to act as co-Sub-Adviser to the ING
Growth and Income Fund. IIMA co-advises the Fund along with its affiliate ING
Investment Management, LLC. IIM is located at 5780 Powers Ferry Road, N.W. Suite
300, Atlanta, Georgia 30327. IIM is a Delaware limited liability corporation
which is engaged in the business of providing investment advice to portfolios
which as of December 31, 1997, were valued at approximately $22 billion. Like
IIMA, IIM is a wholly-owned subsidiary of ING Group and is affiliated with the
Manager. IIM is registered with the SEC as an investment adviser. IIM also
advises other registered investment companies.
The ING Growth and Income Fund is managed by a team of six investment
professionals led by Mr. David Kushner. The average experience of the team is 10
years. Mr. Kushner has been employed by IIM as an investment professional since
1996. Prior to that ______________________________________.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust)
pays to the co-Sub-Advisers monthly fee based on the average daily net assets of
the Fund at the annual rate of 0.375%.
30
<PAGE> 39
The figures below show past performance of co-Sub-Advisers in managing
a pooled account with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING Growth and Income
Fund. The performance is not necessarily representative of the past performance
of the above-referenced team or any individual of the team. Information
presented is based on performance data provided by the co-Sub-Advisers. The past
performance does not represent the ING Growth and Income Fund's performance, as
it is newly organized and has no performance record of its own. The table shows
the actual total returns for a pooled account managed by the co-Sub-Advisers for
various periods ended September 30, 1998, as adjusted for the projected annual
expenses for the ING Growth and Income Fund's Class A, Class B, Class C and
Class X shares during its initial fiscal period as set forth in the Fee Table in
this Prospectus. Included for comparison purposes are performance figures of the
S&P 500 Index, an unmanaged market index.
The pooled account is not a U.S. registered investment company and is
not subject to diversification and other requirements that apply to mutual funds
under applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the pooled account and those used on the ING Growth and Income Fund may
vary in some respects. The information should not be considered a prediction of
the future performance of the ING Growth and Income Fund. The actual performance
may be higher or lower than that shown.
Annualized Rates of Return for
Periods Ending September 30, 1998
<TABLE>
<CAPTION>
IIM
Class A Class B Class C Class X S&P 500 Index
------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
1 Year 0.22% 0.66% 4.66% 3.30% 9.04%
Since Inception 3/10/97 12.70% 13.97% 16.34% 15.85% 17.29%
</TABLE>
FURMAN SELZ CAPITAL MANAGEMENT LLC. The Manager has retained FSCM,
located at 230 Park Avenue, New York, New York 10169, to act as Sub-Adviser to
the ING Mid Cap Growth Fund, ING Balanced Fund and the ING Focus Fund. FSCM is a
Delaware limited liability company which is engaged in the business of providing
investment advice to institutional and individual clients which, as of December
31, 1997, were valued at approximately $10 billion. FSCM is a wholly owned
subsidiary of ING Group and is affiliated with the Manager. FSCM is registered
with the SEC as an investment adviser. FSCM is also Sub-Adviser to other
registered investment companies.
31
<PAGE> 40
The ING Mid Cap Growth Fund is managed by a team of four investment
professionals led by Messrs. Matthew Price and David Campbell. The average
experience of the team is 18 years. Messrs. Price and Campbell have been
investment professionals with FSCM since 1990 and each has over 20 years of
experience.
The ING Balanced Fund is managed by a team of four investment
professionals with an average of 16 years of investment experience. Messrs.
Robert Schonbrunn and Alan Segars are responsible for the fixed income portion
of the Fund. Messrs. Adrian Jones and Michael Kass are responsible for the
equity portion of the ING Balanced Fund. Mr. Jones has been an investment
professional with FSCM since 1996 and has 10 years of experience. Mr. Kass has
been an investment professional with FSCM since 1996 and has 11 years of
experience. Prior to 1996, Mr. Kass was an investment professional with Furman
Selz for five years in the Proprietary Management Division. Mr. Schonbrunn has
been an investment professional with FSCM since 1985 and has 31 years of
experience. Mr. Segars has been an investment professional with FSCM since 1993
and has 29 years of experience. Messrs. Kass and Jones are also responsible for
the day-to-day management of the ING Focus Fund.
The ING Focus Fund is managed _________________________________.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust)
pays to FSCM a monthly fee based on the average daily net assets of the
applicable Fund at the following annual rates:
<TABLE>
<CAPTION>
Fund Investment Sub Advisory Fee
- ---- ---------------------------
<S> <C>
ING Mid Cap Growth Fund 0.50%
ING Balanced Fund 0.40%
ING Focus Fund 0.50%
</TABLE>
The figures below show past performance of FSCM in managing accounts
with investment objectives, policies, styles and techniques substantially
similar though not identical to those of the ING Mid Cap Growth Fund, ING
Balanced Fund and the ING Focus Fund. The performance is intended to be
representative of the past performance of the above referenced individuals
working as a team. Information presented is based on performance data provided
by FSCM. The past performance does not represent the ING Mid Cap Growth Fund,
the ING Balanced Fund or the ING Focus Fund's performance, as each is newly
organized and has no performance record of its own. The table shows the total
returns for a composite of the estimated performance of Balanced wrap accounts
and Focus wrap accounts managed by FSCM for various periods ended September 30,
1998, as adjusted for the projected annual expenses for the ING Mid Cap Growth
Fund, the Balanced and ING Focus Funds' Class A, Class B, Class C and Class X
shares during their initial fiscal period as set forth in the Fee Table in this
Prospectus.* shares. Included for comparison purposes are performance figures of
the Russell Mid Cap with Income and Russell Mid Cap Growth & Income for the ING
Mid Cap Growth
- --------
* [The wrap account performance was adjusted for estimated
transaction costs such as brokerage and custody cost to obtain
estimated gross wrap account performance.]
32
<PAGE> 41
Fund, the Balanced Index** for the ING Balanced Fund and the S&P 500 With Income
for the ING Focus Fund, each an unmanaged market index.
The composites are made up of unregistered accounts that are not
subject to diversification and other requirements that apply to mutual funds
under applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING Balanced Fund and the ING Best
Ideas Fund may vary in some respects. The information should not be considered a
prediction of the future performance of the Balanced Fund. The actual
performance may be higher or lower than that shown. The performance shown below
is calculated in accordance with AIMR.
Mid Cap Growth Wrap Accounts
<TABLE>
<CAPTION>
FSCM
----------------------------------------------
Russell Russell
Mid-Cap Mid-Cap
with Growth &
Class A Class B Class C Class X Income Income
------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 Year -21.53% -21.48% -18.17% -19.52% -6.00% -9.40%
3 Years 4.61% 4.82% 6.02% 5.71% 13.80% 11.00%
5 Years 8.58% 8.90% 9.19% 9.45% 13.70% 12.70%
Since Inception
(6/30/93) 10.34% 10.77% 10.90% 11.30% 14.20% 13.40%
</TABLE>
<TABLE>
<CAPTION>
50% Lehman
Intermediate
Government/
Balanced Wrap Accounts Corporate Bond
- ---------------------- --------------
FSCM
----------------------------------------------
Class A Class B Class C Class X and 50% S&P 500
------- ------- ------- ------- Index
-----
<S> <C> <C> <C> <C> <C>
1 - Year 1.47% 1.98% 5.98% 4.65% 10.20%
3 - Years 13.93% 14.48% 15.49% 15.46% 15.30%
5 - Years 10.71% 11.07% 11.33% 11.63% 13.30%
10 Years 11.27% 11.37% 11.23% 11.65% 13.00%
</TABLE>
- ----------
** 50% S&P Index with income and 50% Lehman Intermediate
Government/Corporate Bond.
33
<PAGE> 42
Focus Wrap Accounts
<TABLE>
<CAPTION>
FSCM
---------------------------
Class A Class B Class C Class X S&P 500 Index
------- ------- ------- ------- -------------
with Income
-----------
<S> <C> <C> <C> <C> <C>
1 Year -3.47% -3.24% 0.76% -0.69% 9.00%
Since Inception (10/1/96) 20.33% 21.41% 22.79% 22.80% 23.80%
</TABLE>
DELTA ASSET MANAGEMENT. The Manager has retained DELTA, located at 333
South Grand Avenue, Los Angeles, California 90071 to act as Sub-Adviser to the
ING Tax Efficient Equity Fund. DELTA is a division of FSCM.
Messrs. Bob Sandroni and Carl Goldsmith are responsible for the
day-to-day operations of the ING Tax Efficient Equity Fund. Messrs. Sandroni and
Goldsmith have been investment professionals with DELTA since 1991 and each has
over 20 years of experience.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust)
pays DELTA a monthly fee based on the average daily net assets of the Fund at
the annual rate of 0.40%.
THE DISTRIBUTOR
IFD acts as the Distributor. IFD is located at 18 Campus Boulevard,
Suite 200, Newtown Square, PA 19073. As Distributor, IFD sells shares of each
Fund on behalf of the Trust.
FUND ACCOUNTANT AND TRANSFER AGENT
ING Fund services has entered into a Fund Services Agreement with the
Funds pursuant to which ING Fund Services will perform or engage third parties
to perform transfer agency, fund accounting and other services. ING Fund
Services has retained DST to act as the Funds' transfer agent and fund
accounting agent. DST is located at 333 West 11th Street, 5th Floor, Kansas
City, Missouri 64105. For its services as transfer agent and fund accounting
agent, DST receives a fee from ING Fund Services (and not the Funds), payable
monthly, based upon the average daily net assets of the Funds.
DISTRIBUTION EXPENSES
Pursuant to a Plan of Distribution adopted by each Fund under Rule
12b-1 under the 1940 Act, each Fund pays the Distributor an annual fee of 0.50%
of average net assets attributable to that Fund's Class A shares, and 0.75% of
average net assets attributable to that Fund's Class B, X and C shares.
The higher distribution fee attributable to Class B, X, and C shares is
designed to permit an investor to purchase such shares through registered
representatives of the Distributor and other broker-dealers without the
assessment of an initial sales charge and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution fee
for all classes may be used by the Distributor for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor:
34
<PAGE> 43
(a) to compensate broker-dealers, including the Distributor and its registered
representatives, for their sale of Fund shares, including the implementation of
various incentive programs with respect to broker-dealers, banks, and other
financial institutions; (b) to pay for interest and other borrowing costs
incurred by the distributor; and (c) to pay other advertising and promotional
expenses in connection with the distribution of Fund shares. These advertising
and promotional expenses include, by way of example but not by way of
limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses. If the distribution plan is terminated by the Funds, the Board of
Trustees may allow the Funds to continue to pay the 12b-1 fees to the
Distributor for distributing shares before the plan was terminated.
SHAREHOLDER SERVICING PLAN
The Funds have adopted a Shareholder Servicing Plan pursuant to which
it may pay a service fee at an annual rate of up to 0.25% of a Fund's average
daily net assets to various banks, trust companies, broker-dealers or other
financial organizations, including the Manager and its affiliates (collectively,
"Service Organizations"), that provide certain administrative and support
services to their customers who own shares of the Funds.
SUB-TRANSFER AGENCY PLAN
The Funds have adopted a Sub-Transfer Agency Plan pursuant to which it
may pay a fee at an annual rate of up to 0.25% of a Fund's average daily net
assets to Service Organizations that provide sub-transfer agency services to
their customers who own shares of the Funds.
The Glass-Steagall Act and other applicable laws provide that, among
other things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or part
of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by the Manager. The costs borne by the Funds include legal
and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian; transfer agent and sub-transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders
35
<PAGE> 44
of reports, proxies and prospectuses. Expenses of the Funds directly
attributable to the Fund are charged to that Fund; other expenses are allocated
proportionately among all of the Funds in relation to the net assets of each
Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Sub-Advisory Contracts, the Sub-Adviser places orders
for the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion. In effecting purchases and
sales of equity and debt securities for the account of the Funds, the
Sub-Adviser will seek the best execution of the Funds' orders. Purchase or sale
of equity securities will generally involve the payment of a commission to a
broker-dealer who executes the transaction on behalf of a Fund. Purchases and
sales of portfolio debt securities for the Funds are generally placed by the
Sub-Adviser with primary market makers for these securities on a net basis,
without any brokerage commission being paid by the Funds. Trading of portfolio
debt securities does, however, involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. As permitted by Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser may cause a Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to the Sub-Adviser an
amount of disclosed commissions for executing a securities transaction for the
Funds in excess of the commissions another broker-dealer would have charged if
the Sub-Adviser believes the commission paid is reasonable in relation to the
value of the brokerage and research services received by the Sub-Adviser.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Sub-Adviser. The Sub-Adviser may allocate purchase
and sales orders for portfolio securities to broker-dealers that are affiliated
with the Manager, the Sub-Adviser or Distributor in agency transactions, if the
Sub-Adviser believes the quality of the transaction and commissions are
comparable to what they would be with other qualified brokerage firms.
FUND SHARE VALUATION
The net asset value per share of the Funds is calculated at 4:00 p.m.
(Eastern time), Monday through Friday, on each day the New York Stock Exchange
is open for business (a "Business Day"). The net asset value per share of each
class is computed by dividing the value of the net assets of each class (i.e.,
the value of the assets less the liabilities) by the total number of outstanding
shares of each class. All expenses, including fees paid to the Manager, the
Administrator and the Distributor, are accrued daily and taken into account for
the purpose of determining the net asset value. Expenses directly attributable
to a Fund are charged to the Fund; other expenses are allocated proportionately
among each Fund within the Trust in relation to the net assets of each Fund, or
on another reasonable basis. These general expenses (e.g., liability insurance
premiums) are allocated among the Funds based on each Fund's relative net
assets. Within each class, the expenses are allocated proportionately based on
the net assets of each class, except class specific expenses which are allocated
directly to the respective class.
Securities listed on an exchange or over-the-counter are valued on the
basis of the last sale prior to the time the valuation is made. If there has
been no sale since the immediately previous valuation, then the average of the
last bid and asked prices is used. Quotations are taken from the exchange where
the security is primarily traded. Portfolio securities which are primarily
traded on foreign exchanges may be valued with the assistance of pricing
services and are generally valued at the preceding closing values of such
securities on their respective exchanges, except that when an occurrence
subsequent to the time a foreign security is valued is likely to have changed
such value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees. Securities for which market quotations are not readily available are
valued at
36
<PAGE> 45
fair value as determined in good faith by or at the direction of the Board of
Trustees. Notwithstanding the above, bonds and other fixed-income securities are
valued by using market quotations and may be valued on the basis of prices
provided by a pricing service approved by the Board of Trustees. All assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean between the bid and asked prices of such currencies
against U.S. dollars as last quoted by any major bank.
With respect to options contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by the
Fund is recorded as an asset and subsequently adjusted to market value.
PRICING OF FUND SHARES
Orders for the purchase of shares will be executed at the net asset
value per share plus any applicable initial sales charges (the "public offering
price") next determined after an order has been received.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in a Fund is $2,000 ($1,000 for an IRA
investment). Any subsequent investments must be at least $50, including an IRA
investment. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. A
separate application is required for an IRA. The Funds reserve the right to
reject any purchase order.
PURCHASE OF FUND SHARES
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Trust reserves the
right to reject any purchase. DST maintains records of each shareholder's
holdings of Fund shares, and each shareholder receives a statement of
transactions, holdings and dividends.
Additional shares may be purchased directly through the Fund or through
any dealer who has entered into an agreement with the Fund. The minimum
investment for subsequent purchases is $50.
All investments may be made using any of the following methods.
Through the Fund by Mail. A completed Account Application together with
a check payable to ING Funds Trust should be forwarded to ING Fund Services Co.,
LLC, P.O. Box 9690, Providence, RI 02940-9690. Purchases made by check in any
Fund are not permitted to be redeemed until payment of the purchase has been
collected, which may take up to fifteen calendar days. Third party and foreign
checks will not be accepted. Please include the Fund name and your account
number on all checks.
Investors who want to purchase additional shares must indicate their
account number and the name of the Fund being purchased. The remittance slip
from a confirmation statement should be used for this purpose and sent to the
Fund at the above address.
37
<PAGE> 46
Through an Authorized Broker or Investment Adviser. Shares are
available to new and existing shareholders through authorized brokers and
investment advisers. Authorized brokers and investment advisers may impose
additional requirements and charges for the services rendered.
Please contact your broker or investment adviser for instructions on
purchasing shares through their organization.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase shares by a Federal funds wire, please first contact ING Fund Services,
Inc. at 1-877-INFO-ING for wiring instructions and to obtain a fund account
number and reference number for the wire. The following wire instructions should
be used:
Bank Name
City, State
Beneficiary Bank ABA/Routing #:
Beneficiary Account Number:
Beneficiary Account Name:
Account Number:
OBI:
By Automated Clearing House: You can purchase additional Fund shares by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish this feature, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-877-INFO-ING. Once the form is completed,
returned, and updated to your account, you can initiate a purchase by contacting
1-877-INFO-ING with the amount of your purchase and an authorization to debit
your designated account will be issued. The debit to your bank account will
occur ordinarily within two banking days of your request.
PURCHASE PLANS
The Trust offers various purchase plans that make investing in
additional shares of the Funds more convenient than by mail or wire. The
following are the plans offered and the features of the plans. Please contact
ING Fund Services Co., LLC at 1-877-INFO-ING for the appropriate authorization
form. All purchase plans listed will not be offered to shareholders of Class X
shares.
ING AUTO-ASSET ACCUMULATION PLAN
This plan permits you to purchase Fund shares (minimum of $50.00 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Auto-Asset Accumulation Plan
account, you must file an authorization form with the Transfer Agent. You may
obtain the necessary authorization form by calling 1-877-INFO-ING. You may
cancel your participation in this Privilege or change the amount of purchase at
any time by mailing written
38
<PAGE> 47
notification to ING Fund Services Co., LLC, P.O. Box 9690, Providence, RI
02940-9690, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this plan at any time or charge a
service fee. No such fee currently is contemplated.
ING DIRECTED FEDERAL DEPOSIT PLAN
ING Directed Federal Deposit Plan enables you to purchase Fund shares
(minimum of $100.00 per transaction) by having Federal salary, Social Security,
or certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. To enroll in this Plan you must file with the Transfer
Agent a completed Directed Deposit Sign-Up Form for each type of payment that
you desire to include in this Plan. The appropriate form may be obtained by
calling 1-877-INFO-ING. Death or legal incapacity will terminate your
participation in this plan. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The Fund
may terminate your participation upon 30 days' notice to you.
ING SCHEDULED PAYROLL INVESTMENT PROGRAM
ING Scheduled Payroll Investment Program permits you to purchase Fund
shares (minimum of $100.00 per transaction) automatically on a regular basis.
Depending upon your employer's direct deposit program, you may have part or all
of you paycheck transferred to your existing ING account electronically through
the Automated Clearing House system at each pay period. To establish a ING
Scheduled Payroll Investment Program account, you must file an authorization
form with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to ING Fund Services Co., LLC. You may
obtain the necessary authorization form by calling 1-877-INFO-ING. You may
change the amount of purchase or cancel the authorization only by written
notification to your employer. It is the sole responsibility of your employer,
not the Distributor, the Trust, the Transfer Agent or any other person, to
arrange for transactions under the ING Scheduled Payroll Investment Program. The
Fund may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund offers investors the choice between multiple classes of
shares which offer differing sales charges and bear different expenses. These
alternatives permit an investor to choose the more beneficial method of
purchasing shares given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances. The "Highlights"
section of the Prospectus contains a summary of these alternative purchase
arrangements. A broker-dealer may receive different levels of compensation
depending on which class of shares is sold. The Distributor may also provide
additional compensation to dealers in connection with selling shares of the
Funds or for their own company-sponsored sales programs. Additional compensation
or assistance may be provided to dealers and includes payment or reimbursement
for educational, training and sales conferences or programs for their employees.
In some cases, this compensation may only be available to dealers whose
representatives have sold or are expected to sell significant amounts of shares.
The Distributor will make these payments from its own resources and none of the
aforementioned additional compensation is paid for by the applicable Fund or its
shareholders.
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<PAGE> 48
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
The public offering price of Class A shares is determined once daily,
by adding a sales charge to the net asset value per share of the shares next
calculated after receipt of the purchase order. The sales charges and
broker-dealer concessions, which vary with the size of the purchase, are shown
in the following table.
<TABLE>
<CAPTION>
SALES CHARGE AS
SALES CHARGE AS PERCENTAGE OF THE
PERCENTAGE OF THE NET AMOUNT BROKER-DEALER
AMOUNT OF SALE OFFERING PRICE INVESTED CONCESSION
- -------------- -------------- -------- ----------
<S> <C> <C> <C>
Less than $50,000 ............. 5.75% 6.10% 5.00%
$50,000 to $99,999 ............ 4.75% 4.99% 4.00%
$100,000 to $249,999 .......... 3.75% 3.90% 3.00%
$250,000 to $499,999 .......... 2.75% 2.83% 2.25%
$500,000 to $999,999 .......... 2.00% 2.04% 1.60%
$1,000,000 or more* ........... 0 0 1.00%
</TABLE>
- -------------
* The Fund imposes a contingent deferred sales charge in connection with
certain purchases of Class A shares of $1,000,000 or more. See
"Redemption--Contingent Deferred Sales Charge."
The above scale applies to purchase of Class A shares by the following:
(1) Any individual, his or her spouse, and their children under the age of 21,
and any of such persons' tax-qualified plans (provided there is only one
participant); (2) A trustee or fiduciary of a single trust estate or single
fiduciary account; and (3) Any organized group, provided that the purchase is
made by means which result in economy of sales effort or expenses, whether the
purchases are made through a central administrator, through a single
broker-dealer or by other means and the group has a tax identification number.
An organized group does not include clients of an investment adviser.
Rights of Accumulation. The initial sales charge for your investment in
Fund shares may also be reduced by aggregating the amount of such investment
with the current value of all Fund shares currently owned by you at the time of
your current purchase.
Letter of Intent ("LOI"). You may reduce the initial sales charge rate
that applies to your purchases of Class A shares by meeting the terms of an
LOI--a non-binding commitment to invest a certain amount within a thirteen-month
period from your initial purchase. The total amount of your intended purchases
of Class A, B, C and X shares will determine the reduced sales charge rate for
Class A shares purchased during that period. This can include purchases made up
to 90 days before the date of the LOI. Of the LOI amount, 5% will be held in
escrow to cover additional sales charges which may be due if your total
investments over the LOI period are not sufficient to qualify for a sales charge
reduction.
Waiver of All Class A Sales Charges. No sales charge is imposed on
sales of Class A shares for the following investors: (1) the Manager, its parent
company, any affiliate or subsidiary of the parent company;
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<PAGE> 49
(2) present or former officers, directors, trustees and employees (and their
parents, spouses and dependent children) of the Fund, the Manager (including,
its parent company or any affiliate or subsidiary of the parent company) or the
Sub-Adviser, and any retirement plans established by such entities for their
employees; (3) accounts with respect to which any person described in (2) above
acts as a custodian on behalf of a minor (including Uniform Gift to Minors Act
and Uniform Transfer to Minors Act accounts); (4) present employees (and their
parents, spouses and dependent children) of the Transfer Agent and the Funds' or
the Trust's legal counsel and administrator; (5) dealers that have a sales
agreement with the Distributor, if they purchase shares for their own accounts
or for retirement plans for their employees; (6) employees and registered
representatives (and their parents, spouses and dependent children) of dealers
or financial institutions that have entered into sales arrangements with such
dealers (and are identified to the Distributor) or with the Distributor; the
purchaser must certify to the Distributor at the time of purchase that the
purchase is for the purchaser's own account (or for the benefit of such
employee's parents, spouse, parents of spouse, or minor children); (7) dealers,
brokers, registered investment advisers or third-party administrators or
consultants that have entered into an agreement with the Distributor providing
specifically for the use of Fund shares in investment products or services made
available to their clients (those clients may be charged a transaction fee by
their dealer, broker or adviser for the purchase or sale of Fund shares); (8)
employees (and their parents, spouses and dependent children) of firms providing
the Funds, the Trust or their affiliates with regular legal, actuarial,
auditing, underwriting, claims, administrative, computer support, marketing,
office or other services; and (9) any Sub-Adviser of the Funds or the Trust.
Additionally, no sales charge is imposed on the following transactions:
(1) shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which a Fund is a party; (2) shares
purchased by the reinvestment of loan repayments by a participant in a
retirement plan; (3) shares purchased by the reinvestment of distributions
received from a Fund; (4) shares purchased and paid for with the proceeds of
shares redeemed in the prior 180 days from a mutual fund on which an initial
sales charge or CDSC was paid (other than a mutual fund managed by the Manager
or any of its affiliates); (5) purchases by a defined contribution plan under
section 401(a) of the Code (including 401(k) plans) with at least 25 eligible
employees; (6) purchases by a 403(b)(7) or 457 plan subject to the Employee
Retirement Income Security Act of 1974, as amended; (7) purchases by former
participants in a qualified retirement plan, where a portion of the plan was
invested in the Fund; (8) purchases by non-qualified deferred compensation
plans; and (9) purchases under arrangements between the Distributor and
organizations which make recommendations to or permit group solicitations of its
employees, members or participants.
In order for the above sales charge reductions or waivers to be
effective, the Transfer Agent must be notified of the reduction or waiver
request when the purchase order is placed. The Transfer Agent may require
evidence of your qualification for such reductions or waivers. Additional
information about the above sales charge reductions or waivers can be obtained
by calling 1-877-INFO-ING.
Conversion from Class B or X Shares. Class B or X shares will
automatically be converted to Class A shares (at net asset value) after eight
years.
Rule 12b-1 Fees. For each Fund, Class A shares are subject to a Rule
12b-1 fee payable at an annual rate of 0.50% of the average daily net assets of
the Fund attributable to such shares. For additional information, see
"Management--Distribution Expenses."
Deferred Sales Charges. Although there is no initial sales charge on
purchases of Class A shares of $1,000,000 or more, the Distributor pays
broker-dealers out of its own assets, a fee of up to 1% of the offering price
41
<PAGE> 50
of such shares. If these shares are redeemed within 12 months, the redemption
proceeds will be reduced by 1.00%. The Class A CDSC will be assessed on the
lesser of the net asset value of the shares at the time of redemption or the
original amount invested. The Class A CDSC is not imposed on the amount of any
increase in your account value over the initial amount invested.
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating
$1 million or more will be waived in the following cases if shares are redeemed
and the Transfer Agent is notified: (1) redemption of shares when a Fund
exercises its right to liquidate accounts which are less than the minimum
account size; (2) redemption to pay for optional insurance coverage described in
the Prospectus under "Optional Benefits"; (3) the death or post-purchase
disability, as defined in Section 72(m)(7) of the Code (if satisfactory evidence
is provided to the Fund); (4) the portion of a mandated minimum distribution
from an IRA, SIMPLE IRA or an individual type 403(b)(7) plan equal to the
percentage of your plan assets held in Class A shares of the Fund; (5)
reinvested dividends and capital gains and (6) a Systematic Withdrawal Plan of
10% per year where the minimum distribution is $500 per month with an initial
account of $20,000 or greater.
CLASS B AND X SHARES--CONTINGENT DEFERRED SALES CHARGE ALTERNATIVES
Class B Shares. The public offering price of Class B shares is the net
asset value of the applicable Fund's shares. Such shares are sold without an
initial sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC will be imposed if shares are redeemed within six
years of purchase. The Class B CDSC will not apply to redemptions of shares
purchased by the reinvestment of dividends or capital gains distributions and
may be waived under certain circumstances described below. The Class B CDSC will
be assessed on the lesser of the net asset value of the shares at the time of
redemption or the original amount invested. The Class B CDSC is not imposed on
the amount of any increase in your account value over the initial amount
invested. The Class B CDSC is paid to the Distributor to reimburse expenses
incurred in providing distribution-related services to the Fund in connection
with the sale of Class B shares. Although Class B shares are sold without an
initial sales charge, the Distributor normally pays a sales commission of 4.00%
of the purchase price of Class B shares to the dealer from its own resources at
the time of the sale. The Distributor has assigned its right to receive any
Class B CDSC, as well as any distribution and service fee to an unaffiliated
third party that provides funding for up-front sales commission payments.
To determine whether the Class B CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares held for over six
years; and (3) shares in the order they were purchased (such that shares held
the longest are redeemed first). The amount of the Class B CDSC will depend on
the number of years since the time you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class B CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
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<PAGE> 51
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class B shares, such as the
payment of compensation to selected broker-dealers, and for selling such shares.
The combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell such
shares without deduction of a sales charge at the time of purchase. Although
such shares are sold without an initial sales charge, the Distributor pays a
dealer concession equal to 4.00% of the amount invested to broker-dealers who
sell Class B shares.
Waiver of Class B CDSC. The Class B CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class B
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B shares are subject to higher annual Rule
12b-1 fees as described below.
Class X Shares. Class X shares are currently only offered to certain
"Qualified" purchasers (including, but not limited to, IRAs, Roth IRAs,
Education IRAs, SEP IRAs, SIMPLE IRAs and 403(b)(7) plans). Any request for
"Non-Qualified" purchases of Class X shares up to $1,000,000 will normally be
considered as a purchase request for Class B shares or declined. Any request for
"Non-Qualified" purchases of Class X shares above $1,000,000 will be
considered as a purchase request for Class A shares or declined. Because it is
more advantageous for an investor to purchase Class A shares for amounts in
excess of $1,000,000, a request to purchase Class X shares for $1,000,000 or
more will normally be considered as a purchase request for Class A shares or
declined.
The public offering price of Class X shares is the net asset value of
the applicable Fund's shares. In addition, investors purchasing Class X shares
will receive, as a bonus, additional shares having a value equal to 2.50% of the
amount invested ("Bonus Shares"). The Distributor has undertaken to pay for
Bonus Shares as part of its services to the Funds. The Distributor expects to
recover costs associated with its purchases of Bonus Shares through fees
received under the Class X Distribution and Service Plan discussed below. Shares
purchased by the reinvestment of dividends or capital gains distributions are
not eligible for Bonus Shares.
Although Class X shares are sold without an initial sales charge, if
Class X shares are redeemed within six years of their purchase, a CDSC will be
deducted from the redemption proceeds. The Class X CDSC will not apply to
redemptions of Bonus Shares or shares purchased by the reinvestment of dividends
or capital gains distributions and may be waived under certain circumstances
described below. The Class X CDSC will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original amount
invested. The Class X CDSC is not imposed on the amount of any increase in your
account value over the initial amount invested. The Class X CDSC is paid to the
Distributor to reimburse expenses incurred in providing distribution-related
services to the Fund in connection with the sale of Class X shares. Although
Class X shares are sold without an initial sales charge, the Distributor
normally pays a sales commission of 4.00% of the purchase price of Class X
shares to the dealer from its own resources at
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<PAGE> 52
the time of the sale. The Distributor has assigned its right to receive any
Class X CDSC, as well as any distribution and service fee to an unaffiliated
third party that provides funding for up-front sales commission payments.
To determine whether the Class X CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares (including Bonus Shares)
held for over six years; (3) shares (not including Bonus Shares) in the order
they were purchased (such that shares held the longest are redeemed first); and
(4) Bonus Shares in the order they were acquired (such that Bonus Shares held
the longest are redeemed first). The amount of the Class X CDSC will depend on
the number of years since the time you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class X CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
Waiver of Class X CDSC. The Class X CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts
which are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of
the Code (if satisfactory evidence is provided to the Fund); (4) the portion
of a mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class X
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution
is $500 per month with an initial account of $20,000 or greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B and X shares are subject to higher annual Rule
12b-1 fees as described below.
Rule 12b-1 Fees. Class B and X shares are subject to a Rule 12b-1 fee
payable at an annual rate of 0.75% of the average daily net assets of the Fund
attributable to such shares. The higher Rule 12b-1 fee will cause Class B and X
shares to have a higher expense ratio and to pay lower dividends than Class A
shares. For additional information about this fee, see "Management--Distribution
Expenses."
Conversion to Class A Shares. Eight years after you purchase Class B
or X shares of a Fund, those shares will automatically convert to Class A shares
of that Fund. This conversion feature relieves Class B and X shareholders of the
higher asset-based distribution charges that applies to these shares. The
conversion is based on the relative net asset value, and no sales load or other
charge is imposed. At the time of conversion, a portion
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<PAGE> 53
of the Class B or Class X shares, as applicable, purchased through the
reinvestment of dividends or capital gains ("Dividend Shares") will also convert
to Class A shares. The portion of Dividend Shares that will convert is
determined by the ratio of your converting Class B or X non-Dividend Shares to
your total Class B or X non-Dividend Shares. Under Section 1036 of the Code, the
automatic conversion of Class X shares will not result in a gain or loss to the
Fund or to affected shareholders.
CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE
The public offering price of Class C shares is the net asset value of
such shares. Class C shares are sold without an initial sales charge so that the
applicable Fund receives the full amount of the investor's purchase. While Class
C shares do not convert to Class A shares, they are subject to a lower
contingent deferred sales charge (1.00%) and do not have to be held for as long
a time (one year) as Class B or X shares to avoid paying a contingent deferred
sales charge. For additional information, see "Redemption--Contingent Deferred
Sales Charge." In addition, Class C shares are subject to higher annual Rule
12b-1 fees as described below. Class C shares do not convert to Class A shares.
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers, and for selling Class C
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Fund to
sell the Class C shares without deduction of a sales charge at the time of
purchase. Although Class C shares are sold without an initial sales charge, the
Distributor pays a dealer concession equal to 1.00% of the amount invested to
broker-dealers who sell Class C shares at the time the shares are sold and an
annual fee of 1.00% of the amount invested that begins to accrue one year after
the shares are sold.
Waiver of Class C CDSC. The Class C CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class C
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
Rule 12b-1 Fees. For each Fund, Class C shares are subject to a Rule
12b-1 fee payable at an annual rate of 0.75% of the average daily net assets
of the Fund attributable to such shares. The higher Rule 12b-1 fee will cause
Class C shares to have a higher expense ratio and to pay lower dividends than
Class A shares. For additional information about this fee, see
"Management--Distribution Expenses."
MINIMUM ACCOUNT BALANCE
If (1) an account opened in a fund has been in effect for at least one
year and the shareholder has not made an additional purchase in that account
within the preceding six calendar months and (2) the value of such account drops
below $500 for three consecutive months as a result of redemptions or exchanges,
the fund has the right to redeem the account, after giving the shareholder 60
days' prior written notice, unless the shareholder makes additional investments
within the notice period to bring the account value up to $500.
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<PAGE> 54
If a fund determines that a shareholder has provided incorrect information in
opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. In addition, an IRA
may be established through a custodial account with Investors Fiduciary Trust
Co. Completion of a special application is required in order to create such an
account, and the minimum initial investment for an IRA is $1,000.
Contributions to IRAs are subject to prevailing amount limits set by the
Internal Revenue Service. For more information and IRA information, call the
Funds at 1-877-INFO-ING. Additional account level fees may be imposed for IRA
accounts.
OPTIONAL BENEFITS
ING Group or its affiliates -- each an "affiliated person" of the Trust
and the Manager within the meaning of the 1940 Act -- may make certain life
insurance coverage available to certain persons on whose behalf shares of the
Funds are purchased. The benefits of this coverage payable at death will be
related to the amounts paid to purchase shares and to the value of the shares
held for the benefit of the insured persons.
Therefore, coverage will terminate if all shares are redeemed.
Purchasers of the life insurance coverage will be required to authorize
periodic redemptions of Fund shares to pay the premiums for such coverage. Such
redemptions will not be subject to contingent deferred sales charges, but will
have the same tax consequences as any other Fund redemptions.
The above life insurance coverage will be available to eligible persons
who enroll for the coverage within a limited time period after shares in any
Fund are initially purchased or transferred. In addition, coverage cannot be
made available unless ING Group knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides ING Group with information
regarding the beneficial owners of such shares. Other restrictions on the
coverage will apply, such as the age of the persons upon whose life the coverage
is issued. This insurance coverage may not be available in all states and may be
subject to additional restrictions or limitations on coverage. Purchasers of
shares should also make themselves familiar with the impact on the life coverage
of purchasing additional shares, reinvestment of dividends and capital gains
distributions and redemptions. Please call 1-800-INFO-ING for more information
and application forms for any of the above programs and privileges.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day
the Fund is valued. Shares will be redeemed without charge (except any
applicable contingent deferred sales charge) at the net asset value next
determined after a redemption request in good order has been received by the
applicable Fund. See "DETERMINATION OF NET ASSET VALUE" in the SAI.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
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<PAGE> 55
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 calendar days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the shares are redeemed, dividends on the shares will continue to
accrue and be payable and the shareholder will be entitled to exercise all other
beneficial rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds
by check to the shareholder at the address of record on the next business day.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. No
interest or additional dividends will be earned on amounts represented by
uncashed redemption checks or misapplied wire payments.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the Trust, the Distributor, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of
ING Funds. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the
Securities and Exchange Commission ("SEC"), and further provided that such
guarantor institution is listed in one of the reference guides contained in the
Transfer Agent's current Signature Guarantee Standards and Procedures, such as
certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact ING Fund
Services, Inc.
Redemption Methods. To ensure acceptance of your redemption request, it
is important to follow the procedures described below. Although the Funds have
no present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Funds may modify or terminate their
services and provisions at any time. If the Funds terminate any particular
service, they will do so only after giving written notice to shareholders.
Redemption by mail will always be available to shareholders.
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You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your authorized broker or
investment adviser or Service Organization and instructing him or her to redeem
your shares. He or she will then contact ING Fund Services Co., LLC and place
a redemption trade on your behalf.
By Mail. You may redeem your shares by sending a letter directly to ING
Fund Services. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming shares; (ii)
your account number; (iii) the amount to be redeemed and (iv) the signatures of
all registered owners. A signature guarantee may be required as indicated in the
beginning of this section. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your shares by calling the Funds at 1-
877-INFO-ING. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Funds. Telephone redemptions are available unless the shareholder
specifically declines this option on the Purchase Application and may only be
sent to the address of record or preassigned wire instructions. The Funds employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Funds fail to employ such reasonable procedures, they may be
liable for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, the Funds require some form of personal
identification prior to acting upon instructions received by telephone, record
telephone instructions and provide written confirmation to investors of such
transactions. Telephone redemptions will be suspended for a period of 10 days
following a telephone address change. You may instruct the Funds to send your
redemption proceeds via a wire transmission to your personal bank. Your
instructions should include: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed.
Wire redemptions can be made only if the "yes" box has been checked in
the "Telephone Redemption Authorization" section on your Purchase Application,
and you have attached a copy of a voided check or a letter summarizing the
wiring instructions of the account where proceeds are to be wired. Your bank may
charge you a fee for receiving a wire payment on your behalf.
The above-mentioned redemption services may not be available for
clients of authorized brokers, investment advisers or Service Organizations or
for IRAs. These clients should contact their representative.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $10,000 or more of a Fund may elect to have periodic
redemptions from his or her account to be paid on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic payment is $50. A sufficient
number of shares to make the scheduled redemption will normally be processed
on the selected day of the selected month(s). Depending on the size of the
payment requested and fluctuation in the net asset value, if any, of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account. A shareholder may request that these payments be sent to a
predesignated bank or other designated
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party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
ING "BANK TO BANK" TRANSFER PLAN
You may request by telephone that redemption proceeds (maximum $500 per
day) be transferred between your Fund account and your bank account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House member may be designated. Redemption proceeds will be on deposit
in your account at an Automated Clearing House member bank ordinarily two days
after receipt of the redemption request. Holders of jointly registered Fund or
bank accounts may redeem through the plan for transfer to their bank account
not more than $250,000 within any 30-day period.
REDEMPTION IN KIND
All redemptions of shares of the Funds shall be made in cash, except
that the commitment to redeem shares in cash extends only to redemption requests
made by each shareholder of a Fund during any 90-day period of up to the lesser
of $250,000 or 1% of the net asset value of that Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC and
is a fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Funds make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities he or she may receive more or less
than the value of such securities as determined above, and might incur brokerage
charges.
Reinstatement Privilege (Class A shares only). Within 90 days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any ING Fund at the net asset value next computed after
receipt by the Transfer Agent of the funds to be reinvested; provided, however,
if the redemption was made from Class A shares of the Intermediate Bond Fund,
High Yield Bond Fund, International Bond Fund, Mortgage Income Fund or National
Tax-Exempt Bond Fund, U.S. Treasury Money Market Fund or Money Market Fund, the
reinvested proceeds will be subject to the difference in sales charge between
the shares redeemed and the shares the proceeds are reinvested in. The
shareholder must ask the Transfer Agent for such privilege at the time of
reinvestment. A realized gain on the redemption is taxable, and reinvestment may
alter any capital gains payable. If there has been a loss on the redemption and
shares of the same fund are repurchased, all of the loss may not be tax
deductible, depending on the timing and amount reinvested. Under the Code, if
the redemption proceeds of fund shares on which a sales charge was paid are
reinvested in (or exchanged for) shares of another ING Fund at a reduced sales
charge within 90 days of the payment of the sales loss or increasing the gain
recognized from the redemption; however, the shareholder's basis in the fund
shares purchased will include the sales charge. Each ING Fund may amend, suspend
or cease offering this privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation. This privilege may only be
exercised once each year by a shareholder with respect to each ING Fund.
Shareholders who are assessed a contingent deferred sales charge in
connection with the redemption of Class A shares and who subsequently reinvest a
portion or all of the value of the redeemed shares in Class A shares of any ING
Fund within 90 days after such redemption may do so at net asset value if such
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privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B, C or X shares.
EXCHANGE OF FUND SHARES
The Funds offer several convenient ways to exchange shares in one Fund
for shares in the same class of another Fund in the Trust. Before engaging in an
exchange transaction, a shareholder should read carefully the Prospectus
describing the Fund into which the exchange will occur, which is available
without charge and can be obtained by writing to ING Funds Trust, [address], or
by calling the Funds at 1-877-INFO-ING. A shareholder may not exchange shares
of one Fund for shares of another Fund if the new Fund is not qualified for sale
in the state of the shareholder's residence. The Trust may terminate or amend
the terms of the exchange privilege at any time upon at least 60 days' prior
written notice to shareholders of any modification or termination of the
exchange privilege.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in good order, plus any applicable sales
charge.
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders will receive written confirmation of the
exchange following completion of the transaction.
EXCHANGE BY MAIL
To exchange Fund shares by mail, simply send a letter of instruction to
the Fund. The letter of instruction must include: (i) your account number; (ii)
the Fund from and the Fund into which you wish to exchange your investment;
(iii) the dollar or share amount you wish to exchange; and (iv) the signatures
of all registered owners or authorized parties.
EXCHANGE BY TELEPHONE
To exchange Fund shares by telephone or if you have any questions
simply call the Funds at 1-877-INFO-ING. You should be prepared to give the
telephone representative the following information: (i) your account number,
social security or tax identification number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. Telephone
exchanges are available unless the shareholder specifically declines this option
on the Purchase Application. Telephone exchanges will be suspended for a period
of ten days following a telephone address change. See "REDEMPTION OF FUND
SHARES--By Telephone" for a discussion of telephone transactions generally.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of the
Fund, in shares of certain other funds in the ING Family of Funds of which you
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are a shareholder. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sale load may be charged with respect to exchanges into
funds sold with a sales load. See "Shareholder Services" in the SAI. The right
to exercise this privilege may be modified or canceled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this privilege at
any time by mailing written notification to the ING Fund Services Co., LLC,
P.O. Box 9690, Providence, RI 02940-9690. The Fund may charge a service fee
for the use of this privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the ING Family of
Funds eligible to participate in this privilege, or to obtain a Auto-Exchange
Authorization Form, please call toll free 1-877-INFO-ING.
ING AUTOMATIC DIVIDEND DIRECTION OPTION
This option enables you to invest automatically dividend and/or capital
gain distributions, if any, paid by the Fund in shares of another Fund in the
Trust of which you are a shareholder. Shares of the other Fund will be
purchased at the then-current net asset value. If you are investing in a
Fund that charges a contingent deferred sales charge, if any, applicable to the
purchased shares. See "Shareholder Services" in the Statement of Additional
Information. ING Automatic Dividend Direction Option permits you to transfer
electronically dividend and/or capital gain distributions, if any, from the Fund
to a designated bank account. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so designated.
Banks may charge a fee for this service.
CONTINGENT DEFERRED SALES CHARGE
CLASS A
Each Fund imposes a contingent deferred sales charge on Class A shares
in certain circumstances. Under the CDSC arrangement, for sales of shares of
$1,000,000 or more (including right of accumulation and statements of intention
(see "Purchase of Fund Shares")), the front-end sales charge ("FESC") will not
be imposed (although the Distributor intends to pay its registered
representatives and other dealers that sell Fund shares, out of its own assets,
a fee of up to 1% of the offering price of such sales except on purchases exempt
from the FESC). However, if such shares are redeemed within twelve months after
their purchase date (the "CDSC Period"), the redemption proceeds will be reduced
by the 1.00% CDSC.
The CDSC will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original amount invested. The CDSC is
not imposed on the amount of any increase in your account value over the initial
amount invested. The CDSC will not be applied to shares acquired through
reinvestment of income dividends or capital gain distributions or shares held
for longer than the applicable CDSC Period. In determining which shares to
redeem, unless instructed otherwise, shares that are not subject to the CDSC
will be redeemed first and shares subject to the CDSC then will be redeemed in
the order purchased.
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating $1
million or more will be waived in the following cases if shares are redeemed and
the Transfer Agent is notified: (1) redemption of shares when a Fund exercises
its right to liquidate accounts which are less than the minimum account size;
(2) redemption to pay for optional insurance coverage described in the
Prospectus under "Optional Benefits"; (3) the death or post-purchase disability,
as defined in Section 72(m)(7) of the Code (if satisfactory evidence is provided
to the Fund); (4) the portion of a mandated minimum
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distribution from an IRA, SIMPLE IRA or an individual type 403(b)(7) plan equal
to the percentage of your plan assets held in Class A shares of the Fund; (5)
reinvested dividends and capital gains and (6) a Systematic Withdrawal Plan of
10% per year where the minimum distribution is $500 per month with an initial
account of $20,000 or greater.
CLASS B, X, AND C SHARES
The CDSC on Class B, X, and C shares will be calculated on the lesser
of the net asset value of the shares at the time of redemption or the original
amount invested. The CDSC is not imposed on the amount of any increase in your
account value over the initial amount invested. No charge will be assessed on
shares derived from reinvestment of dividends or capital gains distributions or
on shares held for longer than the applicable CDSC Period.
Upon any request for redemption of shares of any class of shares that
imposes a CDSC, it will be assumed, unless otherwise requested, that shares
subject to no CDSC will be redeemed first in the order purchased and all
remaining shares that are subject to a CDSC will be redeemed in the order
purchased. With respect to the redemption of shares subject to no CDSC where the
shareholder owns more than one class of shares, those shares with the highest
Rule 12b-1 fee will be redeemed in full prior to any redemption of shares with a
lower Rule 12b-1 fee.
The CDSC does not apply to: (1) redemption of shares when a Fund
exercises its right to liquidate accounts which are less than the minimum
account size; (2) redemption to pay for optional insurance coverage described in
the Prospectus under "Optional Benefits"; (3) redemptions following death or
post-purchase disability (as defined by Section 72(m)(7) of the Code); (4) the
portion of a mandated minimum distribution from an IRA, SIMPLE IRA or an
individual type 403(b)(7) plan equal to the percentage of your plan assets held
in the applicable Class of shares of the Fund; (5) reinvested dividends and
capital gains; and (6) a Systematic Withdrawal Plan of 10% per year where the
minimum distribution is $500 per month with an initial account of $20,000 or
greater.
As an illustration of CDSC calculations, assume that Shareholder X
purchases on Year 1/Day 1 100 shares at $10 per share. Assume further that, on
Year 2/Day 1, Shareholder X purchased an additional 100 shares at $12 per share.
Finally, assume that, on Year 3/Day 1, Shareholder X wishes to redeem shares
worth $1,300, and that the net asset value per share as of the close of business
on such day is $13. To effect Shareholder X's redemption request, 100 shares at
$13 per share (totaling $1,300) would be redeemed. The CDSC would be waived in
connection with the redemption of that number of shares equal in value (at the
time of redemption) to $220 (10% of $1,000--the purchase amount of the shares
purchased by Shareholder X on Year 1/Day 1--plus 10% of $1,200--the purchase
amount of the shares purchased by Shareholder X on Year 2/Day 1). In addition,
no CDSC would apply to the $400 in capital appreciation on Shareholder X's
shares ($2,600 Year 3 value minus $2,200 purchase cost of shares). If a
shareholder exchanges shares subject to a CDSC for Class B, X, or C shares of a
different Fund, the transaction will not be subject to a CDSC. However, when
shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC
Period and applying the CDSC.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
Each Fund intends to qualify and elect to be treated as a regulated
investment company and intends to continue to qualify to be treated as a
regulated investment company for each taxable year pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying and electing,
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each Fund generally will not be subject to Federal income tax to the extent that
it distributes investment company taxable income and net realized capital gains
in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all
of its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). The Funds will pay those dividends annually, except for the ING
Growth and Income Fund and the ING Balanced Fund, which will pay dividends
quarterly. Each Fund intends to distribute, at least annually, substantially all
net capital gains (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
The amount declared each day as a dividend may be based on projections
of estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
For all distributions, the shareholder may elect in writing, not less
than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
period will be paid within five business days after the end of the period.
Unless the shareholder chooses to receive dividend and/or capital gain
distributions in cash, distributions will be automatically reinvested in
additional shares of the respective Fund at net asset value. If you elect to
receive distributions in cash and checks (1) if returned and marked as
"undeliverable" or (2) remain uncashed for six months, your cash election will
be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a
dividend payment date will be entitled on the next dividend payment date to all
dividends declared but unpaid on those shares at the time of their redemption.
Distributions of net investment company taxable income (regardless of
whether derived from dividends, interest or short-term capital gains) generally
will be taxable to shareholders as ordinary income. Distributions of net
long-term capital gains designated by a Fund as capital gain distributions will
be taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares. This is true for distributions from net gains on
securities held for more than one year, but not more than 18 months, and from
net gains on securities held more than 18 months. Distributions are taxable in
the same manner whether received in additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution will be treated as paid on December 31 of the calendar
year if it is declared by a Fund during October, November, or December of that
year to shareholders of record in such a month and paid by a Fund during January
of the following calendar year. Such distributions will be treated as received
by shareholders (and therefore taxable) in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
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Special tax rules may apply to a Fund's acquisition of financial
futures contracts, forward contracts, and options on futures contracts. Such
rules may, among other things, affect whether gains and losses from such
transactions are considered to be short-term or long-term, may have the effect
of deferring losses and/or accelerating the recognition of gains or losses, and,
for purposes of qualifying as a regulated investment company, may limit the
extent to which a Fund may be able to engage in such transactions.
It is expected that dividends and interest from non-U.S. sources
received by a Fund will be subject to non-U.S. withholding taxes. Such
withholding taxes may be reduced or eliminated under the terms of applicable
United States income tax treaties, and the Fund intends to undertake any
procedural steps required to claim the benefits of such treaties. With respect
to any non-U.S. taxes (including withholding taxes) actually paid by the Fund,
if more than 50% in value of the Fund's total assets at the close of any taxable
year consists of stocks or securities of any non-U.S. corporations, the Fund may
elect to treat any non-U.S. taxes paid by it as paid by its shareholders. If the
Fund does not make the election permitted under Section 853, any foreign taxes
paid or accrued will represent an expense to the Fund which will reduce its
investment company taxable income. Absent this election, shareholders will not
be able to claim either a credit or a deduction for their pro rata portion of
such taxes paid by the Fund, nor will shareholders be required to treat as part
of the amounts distributed to them their pro rata portion of such taxes paid.
In the event a Fund makes the election described above to pass through
non-U.S. taxes to shareholders, shareholders will be required to include in
income (in addition to any distributions received) their proportionate portion
of the amount of non-U.S. taxes paid by the Fund and will be entitled to claim
either a credit or deduction for their portion of such taxes in computing their
U.S. Federal income tax liability. Availability of such a credit or deduction is
subject to certain limitations. Shareholders will be informed each year in which
the Fund makes the election regarding the amount and nature of foreign taxes to
be included in their income for U.S. Federal income tax purposes.
A Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term generally depending upon the shareholder's holding
period of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of a Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term capital loss to the extent of
such capital gain dividends.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
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Shareholders will be notified annually by the Funds as to the Federal
tax status of distributions made by the Funds in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisers as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
The following is a description of investment practices of the Funds and
the securities in which they may invest:
U.S. Treasury Obligations (All Funds). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the
United States Government as to the timely payment of principal and interest.
U.S. Treasury obligations consist of bills, notes, and bonds and separately
traded interest and principal component parts of such obligations known as
STRIPS which generally differ in their interest rates and maturities. U.S.
Treasury bills, which have original maturities of up to one year, notes, which
have maturities ranging from one year to 10 years, and bonds, which have
original maturities of 10 to 30 years, are direct obligations of the United
States Government.
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the United States Government or U.S. Treasury
guarantees, such as mortgage-backed certificates guaranteed by the Government
National Mortgage Association ("GNMA"). Other types of U.S. Government
securities, such as obligations of the Student Loan Marketing Association,
provide recourse only to the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States Government, the investor must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and United States Government agencies
and instrumentalities, subject to the rating requirements specified for each
Fund.
Corporate Debt Securities (All Funds). The Funds may purchase corporate
debt securities, subject to the rating and quality requirements specified with
respect to each Fund. The Funds may invest in both rated commercial paper and
rated corporate debt obligations of foreign issuers that meet the same quality
criteria applicable to investments by the Funds in commercial paper and
corporate debt obligations of domestic issuers. These investments, therefore,
are not expected to involve significant additional risks as compared to the
risks of investing in comparable domestic securities. Generally, all foreign
investments carry with them both opportunities and risks not applicable to
investments in securities of domestic issuers, such as risks of foreign
political and economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital, changes in foreign governmental attitudes
toward private investment (possibly leading to nationalization, increased
taxation or confiscation of foreign assets) and
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added difficulties inherent in obtaining and enforcing a judgment against a
foreign issuer of securities should it default.
Mortgage-Related Securities (All Funds). The Funds are permitted to
invest in mortgage-related securities subject to the rating and quality
requirements specified with respect to each such Fund. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect, "passing through" monthly payments made by the individual
borrowers on the mortgage loans which underlie the securities (net of fees paid
to the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure, net of fees and
costs which may be incurred) may expose a Fund to a lower rate of return upon
reinvestment of principal. Also, if a security subject to prepayment has been
purchased at a premium, in the event of prepayment the value of the premium
would be lost. As with other fixed-income securities, when interest rates
rise, the value of mortgage-related securities generally will decline; however,
when interest rates decline, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
In recognition of this prepayment risk to investors, the Public Securities
Association (the "PSA") has standardized the method of measuring the rate of
mortgage loan principal prepayments. The PSA formula, the Constant Prepayment
Rate or other similar models that are standard in the industry will be used by
the Funds in calculating maturity for purposes of investment in mortgage-related
securities. The inverse relation between interest rates and value of fixed
income securities will be more pronounced with respect to investments by the
Fund in mortgage-related securities, the value of which may be more sensitive to
interest rate changes.
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by GNMA or guaranteed by agencies or instrumentalities of
the U.S. Government (in the case of securities guaranteed by the Federal
National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported in various
forms of insurance or guarantees issued by governmental entities.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments
with characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured in multiple
classes, with each class bearing a different stated maturity or interest rate.
The inverse relation between interest rates and value of fixed income securities
will be more pronounced with respect to investments by the Fund in
mortgage-related securities, the value of which may be more sensitive to
interest rate changes.
Asset-Backed Securities (ING Growth and Income Fund, ING Balanced
Fund and ING Emerging Markets Equity Fund). These Funds are permitted to invest
in asset-backed securities, subject to the rating and quality requirements
specified with respect to each such Fund. Through the use of trusts and special
purpose subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above.
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Consistent with the Funds' investment objectives, policies and quality
standards, a Fund may invest in these and other types of asset-backed securities
which may be developed in the future.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities. The risks associated with
asset-backed securities are often reduced by the addition of credit enhancements
such as a letter of credit from a bank, excess collateral or a third-party
guarantee.
Common Stocks (All Funds). Common stock represents the residual
ownership interest in the issuer after all of its obligations and preferred
stocks are satisfied. Common stock fluctuates in price in response to many
factors, including historical and prospective earnings of the issuer, the value
of its assets, general economic conditions, interest rates, investor perceptions
and market volatility.
Preferred Stocks (All Funds). Preferred stock has a preference over
common stock in liquidation and generally in dividends as well, but is
subordinated to the liabilities of the issuer in all respects. Preferred stock
may or may not be convertible into common stock. As a general rule, the market
value of preferred stock with a fixed dividend rate and no conversion element
varies inversely with interest rates and perceived credit risk. Because
preferred stock is junior to debt securities and other obligations of the
issuer, deterioration in the credit quality of the issuer will cause greater
changes in the value of a preferred stock than in a more senior debt security
with similar stated yield characteristics.
Real Estate Investment Trusts (All Funds). The ING Global Real Estate
Fund will invest in shares of real estate investment trusts ("REITs"). REITs
pool investors' funds for investment primarily in income producing real estate
or real estate related loans or interests. Under the Internal Revenue Code of
1986 (the "Code"), a REIT is not taxed on income it distributes to its
shareholders if it complies with several requirements relating to its
organization, ownership, assets, and income and a requirement that it generally
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year. REITs can generally be classified as
Equity REITs, Mortgage REITs, and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both Equity
REITs and Mortgage REITs.
Depositary Receipts (All Funds). American Depositary Receipts ("ADRs")
are U.S. dollar-denominated receipts generally issued by domestic banks, which
evidence the deposit with the bank of the common stock of a foreign issuer and
which are publicly traded on exchanges or over-the-counter in the United States.
These Funds may each invest in both sponsored and unsponsored ADR
programs. There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depository and the shareholder. The company issuing the
stock underlying the ADR pays nothing to establish
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the unsponsored facility, as fees for ADR issuance and cancellation are paid by
brokers. Investors directly bear the expenses associated with certificate
transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be several depositories
with no defined legal obligations to the non-U.S. company. The duplicate
depositories may lead to marketplace confusion because there would be no central
source of information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in
purely domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards (and certain currencies may become unavailable for transfer
from a foreign currency), resulting in a Fund's possible inability to convert
proceeds realized upon the sale of portfolio securities of the affected foreign
companies immediately into U.S. currency. The ING International Equity,
ING Emerging Markets Equity and ING European Equity Funds may also invest in
European Depository Receipts ("EDRs") and Global Depositary Receipts
("GDRs"). EDRs are receipts issued in bearer form by a European financial
institution and traded in European securities' markets. GDRs are receipts issued
globally. EDRs are designed for trading in European Markets and GDRs are
designed for trading in non-U.S. securities markets. Investments in EDRs and
GDRs involve similar risks as ADRs.
Investment in Foreign Securities (All Funds). These Funds may each
invest in securities of foreign governmental and private issuers. Investments in
foreign securities involve certain considerations that are not typically
associated with investing in domestic securities. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
issuers. In addition, with respect to certain foreign countries, interest may be
withheld at the source under foreign income tax laws, and there is a possibility
of expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in securities of
issuers located in those countries.
Convertible and Exchangeable Securities (All Funds). The Funds are
permitted to invest in convertible and exchangeable securities, subject to the
rating and quality requirements specified with respect to each such Fund.
Convertible securities generally offer fixed interest or dividend yields and may
be converted either at a stated price or stated rate for common or preferred
stock. Exchangeable securities may be exchanged on specified terms for common or
preferred stock. Although to a lesser extent than with fixed income securities
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion or exchange feature, the market
value of convertible or exchangeable securities tends to vary with fluctuations
in the market value of the underlying common or preferred
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stock. Debt securities that are convertible into or exchangeable for preferred
or common stock are liabilities of the issuer but are generally subordinated to
senior debt of the issuer.
Domestic and Foreign Bank Obligations (All Funds). These obligations
include but are not restricted to certificates of deposit, commercial paper,
Yankee dollar certificates of deposit, bankers' acceptances, Eurodollar
certificates of deposit and time deposits, promissory notes and medium-term
deposit notes. The Funds will not invest in any obligations of their affiliates,
as defined under the 1940 Act.
Each Fund limits its investment in United States bank obligations to
obligations of United States banks (including foreign branches). Each Fund
limits its investment in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of the Sub-Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds. There is no limitation on the amount of the Funds'
assets which may be invested in obligations of foreign banks meeting the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may
be subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing in more than seven days may not exceed 15% of the value of the net
assets of the Funds.
Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankee dollar obligations involve
additional risks. Most notably, there generally is less publicly available
information about foreign companies; there may be less governmental regulation
and supervision; they may use different accounting and financial standards; and
the adoption of foreign governmental restrictions may adversely affect the
payment of principal and interest on foreign investments. In addition, not all
foreign branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
STRIPS and Zero Coupon Securities (All Funds). Each Fund may invest in
separately traded principal and interest components of securities backed by the
full faith and credit of the United States Treasury. The principal and interests
components of United States Treasury bonds with remaining maturities of longer
than ten years are eligible to be traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are separately
issued by the United States Treasury at the request of depository financial
institutions, which then trade the component parts
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separately. The interest component of STRIPS may be more volatile than that of
United States Treasury bills with comparable maturities. The Funds will not
actively trade in STRIPS.
The Funds may invest in zero coupon securities. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to its
face value at maturity. The market prices of zero coupon securities generally
are more volatile than the market prices of securities that pay interest
periodically and are more sensitive to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Variable rate demand obligations (All Funds). Variable rate demand
obligations have a maturity of five to twenty years but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
on short notice, typically seven days or less. Generally, the remarketing agent
will adjust the interest rate every seven days (or at other intervals
corresponding to the notice period for the put), in order to maintain the
interest rate at the prevailing rate for securities with a seven-day maturity.
The remarketing agent is typically a financial intermediary that has agreed to
perform these services. Variable rate master demand obligations permit a Fund to
invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the Funds, as lender, and the borrower. Because the
obligations are direct lending arrangements between the Funds and the borrower,
they will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the obligation without penalty. While master
demand obligations, as such, are not typically rated by credit rating agencies,
if not so rated, a Fund may, under its minimum rating standards, invest in them
only if, in the opinion of the Sub-Adviser, they are of an investment quality
comparable to other debt obligations in which the Funds may invest and are
within the credit quality policies, guidelines and procedures established by the
Board of Trustees. See the STATEMENT OF ADDITIONAL INFORMATION for further
details on variable rate demand obligations and variable rate master demand
obligations.
Other Open-End Mutual Funds (All Funds). Each Fund may invest in shares
of other open-end, management investment companies, subject to the limitations
of the 1940 Act and subject to such investments being consistent with the
overall objective and policies of the Fund making such investment, provided that
any such purchases will be limited to short-term investments in shares of other
investment companies. The purchase of securities of other mutual funds results
in duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs, and
investment advisory and administrative fees.
Closed-End Investment Companies (All Funds). The Fund may invest in
securities issued by closed-end investment companies which principally invest in
securities in which the Fund invests. Under the 1940 Act, the Fund's investment
in such securities, subject to certain exceptions, currently is limited to (i)
3% of the total voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment company and (iii) 10% of
the Fund's total assets in the aggregate. Investments in the securities of other
investment companies may involve duplication of advisory fees and certain other
expenses.
Options on Securities (All Funds). The Funds may purchase put and call
options and write covered put and call options on securities in which each Fund
may invest directly and that are traded on registered domestic securities
exchanges or that result from separate, privately negotiated transactions (i.e.,
over-the-counter (OTC) options). The writer of a call option, who receives a
premium, has the obligation, upon exercise, to deliver the underlying security
against payment of the exercise price during the option period. The writer of a
put option
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who receives a premium, has the obligation to buy the underlying security, upon
exercise, at the exercise price during the option period.
The Funds may write put and call options on securities only if they are
covered, and such options must remain covered as long as the Fund is obligated
as a writer. A call option is covered if a Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration if the underlying security is held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is covered if a Fund maintains cash, U.S. Treasury bills
or other high grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Funds forego the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retain the risk of loss should the price of the
security decline. In return for the premium received for a put option, the Funds
assume the risk that the price of the underlying security will decline below the
exercise price, in which case the put would be exercised and the Fund would
suffer a loss. The Funds may purchase put options in an effort to protect the
value of a security it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series. OTC options are not generally terminable at the option of the
writer and may be closed out only by negotiation with the holder. There is also
no assurance that a liquid secondary market on an exchange will exist. In
addition, because OTC options are issued in privately negotiated transactions
exempt from registration under the Securities Act of 1933, there is no assurance
that the Funds will succeed in negotiating a closing out of a particular OTC
option at any particular time. If a Fund, as covered call option writer, is
unable to effect a closing purchase transaction in the secondary market or
otherwise, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are generally illiquid
securities. However, the staff has also opined that, to the extent a mutual fund
sells an OTC option to a primary dealer that it considers creditworthy and
contracts with such primary dealer to establish a formula price at which the
fund would have the absolute right to repurchase the option, the fund would only
be required to treat as illiquid the portion of the assets used to cover such
option equal to the formula price minus the amount by which the option is
in-the-money. Pending resolution of the issue, the Funds will treat such options
and, except to the extent permitted through the procedure described in the
preceding sentence, assets as subject to each such Fund's limitation on
investments in securities that are not readily marketable.
Dollar Roll Transactions (ING Growth and Income Fund, ING Balanced
Fund and ING Emerging Markets Equity Fund). The Funds may enter into dollar roll
transactions wherein the Fund sells fixed income securities, typically
mortgage-backed securities, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. Like a forward
commitment, during the roll period no payment is made for the securities
purchased and no interest or principal payments on the security accrue to the
purchaser, but a Fund assumes the risk of ownership. A Fund is compensated for
entering into dollar roll transactions by the
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difference between the current sales price and the forward price for the future
purchase, as well as by the interest earned on the cash proceeds of the initial
sale. Like other when-issued securities or firm commitment agreements, dollar
roll transactions involve the risk that the market value of the securities sold
by the Funds may decline below the price at which a Fund is committed to
purchase similar securities. In the event the buyer of securities under a dollar
roll transaction becomes insolvent, the Funds' use of the proceeds of the
transaction may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Funds' obligation to repurchase the
securities. The Funds will engage in roll transactions primarily for the purpose
of acquiring securities for its portfolio and not for investment leverage.
Swap Agreements (ING Growth and Income Fund, ING Balanced Fund and
ING Emerging Markets Equity Fund). To manage its exposure to different types of
investments, the Funds may enter into interest rate, total return, currency and
mortgage (or other asset) swap agreements and may purchase and sell interest
rate "caps," "floors" and "collars." In a typical interest rate swap agreement,
one party agrees to make regular payments equal to a floating interest rate on a
specified amount (the "notional principal amount") in return for payments to a
fixed interest rate on the same amount for a specified period. Total return swap
agreements are similar to interest rate swap agreements, except the numerical
amount is tied to a market-linked return. If a swap agreement provides for
payment in different currencies, the parties may also agree. If a swap agreement
provides for payment in different currencies, the parties may also agree to
exchange the notional principal amount. Mortgage swap agreements are similar to
interest rate swap agreements, except that the notional principal amount is tied
to a reference pool of mortgages. In a cap or floor, one party agrees, usually
in return for a fee, to make payments under particular circumstances. For
example, the purchaser of an interest rate cap has the right to receive payments
to the extent a specified interest rate exceeds an agreed upon level; the
purchaser of an interest rate floor has the right to receive payments to the
extent a specified interest rate falls below an agreed upon level. A collar
entitles the purchaser to receive payments to the extent a specified interest
rate falls outside an agreed upon range.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Fund's performance. Swap agreements involve risks depending upon the
counterparties creditworthiness and ability to perform as well as the Fund's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. The Sub-Advisers monitor the creditworthiness
of counterparties to these transactions and intends to enter into these
transactions only when they believe the counterparties present minimal credit
risks and the income expected to be earned from the transaction justifies the
attendant risks.
Short Selling (ING Emerging Markets Equity Fund). The Fund may sell a
security it does not own in anticipation of a decline in the market value of
that security (short sales). To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated to
replace the security borrowed by purchasing it at market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required to pay
a premium, which would increase the cost of the security sold. The proceeds of
the short sale will be retained by the broker, to the extent necessary to meet
margin requirements, until the short position is closed out. Until the Fund
replaces a borrowed security, the Fund will maintain daily a segregated account
with the Fund's custodian, liquid assets, at such a level that (i) the amount
deposited in the account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short and (ii) the amount
deposited in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the time it
was sold short. The Fund will incur a loss as a result of the short sale if
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the price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
gain if the security declines in price between those dates. This result is the
opposite of what one would expect from a cash purchase of a long position in a
security. The amount of any gain will be decreased, and the amount of any loss
increased, by the amount of any premium, dividends or interest the Fund may be
required to pay in connection with a short sale. No more than 25% of the Fund's
net assets will be, when added together: (i) deposited as collateral for the
obligation to replace securities borrowed to effect short sales; and (ii)
allocated to segregated accounts in connection with short sales. Short sales
against-the-box are not subject to this 25% limit.
In a short sale "against-the-box," the Fund enters into a short sale of
a security which the Fund owns or has the right to obtain at no added cost. Not
more than 25% of the Fund's net assets (determined at the time of the short sale
against-the-box) may be subject to such sales.
Futures, Related Options and Options on Stock Indices (All Funds). The
Funds may attempt to reduce the risk of investment in equity securities by
hedging a portion of its portfolio through the use of certain futures
transactions, options on futures traded on a board of trade and options on stock
indices traded on national securities exchanges. A Fund may hedge a portion
of its portfolio by purchasing such instruments during a market advance or when
the Sub-Adviser anticipates an advance. In attempting to hedge a portfolio, the
Funds may enter into contracts for the future delivery of securities and futures
contracts based on a specific security, class of securities or an index,
purchase or sell options on any such futures contracts, and engage in related
closing transactions. The Funds will use these instruments primarily as a hedge
against changes resulting from market conditions in the values of securities
held in its portfolio or which it intends to purchase.
A stock index assigns relative weighing to the common stocks in the
index, and the index generally fluctuates with changes in the market values of
these stocks. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. The Funds will sell stock index futures only if the amount
resulting from the multiplication of the then current level of the indices upon
which such futures contracts are based, and the number of futures contracts
which would be outstanding, do not exceed one-third of the value of the Fund's
net assets.
When a futures contract is executed, each party deposits with a broker
or in a segregated custodial account up to 5% of the contract amount, called the
"initial margin," and during the term of the contract, the amount of the deposit
is adjusted based on the current value of the futures contract by payments of
variation margin to or from the broker or segregated account.
In the case of options on stock index futures, the holder of the option
pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option writer's position
in a stock index futures contract. If the option is exercised by the holder
before the last trading day during the option period, the option writer delivers
the futures position, as well as any balance in the writer's futures margin
account. If it is exercised on the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. In the case of options on stock indexes, the holder of the
option pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to receive cash equal
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to the dollar amount of the difference between the closing price of the relevant
index and the option exercise price times a specified multiple, called the
"multiplier."
During a market decline or when the Sub-Adviser anticipates a decline,
a Fund may hedge a portion of its portfolio by selling futures contracts or
purchasing puts on such contracts or on a stock index in order to limit exposure
to the decline. This provides an alternative to liquidation of securities
positions and the corresponding costs of such liquidation. Conversely, during a
market advance or when the Sub-Adviser anticipates an advance, each Fund may
hedge a portion of its portfolio by purchasing futures, options on these futures
or options on stock indices. This affords a hedge against a Fund not
participating in a market advance at a time when it is not fully invested and
serves as a temporary substitute for the purchase of individual securities which
may later be purchased in a more advantageous manner. Each Fund will sell
options on futures and on stock indices only to close out existing positions.
Interest Rate Futures Contracts (All Funds). The Funds may, to a
limited extent, enter into interest rate futures contracts--i.e., contracts for
the future delivery of securities or index-based futures contracts--that are, in
the opinion of the Sub-Adviser, sufficiently correlated with the Fund's
portfolio. These investments will be made primarily in an attempt to protect a
Fund against the effects of adverse changes in interest rates (i.e., "hedging").
When interest rates are increasing and portfolio values are falling, the sale of
futures contracts can offset a decline in the value of a Fund's current
portfolio securities. The Funds will engage in such transactions primarily for
bona fide hedging purposes.
Options on Interest Rate Futures Contracts (All Funds). The Funds may
purchase put and call options on interest rate futures contracts, which give a
Fund the right to sell or purchase the underlying futures contract for a
specified price upon exercise of the option at any time during the option
period. Each Fund may also write (sell) put and call options on such futures
contracts. For options on interest rate futures that a Fund writes, such Fund
will receive a premium in return for granting to the buyer the right to sell to
the Fund or to buy from the Fund the underlying futures contract for a specified
price at any time during the option period. As with futures contracts, each Fund
will purchase or sell options on interest rate futures contracts primarily for
bona fide hedging purposes.
Foreign Exchange Contracts (ING International Equity Fund and ING
Emerging Markets Equity Fund). Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. When investing in foreign securities, the Funds
usually effect currency exchange transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign exchange market. The Funds incur foreign
exchange expenses in converting assets from one currency to another.
The Funds may enter into foreign currency forward contracts or currency
futures for the purchase or sale of foreign currency to "lock in" the U.S.
dollar price of the securities denominated in a foreign currency or the U.S.
dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which
the Fund has investments may suffer a decline against the U.S. dollar. The Funds
may choose to lock in the price of securities or dividends or interest to be
received in a currency other than the U.S. dollar when the Sub-Adviser believes
that doing so is in the best interest of the Fund. In addition, when the
Sub-Adviser believes that the currency of a particular country (the "hedged
currency") may suffer a substantial decline against the U.S. dollar or against a
major foreign currency, such as the Deutschemark or the
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European Currency Unit, it may enter into a forward or futures contract to sell,
for a fixed amount of U.S. dollars or such currency, as the case may be, the
amount of that currency approximating the value of some or all of the Funds'
portfolio securities denominated in the hedged currency (called a "short"
position). The Fund may attempt to accomplish objectives similar to those
described above with respect to forward and futures contracts for currency by
means of purchasing put or call options traded on exchanges. A forward currency
contract is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time for the contract. This method of
attempting to hedge the value of the Funds' portfolio securities against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline in
the value of the hedged currency, it could also limit the potential gain from an
increase in the value of the currency. The Funds do not intend to maintain a net
exposure to such contracts where the fulfillment of the Funds' obligations under
such contracts would obligate the Funds to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in the currency. The Funds will not enter into these contracts for
speculative purposes and will not enter into non-hedging currency contracts.
These contracts involve a risk of loss if the Sub-Adviser fail to predict
currency values correctly.
"When-Issued" and "Forward Commitment" Transactions (All Funds). The
Funds may purchase securities on a when-issued and delayed-delivery basis and
may purchase or sell securities on a forward commitment basis. When-issued or
delayed-delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an agreement
by a Fund to purchase or sell securities at a specified future date. When a Fund
engages in these transactions, the Fund relies on the buyer or seller, as the
case may be, to consummate the sale. Failure to do so may result in the Fund
missing the opportunity to obtain a price or yield considered to be
advantageous. When-issued and delayed-delivery transactions and forward
commitment transactions may be expected to occur a month or more before delivery
is due. However, no payment or delivery is made by a Fund until it receives
payment or delivery from the other party to the transaction. A separate account
containing only liquid assets such as cash, U.S. Government securities, or other
liquid high grade debt obligations equal to the value of purchase commitments
will be maintained until payment is made. Such securities have the effect of
leverage on the Funds and may contribute to volatility of a Fund's net asset
value. For further information, see the SAI.
Loans of Portfolio Securities (All Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33 1/3% of each
such Fund's total assets to brokers, dealers and financial institutions,
provided certain conditions are met, including the condition that each loan is
secured continuously by collateral maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities loaned.
These transactions involve a loan by the applicable Fund and are subject to the
same risks as repurchase agreements. For further information, see the SAI.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with any bank and broker-dealer which, in the opinion of the
Trustees, presents a minimal risk of bankruptcy. Under a repurchase agreement a
Fund acquires securities and obtains a simultaneous commitment from the seller
to repurchase the securities at a specified time and at an agreed upon yield.
The agreements will be fully collateralized and the value of the collateral,
including accrued interest, marked-to-market daily. The agreements may be
considered to be loans made by the purchaser, collateralized by the underlying
securities. If the seller should default on its obligation to repurchase the
securities, a Fund may experience a loss of income from the loaned securities
and a decrease in the
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value of any collateral, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of
securities. The Funds may not invest more than 15% of its net assets in
repurchase agreements maturing in more than seven business days or in securities
for which market quotations are not readily available. For more information
about repurchase agreements, see "Investment Policies" in the SAI.
Borrowing (All Funds). The Fund may borrow up to 33 1/2 of its net
assets to purchase securities and for temporary purposes. Leveraging by means of
borrowing will exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Funds net asset value; money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances), which may or may not exceed
the income received from the securities purchased with borrowed funds. The use
of borrowing tends to result in a faster than average movement, up or down, in
the net asset value of the Fund's shares. The Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
Reverse Repurchase Agreements (All Funds). The Funds may also enter
into reverse repurchase agreements. Pursuant to a reverse repurchase agreement,
a Fund will sell portfolio securities and agree to repurchase them from the
buyer at a particular date and price. Whenever a Fund enters into a reverse
repurchase agreement, it will establish a segregated account in which it will
maintain liquid assets in an amount at least equal to the repurchase price
marked to market daily (including accrued interest), and will subsequently
monitor the account to ensure that such equivalent value is maintained. The Fund
pays interest on amounts obtained pursuant to reverse repurchase agreements.
Reverse repurchase agreements are considered to be borrowings by a Fund under
the 1940 Act.
Portfolio Turnover. The Funds generally will not engage in the trading
of securities for the purpose of realizing short-term profits, but each Fund
will adjust its portfolio as it deems advisable in view of prevailing or
anticipated market conditions or fluctuations in interest rates to accomplish
its respective investment objective. For example, each Fund may sell portfolio
securities in anticipation of an adverse market movement. Other than for tax
purposes, frequency of portfolio turnover will not be a limiting factor if a
Fund considers it advantageous to purchase or sell securities. The Funds do not
anticipate that the respective annual portfolio turnover rates will exceed the
following: ING Large Cap Growth Fund 100%; ING Growth and Income Fund 100%; ING
Mid Cap Growth Fund 100%; ING Small Cap Growth Fund 100%; ING Balanced Fund
100%; ING Global Brand Names Fund 100%; ING International Equity Fund 200%; ING
Emerging Markets Equity Fund 200%; ING European Equity Fund 100%; ING Tax
Efficient Equity Fund 50%; ING Focus Fund, 100%; ING Global Information
Technology Fund 100%; and ING Global Real Estate Fund 100%. A high rate of
portfolio turnover involves correspondingly greater transaction expenses than a
lower rate, which expenses must be borne by each Fund and its shareholders.
RISKS OF INVESTING IN THE FUNDS
CERTAIN RISK CONSIDERATIONS
General. The price per share of each of the Funds will fluctuate with
changes in value of the investments held by the Fund. For example, the value of
a Fund's shares will generally fluctuate inversely with the movements in
interest rates. Shareholders of a Fund should expect the value of their shares
to fluctuate with changes
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in the value of the securities owned by the Fund. There is, of course, no
assurance that a Fund will achieve its investment objective or be successful in
preventing or minimizing the risk of loss that is inherent in investing in
particular types of investment products. In order to attempt to minimize that
risk, the Sub-Adviser monitors developments in the economy, the securities
markets, and with each particular issuer. Also, as noted earlier, each
diversified Fund (i.e., all funds except the ING Global Brand Names Fund, ING
Best Ideas Fund and ING Global Real Estate Fund) is managed within certain
limitations that restrict the amount of the Fund's investment in any single
issuer.
Equity Securities. Investments in equity securities in general are
subject to market risks that may cause their prices to fluctuate over time. The
value of convertible equity securities is also affected by prevailing interest
rates, the credit quality of the issuer and any call provisions. Fluctuations in
the value of equity securities in which a Fund invests will cause the net asset
value of the Fund to fluctuate.
Investments in mid- and small-capitalization companies involve greater
risk than is customarily associated with larger, more established companies due
to the greater business risks of small size, limited markets and financial
resources, narrow product lines and the frequent lack of depth of management.
The securities of smaller companies are often traded over-the-counter and may
not be traded in volumes typical on a national securities exchange.
Consequently, the securities of smaller companies may have limited market
stability and may be subject to more abrupt or erratic market movements than
securities of larger, more established growth companies or the market averages
in general.
Real Estate Securities. While the ING Global Real Estate Fund will not
invest in real estate directly, the Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities markets risks) because of its policy of concentration in the
securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash flow dependency,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, liability to third parties for damages
resulting from environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values and in the appeal of
properties to tenants and changes in interest rates.
In addition to these risks, Equity REITs may be affected by changes in
the value of the underlying property owned by the trusts, while Mortgage REITs
may be affected by the quality of any credit they extend. Further, Equity REITs
and Mortgage REITs are dependent upon management skills and generally may not be
diversified. Equity REITs and Mortgage REITs are also subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. In addition, Equity
REITs and Mortgage REITs could possibly fail to qualify for tax-free
pass-through of income under the Code or to maintain their exemptions from
registration under the 1940 Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the REIT. In the
event of a default by a borrower or lessee, the REIT may experience delays in
enforcing its rights as a mortgagee or lessor and may incur substantial costs
associated with protecting its investments. In addition to the foregoing risks,
certain "special purpose" REITs in which the Fund invests may invest their
assets in specific real estate sectors, such as hotel REITs, nursing home REITs
or warehouse REITs, and are therefore subject to the risks associated with
adverse developments in any such sectors.
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Foreign Securities. Investing in the securities of issuers in any
foreign country including ADRs and EDRs involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. The Funds' investments may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments. See the SAI
for further information about foreign securities.
Fixed Income Securities. The market value of a Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Securities with longer
maturities are subject to greater fluctuations in value than securities with
shorter maturities. Changes by an NRSRO in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of a
Fund's securities will not affect cash income derived from these securities but
will affect the Fund's net asset value.
Securities rated BBB or Baa by an NRSRO are deemed by these rating
services to have speculative characteristics.
Securities held by a Fund that are guaranteed by the U.S. Government,
its agencies or instrumentalities guarantee only the payment of principal and
interest on the guaranteed securities, and do not guarantee the securities'
yield or value or the yield or value of a Fund's shares.
Risks of Options and Futures Contracts. One risk involved in the
purchase and sale of futures and options is that a Fund may not be able to
effect closing transactions at a time when it wishes to do so. Positions in
futures contracts and options on futures contracts may be closed out only on an
exchange or board of trade that provides an active market for them, and there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. To mitigate this risk, each Fund will ordinarily
purchase and write options only if a secondary market for the options exists on
a national securities exchange or in the over-the-counter market. Another risk
is that during the option period, if a Fund has written a covered call option,
it will have given up the opportunity to profit from a price increase in the
underlying securities above the exercise price in return for the premium on the
option (although the premium can be used to offset any losses or add to a
Fund's income) but, as long as its obligation as a writer continues, such Fund
will have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
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The Funds' successful use of stock index futures contracts, options
on such contracts and options on indices depends upon the ability of the
Sub-Adviser to predict the direction of the market and is subject to various
additional risks. The correlation between movements in the price of the futures
contract and the price of the securities being hedged is imperfect and the risk
from imperfect correlation increases in the case of stock index futures as the
composition of the Funds' portfolios diverge from the composition of the
relevant index. Such imperfect correlation may prevent the Funds from achieving
the intended hedge or may expose the Funds to risk of loss. In addition, if the
Funds purchase futures to hedge against market advances before they can invest
in common stock in an advantageous manner and the market declines, the Funds
might create a loss on the futures contract. Particularly in the case of options
on stock index futures and on stock indices, the Funds' ability to establish
and maintain positions will depend on market liquidity. The successful
utilization of options and futures transactions requires skills different from
those needed in the selection of the Funds' portfolio securities. The Funds
believe that the Sub-Adviser possesses the skills necessary for the successful
utilization of such transactions.
The Funds are permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of each Fund's liquidating value after
taking into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Funds will not market, and are not
marketing, themselves as commodity pools or otherwise as vehicles for trading in
futures and related options. The Funds will segregate liquid assets such as
cash, U.S. Government securities or other liquid high grade debt obligations to
cover the futures and options.
Risks of Techniques Involving Leverage. Utilization of leveraging
involves special risks and may involve speculative investment techniques.
Certain Funds may borrow for other than temporary or emergency purposes, lend
their securities, enter reverse repurchase agreements, and purchase securities
on a when issued or forward commitment basis. In addition, certain Funds may
engage in dollar roll transactions. Each of these transactions involve the use
of "leverage" when cash made available to the Fund through the investment
technique is used to make additional portfolio investments. The Funds use these
investment techniques only when the Sub-Adviser believes that the leveraging and
the returns available to the Fund from investing the cash will provide
shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital
base that exceeds the investment the Fund has invested. Leverage creates the
risk of magnified capital losses which occur when losses affect an asset base,
enlarged by borrowings or the creation of liabilities, that exceeds the equity
base of the Fund. Leverage may involve the creation of a liability that requires
the Fund to pay interest (for instance, reverse repurchase agreements) or the
creation of a liability that does not entail any interest costs (for instance,
forward commitment transactions).
The risks of leverage include a higher volatility of the net asset
value of a Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. So long as a Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, if any, leverage will
result in higher current net investment income being realized by such Fund than
if the Fund were not leveraged. On the other hand, interest rates change from
time to time as does their relationship to each other depending upon such
factors as supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the relationship between the
cost of leveraging and the yield to change so that rates involved in the
leveraging arrangement may substantially increase relative to the yield on the
obligations in which
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the proceeds of the leveraging have been invested. To the extent that the
interest expense involved in leveraging approaches the net return on a Fund's
investment portfolio, the benefit of leveraging will be reduced, and, if the
interest expense on borrowings were to exceed the net return to shareholders,
such Fund's use of leverage would result in a lower rate of return than if the
Fund were not leveraged. Similarly, the effect of leverage in a declining market
could be a greater decrease in net asset value per share than if a Fund were not
leveraged. In an extreme case, if a Fund's current investment income were not
sufficient to meet the interest expense of leveraging, it could be necessary for
such Fund to liquidate certain of its investments at an inappropriate time. The
use of leverage may be considered speculative.
Non-diversified investment companies. The ING Global Brand Names Fund,
the ING Focus Fund and the ING Global Real Estate Fund are classified as
non-diversified investment companies under the 1940 Act, which means that each
Fund is not limited by the 1940 Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The investment of a large
percentage of a Fund's assets in the securities of a small number of issuers may
cause that Fund's share price to fluctuate more than that of a diversified
investment company.
Concentration. The ING Global Information Technology Fund and ING
Global Real Estate Fund "concentrate" (for purposes of the 1940 Act) their
assets in securities related to a particular sector or industry, which means
that at least 25% of its assets will be invested in these assets at all times.
As a result, each Fund may be subject go greater market fluctuation than a fund
which has securities representing a broader range of investment alternatives.
Year 2000. Like other funds and business organizations around the
world, the Funds could be adversely affected if the computer systems used by the
Manager and the Fund's other service providers do not properly process and
calculate date-related information for the year 2000 and beyond. The Funds have
been informed that the Manager, and the Funds' other service providers (i.e.,
Sub-Adviser, Administrator, Transfer Agent, Fund Accounting Agent, Distributor
and Custodian) have developed and are implementing clearly defined and
documented plans to minimize the risk associated with the Year 2000 problem.
These plans include the following activities: inventorying of software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems and retesting for Year 2000
readiness. In addition, the service providers are obtaining assurances from
their vendors and suppliers in the same manner. Non-compliant Year 2000 systems
upon which the Fund is dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (1) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (2) the costs currently associated with the implementation
of their plans will have material adverse impact on the business, operations or
financial condition of the Funds or their service providers.
In addition, the Year 2000 problem may adversely affect the companies
in which the Funds invest. For example, these companies may incur substantial
costs to correct the problem and may suffer losses caused by data processing
errors. Since the ultimate costs or consequences of incomplete or untimely
resolution of the Year 2000 problem by the Funds' service providers are unknown
to the Funds at this time, no assurance can be made that such costs or
consequences will not have a material adverse impact on the Funds or their
service providers.
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The Funds and the Manager will continue to monitor developments
relating to the Year 2000 problem, including the development of contingency
plans for providing back-up computer services in the event of a systems failure.
European Economic and Monetary Union. Several European countries are
participating in the European Economic and Monetary Union, which will establish
a common European currency for participating countries. This currency will
commonly be known as the "Euro." Each such participating country anticipates
replacing its existing currency with the Euro on January 1, 1999. Other European
countries may participate after that date. This conversion presents unique
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will be ready by the scheduled launch date; the
legal treatment of certain outstanding financial contracts after January 1, 1999
that refer to existing currencies rather than the euro; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement payment systems for the new currency. These or
other factors, including political and economical risks, could cause market
disruptions before or after the interaction of the euro, and could adversely
affect the value of securities held by the Funds.
The Funds have been informed that the Manager, and the Funds' other
service providers, as applicable, are taking steps to minimize the risk
associated with the conversion. In addition, where appropriate, certain service
providers are obtaining assurances from their vendors in the same manner.
Since the ultimate consequences of the conversion are unknown to the
Funds at this time, no assurance can be made that such consequences will not
have a material adverse impact on the Funds. The Funds and the Manager will
continue to monitor developments relating to the conversion.
OTHER INFORMATION
CAPITALIZATION
ING Funds Trust was organized as a Delaware business trust on July 30,
1998 and currently consists of 20 separately managed portfolios, each of which
is divided into Class A, B, C, and X shares. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Funds consists
solely of an unlimited number of shares of beneficial interest with a par value
of $0.001 each. When issued, shares of the Funds are fully paid, non-assessable
and freely transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Declaration
of Trust, they may be entitled to vote. The Funds are not required to hold
regular annual meetings of shareholders and do not intend to do so.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Funds may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Funds and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the Act. See "OTHER
INFORMATION--Voting Rights" in the SAI.
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Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Funds) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Funds) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund (or
the Funds).
PERFORMANCE INFORMATION
A Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Funds is mandated by the
SEC.
Quotations of average annual total return for a Fund will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in that Fund over periods of 1, 5 and 10 years (up to the life of
that Fund), reflect the deduction of a proportional share of Fund expenses (on
an annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, Standard & Poor's 500 Stock Index, the Russell 2500 Index,
the Dow Jones Industrial Average and other entities or organizations which track
the performance of investment companies. Any performance information should be
considered in light of the Fund's investment objectives and policies,
characteristics and quality of the Funds and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield and total return for Funds, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a
quarterly statement for each shareholder. In those cases where a Service
Organization or its nominee is the shareholder of record of shares purchased for
its customer, the Funds have been advised that the statement may be transmitted
to the customer at the discretion of the Service Organization.
First Data acts as the Funds' transfer agent pursuant to a Services
Agreement with ING Fund Services. ING Fund Services (not the Funds) compensates
DST for providing personnel and facilities to perform dividend disbursing and
transfer agency-related services for the Funds.
CUSTODIAN
Investors Fiduciary Trust Co. acts as the Funds' Custodian. Pursuant to
the Custodian Agreement, the Custodian is responsible for holding each Fund's
cash and portfolio securities. The Custodian may enter into sub-custodian
agreements with certain qualified banks.
Rules adopted under the 1940 Act permit investment companies to
maintain their securities and cash in the custody of certain eligible foreign
banks and depositories. The ING Global Brand Names Fund, ING International
Equity Fund, ING Emerging Markets Equity Fund, ING European Equity Funds, ING
Global Information Technology Fund and ING Global Real Estate Fund portfolios
of non-United States securities are held by
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sub-custodians which are approved by the Trustees or a foreign custody manager
appointed by the Trustees in accordance with these rules. The Board has
appointed the Custodian as its foreign custody manager. The determination to
place assets with a particular foreign sub-custodian is made pursuant to these
rules which require a consideration of a number of factors including, but not
limited to, the reliability and financial stability of the sub-custodian; the
sub-custodian's practices, procedures and internal controls; and the reputation
and standing of the sub-custodian in its national market.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the
Trust and from time to time provides advice to the Advisers.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at ING
Fund Services Co., LLC P.O. Box 9690, Providence, RI 02940-9690.
General and Account Information: 1-877-INFO-ING
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ING FUNDS TRUST
PROSPECTUS
OCTOBER 30, 1998
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Bond Fund
ING Mortgage Income Fund
ING National Tax-Exempt Bond Fund
<PAGE> 83
ING FUNDS TRUST
ING Fund Services Co., LLC
P.O. Box 9690
Providence, RI 02940-9690
General & Account Information:
1-877-INFO-ING
ING MUTUAL FUNDS MANAGEMENT CO. LLC--Investment Manager
("IMFC" or the "Manager")
ING FUNDS DISTRIBUTOR, INC.--Distributor, Principal Underwriter and Sponsor
("IFD" or the "Distributor")
This prospectus describes five funds (each, a "Fund" or, collectively,
the "Funds"), managed by ING Mutual Funds Management Co. LLC, a Delaware limited
liability company. The Manager has delegated certain of its investment advisory
activities to sub-advisers described herein (the "Sub-Advisers"). The Manager
and its Sub-Advisers are wholly-owned subsidiaries of ING Group N.V. ("ING
Group"). The Funds and their investment objectives are:
The ING Intermediate Bond Fund seeks to provide investors with a high
level of current income consistent with the preservation of capital and
liquidity.
The ING High Yield Bond Fund seeks to provide investors with high
current income and, secondarily, total return when consistent with the primary
objective.
The ING International Bond Fund is a non-diversified fund that seeks to
provide investors with high total return.
The ING Mortgage Income Fund seeks to provide investors with long-term
income consistent with preservation of capital.
The ING National Tax-Exempt Bond Fund seeks to provide investors with a
high level of current income that is exempt from federal income taxes,
consistent with preservation of capital.
There can be no assurance that the Funds' investment objectives will be
achieved.
Shares of the Funds are sold to the public by the Distributor as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
The Funds are separate investment funds of ING Funds Trust (the "Trust"), a
Delaware business trust and registered management investment company.
Investments in shares of the Funds involve risks, including loss of principal.
The Trust also offers the following money market ("ING Money Market Funds") and
equity funds ("ING Equity Funds") under separate prospectuses:
<PAGE> 84
<TABLE>
<CAPTION>
Money Market Funds Equity Funds
- ----------------------------------- --------------------------------------
<S> <C>
ING U.S. Treasury Money Market Fund ING Large Cap Growth Fund
ING Money Market Fund ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
</TABLE>
Each Fund offers four different classes of shares--Class A shares,
Class B shares, Class C shares and Class X shares. The different classes of
shares represent investments in the same portfolio of securities but are subject
to different sales charges and expenses. These alternatives permit investors to
choose the most beneficial method of purchasing shares given the amount of the
purchase, the length of time the investor expects to hold shares, and other
circumstances. When you purchase shares of the Funds, be sure to specify the
class of shares of the Fund(s) you wish to purchase. If you do not choose, your
investment will be made in the Class A shares. See "Purchase of Fund Shares."
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY AND MAY INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL. THE NET ASSET VALUE OF THE FUNDS WILL FLUCTUATE FROM TIME TO TIME.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Funds and should be read and
retained for information about each Fund.
A Statement of Additional Information (the "SAI"), dated October 30,
1998, containing additional and more detailed information about the Funds, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and phone
number printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 30, 1998
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
HIGHLIGHTS ......................................................... 1
FUND EXPENSES ...................................................... 5
THE FUNDS .......................................................... 10
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS ................. 10
MANAGEMENT OF THE FUNDS ............................................ 14
FUND SHARE VALUATION ............................................... 20
PRICING OF FUND SHARES ............................................. 20
MINIMUM PURCHASE REQUIREMENTS ...................................... 21
PURCHASE OF FUND SHARES ............................................ 21
PURCHASE PLANS ..................................................... 22
INDIVIDUAL RETIREMENT ACCOUNTS ..................................... 29
OPTIONAL BENEFITS .................................................. 30
REDEMPTION OF FUND SHARES .......................................... 30
EXCHANGE OF FUND SHARES ............................................ 33
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ........................... 36
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES ................. 39
RISKS OF INVESTING IN THE FUNDS .................................... 53
OTHER INFORMATION .................................................. 58
</TABLE>
i
<PAGE> 86
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes five funds managed by IMFC. Each Fund has a
distinct investment objective and policies. There can be no assurance that any
Fund will achieve its investment objective.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
THE FUNDS:
ING Intermediate Bond Fund. The Intermediate Bond Fund seeks to provide
investors with a high level of current income consistent with the preservation
of capital and liquidity. Under normal market conditions, the Fund will invest
at least 65% of its total assets in debt securities. The Fund will normally
invest at least 80% of its assets in securities rated BBB or better by a
Nationally Recognized Statistical Rating Organization ("NRSRO") and will seek to
maintain a minimum average portfolio quality rating of "BBB." Fixed income
securities downgraded to below BBB subsequent to purchase may be retained in the
portfolio when deemed by the Fund's Sub-Adviser to be in the best interest of
Fund shareholders. For purposes of this Prospectus, a "bond" is defined as a
debt instrument with a fixed interest rate. The dollar-weighted average maturity
of the Intermediate Bond Fund will generally range between three and ten years.
ING High Yield Bond Fund. The ING High Yield Bond Fund seeks to provide
investors with current income and total return. Under normal market conditions,
the Fund intends to invest at least 80% of its total assets in high yield (high
risk) bonds.
ING International Bond Fund. The ING International Bond Fund is a
non-diversified fund that seeks to provide investors with high total return.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in fixed income securities of international issuers located in at least
three different countries outside of the United States. Under normal conditions,
the Sub-Adviser expects that the Fund generally will be invested in at least six
different countries, although the Fund may at times invest all of its assets in
a single country.
ING Mortgage Income Fund. The ING Mortgage Income Fund seeks to provide
investors with long-term income consistent with preservation of capital. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in mortgage-backed securities.
ING National Tax-Exempt Bond Fund. The ING National Tax-Exempt Bond
Fund seeks to provide investors with a high level of current income that is
exempt from federal income taxes, consistent with preservation of capital. Under
normal market conditions, the Fund will invest at least 80% of its net assets in
municipal securities the interest of which is exempt from federal income taxes
(collectively "Municipal Securities"). The issuers of these securities can be
located in all fifty states, the District of Columbia, Puerto Rico, and other
U.S. territories and possessions. Under normal conditions, the Fund will invest
at least 80% of its net assets in securities the interest on which is not a
preference item for purposes of the federal alternative minimum tax. Although
the Sub-Adviser has no present intention of doing so, up to 20% of the
<PAGE> 87
Fund's total assets may be invested in taxable debt securities for defensive
purposes or when sufficient tax exempt securities considered appropriate by the
Advisers are not available for purchase.
All Funds may also use various investment strategies and techniques
when the Sub-Adviser determines that such use is appropriate in an effort to
meet a Fund's objective.
For additional information concerning the investment policies,
practices and risk consideration of the Funds, see "The Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
General. The price per share of each Fund will fluctuate with changes
in value of the investments held by such Fund. Additionally, there can be no
assurance that the Funds will achieve their investment objectives or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of investment products.
Fixed Income Securities. The market value of a Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Securities with longer
maturities are subject to greater fluctuations in value than securities with
shorter maturities.
Foreign Securities. Investments in securities of issuers in any foreign
country involves special risk considerations not typically associated with
investing in U.S. companies.
Risks of Techniques Involving Leverage. Utilization of leveraging
involves special risks and may involve speculative investment techniques.
Certain Funds may borrow for other than temporary or emergency purposes, lend
their securities, enter reverse repurchase agreements, and purchase securities
on a when issued or forward commitment basis and engage in dollar roll
transactions. Each of these transactions involve the use of "leverage" when cash
made available to the Fund through the investment technique is used to make
additional portfolio investments.
The risks of leverage include a higher volatility of the net asset
value of a Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. The risks of leverage may be considered speculative.
Non-diversified investment companies. The ING International Fixed
Income Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940 (the "1940 Act"), which means that the Fund is
not limited by the 1940 Act in the proportion of its assets that it may invest
in the obligations of a single issuer. The investment of a large percentage of a
Fund's assets in the securities of a small number of issuers may cause the
Fund's share price to fluctuate more than that of a diversified investment
company.
2
<PAGE> 88
High Yield Securities. The ING High Yield Bond Fund will invest
primarily in high yield bonds. Certain high yield bonds carry particular market
risks and may experience greater volatility in market value other than
investment grade corporate bonds. Changes in interest rates, the market's
perception of the issuers and the creditworthiness of the parties involved may
significantly affect the value of these bonds. Some of these securities may be
subject to call and have a structure that makes their reaction to interest rates
and other factors difficult to predict, causing their value to be highly
volatile. These bonds also may be subject to prepayment risk.
For additional information concerning the risks of investing in the
Funds, see "Risks of Investing in the Funds" in this Prospectus.
MANAGEMENT OF THE FUNDS
As Manager of the Funds, IMFC has overall responsibility, subject to
the supervision of the Board of Trustees, for engaging Sub-Advisers and for
monitoring and evaluating the management of the assets of each Fund by its
respective Sub-Adviser. IMFC also provides certain administrative services
necessary for the Funds' operations. Pursuant to a Management Agreement, the
Trust currently pays the Manager for its services a monthly fee at an annual
rate. See "Fund Expenses--Fee Table" and "Management of the Trust--The Manager"
in this Prospectus. All of the sub-advisers are indirect subsidiaries of ING
Group and are affiliates of each other and the Manager and Distributor.
Baring International Investment Limited ("BIIL") Baring International
Investment (Far East) Limited ("BIFL") and Baring Asset Management, Inc. ("BAM")
serve as co-sub-advisers to the International Bond Fund. Furman Selz Capital
Management LLC ("FSCM") serves as sub-adviser to the ING National Tax-Exempt
Bond Fund. ING Investment Management, LLC ("IIM") serves as sub-adviser to the
ING Intermediate Bond Fund, ING High Yield Bond Fund and ING Mortgage Income
Fund. BIIL, BIFL, BAM, FSCM and IIM may be referred to herein individually as a
"Sub-Adviser" and collectively as the "Sub-Advisers." For their services, the
Sub-Advisers receive a fee based on the respective Fund's average daily net
assets. See "Management of the Funds--the Sub-Advisers" in this Prospectus.
The Sub-Advisers have full investment discretion and make all
determinations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities consistent with the investment
objectives, policies, and restrictions for such Fund. The Sub-Advisers are
compensated by the Manager (and not the Trust).
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated
for certain of its distribution-related expenses. ING Fund Services LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Funds
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting and other services. ING Fund Services
has hired DST Systems, Inc. ("DST") to act as the Funds' transfer agent and fund
accounting agent.
3
<PAGE> 89
CLASSES OF SHARES
The Funds offer investors a choice among multiple classes of shares
with different sales charges and expenses. In selecting which class of shares to
purchase, you should consider, among other things, the length of time you expect
to hold your investment, the amount of any applicable sales charge (whether
imposed at the time of purchase or redemption) and Rule 12b-1 fees, as noted
above, whether you qualify for any reduction or waiver of any applicable sales
charge (e.g., if you are exempt from the sales charge, you must invest in Class
A shares), the various exchange privileges among the different classes of shares
and the fact that Class B and X shares automatically convert to Class A shares
after eight years.
CLASS A SHARES. Generally, an investor who purchases Class A shares
pays a 5.75% sales charge at the time of purchase. As a result, Class A shares
are not subject to any charges when they are redeemed (except for sales at net
asset value in excess of $1 million which may be subject to a contingent
deferred sales charge). The initial sales charge may be reduced or waived for
certain purchases. Class A shares are also subject to an annual Rule 12b-1 fee
of 0.50% of average daily net assets attributable to Class A shares. This fee is
lower than the other classes having Rule 12b-1 fees and therefore Class A shares
have lower expenses and pay higher dividends. See "Purchase of Fund
Shares--Class A Shares."
CLASS B SHARES. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge ("CDSC") of 5.00%
if redeemed within one year of purchase, with declining charges for redemptions
thereafter up to six years after purchase. Class B shares are also subject to a
higher annual Rule 12b-1 fee than Class A shares--0.75% of the Fund's average
daily net assets attributable to Class B shares. However, after eight years,
Class B shares automatically will be converted to Class A shares at no charge to
the investor, resulting in a lower Rule 12b-1 fee thereafter. Class B shares
provide the benefit of putting all dollars to work from the time of investment,
but will have a higher expense ratio and pay lower dividends than Class A shares
due to the higher Rule 12b-1 fee and any other class specific expenses. See
"Purchase of Fund Shares--Class B and X Shares."
CLASS C SHARES. Class C shares are sold without an initial sales
charge, are subject to a higher annual Rule 12b-1 fee than the Class A
shares--0.75% of the Fund's average daily net assets attributable to Class C
shares. Class C shares provide the benefit of putting all dollars to work from
the time of investment, but will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher Rule 12b-1 fee. While Class C
shares do not convert to Class A shares, they are subject to a lower contingent
deferred sales charge (1.00%) and do not have to be held for as long a time (one
year) as Class B or X shares to avoid paying a contingent deferred sales charge.
See "Purchase of Fund Shares--Class C Shares."
CLASS X SHARES. Class X shares are sold without an initial sales
charge. In addition, investors purchasing Class X shares will receive, as a
bonus, additional shares having a value equal to 2.50% of the amount invested
("Bonus Shares"). The Distributor has undertaken to pay for Bonus Shares as part
of its services to the Funds. Shares purchased by the reinvestment of dividends
or capital gains distributions are not eligible for Bonus Shares. Class X shares
are subject to a contingent deferred sales charge of 5.00% if redeemed within
one year, with declining charges for redemptions thereafter up to six years
after purchase. Class X shares are also subject to a higher annual Rule 12b-1
fee than Class A shares--0.75% of the Fund's average daily net assets
attributable to Class X shares. However, after eight years, Class X shares
automatically will be converted to Class A shares at no charge to the investor,
resulting in a lower Rule 12b-1 fee thereafter. Class X shares provide the
benefit of putting all dollars to work from the time of
4
<PAGE> 90
investment, but will have a higher expense ratio and pay lower dividends than
Class A shares due to the higher Rule 12b-1 fee. See "Purchase of Fund
Shares--Class X Shares." Class X shares are currently only offered to certain
Qualified purchasers (including, but not limited to, IRAs, Roth IRAs, Education
IRAs, SEP IRAs, SIMPLE IRAs and 403(b)(7) plans).
Each Class of shares is also subject to shareholder servicing fees of
up to 0.25% of the average daily net assets and sub-transfer agency fees of up
to 0.25% of the average daily net assets attributable to such shares.
FUND EXPENSES
The purpose of the following table is to assist the shareholder in
understanding the various costs and expenses that an investor in each Fund will
bear, either directly or indirectly. Each Fund's costs and expenses are based
upon estimates of the Fund's operating expenses for the Fund's first fiscal
year:
FEE TABLE
<TABLE>
<CAPTION>
ING Intermediate Bond Fund
----------------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% NONE NONE NONE
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales Load (as
a percentage of redemption proceeds) NONE 5.00% 1.00% 5.00%
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average net assets)
Management Fees (after waivers)* 0.13% 0.13% 0.13% 0.13%
12b-1 Fees(after waivers)* 0.00% 0.75% 0.75% 0.75%
Shareholder Servicing Fee 0.25% 0.25% 0.25% 0.25%
Other Expenses** [0.60]% [0.60]% [0.60]% [0.60]%
Total Portfolio Operating Expenses
(after waivers)*** [0.97]% [1.72]% [1.72]% [1.72]%
</TABLE>
<TABLE>
<CAPTION>
ING High Yield Bond Fund
----------------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% NONE NONE NONE
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales Load (as
a percentage of redemption proceeds) NONE 5.00% 1.00% 5.00%
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average net assets)
Management Fees (after waivers)* 0.16% 0.16% 0.16% 0.16%
12b-1 Fees(after waivers)* 0.00% 0.75% 0.75% 0.75%
Shareholder Servicing Fee 0.25% 0.25% 0.25% 0.25%
Other Expenses** [0.59]% [0.59]% [0.59]% [0.59]%
Total Portfolio Operating Expenses
(after waivers)*** [1.00]% [1.75]% [1.75]% [1.75]%
</TABLE>
- ----------------------------------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial
sales charge but you may incur a CDSC if you redeem some or all of your
Class B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or its original cost of the amount invested for redemptions occurring
in years one through six, respectively. No CDSC is charged after the
six year. The CDSC is not imposed on the amount of any interest in your
account over the initial amount invested. If you purchase Class C
shares, you do not pay an initial sales charge but you may incur a CDSC
if you redeem some or all of your Class C shares within 12 months of
the calendar month of purchase. For a discussion of the Class B, X and
C CDSC, see this Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
for the ING Intermediate Bond Fund and the ING High Yield Bond Fund
would be 0.50% and 0.65%, respectively. 12b-1 Fees (before waivers) for
Class A shares would be 0.50% for each Fund. The fee waivers reflected
in the table are voluntary and may be modified or terminated at any
time without the Funds' consent.
5
<PAGE> 91
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 1.85% for
Class A shares and 2.10% for Class B, C and X shares of the ING
Intermediate Bond Fund and 1.99% for Class A shares and 2.24% for Class
B, C and X shares of the ING High Yield Bond Fund.
6
<PAGE> 92
FEE TABLE
<TABLE>
<CAPTION>
ING International Bond Fund
----------------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 4.75% NONE NONE NONE
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales
Load (as a percentage of redemption
proceeds) NONE 5.00% 1.00% 5.00%
Annual Fund Operating Expense
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.25% 0.25% 0.25% 0.25%
12b-1 Fees (after waivers)* 0.10% 0.75% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25% 0.25%
Other Expenses** [0.88]% [0.88]% [0.88]% [0.88]%
Total Portfolio Operating Expenses
(after waivers)*** [1.48]% [2.13]% [2.13]% [2.13]%
</TABLE>
<TABLE>
<CAPTION>
ING Mortgage Income Fund
----------------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 4.75% NONE NONE NONE
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales
Load (as a percentage of redemption
proceeds) NONE 5.00% 1.00% 5.00%
Annual Fund Operating Expense
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.13% 0.13% 0.13% 0.13%
12b-1 Fees(after waivers)* 0.00% 0.75% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25% 0.25%
Other Expenses** [0.58]% [0.58]% [0.58]% [0.58]%
Total Portfolio Operating Expenses
(after waivers)*** [0.95]% [1.70]% [1.70]% [1.70]%
</TABLE>
- -------------------------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial
sales charge but you may incur a CDSC if you redeem some or all of your
Class B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or its original cost of the amount invested for redemptions occurring
in years one through six, respectively. No CDSC is charged after the
six year. The CDSC is not imposed on the amount of any interest in your
account over the initial amount invested. If you purchase Class C
shares, you do not pay an initial sales charge but you may incur a CDSC
if you redeem some or all of your Class C shares within 12 months of
the calendar month of purchase. For a discussion of the Class B, X and
C CDSC, see this Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
for the ING Intermediate Bond Fund and ING Mortgage Income Fund would
be 1.00% and 0.50%, respectively. 12b-1 Fees (before waivers) for Class
A shares would be 0.50%. The fee waivers reflected in the table are
voluntary and may be modified or terminated at any time without the
Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 2.63% for
Class A shares and 2.88% for Class B, C and X shares of the ING
International Bond Fund and 1.83% for Class A shares and 2.08% for
Class B, C and X shares of the ING Mortgage Income Fund.
7
<PAGE> 93
FEE TABLE
<TABLE>
<CAPTION>
ING National Tax-Exempt Bond Fund
--------------------------------------------------
Class A(1) Class B(2) Class C(2) Class X(2)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price) 4.75% NONE NONE NONE
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales Load (as a
percentage of redemption proceeds) NONE 5.00% 1.00% 5.00%
Annual Fund Operating Expense
(as a percentage of average net assets)
Management Fees (after waivers)* 0.13% 0.13% 0.13% 0.13%
12b-1 Fees(after waivers)* 0.00% 0.75% 0.75% 0.75%
Shareholder Servicing Fee 0.25% 0.25% 0.25% 0.25%
Other Expenses** [0.58]% [0.58]% [0.58]% [0.58]%
Total Portfolio Operating Expenses
(after waivers)*** [0.95]% [1.70]% [1.70]% [1.70]%
</TABLE>
- ------------------------------
(1) Under certain circumstances, purchases of Class A shares not subject to
an initial sales charge will be subject to a contingent deferred sales
charge if redeemed within 12 months of the calendar month of purchase.
For an additional discussion of the Class A CDSC, see this Prospectus
under "Purchase of Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial
sales charge but you may incur a CDSC if you redeem some or all of your
Class B or X shares before the end of the sixth year after which you
purchased such shares. The CDSC is 5%, 4%, 4%, 3%, 2% and 1% of the
lesser of the net asset value of the shares at the time of redemption
or its original cost of the amount invested for redemptions occurring
in years one through six, respectively. No CDSC is charged after the
six year. The CDSC is not imposed on the amount of any interest in your
account over the initial amount invested. If you purchase Class C
shares, you do not pay an initial sales charge but you may incur a CDSC
if you redeem some or all of your Class C shares within 12 months of
the calendar month of purchase. For a discussion of the Class B, X and
C CDSC, see this Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 0.50%. 12b-1 Fees (before waivers) for Class A shares would
be 0.50%. The fee waivers reflected in the table are voluntary and may
be modified or terminated at any time without the Funds' consent.
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25% of
the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 1.83% for
Class A shares and 2.08% for Class B, C and X shares.
8
<PAGE> 94
EXPENSE EXAMPLES:
<TABLE>
<CAPTION>
ING Intermediate Bond Fund Full Redemption* No Redemption**
- ------------------------------------- ---------------- ----------------
1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $57 $77 $57 $77
Class B Shares $68 $95 $18 $55
Class C Shares $28 $55 $18 $55
Class X Shares*** $68 $96 $18 $56
</TABLE>
<TABLE>
<CAPTION>
ING High Yield Bond Fund Full Redemption* No Redemption**
- ------------------------------------- ---------------- ----------------
1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $57 $78 $57 $78
Class B Shares $68 $96 $18 $56
Class C Shares $28 $56 $18 $56
Class X Shares*** $68 $97 $18 $57
</TABLE>
<TABLE>
<CAPTION>
ING International Bond Fund Full Redemption* No Redemption**
- ------------------------------------- ---------------- ----------------
1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $62 $ 92 $62 $92
Class B Shares $72 $107 $22 $67
Class C Shares $32 $ 67 $22 $67
Class X Shares*** $72 $109 $22 $69
</TABLE>
<TABLE>
<CAPTION>
ING Mortgage Income Fund Full Redemption* No Redemption**
- ------------------------------------- ---------------- ----------------
1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $67 $86 $67 $86
Class B Shares $67 $94 $17 $54
Class C Shares $27 $54 $17 $54
Class X Shares*** $68 $95 $18 $55
</TABLE>
<TABLE>
<CAPTION>
ING National Tax-Exempt Bond Fund Full Redemption* No Redemption**
- ------------------------------------- ---------------- ----------------
1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $57 $77 $57 $77
Class B Shares $67 $94 $17 $54
Class C Shares $27 $54 $17 $54
Class X Shares*** $68 $95 $18 $55
</TABLE>
(*) Full Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and full
redemption of your shares at the end of each period shown.
(**) No Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and no redemption
of your shares at the end of each period shown.
(***) Expense examples for purchase of Class X shares of the Funds reflect
the shareholder's receipt of additional "bonus shares." For a
discussion of the issuance of "bonus shares," see this Prospectus under
"Purchase of Fund Shares - Class X Shares."
The above tables are provided to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as an
investor in the Fund(s). THE EXAMPLES PROVIDED SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF THE FUNDS' PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5%
ANNUAL RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN THAT IS GREATER OR LESS THAN 5%.
9
<PAGE> 95
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as
a mutual fund. The Funds are portfolios of a Delaware business trust organized
under the laws of the State of Delaware as an open-end management investment
company on July 30, 1998. The Trust's Board of Trustees oversees the overall
management of the Funds and elects the officers of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The "Investment Restrictions" section of the
SAI contains specific investment restrictions (the "Investment Restrictions")
which govern each Fund's investments. The Investment Restrictions and each
Fund's investment objective are fundamental policies which may not be changed
without a majority vote of shareholders of the affected Fund. Except for the
objectives and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental, and may therefore be changed by the Board of Trustees
without shareholder approval.
The ING Intermediate Bond Fund. The ING Intermediate Bond Fund seeks to
provide investors with a high level of current income consistent with the
preservation of capital and liquidity. Under normal market conditions, the Fund
will invest at least 65% of its total assets in debt securities. The Fund will
normally invest at least 80% of its net assets in securities rated BBB or better
by a NRSRO or, if not rated, determined to be of comparable quality by the
Fund's Sub-Adviser at the time of purchase and will seek to maintain a minimum
average portfolio quality rating of "BBB." A description of security ratings is
contained in an Appendix to the SAI. For purposes of this Prospectus, a "bond"
is defined as a debt instrument with a fixed interest rate. The dollar-weighted
average maturity of the ING Intermediate Bond Fund will generally range between
three and ten years. Any remaining assets may be invested in convertible
securities, preferred stocks and debt of foreign issuers, U.S. Government
securities and money market instruments that the Fund's Sub-Adviser believes are
appropriate in light of the Fund's objective. Money-market instruments must be
rated in one of the top two rating categories by a NRSRO or, if not rated,
determined to be of comparable quality by the Fund's Sub-Adviser.
ING High Yield Bond Fund. The ING High Yield Bond Fund seeks to provide
investors with high current income total return when consistent with the primary
objective. Under normal market conditions, the Fund intends to invest at least
80% of its total assets in high yield bonds (except when maintaining a temporary
defensive position). Any remaining assets may be invested in investment grade
bonds, debt of foreign issuers, common and preferred stocks, U.S. Government
securities and money market instruments that the Fund's Sub-Adviser believes are
appropriate in light of the Fund's objective. High yield bonds, which are high
risk bonds are debt securities that are not rated by a NRSRO or are rated below
investment grade by a NRSRO such as Ba or lower by Moody's Investors Services,
Inc. ("Moody's") or BB or lower by Standard & Poor's Rating Group ("S&P"). A
description of security ratings is contained in an Appendix to the SAI. The Fund
defines high yield bonds to include: bank loans, payment in kind ("PIK")
securities, fixed, variable, floating rate and deferred interest debt
obligations, zero coupon bonds, pay-in-kind bonds; asset and mortgage-backed
debt obligations; structured debt obligations; and convertible bonds. In
evaluating the quality of a particular high yield bond for investment in the
Fund, the Sub-Adviser does not rely
10
<PAGE> 96
exclusively on ratings assigned by the NRSROs. The Sub-Adviser will utilize a
security's credit rating as simply one indication of an issuer's
creditworthiness and will principally rely upon its own analysis of any
security. However, the Sub-Adviser does not have restrictions on the rating
level of the securities in the Fund's portfolio and may purchase and hold
securities in default.
The Fund will not purchase any common stocks if, after such purchase,
more than 20% of the value of its total assets would be invested in common
stocks. This 20% limit includes common stocks in order to attempt to achieve
either a combination of its primary and secondary goals, in which case the
common stocks will be dividend-paying, or to achieve its secondary goal, in
which case the common stocks may not pay dividends.
ING International Bond Fund. The ING International Bond Fund is a
non-diversified fund that seeks to provide investors with high total return.
Under normal circumstances, the Fund invests at least 65% of its total assets in
investment grade fixed income securities of international issuers.
The Fund strives to take maximum advantage of financial and economic
developments and currency fluctuations.
Fixed income securities consist of: (i) securities issued or guaranteed
by foreign governments, their political subdivisions, agencies or
instrumentalities (sovereign debt); (ii) corporate bonds and debentures rated in
the highest four rating categories by a NRSRO; (iii) obligations of
supranational entities; (iv) repurchase agreements involving such securities;
(v) loan participations; (vi) short-term commercial paper of U.S. or foreign
issuers rated in the highest two rating categories by a NRSRO; and (vii) swaps.
Any remaining Fund assets may be invested in: (i) securities
denominated in U.S. dollars or foreign currencies which are rated below
investment grade; (ii) obligations issued or guaranteed as to principal and
interest by the U.S. Government or its agencies and instrumentalities; (iii)
obligations (certificates of deposit, time deposits, and bankers' acceptances)
of commercial banks, savings and loan institutions, and U.S. and foreign
branches of foreign banks that have total assets of $500 million or more as
shown on their last published financial statements at the time of investment;
(iv) mortgage-backed securities rated in the highest three rating categories by
a NRSRO; (v) asset-backed securities rated in the highest three rating
categories by a NRSRO; (vi) receipts; and (vii) Guaranteed Insurance
Contracts("GICs"). The Fund may invest or hold a portion of its assets in U.S.
dollars and foreign currencies, including multinational currency units.
Normally, a portion of the Fund's total assets is held in U.S. dollars.
There are no restrictions on the average maturity of the Fund or on the
maturity of any single instrument. Maturities may vary widely depending on the
Advisor's assessment of interest rate trends and other economic and market
factors.
The Fund is non-diversified for purposes of the 1940 Act, which means
that it is not limited by the 1940 Act in the proportion of its assets that it
may invest in the obligations of a single issuer.
ING Mortgage Income Fund. The ING Mortgage Income Fund seeks to provide
investors with long-term income consistent with preservation of capital. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in mortgage-backed securities. Any remaining assets may be invested in fixed
income securities including, but not limited to, U.S. Government securities,
corporate bonds, notes and
11
<PAGE> 97
debentures, asset-backed securities and money market instruments that the Fund's
Sub-Advisor believes are appropriate in light of the Fund's objective. The
Fund's investments will be rated at least A by Moody's or S&P or similarly rated
by another NRSRO or if non-rated, they are, in the view of the Sub-Adviser, of
comparable quality. A description of security ratings is contained in an
Appendix to the SAI.
The Fund may vary the proportion of its holdings of long- and
short-term debt securities in order to reflect its assessment of prospective
changes in interest rates even if such action may adversely affect current
income. For example, if in the opinion of the Sub-Adviser, interest rates
generally are expected to decline, the Fund may sell its shorter term securities
and purchase longer term securities in order to benefit from greater expected
relative price appreciation; the securities sold may have a higher current yield
than those being purchased. The success of this strategy will depend on the
Sub-Adviser's ability to forecast changes in interest rates. Moreover, the Fund
intends to manage its portfolio actively by taking advantage of trading
opportunities such as sales of fund securities and purchases of higher yielding
securities of similar quality due to distortions in normal yield differentials.
Mortgage-backed securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. There are currently three basic types of
mortgage-backed securities: (i) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"); (ii) those issued
by private issuers that represent an interest in or are collateralized by
mortgage-backed securities issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities; and (iii) those issued by private issuers
that represent an interest in or are collateralized by whole mortgage loans or
mortgage-backed securities without a government guarantee but usually having
some form of private credit enhancement. See "Private Mortgage Pass-Through
Securities" below. The Fund may invest in adjustable rate and fixed rate
mortgage securities.
The Fund may invest in mortgage-backed securities and other derivative
mortgage products, including those representing an undivided ownership interest
in a pool of mortgages, e.g., GNMA, FNMA and FHLMC certificates where the U.S.
Government or its agencies or instrumentalities guarantees the payment of
interest and principal of these securities. These guarantees do not extend to
the yield or value of the securities or the Fund's shares. These certificates
are in most cases pass-through instruments, through which the holder receives a
share of all interest and principal payments from the mortgages underlying the
certificate, net of certain fees. The value of these securities is likely to
vary inversely with fluctuations in interest rates.
ING National Tax-Exempt Bond Fund. The ING National Tax-Exempt Bond
Fund seeks to provide investors with a high level of current income that is
exempt from federal income taxes, consistent with preservation of capital. Under
normal circumstances, at least 80% of its net assets will be invested in
Municipal Securities. The issuers of these securities can be located in all
fifty states, the District of Columbia, Puerto Rico, and other U.S. territories
and possessions. Under normal conditions, the Fund will invest at least 80% of
its net assets in securities the interest on which is not a preference item for
purposes of the federal alternative minimum tax. Although the Sub-Adviser has no
present intention of doing so, up to 20% of all assets in the Fund can be
invested in taxable debt securities for defensive purposes or when sufficient
tax exempt securities considered appropriate by the Sub-Adviser are not
available for purchase.
12
<PAGE> 98
The Fund may purchase the following types of municipal obligations, but
only if such securities, at the time of purchase, either have the requisite
rating, or, if not rated, are of comparable quality as determined by the
Sub-Adviser: (i) municipal bonds rated A or better by S&P or by Moody's, and the
Fund may invest up to 50% of its total assets in municipal bonds rated BBB by
S&P or Baa by Moody's; (ii) municipal notes rated at least SP-1 by S&P or MIG-1
or VMIG-1 by Moody's; and (iii) tax-exempt commercial paper rated at least A-1
by S&P or Prime-1 by Moody's.
Not more than 25% of Fund assets will be invested in (a) Municipal
Securities whose issuers are located in the same state and (b) Municipal
Securities the interest on which is derived from revenues of similar type
projects. This restriction does not apply to Municipal Securities in any of the
following categories: public housing authorities; general obligations of states
and localities; state and local housing finance authorities, or municipal
utilities systems.
There could be economic, business, or political developments which
might affect all Municipal Securities of a similar type. To the extent that a
significant portion of the Fund's assets are invested in Municipal Securities
payable from revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so invested.
The Fund will typically maintain a dollar-weighted average Fund
maturity of three to ten years. However, when the Sub-Adviser determines that
market conditions so warrant, the Fund can maintain a dollar-weighted average
maturity of less than three years.
The Fund may invest in variable and floating rate obligations, may
purchase securities on a "when-issued" basis, and reserves the right to engage
in transactions involving standby commitments. The Fund may also purchase other
types of tax-exempt instruments as long as they are of a quality equivalent to
the long-term bond or commercial paper ratings stated above. Although permitted
to do so, the Fund has no present intent to invest in repurchase agreements or
to purchase securities subject to the federal alternative minimum tax. The Fund
will not invest more than 15% of its net assets in illiquid securities.
The taxable securities in which the Fund may invest consist of U.S.
Treasury obligations; obligations issued or guaranteed by the U.S. Government or
by its agencies or instrumentalities whether or not backed by the full faith and
credit of the U.S. Government; instruments of U.S. commercial banks or savings
and loan institutions (not including foreign branches of U.S. banks or U.S.
branches of foreign banks) which are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation and which have total assets of $1
billion or more as shown on their last published financial statements at the
time of investment; and repurchase agreements involving any of such obligations.
All Funds
There can be no assurance that any Fund will achieve its investment
objective.
The SEC currently requires a Fund to invest at least 65% of its total
assets in investments that are consistent with its name. To the extent the SEC
increases the percentage of a Fund's assets that must be invested in investments
that are consistent with its name, each Fund reserves the right to change,
without shareholder approval, the percentage required to be invested by the Fund
from 65% of total assets to the percentage required by the SEC or to change the
name of the Fund.
13
<PAGE> 99
In order to meet liquidity needs or for temporary defensive purposes,
each Fund may invest up to 100% of its assets in fixed income securities, money
market securities, certificates of deposit, bankers' acceptances, commercial
paper or in equity securities which in the Sub-Adviser's opinion are more
conservative than the types of securities that the Fund typically invests in. To
the extent the Funds are engaged in temporary defensive investments, a Fund will
not be pursuing its investment objective.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
The types of securities and investment practices used by the funds are
described in greater detail at "DESCRIPTION OF SECURITIES AND INVESTMENT
PRACTICES."
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Board of Trustees. Additional information about the Trustees, as well as
the Funds' executive officers, may be found in the SAI under the heading
"MANAGEMENT--Trustees and Officers."
The Manager: ING MUTUAL FUNDS MANAGEMENT CO. LLC
IMFC, 18 Campus Boulevard, Suite 200, Newtown Square, PA 19073, serves
as the manager of the Funds. IMFC serves as the Manager to the Funds pursuant to
a Management Agreement with the Trust. IMFC was formed on September 8, 1998, as
a Delaware limited liability company and is a wholly-owned subsidiary of ING
Group. IMFC is registered with the SEC as an investment adviser. IMFC has no
prior experience as an investment adviser to an investment company.
Under the Management Agreement, IMFC has overall responsibility,
subject to the supervision of the Board of Trustees, for engaging sub-advisers
and for monitoring and evaluating the management of the assets of each Fund by
the Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Advisers on a periodic basis, and will consider their performance
records with respect to the investment objectives and policies of each Fund.
IMFC also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
transfer agent, custodian, independent accountants and legal counsel; (ii)
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities
commissions;(iii) preparation of proxy statements and shareholder reports for
the Funds; (iv) general supervision relative to the compilation of data required
for the preparation of periodic reports distributed to the Funds' Officers and
Board of Trustees; and(v) furnishing office space and certain facilities
required for conducting the business of the Funds.
Pursuant to the Management Agreement, the Manager is authorized to
exercise full investment discretion and make all determinations with respect to
the investment of a Fund's assets and the purchase and sale of portfolio
securities for one or more Funds in the event that at any time no Sub-Adviser is
engaged to manage the assets of a Fund. The Management Agreement may be
terminated without penalty by the vote of the Board
14
<PAGE> 100
of Trustees or the shareholders of the Fund upon 60 days' written notice by the
Board, or by the Manager and will terminate automatically if assigned as that
term is described in the 1940 Act.
The Trust pays the Manager for its services under the Management
Agreement a fee, payable monthly, based on the average daily net assets of each
Fund at the following annual rates:
<TABLE>
<CAPTION>
Management
Fee
----------
<S> <C>
Fund:
ING Intermediate Bond Fund 0.50%
ING High Yield Bond Fund 0.65%
ING International Bond Fund 1.00%
ING Mortgage Income Fund 0.50%
ING National Tax-Exempt Bond Fund 0.50%
</TABLE>
THE SUB-ADVISERS:
The Manager has entered into Sub-Advisory Agreements with the
Sub-Advisers. Under the Agreements, the Sub-Advisers have full investment
discretion and make all determinations with respect to the investment of a
Fund's assets and the purchase and sale of portfolio securities and other
investments. The Sub-Advisory Agreement may be terminated without penalty by the
Manager, the Board of Trustees or the shareholders of a Fund, or by the
Sub-Adviser, on 60 days' written notice by any party to a Sub-Advisory Agreement
and will terminate automatically if assigned as that term is described in the
1940 Act. Each of the Sub-Advisers is an affiliate of the Manager. The Manager
reserves the right to terminate a Sub-Advisory Agreement with a Fund's
Sub-Adviser and either manage the assets itself or appoint another Sub-Adviser
without shareholder approval.
BARING INTERNATIONAL INVESTMENT LIMITED. The Manager has retained BIIL
located at 155 Bishopsgate, London to act as co-sub-adviser to the International
Bond Fund along with its affiliates, BAM and BIFL. BAM is located at 125 High
Street, Boston, MA 02110 and BIFL is located at 19/F Edinburgh Tower, 15 Queens
Road, The Landmark Central, Hong Kong. BIIL, BAM and BIFL may be referred to
herein as the "Co-Sub-Advisors". BIIL, BAM and BIFL are registered under the
Investment Advisor's Act of 1940 and provides investment management services to
clients located around the world. The Co-Sub-Advisors are wholly owned
subsidiaries of Baring Asset Management Holdings Limited ("BAMHL"). BAMHL, a
company registered in England and Wales, is the parent of the world-wide group
of investment management companies that operate under the collective name Baring
Asset Management (the "BAM Group"). BAMHL is a wholly owned indirect subsidiary
of ING Group a publicly traded company based in the Netherlands with worldwide
insurance and banking subsidiaries and is affiliated with the Manager.
BAM Group provides global investment management services and maintains
major investment offices in Boston, London, Hong Kong and Tokyo, and together
with its predecessor corporation was founded in 1762. BAM Group provides
advisory services to regulated investment companies, institutional investors,
offshore investment companies, insurance companies and private clients. As of
December 31, 1997, Baring Asset Management managed approximately $36.1 billion
of assets.
15
<PAGE> 101
The ING International Bond Fund is managed by Mr. Paul Thursby, a
member of the team of 12 investment professionals. The team has an average of 17
years of investment experience. Mr. Thursby has been an investment professional
with BAMHL and BIIL since 1981 and has 18 years of investment experience.
Pursuant to the Sub-Advisory Agreements, the Manager (not the Trust)
pays to the Co-Sub-Advisors a monthly fee based on the average daily net assets
of the Fund at the annual rate of 0.500%.
The figures below show past performance of the Co-Sub-Advisor in
managing accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the International Bond
Fund. The performance is not necessarily representative of the past performance
of the above-referenced team or any individual of the team. Information
presented is based on performance data provided by the Co-Sub-Advisor. The past
performance does not represent the ING International Bond Fund's performance, as
it is newly organized and has no performance record of its own. The table shows
the total returns for a composite of the actual performance of international
bond accounts managed by Co-Sub-Advisors for various periods ended September 30,
1998, as adjusted for the projected annual expenses for the ING International
Bond Fund's Class A, B, C and X shares during its initial fiscal period as set
forth in the Fee Table in this Prospectus. Included for comparison purposes are
performance figures of the Salomon Government Bond Non-U.S. Dollar Index, an
unmanaged market index. The performance shown below is calculated in accordance
with the Association for Investment Management and Research ("AIMR").
The composite is made up of unregistered accounts that are not subject
to diversification and other requirements that apply to mutual funds under
applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING International Bond Fund may vary
in some respects. The information should not be considered a prediction of the
future performance of the ING International Bond Fund. The actual performance
may be higher or lower than that shown.
<TABLE>
<CAPTION>
Annualized Rates of Return for
Periods Ending September 30, 1998
------------------------------------------------
International Bond Composite SWGWBI
------------------- --------------
Class A Class B Class C Class X ex-U.S.$ Index
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
1 Year 10.71% 10.53% 14.53% 13.41% 10.35%
3 Years 9.97% 9.98% 11.07% 10.92% 4.41%
5 Years 9.45% 9.55% 9.83% 10.10% 7.20%
10 Years 11.08% 11.06% 10.92% 11.34% 9.13%
</TABLE>
ING Investment Management, LLC. The Manager has retained IIM, located
at 5780 Powers Ferry Road, N.W. Suite 300, Atlanta, Georgia 30327 to act as
sub-adviser to the ING Intermediate Bond Fund, ING High Yield Bond Fund and the
ING Mortgage Income Fund. IIM is a Delaware limited liability corporation which
is engaged in the business of providing investment advice to portfolios which,
as of December 31, 1997, were valued at $22 billion. IIM is a wholly owned
subsidiary of ING Group and is
16
<PAGE> 102
affiliated with the Manager. IIM is registered with the SEC as an investment
adviser. IIM is also a sub-adviser to other registered investment companies.
Each Fund is managed by a team of IIM investment professionals.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust)
pays to IIM a monthly fee based on the average daily net assets of the
applicable Fund at the following annual rates of the average daily net assets:
<TABLE>
<CAPTION>
Fund Investment Advisory Fee
- ------------------------------- ------------------------
<S> <C>
ING Intermediate Bond Fund 0.250%
ING High Yield Bond Fund 0.325%
ING Mortgage Income Fund 0.250%
</TABLE>
Furman Selz Capital Management LLC. The Manager has retained FSCM,
located at 230 Park Avenue, New York, NY 10169, to act as sub-adviser to the ING
National Tax-Exempt Bond Fund. FSCM is a Delaware limited liability company
which is engaged in the business of providing investment advice to institutional
and individual clients which, as of December 31, 1997, were valued at
approximately $10 billion. FSCM is a wholly-owned subsidiary of ING Group and is
affiliated with the Manager. FSCM is registered with the SEC as an investment
adviser. FSCM is also sub-adviser to other registered investment companies.
Messrs. Robert Schonbrunn and Alan Segars are responsible for the
day-to-day operations of the ING National Tax-Exempt Bond Fund. Mr. Schonbrunn
has been an investment professional with FSCM since 1985 and has 31 years of
experience. Mr. Segars has been an investment professional with FSCM since 1985
and has 29 years of experience.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust)
pays to FSCM a monthly fee based on the average daily net assets of the Fund at
the annual rate of 0.250%.
The figures below show past performance of FSCM in managing accounts
with investment objectives, policies, styles and techniques substantially
similar though not identical to those of the ING National Tax Exempt Bond Fund.
Information presented is based on performance data provided by FSCM. The past
performance does not represent the ING National Tax Exempt Bond Fund's
performance, as it is newly organized and has no performance record of its own.
The table shows the total returns for a composite of the actual performance of
federal tax exempt accounts managed by FSCM for various periods ended September
30, 1998, as adjusted for the projected annual expenses for the ING National Tax
Exempt Bond Fund's Class A, B, C and X shares during its initial fiscal period
as set forth in the Fee Table in this Prospectus. Included for comparison
purposes are performance figures of the Lehman 7 year G.O. Municipals Index, an
unmanaged market index. The performance shown below is calculated in accordance
with AIMR.
17
<PAGE> 103
The composite is made up of unregistered accounts that are not subject
to diversification and other requirements that apply to mutual funds under
applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING National Tax Exempt Bond Fund
may vary in some respects. The information should not be considered a prediction
of the future performance of the ING National Tax Exempt Bond Fund. The actual
performance may be higher or lower than that shown.
<TABLE>
<CAPTION>
Annualized Rates of Return for
Periods Ending September 30, 1998
---------------------------------------------------
FSCM Lehman 7 year
--------------------------------------------------- G.O. Municipals
Class A Class B Class C Class X Index
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
1 Year 1.74% 1.03% 5.03% 3.68% 8.00%
3 Years 4.11% 3.82% 5.04% 4.70% 6.80%
5 Years 3.70% 3.60% 3.95% 4.12% 6.00%
Since Inception (12/31/91) 5.55% 5.54% 5.54% 5.93% 7.00%
</TABLE>
THE DISTRIBUTOR
IFD acts as the Distributor. IFD is located at 18 Campus Boulevard,
Suite 200, Newtown Square, PA 19073. As Distributor, IFD sells shares of each
Fund on behalf of the Trust.
FUND ACCOUNTANT AND TRANSFER AGENT
ING Fund Services has entered into a Fund Services Agreement with the
Funds pursuant to which ING Fund Services will perform or engage third parties
to perform transfer agency, fund accounting and other services. ING Fund
Services has retained DST to act as the Funds' transfer agent and fund
accounting agent. DST is located at 333 W. 11th Street, Kansas City, Missouri
64105. For its services as transfer agent and fund accounting agent, DST
receives a fee from ING Fund Services (and not the Funds), payable monthly,
based upon the average daily net assets of the Funds.
DISTRIBUTION EXPENSES
Pursuant to a Plan of Distribution adopted by each Fund under Rule
12b-1 under the 1940 Act, each Fund pays the Distributor an annual fee of 0.50%
of average net assets attributable to that Fund's Class A shares, 0.75% of
average net assets attributable to that Fund's Class B, Class X and C shares.
The higher distribution fee attributable to Class B, X, and C shares is
designed to permit an investor to purchase such shares through registered
representatives of the Distributor and other broker-dealers without the
assessment of an initial sales charge and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution
18
<PAGE> 104
fee for all classes may be used by the Distributor for the purpose of financing
any activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor: (a) to compensate broker-dealers, including the Distributor and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions,(b) to pay for interest and other
borrowing costs incurred by the distributor; and (c) to pay other advertising
and promotional expenses in connection with the distribution of Fund shares.
These advertising and promotional expenses include, by way of example but not by
way of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses. If the distribution plan is terminated by the Funds, the Board of
Trustees may allow the Funds to pay the 12b-1 Fees to the Distributor for
distributing shares before the plan was terminated.
SHAREHOLDER SERVICING PLAN
The Funds have adopted a Shareholder Servicing Plan pursuant to which
it may pay a service fee up to an annual rate of 0.25% of Fund average daily net
assets to various banks, trust companies, broker-dealers (other than the
Distributor) or other financial organizations including the Manager and its
affiliates (collectively, "Service Organizations") that provide certain
administrative and support services to their customers who own shares of the
Funds.
SUB-TRANSFER AGENCY PLAN
The Funds have adopted a Sub-Transfer Agency Plan pursuant to which it
may pay a fee of up to an annual rate of 0.25% of Fund average daily net assets
to service organizations who provide sub-transfer agency services to their
customers who own shares of the Funds.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by the Manager. The costs borne by the Funds include legal
and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian; transfer agent and sub-transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Expenses of the Funds directly attributable to the
Fund are charged to that Fund; other expenses are allocated proportionately
among all of the Funds in relation to the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Sub-Advisory Contracts, the Sub-Adviser places orders
for the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion. In
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<PAGE> 105
effecting purchases and sales of equity and debt securities for the account of
the Funds, the Sub-Adviser will seek the best execution of the Funds' orders.
Purchases and sales of portfolio debt securities for the Funds are generally
placed by the Sub-Adviser with primary market makers for these securities on a
net basis, without any brokerage commission being paid by the Funds. Trading of
portfolio debt securities does, however, involve transaction costs. Transactions
with dealers serving as primary market makers reflect the spread between the bid
and asked prices. As permitted by Section 28(e) of the Securities Exchange Act
of 1934, the Adviser may cause a Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to the Sub-Adviser an
amount of disclosed commissions for executing a securities transaction for the
Funds in excess of the commissions another broker-dealer would have charged if
the Sub-Adviser believes the commission paid is reasonable in relation to the
value of the brokerage and research services received by the Sub-Adviser.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Sub-Adviser. The Sub-Adviser may allocate purchase
and sales orders for portfolio securities to broker-dealers that are affiliated
with the Manager, the Sub-Adviser or Distributor in agency transactions, if the
Sub-Adviser believes the quality of the transaction and commissions are
comparable to what they would be with other qualified brokerage firms.
FUND SHARE VALUATION
The net asset value per share of the Funds is calculated at 4:00 p.m.
(Eastern time), Monday through Friday, on each day the New York Stock Exchange
is open for business (a "Business Day"). The net asset value per share of each
class is computed by dividing the value of the net assets of each class (i.e.,
the value of the assets less the liabilities) by the total number of outstanding
shares of each class. All expenses, including fees paid to the Manager, the
Administrator and the Distributor, are accrued daily and taken into account for
the purpose of determining the net asset value. Expenses directly attributable
to a Fund are charged to the Fund; other expenses are allocated proportionately
among each Fund within the Trust in relation to the net assets of each Fund, or
on another reasonable basis. These general expenses (e.g., liability insurance
premiums) are allocated among the Funds based on each Fund's relative net
assets. Within each class, the expenses are allocated proportionately based on
the net assets of each class, except class specific expenses which are allocated
directly to the respective class.
Securities listed on an exchange or over-the-counter are valued on the
basis of the last sale prior to the time the valuation is made. If there has
been no sale since the immediately previous valuation, then the average of the
last bid and asked prices is used. Quotations are taken from the exchange where
the security is primarily traded. Portfolio securities which are primarily
traded on foreign exchanges may be valued with the assistance of pricing
services and are generally valued at the preceding closing values of such
securities on their respective exchanges, except that when an occurrence
subsequent to the time a foreign security is valued is likely to have changed
such value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees. Notwithstanding the above, bonds and other fixed-income
securities are valued by using market quotations and may be valued on the basis
of prices provided by a pricing service approved by the Board of Trustees. All
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and asked prices of such
currencies against U.S. dollars as last quoted by any major bank.
With respect to options contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in
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<PAGE> 106
accordance with the preceding paragraph. The premium paid for an option
purchased by the Fund is recorded as an asset and subsequently adjusted to
market value.
PRICING OF FUND SHARES
Orders for the purchase of shares will be executed at the net asset
value per share plus any applicable initial sales charges (the "public offering
price") next determined after an order has been received.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in a Fund is $2,000 ($1,000 for an IRA
investment). Any subsequent investments must be at least $50, including an IRA
Investment. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. A
separate application is required for an IRA. The Funds reserve the right to
reject any purchase order.
PURCHASE OF FUND SHARES
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Trust reserves the
right to reject any purchase. First Data maintains records of each shareholder's
holdings of Fund shares, and each shareholder receives a statement of
transactions, holdings and dividends.
Additional shares may be purchased directly through the Fund or through
any dealer who has entered into an agreement with The Fund. The minimum
investment for subsequent purchases is $50.
All investments may be made using any of the following methods.
Through the Fund by Mail. A completed Account Application together with
a check payable to ING Funds Trust should be forwarded to ING Fund Services Co.,
LLC, P.O. Box 9690, Providence, RI 02940-9690. Purchases made by check in any
Fund are not permitted to be redeemed until payment of the purchase has been
collected, which may take up to fifteen calendar days. Third party and foreign
checks will not be accepted. Please include the Fund name and your account
number on all checks.
Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose and sent to the Fund at the above address.
Through an Authorized Broker or Investment Adviser. Shares are
available to new and existing shareholders through authorized brokers or
investment advisers. Authorized brokers and investment advisers may impose
additional requirements and charges for the services rendered.
Please contact your broker or investment adviser for instructions on
purchasing shares through their organization.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be
21
<PAGE> 107
a member of the Federal Reserve Banking System or have a relationship with a
bank that is. Your bank will normally charge you a fee for handling the
transaction. To purchase shares by a Federal funds wire, please first contact
ING Fund Services at 1-877-INFO-ING for wiring instructions and to obtain a fund
account number and reference number for the wire. The following wire
instructions should be used:
Bank Name
City, State
Beneficiary Bank ABA/Routing #:
Beneficiary Account Number:
Beneficiary Account Name:
Account Number:
OBI:
By Automated Clearing House. You can purchase additional Fund shares by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish this feature, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-877-INFO-ING. Once the form is completed,
returned, and updated to your account, you can initiate a purchase by contacting
1-877-INFO-ING with the amount of your purchase and an authorization to debit
your designated account will be issued. The debit to your bank account will
occur ordinarily within two banking days of your request.
PURCHASE PLANS
The Trust offers various purchase plans that make investing in
additional shares of the Funds more convenient than by mail or wire. The
following are the plans offered and the features of the plans. Please contact
ING Fund Services Co., LLC at 1-877-INFO-ING for the appropriate authorization
form. All purchase plans listed will not be offered to shareholders of Class X
shares.
ING AUTO-ASSET ACCUMULATION PLAN
This plan permits you to purchase Fund shares (minimum of $100.00 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an ING Auto-Asset Accumulation
account, you must file an authorization form with the Transfer Agent. You may
obtain the necessary authorization form by calling 1-877-INFO-ING. You may
cancel your participation in this plan or change the amount of purchase at any
time by mailing written notification to ING Fund Services Co., LLC, P.O. Box
9690, Providence, RI 02940-9690 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this plan at
any time or charge a service fee. No such fee currently is contemplated.
ING DIRECTED FEDERAL DEPOSIT PLAN
ING Directed Deposit Plan enables you to purchase Fund shares (minimum
of $100.00 per transaction) by having Federal salary, Social Security, or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
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<PAGE> 108
payments as you elect. To enroll in this Plan you must file with the Transfer
Agent a completed Directed Federal Deposit Sign-Up Form for each type of payment
that you desire to include in this Plan. The appropriate form may be obtained by
calling 1-877-INFO-ING. Death or legal incapacity will terminate your
participation in this plan. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The Fund
may terminate your participation upon 30 days' notice to you.
ING SCHEDULED PAYROLL INVESTMENT PROGRAM
ING Schedule Payroll Investment Program permits you to purchase Fund
shares (minimum of $50.00 per transaction) automatically on a regular basis.
Depending upon your employer's direct deposit program, you may have part or all
of your paycheck transferred to your existing ING account electronically through
the Automated Clearing House system at each pay period. To establish an ING
Scheduled Payroll Investment Program account, you must file an authorization
form with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to ING Fund Services Co., LLC, P.O. Box
9690, Providence, RI 02940-9690. You may obtain the necessary authorization form
by calling 1-877-INFO-ING. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, the Trust, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the ING
Scheduled Payroll Investment Program. The Fund may modify or terminate this
program at any time or charge a service fee. No such fee currently is
contemplated.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund offers investors the choice between multiple classes of
shares which offer differing sales charges and bear different expenses. These
alternatives permit an investor to choose the more beneficial method of
purchasing shares given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances. The "Highlights"
section of the Prospectus contains a summary of these alternative purchase
arrangements. A broker-dealer may receive different levels of compensation
depending on which class of shares is sold. The Distributor may also provide
additional compensation to dealers in connection with selling shares of the
Funds or for their own company-sponsored sales programs. Additional compensation
or assistance may be provided to dealers and includes payment or reimbursement
for educational, training and sales conferences or programs for their employees.
In some cases, this compensation may only be available to dealers whose
representatives have sold or are expected to sell significant amounts of shares.
The Distributor will make these payments from its own resources and none of the
aforementioned additional compensation is paid for by the applicable Fund or its
shareholders.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
The public offering price of Class A shares is determined once daily,
by adding a sales charge to the net asset value per share of the shares next
calculated after receipt of the purchase order. The sales charges and
broker-dealer concessions, which vary with the size of the purchase, are shown
in the following table.
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<PAGE> 109
<TABLE>
<CAPTION>
Sales Charge as
Sales Charge as Percentage of the
Percentage of the Net Amount Broker-Dealer
Amount of Sale Offering Price Invested Concession
- ----------------------------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
Less than $50,000....................... 4.75% 4.99% 4.00%
$50,000 to $99,999...................... 4.25% 4.44% 3.50%
$100,000 to $249,999.................... 3.50% 3.63% 2.75%
$250,000 to $499,999.................... 2.50% 2.56% 2.00%
$500,000 to $999,999.................... 2.00% 2.04% 1.60%
$1,000,000 or more*..................... -0- -0- 1.00%
</TABLE>
- --------------------------------------------
* The Fund imposes a contingent deferred sales charge in connection with
certain purchases of Class A shares of $1,000,000 or more. See
"Redemption--Contingent Deferred Sales Charge."
The above scale applies to purchase of Class A shares by the following:
(1) Any individual, his or her spouse, and their children under the age of 21,
and any of such persons' tax-qualified plans (provided there is only one
participant); (2) A trustee or fiduciary of a single trust estate or single
fiduciary account; and (3) Any organized group, provided that the purchase is
made by means which result in economy of sales effort or expenses, whether the
purchases are made through a central administrator, through a single
broker-dealer or by other means and the group has a tax identification number.
An organized group does not include clients of an investment adviser.
Rights of Accumulation. The initial sales charge for your investment in
Fund shares may also be reduced by aggregating the amount of such investment
with the current value of all Fund shares currently owned by you at the time of
your current purchase.
Letter of Intent ("LOI"). You may reduce the initial sales charge rate
that applies to your purchases of Class A shares by meeting the terms of an
LOI--a non-binding commitment to invest a certain amount within a thirteen-month
period from your initial purchase. The total amount of your intended purchases
of Class A, B, C and X shares will determine the reduced sales charge rate for
Class A shares purchased during that period. This can include purchases made up
to 90 days before the date of the LOI. Of the LOI amount, 5% will be held in
escrow to cover additional sales charges which may be due if your total
investments over the LOI period are not sufficient to qualify for a sales charge
reduction.
Waiver of All Class A Sales Charges. No sales charge is imposed on
sales of Class A shares for the following investors: (1) the Manager, its parent
company, any affiliate or subsidiary of the parent company; (2) present or
former officers, directors, trustees and employees (and their parents, spouses
and dependent children) of the Fund, the Manager (including, its parent company
or any affiliate or subsidiary of the parent company) or the Sub-adviser, and
any retirement plans established by such entities for their employees; (3)
accounts with respect to which any person described in (2) above acts as a
custodian on behalf of a minor (including Uniform Gift to Minors Act and Uniform
Transfer to Minors Act accounts); (4) present employees (and their parents,
spouses and dependent children) of the Transfer Agent and the Funds' or the
Trust's
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<PAGE> 110
legal counsel and administrator; (5) dealers that have a sales agreement with
the Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees; (6) employees and registered
representatives (and their parents, spouses and dependent children) of dealers
or financial institutions that have entered into sales arrangements with such
dealers (and are identified to the Distributor) or with the Distributor; the
purchaser must certify to the Distributor at the time of purchase that the
purchase is for the purchaser's own account (or for the benefit of such
employee's parents, spouse, parents of spouse, or minor children); (7) dealers,
brokers, registered investment advisers or third-party administrators or
consultants that have entered into an agreement with the Distributor providing
specifically for the use of Fund shares in investment products or services made
available to their clients (those clients may be charged a transaction fee by
their dealer, broker or adviser for the purchase or sale of Fund shares); (8)
employees (and their parents, spouses and dependent children) of firms providing
the Funds, the Trust or their affiliates with regular legal, actuarial,
auditing, underwriting, claims, administrative, computer support, marketing,
office or other services; and (9) any sub-adviser of the Funds or the Trust.
Additionally, no sales charge is imposed on the following transactions:
(1) shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which a Fund is a party; (2) shares
purchased by the reinvestment of loan repayments by a participant in a
retirement plan; (3) shares purchased by the reinvestment of distributions
received from a Fund; (4) shares purchased and paid for with the proceeds of
shares redeemed in the prior 180 days from a mutual fund on which an initial
sales charge or CDSC was paid (other than a mutual fund managed by the Manager
or any of its affiliates); (5) purchases by a defined contribution plan under
section 401(a) of the Code (including 401(k) plans) with at least 25 eligible
employees; (6) purchases by a 403(b)(7) or 457 plan subject to the Employee
Retirement Income Security Act of 1974, as amended; (7) purchases by former
participants in a qualified retirement plan, where a portion of the plan was
invested in the Fund; (8) purchases by non-qualified deferred compensation
plans; and (9) purchases under arrangements between the Distributor and
organizations which make recommendations to or permit group solicitations of its
employees, members or participants.
In order for the above sales charge reductions or waivers to be
effective, the Transfer Agent must be notified of the reduction or waiver
request when the purchase order is placed. The Transfer Agent may require
evidence of your qualification for such reductions or waivers. Additional
information about the above sales charge reductions or waivers can be obtained
from the ING Fund Services by calling 1-877-INFO-ING.
Conversion from Class B or X Shares. Class B or X shares will
automatically be converted to Class A shares (at net asset value) after eight
years.
Rule 12b-1 Fees. For each Fund, Class A shares are subject to a Rule
12b-1 fee payable at an annual rate of 0.50% of the average daily net assets of
the Fund attributable to such shares. For additional information, see
"Management--Distribution Expenses."
Deferred Sales Charges. Although there is no initial sales charge on
purchases of Class A shares of $1,000,000 or more, the Distributor pays
broker-dealers out of its own assets, a fee of up to 1% of the offering price of
such shares. If these shares are redeemed within 12 months, the redemption
proceeds will be reduced by 1.00%. The CDSC will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the original
amount invested. The CDSC is not imposed on the amount of any increase in your
account value over the initial amount invested. For additional information, see
"Redemption--Contingent Deferred Sales Charge."
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating $1
million or more will be waived in the following cases if shares are redeemed and
the Transfer Agent is notified:
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<PAGE> 111
(1) redemption of shares when a Fund exercises its right to liquidate accounts
which are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class A
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
CLASS B AND X SHARES--CONTINGENT DEFERRED SALES CHARGE ALTERNATIVES
Class B Shares. The public offering price of Class B shares is the net
asset value of the applicable Fund's shares. Such shares are sold without an
initial sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC will be imposed if shares are redeemed within six
years of purchase. The Class B CDSC will not apply to redemptions of shares
purchased by the reinvestment of dividends or capital gains distributions and
may be waived under certain circumstances described below. The Class B CDSC will
be assessed on the lesser of the net asset value of the shares at the time of
redemption or the original amount invested. The Class B CDSC is not imposed on
the amount of any increase in your account value over the initial amount
invested. The Class B CDSC is paid to the Distributor to reimburse expenses
incurred in providing distribution-related services to the Fund in connection
with the sale of Class B shares. Although Class B shares are sold without an
initial sales charge, the Distributor normally pays a sales commission of 4.00%
of the purchase price of Class B shares to the dealer from its own resources at
the time of the sale. The Distributor has assigned its right to receive any
Class B CDSC, as well as any distribution and service fee to an unaffiliated
third party that provides funding for up-front sales commission payments.
To determine whether the Class B CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares held for over six years;
and (3) shares in the order they were purchased (such that shares held the
longest are redeemed first). The amount of the Class B CDSC will depend on the
number of years since the time you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class B CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
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<PAGE> 112
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class B shares, such as the
payment of compensation to selected broker-dealers, and for selling such shares.
The combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell such
shares without deduction of a sales charge at the time of purchase. Although
such shares are sold without an initial sales charge, the Distributor pays a
dealer concession equal to 4% of the amount invested to broker-dealers who sell
Class B shares.
Waiver of Class B CDSC. The Class B CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class B
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B shares are subject to higher annual Rule 12b-1
fees as described below.
Class X Shares. Class X shares are currently only offered to certain
"Qualified" purchasers (including, but not limited to, IRAs, Roth IRAs,
Education IRAs, SEP IRAs, SIMPLE IRAs and 403(b)(7) plans). Any request for
"Non-Qualified" purchases of Class X shares up to $1,000,000 will normally be
considered as a purchase request for Class B shares or declined. Any request for
"Non-Qualified" purchases of Class X shares above $1,000,000 will be considered
as a purchase request for Class A shares or declined. Because it is more
advantageous for an investor to purchase Class A shares for amounts in excess of
$1,000,000, a request to purchase Class X shares for $1,000,000 or more will
normally be considered as a purchase request for Class A shares or declined.
The public offering price of Class X shares is the net asset value of
the applicable Fund's shares. In addition, investors purchasing Class X shares
will receive, as a bonus, additional shares having a value equal to 2.50% of the
amount invested ("Bonus Shares"). The Distributor has undertaken to pay for
Bonus Shares as part of its services to the Funds. The Distributor expects to
recover costs associated with its purchases of Bonus Shares through fees
received under the Class X Distribution and Service Plan discussed below. Shares
purchased by the reinvestment of dividends or capital gains distributions are
not eligible for Bonus Shares.
Although Class X shares are sold without an initial sales charge, if
Class X shares are redeemed within six years of their purchase, a CDSC will be
deducted from the redemption proceeds. The Class X CDSC will not apply to
redemptions of Bonus Shares or shares purchased by the reinvestment of dividends
or capital gains distributions and may be waived under certain circumstances
described below. The Class X CDSC will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original amount
invested. The Class X CDSC is not imposed on the amount of any increase in your
account value over the initial amount invested. The Class X CDSC will be
assessed on the net asset value of the shares at the time of redemption. The
Class X CDSC is paid to the Distributor to reimburse expenses incurred in
providing distribution-related services to the Fund in connection with the sale
of Class X shares. Although Class X shares are sold without an initial sales
charge, the Distributor normally pays a sales commission of 4.00% of the
purchase price of Class X shares to the dealer from its own resources at the
time of the sale. During the initial offering period of the Class X shares, the
Distributor intends to pay a ___% up-front sales commission to the dealer. The
Distributor has assigned
27
<PAGE> 113
its right to receive any Class X CDSC, as well as any distribution and service
fee to an unaffiliated third party that provides funding for up-front sales
commission payments.
To determine whether the Class X CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares (including Bonus Shares)
held for over six years; (3) shares (not including Bonus Shares) in the order
they were purchased (such that shares held the longest are redeemed first); and
(4) Bonus Shares in the order they were acquired (such that Bonus Shares held
the longest are redeemed first). The amount of the Class X CDSC will depend on
the number of years since the time you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class X CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
Waiver of Class X CDSC. The Class X CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code(if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class X
shares of the Fund; (5) reinvested dividends and capital gains and(6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B and X shares are subject to higher annual Rule
12b-1 fees as described below.
Rule 12b-1 Fees. Class B and X shares are subject to a Rule 12b-1 fee
payable at an annual rate of 0.75% of the average daily net assets of the Fund
attributable to such shares. The higher Rule 12b-1 fee will cause Class B and X
shares to have a higher expense ratio and to pay lower dividends than Class A
shares. For additional information about this fee, see "Management--Distribution
Expenses."
Conversion to Class A Shares. Eight years after you purchase Class B or
X shares of a Fund, those shares will automatically convert to Class A shares of
that Fund. This conversion feature relieves Class B and X shareholders of the
higher asset-based distribution charges that applies to these shares. The
conversion is based on the relative net asset value, and no sales load or other
charge is imposed. At the time of conversion,
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a portion of the Class B or Class X shares, as applicable, purchased through the
reinvestment of dividends or capital gains ("Dividend Shares") will also convert
to Class A shares. The portion of Dividend Shares that will convert is
determined by the ratio of your converting Class B or X non-Dividend Shares to
your total Class B or X non-Dividend Shares. Under Section 1036 of the Code, the
automatic conversion of Class X shares will not result in a gain or loss to the
Fund or to affected shareholders.
CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE
The public offering price of Class C shares is the net asset value of
such shares. Class C shares are sold without an initial sales charge so that the
applicable Fund receives the full amount of the investor's purchase. While Class
C shares do not convert to Class A shares, they are subject to a lower
contingent deferred sales charge (1.00%) and do not have to be held for as long
a time (one year) as Class B or X shares to avoid paying a contingent deferred
sales charge. For additional information, see "Redemption--Contingent Deferred
Sales Charge." In addition, Class C shares are subject to higher annual Rule
12b-1 fees as described below. Class C shares do not convert to Class A shares.
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers, and for selling Class C
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Fund to
sell the Class C shares without deduction of a sales charge at the time of
purchase. Although Class C shares are sold without an initial sales charge, the
Distributor pays a dealer concession equal to 1.00% of the amount invested to
broker-dealers who sell Class C shares at the time the shares are sold and an
annual fee of 1.00% of the amount invested that begins to accrue one year after
the shares are sold.
Waiver of Class C CDSC. The Class C CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class C
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater
Rule 12b-1 Fees. For each Fund, Class C shares are subject to a Rule
12b-1 fee payable at an annual rate of 0.75% of the average daily net assets of
the Fund attributable to such shares. The higher Rule 12b-1 fee will cause Class
C shares to have a higher expense ratio and to pay lower dividends than Class A
shares. For additional information about this fee, see "Management--Distribution
Expenses."
MINIMUM ACCOUNT BALANCE.
If (1) an account opened in a fund has been in effect for at least one
year and the shareholder has not made an additional purchase in that account
within the preceding six calendar months and (2) the value of such account drops
below $500 for three consecutive months as a result of redemptions or exchanges,
the fund has the right to redeem the account, after giving the shareholder 60
days' prior
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written notice, unless the shareholder makes additional investments within the
notice period to bring the account value up to $500. If a fund determines that a
shareholder has provided incorrect information in opening an account with a fund
or in the course of conducting subsequent transactions with the fund related to
such account, the fund may, in its discretion, redeem the account and distribute
the proceeds of such redemption to the shareholder.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. In addition, an IRA
may be established through a custodial account with Investors Fiduciary Trust
Co. Completion of a special application is required in order to create such an
account, and the minimum initial investment for an IRA is $1,000. Contributions
to IRAs are subject to prevailing amount limits set by the Internal Revenue
Service. For more information and IRA information, call the Funds at
1-877-INFO-ING. Additional account level fees may be imposed for IRA accounts.
OPTIONAL BENEFITS
ING Group or its affiliates -- each an "affiliated person" of the Trust
and the Manager within the meaning of the 1940 Act -- may make certain life
insurance coverage available to certain persons on whose behalf shares of the
Funds are purchased. The benefits of this coverage payable at death will be
related to the amounts paid to purchase shares and to the value of the shares
held for the benefit of the insured persons. Therefore, coverage will terminate
if all shares are redeemed.
Purchasers of the life insurance coverage will be required to authorize
periodic redemptions of Fund shares to pay the premiums for such coverage. Such
redemptions will not be subject to contingent deferred sales charges, but will
have the same tax consequences as any other Fund redemptions.
The above life insurance coverage will be available to eligible persons
who enroll for the coverage within a limited time period after shares in any
Fund are initially purchased or transferred. In addition, coverage cannot be
made available unless ING Group knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides ING Group with information
regarding the beneficial owners of such shares. Other restrictions on the
coverage will apply, such as the age of the persons upon whose life the coverage
is issued. This insurance coverage may not be available in all states and may be
subject to additional restrictions or limitations on coverage. Purchasers of
shares should also make themselves familiar with the impact on the life coverage
of purchasing additional shares, reinvestment of dividends and capital gains
distributions and redemptions. Please call 1-800-INFO-ING for more information
and application forms for any of the above programs and privileges.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day
the Fund is valued. Shares will be redeemed without charge (except any
applicable contingent deferred sales charge) at the net asset value next
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determined after a redemption request in good order has been received the
applicable Fund. See "DETERMINATION OF NET ASSET VALUE" in the SAI.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 calendar days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the shares are redeemed, dividends on the shares will continue to
accrue and be payable and the shareholder will be entitled to exercise all other
beneficial rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds
by check to the shareholder at the address of record on the next business day.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. No
interest to or additional dividends will be earned on amounts represented by
uncashed redemption checks or misapplied wire payments.
Signature Guarantees. A signature guarantee is designed to protect the
investor, the Trust, the Distributor and their agents by verifying the signature
of each investor seeking to redeem, transfer, or exchange shares of an ING Fund.
Examples of when signature guarantees are required are: (1) redemptions by mail
in excess of $50,000; (2) redemptions by mail if the proceeds are to be paid to
someone other than the name(s) in which the account is registered; (3) written
redemptions requesting proceeds to be sent by wire to other than the bank of
record for the account; (4) redemptions requesting proceeds to be sent to a new
address or an address that has been changed within the past 30 days; (5)
requests to transfer the registration of shares to another owner; (6) telephone
exchange and telephone redemption authorization forms; (7) changes in previously
designated wiring instructions; and (8) written redemptions or exchanges of
shares previously reported as lost, whether or not the redemption amount is
under $50,000 or the proceeds are to be sent to the address of record. These
requirements may be waived or modified upon notice to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact ING Fund Services Co., LLC.
Redemption Methods. To ensure acceptance of your redemption request, it
is important to follow the procedures described below. Although the Funds have
no present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place
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orders by telephone during periods of severe market or economic change, and a
shareholder should consider alternative methods of communications, such as
couriers. The Funds may modify or terminate their services and provisions at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders. Redemption by mail will always be
available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your Authorized Broker or
Investment Adviser or Service Organization and instructing him or her to redeem
your shares. He or she will then contact ING Fund Services Co., LLC and place a
redemption trade on your behalf.
By Mail. You may redeem your shares by sending a letter directly to ING
Fund Services Co., LLC, P.O. Box 9690, Providence, RI 02940-9690. To be
accepted, a letter requesting redemption must include: (i) the Fund name and
account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed and (iv) the signatures of all
registered owners. A signature guarantee may be required as indicated in the
beginning of this section. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your shares by calling the Funds at
1-877-INFO-ING. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Funds. Telephone redemptions are available unless the shareholder
specifically declines this option on the Purchase Application and may only be
sent to the address of record or preassigned wire instructions. The Funds employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Funds fail to employ such reasonable procedures, they may be
liable for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, the Funds require some form of personal
identification prior to acting upon instructions received by telephone, record
telephone instructions and provide written confirmation to investors of such
transactions. Telephone redemptions will be suspended for a period of 10 days
following a telephone address change. You may instruct the Funds to send your
redemption proceeds via a wire transmission to your personal bank. Your
instructions should include: (1) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. Wire redemptions can be made only if the
"yes" box has been checked in the "Telephone Redemption Authorization" section
on your Purchase Application, and you have attached a copy of a voided check or
a letter summarizing the wiring instructions of the account where proceeds are
to be wired. Your bank may charge you a fee for receiving a wire payment on your
behalf.
The above-mentioned redemption services may not be available for
clients of authorized brokers, Investment Advisers or Service Organizations or
for IRAs. These clients should contact their representative.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $10,000 or more of a Fund may elect to have periodic
redemptions from his or her account to be paid on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic payment is
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$50. A sufficient number of shares to make the scheduled redemption will
normally be processed on the selected day of the selected month(s). Depending on
the size of the payment requested and fluctuation in the net asset value, if
any, of the shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
ING "BANK TO BANK" TRANSFER PLAN
You may request by telephone that redemption proceeds (maximum $150,000
per day) be paid by check and mailed to your address. You may telephone
redemption instructions by calling 1-877-INFO-ING. The Telephone Redemption
Privilege is granted automatically unless you refuse it. You may request by
telephone that redemption proceeds (minimum $500 per day) be transferred between
your Fund account and your bank account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House member may
be designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request. Holders of jointly registered Fund or bank accounts may
redeem through the plan for transfer to their bank account not more than
$250,000 within any 30-day period.
REDEMPTION IN KIND. All redemptions of shares of the Funds shall be
made in cash, except that the commitment to redeem shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Funds that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such securities he or she
may receive more or less than the value of such securities as determined above,
and might incur brokerage charges.
REINSTATEMENT PRIVILEGE (CLASS A SHARE ONLY). Within 90 days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any ING Fund at the net asset value next computed after
receipt by the Transfer Agent of the funds to be reinvested; provided, however,
if the redemption was made from Class A shares of either ING Money Market Fund
or ING U.S. Treasury Money Market Fund, the reinvested proceeds will be subject
to the difference in sales charge between the shares redeemed and the shares the
proceeds are reinvested in. The shareholder must ask the Transfer Agent for such
privilege at the time of reinvestment. A realized gain on the redemption is
taxable, and reinvestment may alter any capital gains payable. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in (or exchanged for) shares of another ING Fund
at a reduced sales charge within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption; however, the shareholder's basis in the fund
shares purchased will include the sales charge. Each ING Fund may amend, suspend
or cease offering
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this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each ING Fund.
Shareholders who are assessed a contingent deferred sales charge in
connection with the redemption of Class A shares and who subsequently reinvest a
portion or all of the value of the redeemed shares in Class A shares of any ING
Fund within 90 days after such redemption may do so at net asset value if such
privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B, C or X shares.
EXCHANGE OF FUND SHARES
The Funds offer several convenient ways to exchange shares in one Fund
for shares in the same class of another Fund in the Trust. Before engaging in an
exchange transaction, a shareholder should read carefully the Prospectus
describing the Fund into which the exchange will occur, which is available
without charge and can be obtained by writing to ING Fund Services Co., LLC,
P.O. Box 9690, Providence, RI 02940-9690, or by calling the Funds at
1-877-INFO-ING. A shareholder may not exchange shares of one Fund for shares of
another Fund if the new Fund is not qualified for sale in the state of the
shareholder's residence. The Trust may terminate or amend the terms of the
exchange privilege at any time upon at least 60 days' prior written notice to
shareholders of any modification or termination of the exchange privilege.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in good order, plus any applicable sales
charge.
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders will receive written confirmation of the
exchange following completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter
of instruction to the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties.
Exchange by Telephone. To exchange Fund shares by telephone or if you
have any questions simply call the Funds at 1-877-INFO-ING. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security or tax identification number and account
registration; (ii) the name of the Fund from and the Fund into which you wish to
transfer your investment; and (iii) the dollar or share amount you wish to
exchange. Telephone exchanges are available unless the shareholder specifically
declines this option on the Purchase Application. Telephone exchanges will be
suspended for a period of ten days following a telephone address change. See
"REDEMPTION OF FUND SHARES--By Telephone" for a discussion of telephone
transactions generally.
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AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of the
Fund, in shares of certain other funds in the ING Family of Funds of which you
are a shareholder. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sales load may be charged with respect to exchanges into
funds sold with a sales load. See "Shareholder Services" in the SAI. The right
to exercise this privilege may be modified or canceled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this privilege at any
time by mailing written notification to the ING Fund Services Co., LLC, P.O. Box
9690, Providence, RI 02940-9690. The Fund may charge a service fee for the use
of this privilege. No such fee currently is contemplated. For more information
concerning this privilege and the funds in the ING Family of Funds eligible to
participate in this privilege, or to obtain an Auto-Exchange Authorization Form,
please call toll free 1-877-INFO-ING.
ING AUTOMATIC DIVIDEND DIRECTION OPTION
This option enables you to invest automatically dividends and/or
capital gain distributions, if any, paid by the Fund in shares of another Fund
in the Trust of which you are a shareholder. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales load may be
charged with respect to investments in shares of a fund sold with a sales load.
If you are investing in a fund that charges a sales load, you may qualify for
share prices which do not include the sales load or which reflect a reduced
sales load. If you are investing in a fund that charges a contingent deferred
sales charge, the shares purchased will be subject on redemption to the
contingent deferred sales charge, if any, applicable to the purchased shares.
See "Shareholder Services" in the SAI. ING Automatic Dividend Direction Option
permits you to transfer electronically dividends and/or capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
CONTINGENT DEFERRED SALES CHARGE
CLASS A
Each Fund imposes a contingent deferred sales charge on Class A shares
in certain circumstances. Under the CDSC arrangement, for sales of shares of
$1,000,000 or more (including right of accumulation and statements of intention
(see "Purchase of Fund Shares")), the front-end sales charge ("FESC") will not
be imposed (although the Distributor intends to pay its registered
representatives and other dealers that sell Fund shares, out of its own assets,
a fee of up to 1% of the offering price of such sales except on purchases exempt
from the FESC). However, if such shares are redeemed within twelve months after
their purchase date (the "CDSC Period"), the redemption proceeds will be reduced
by the 1.00% CDSC.
The CDSC will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original amount invested. The CDSC is
not imposed on the amount of any increase in your account value over the initial
amount invested. The CDSC will not be applied to shares acquired through
reinvestment of income dividends or capital gain distributions or shares held
for longer than the applicable CDSC Period. In determining which shares to
redeem, unless instructed
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otherwise, shares that are not subject to the CDSC will be redeemed first and
shares subject to the CDSC then will be redeemed in the order purchased.
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating $1
million or more will be waived in the following cases if shares are redeemed and
the Transfer Agent is notified: (1) redemption of shares when a Fund exercises
its right to liquidate accounts which are less than the minimum account size;
(2) redemption to pay for optional insurance coverage described in the
Prospectus under "Optional Benefits"; (3) the death or post-purchase disability,
as defined in Section 72(m)(7) of the Code (if satisfactory evidence is provided
to the Fund); (4) the portion of a mandated minimum distribution from an IRA,
SIMPLE IRA or an individual type 403(b)(7) plan equal to the percentage of your
plan assets held in Class A shares of the Fund; (5) reinvested dividends and
capital gains and (6) a Systematic Withdrawal Plan of 10% per year where the
minimum distribution is $500 per month with an initial account of $20,000 or
greater.
CLASS B, X, AND C SHARES
The CDSC on Class B, X, and C shares will be calculated on the lesser
of the net asset value of the shares at the time of redemption or the original
amount invested. The Class B CDSC is not imposed on the amount of any increase
in your account value over the initial amount invested. No charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions or on shares held for longer than the applicable CDSC Period.
Upon any request for redemption of shares of any class of shares that
imposes a CDSC, it will be assumed, unless otherwise requested, that shares
subject to no CDSC will be redeemed first in the order purchased and all
remaining shares that are subject to a CDSC will be redeemed in the order
purchased. With respect to the redemption of shares subject to no CDSC where the
shareholder owns more than one class of shares, those shares with the highest
Rule 12b-1 fee will be redeemed in full prior to any redemption of shares with a
lower Rule 12b-1 fee.
The CDSC does not apply to: (1) redemption of shares when a Fund
exercises its right to liquidate accounts which are less than the minimum
account size; (2) redemption to pay for optional insurance coverage described in
the Prospectus under "Optional Benefits"; (3) the death or post-purchase
disability, as defined in Section 72(m)(7) of the Code (if satisfactory evidence
is provided to the Fund);(4) the portion of a mandated minimum distribution from
an IRA, SIMPLE IRA or an individual type 403(b)(7) plan equal to the percentage
of your plan assets held in shares of the Fund;(5) reinvested dividends and
capital gains and (6) a Systematic Withdrawal Plan of 10% per year where the
minimum distribution is $500 per month with an initial account of $20,000 or
greater.
As an illustration of CDSC calculations, assume that Shareholder X
purchases on Year 1/Day 1 100 shares at $10 per share. Assume further that, on
Year 2/Day 1, Shareholder X purchased an additional 100 shares at $12 per share.
Finally, assume that, on Year 3/Day 1, Shareholder X wishes to redeem shares
worth $1,300, and that the net asset value per share as of the close of business
on such day is $13. To effect Shareholder X's redemption request, 100 shares at
$13 per share (totaling $1,300) would be redeemed. The CDSC would be waived in
connection with the redemption of that number of shares equal in value (at the
time of redemption) to $220 (10% of $1,000--the purchase amount of the shares
purchased by Shareholder X on Year 1/Day 1--plus 10% of $1,200--the purchase
amount of the shares purchased by Shareholder X on Year 2/Day 1). In addition,
no CDSC would apply to the $400 in capital appreciation on Shareholder X's
shares ($2,600 Year 3 value minus $2,200 purchase cost of shares). If a
shareholder exchanges shares subject
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to a CDSC for Class B, X, or C shares of a different Fund, the transaction will
not be subject to a CDSC. However, when shares acquired through the exchange are
redeemed, the shareholder will be treated as if no exchange took place for the
purpose of determining the CDSC Period and applying the CDSC.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
Each Fund intends to qualify and elect to be treated as a regulated
investment company and intends to continue to qualify to be treated as a
regulated investment company for each taxable year pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying and electing, each Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net realized capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all
of its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). The Funds will declare distributions of such income daily and pay those
dividends monthly. Each Fund intends to distribute, at least annually,
substantially all net capital gains (the excess of net long-term capital gains
over net short-term capital losses). In determining amounts of capital gains to
be distributed, any capital loss carryovers from prior years will be applied
against capital gains.
The amount declared each day as a dividend may be based on projections
of estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
For all distributions, the shareholder may elect in writing, not less
than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
period will be paid within five business days after the end of the period.
Unless the shareholder chooses to receive dividend and/or capital gain
distributions in cash, distributions will be automatically reinvested in
additional shares of the respective Fund at net asset value. If you elect to
receive distributions in cash and checks (1) if returned and marked as
"undeliverable" or (2) remain uncashed for six months, your cash election will
be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a
dividend payment date will be entitled on the next dividend payment date to all
dividends declared but unpaid on those shares at the time of their redemption.
Distributions of net investment company taxable income (regardless of
whether derived from dividends, interest or short-term capital gains) generally
will be taxable to shareholders as ordinary income. Distributions of net
long-term capital gains designated by a Fund as capital gain distributions will
be taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares. This is true for distributions from net gains on
securities held for more than one year, but not more than 18 months, and from
net gains on
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securities held more than 18 months. Distributions are taxable in the same
manner whether received in additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an exempt interest dividend, will be treated
as paid on December 31 of the calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders (and therefore
taxable) in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial
futures contracts, forward contracts, and options on futures contracts. Such
rules may, among other things, affect whether gains and losses from such
transactions are considered to be short-term or long-term, may have the effect
of deferring losses and/or accelerating the recognition of gains or losses, and,
for purposes of qualifying as a regulated investment company, may limit the
extent to which a Fund may be able to engage in such transactions.
It is expected that dividends and interest from non-U.S. sources
received by a Fund will be subject to non-U.S. withholding taxes. Such
withholding taxes may be reduced or eliminated under the terms of applicable
United States income tax treaties, and the Fund intends to undertake any
procedural steps required to claim the benefits of such treaties. With respect
to any non-U.S. taxes (including withholding taxes) actually paid by the Fund,
if more than 50% in value of the Fund's total assets at the close of any taxable
year consists of stocks or securities of any non-U.S. corporations, the Fund may
elect to treat any non-U.S. taxes paid by it as paid by its shareholders. If the
Fund does not make the election permitted under Section 853, any foreign taxes
paid or accrued will represent an expense to the Fund which will reduce its
investment company taxable income. Absent this election, shareholders will not
be able to claim either a credit or a deduction for their pro rata portion of
such taxes paid by the Fund, nor will shareholders be required to treat as part
of the amounts distributed to them their pro rata portion of such taxes paid.
In the event a Fund makes the election described above to pass through
non-U.S. taxes to shareholders, shareholders will be required to include in
income (in addition to any distributions received) their proportionate portion
of the amount of non-U.S. taxes paid by the Fund and will be entitled to claim
either a credit or deduction for their portion of such taxes in computing their
U.S. Federal income tax liability. Availability of such a credit or deduction is
subject to certain limitations. Shareholders will be informed each year in which
the Fund makes the election regarding the amount and nature of foreign taxes to
be included in their income for U.S. Federal income tax purposes.
A Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
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Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term generally depending upon the shareholder's holding
period of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of a Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term capital loss to the extent of
such capital gain dividends.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Funds as to the Federal
tax status of distributions made by the Funds in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISERS AS TO THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF OWNERSHIP OF SHARES OF THE FUNDS IN THEIR PARTICULAR
CIRCUMSTANCES.
ING NATIONAL TAX-EXEMPT BOND FUND
Provided that the ING National Tax-Exempt Bond Fund complies with
applicable requirements of the Code, dividends derived from interest on
Municipal Securities will constitute exempt-interest dividends and, except as
discussed below, will not be subject to Federal income tax. Some portion of the
exempt-interest dividends paid by the Fund will be treated as an item of "tax
preference" for purposes of the alternative minimum tax if the Fund invests in
certain types of municipal obligations (see discussion below).
Under the Code, interest on certain types of Municipal Securities is
designated as an item of tax preference for purposes of the alternative minimum
tax on individuals and corporations. Therefore, if the Fund were to invest in
such types of obligations, shareholders would be required to treat as an item of
tax preference that part of the distributions by the Fund that is derived from
interest income on such obligations.
Exempt-interest dividends received by corporations which hold shares of
the Fund may result in or increase liability for the corporate alternative
minimum tax.
Entities or persons who are "substantial users" (or persons related to
"substantial users") as defined in the Code, of facilities financed by Municipal
Securities issued for certain private activities should consult their tax
advisers before purchasing shares of the Fund.
Exempt-interest dividends and other distributions paid by the Fund are
includable in the tax base for determining the taxability of social security or
railroad retirement benefits. Interest on debt incurred to purchase or carry
shares in the Fund may not be deductible for Federal income tax purposes.
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Depending on the residence of the Fund's shareholders for tax purposes,
distributions may also be subject to state and local taxes. Shareholders are
required to report the amount of tax-exempt interest received each year,
including exempt-interest dividends, on their Federal tax returns. Shareholders
should consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of the Fund shares in their particular circumstances.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
The following is a description of investment practices of the Funds and
the securities in which they may invest:
U.S. Treasury Obligations (All Funds). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the
United States Government as to the timely payment of principal and interest.
U.S. Treasury obligations consist of bills, notes, and bonds and separately
traded interest and principal component parts of such obligations known as
STRIPS which generally differ in their interest rates and maturities. U.S.
Treasury bills, which have original maturities of up to one year, notes, which
have maturities ranging from one year to 10 years, and bonds, which have
original maturities of 10 to 30 years, are direct obligations of the United
States Government.
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the United States Government or U.S. Treasury
guarantees, such as mortgage-backed certificates guaranteed by the GNMA. Other
types of U.S. Government securities, such as obligations of the Student Loan
Marketing Association, provide recourse only to the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States Government, the investor must
look to the agency issuing or guaranteeing the obligation for ultimate
repayment.
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and United States Government agencies
and instrumentalities, subject to the rating requirements specified for each
Fund.
Corporate Debt Securities (All Funds). The Funds may purchase corporate
debt securities, subject to the rating and quality requirements specified with
respect to each Fund. The Funds may invest in both rated commercial paper and
rated corporate debt obligations of foreign issuers that meet the same quality
criteria applicable to investments by the Funds in commercial paper and
corporate debt obligations of domestic issuers. These investments, therefore,
are not expected to involve significant additional risks as compared to the
risks of investing in comparable domestic securities. Generally, all foreign
investments carry with them both opportunities and risks not applicable to
investments in securities of domestic issuers, such as risks of foreign
political and economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital, changes in foreign governmental attitudes
toward private investment (possibly leading to nationalization, increased
taxation or confiscation of foreign assets) and added difficulties inherent in
obtaining and enforcing a judgment against a foreign issuer of securities should
it default.
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Mortgage-Backed Securities (All Funds). Mortgage-backed securities are
securities that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans secured by real property. There are
currently three basic types of mortgage-backed securities: (i) those issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities,
such as GNMA, FNMA and FHLMC; (ii) those issued by private issuers that
represent an interest in or are collateralized by mortgage-backed securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or mortgage-backed
securities without a government guarantee but usually having some form of
private credit enhancement. See "Private Mortgage Pass-Through Securities"
below. The Funds may invest in adjustable rate and fixed rate mortgage
securities.
The Funds may invest in mortgage-backed securities and other derivative
mortgage products, including those representing an undivided ownership interest
in a pool of mortgages, e.g., GNMA, FNMA and FHLMC certificates where the U.S.
Government or its agencies or instrumentalities guarantees the payment of
interest and principal of these securities. These guarantees do not extend to
the yield or value of the securities or the Fund's shares. See "Investment
Objective and Policies--Mortgage-Backed Securities--Non-Agency Mortgage-Backed
Securities" in the SAI. These certificates are in most cases pass-through
instruments, through which the holder receives a share of all interest and
principal payments from the mortgages underlying the certificate, net of certain
fees. The value of these securities is likely to vary inversely with
fluctuations in interest rates.
Mortgage-backed securities are subject to the risk that the principal
on the underlying mortgage loans may be prepaid at any time. Although the extent
of prepayments on a pool of mortgage loans depends on various economic and other
factors, as a general rule prepayments on fixed rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Accordingly, amounts available for reinvestment by the
Fund are likely to be greater during a period of declining interest rates and,
as a result, likely to be reinvested at lower interest rates than during a
period of rising interest rates. Mortgage-backed securities may decrease in
value as a result of increases in interest rates and may benefit less than other
fixed income securities from declining interest rates because of the risk of
prepayment. During periods of rising interest rates, the rate of prepayment of
mortgages underlying mortgage-backed securities can be expected to decline,
extending the projected average maturity of mortgage-backed securities. A
decline in the rate of repayment may effectively change a security which was
considered short- or intermediate-term at the time of purchase into a long-term
security. Long-term securities generally fluctuate more widely in response to
changes in interest rates than short- or intermediate-term securities.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities (All Funds). A collateralized mortgage obligation ("CMO") is a
security issued by a corporation or U.S. Government agency or instrumentality
which is backed by a portfolio of mortgages or mortgage-backed securities. The
issuer's obligation to make interest and principal payments is secured by the
underlying portfolio of mortgages or mortgage-backed securities. Multiclass
pass-through securities are equity interests in a trust composed of mortgages or
mortgage-backed securities. Payments of principal of and interest on the
underlying mortgage assets, and any reinvestment income thereon, provide the
funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including depository institutions, mortgage banks,
investment banks and special purpose subsidiaries of the foregoing. The issuer
of a series of CMOs may elect to be treated as a Real Estate Mortgage Investment
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Conduit ("REMIC"). All future references to CMOs include securities issued by
REMICs and multiclass pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a tranche, is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the underlying mortgage assets may
cause the CMOs to be retired substantially earlier than their stated maturities
or final distribution dates. Interest is paid or accrues on classes of the CMOs
on a monthly, quarterly or semi-annual basis. The principal of and interest on
the underlying mortgage assets may be allocated among the several classes of a
CMO series in a number of different ways. Generally, the purpose of the
allocation of the cash flow of a CMO to the various classes is to obtain a more
predictable cash flow to the individual tranches than exists with the underlying
collateral of the CMO. As a general rule, the more predictable the cash flow is
on a CMO tranche, the lower the anticipated yield will be on that tranche at the
time of issuance relative to prevailing market yields on mortgage-backed
securities. Certain classes of CMOs may have priority over others with respect
to the receipt of prepayments.
In reliance on rules and interpretations of the Commission, the Funds'
investments in certain qualifying CMOs and REMICs are not subject to the 1940
Act's limitation on acquiring interests in other investment companies. See
"Investment Objective and Policies--Mortgage-Backed Securities--Collateralized
Mortgage Obligations" in the SAI.
Stripped Mortgage-Backed Securities (All Funds except ING National
Tax-Exempt Bond Fund). The Funds may invest in mortgage-backed security strips
("MBS strips") (i) issued by the U.S. Government or its agencies or
instrumentalities or (ii) issued by private originators of, or investors in,
mortgage loans, including depository institutions, mortgage banks, investment
banks and special purpose subsidiaries of the foregoing (derivative multiclass
mortgage securities). MBS strips are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or IO class), while the other class will
receive all of the principal (the principal-only or PO class). The yields to
maturity on IOs and POs are sensitive to the expected or anticipated rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and principal payments may have a material effect on yield to maturity.
If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Funds may not fully recoup its initial investment
in IOs. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the yield on POs could be materially
adversely affected. See "Investment Objective and Policies--Mortgage-Backed
Securities" in the SAI. Derivative mortgage-backed securities such as MBS strips
are highly sensitive to changes in prepayment and interest rates.
Private Mortgage Pass-Through Securities (All Funds except ING National
Tax-Exempt Bond Fund). Private mortgage pass-through securities are structured
similarly to the GNMA, FNMA and FHLMC mortgage pass-through securities and are
issued by originators of and investors in mortgage loans, including depository
institutions, mortgage banks, investment banks and special purpose subsidiaries
of the foregoing. These securities usually are backed by a pool of conventional
fixed rate or adjustable rate mortgage loans. Since private mortgage
pass-through securities typically are not guaranteed by an entity having the
credit status of GNMA, FNMA and FHLMC, such securities generally are structured
with one or more types of credit enhancement.
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Real Estate Investment Trusts (All Funds). The Funds will invest
primarily in shares of real estate investment trusts ("REITs"). REITs pool
investors' funds for investment primarily in income producing real estate or
real estate related loans or interests. Under the Internal Revenue Code of 1986
(the "Code"), a REIT is not taxed on income it distributes to its shareholders
if it complies with several requirements relating to its organization,
ownership, assets, and income and a requirement that it generally distribute to
its shareholders at least 95% of its taxable income (other than net capital
gains) for each taxable year. REITs can generally be classified as Equity REITs,
Mortgage REITs, and Hybrid REITs. Equity REITs, which invest the majority of
their assets directly in real property, derive their income primarily from
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs, which invest the majority of their
assets in real estate mortgages, derive their income primarily from interest
payments. Hybrid REITs combine the characteristics of both Equity REITs and
Mortgage REITs.
Adjustable Rate Securities(ING High Yield Bond Fund and ING Mortgage
Income Fund). The Funds are permitted to invest in adjustable rate or floating
rate debt securities, including corporate securities, securities issued by U.S.
Government agencies and mortgage-backed securities, whose interest rate is
calculated by reference to a specified index such as the constant maturity
Treasury rate, the T-bill rate or LIBOR (London Interbank Offered Rate) and is
reset periodically. Adjustable rate securities allow the Funds to participate in
increases in interest rates through these periodic adjustments. The value of
adjustable or floating rate securities will, like other debt securities,
generally vary inversely with changes in prevailing interest rates. The value of
adjustable or floating rate securities is unlikely to rise in periods of
declining interest rates to the same extent as fixed rate instruments of similar
maturities. In periods of rising interest rates, changes in the coupon will lag
behind changes in the market rate resulting in a lower net asset value until the
coupon resets to market rates.
Structured Securities(ING Intermediate Bond Fund and ING High Yield
Bond Fund). The Fund may invest in structured notes and/or preferred stocks, the
value of which is linked to currencies, interest rates, other commodities,
indices or other financial indicators. The securities differ from other
securities in which the Fund may invest in several ways. For example, the
coupon, dividend and/or redemption amount at maturity may be increased or
decreased depending on the value of the underlying instrument.
Investment in structured securities involves certain risks. In addition
to the credit risk of the issuer and the normal risks of changes in interest
rates, the redemption amount may increase or decrease as a result of price
changes in the underlying instrument. Further, in the case of certain structured
securities, the coupon and/or dividend may be reduced to zero, and any further
declines in the value of the underlying instrument may then reduce the
redemption amount payable at maturity. Finally, structured securities may have
more volatility than the price of the underlying instrument.
Asset-Backed Securities (All Funds except ING National Tax-Exempt
Fund). These Funds are permitted to invest in asset-backed securities, subject
to the rating and quality requirements specified with respect to each such Fund.
Through the use of trusts and special purpose subsidiaries, various types of
assets, primarily home equity loans and automobile and credit card receivables,
are being securitized in pass-through structures similar to the mortgage
pass-through structures described above. Consistent with the Funds' investment
objectives, policies and quality standards, a Fund may invest in these and other
types of asset-backed securities which may be developed in the future.
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Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities. The risks associated with
asset-backed securities are often reduced by the addition of credit enhancements
such as a letter of credit from a bank, excess collateral or a third-party
guarantee.
Preferred Stocks (All Funds except ING National Tax-Exempt Fund).
Preferred stock has a preference over common stock in liquidation and generally
in dividends as well, but is subordinated to the liabilities of the issuer in
all respects. Preferred stock may or may not be convertible into common stock.
As a general rule, the market value of preferred stock with a fixed dividend
rate and no conversion element varies inversely with interest rates and
perceived credit risk. Because preferred stock is junior to debt securities and
other obligations of the issuer, deterioration in the credit quality of the
issuer will cause greater changes in the value of a preferred stock than in a
more senior debt security with similar stated yield characteristics.
American Depository Receipts (International Bond Fund). American
Depository Receipts ("ADRs") are U.S. dollar-denominated receipts generally
issued by domestic banks, which evidence the deposit with the bank of the common
stock of a foreign issuer and which are publicly traded on exchanges or
over-the-counter in the United States.
The Fund may each invest in both sponsored and unsponsored ADR
programs. There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depository and the shareholder. The company issuing the
stock underlying the ADR pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
In an unsponsored ADR program, there also may be several depositories
with no defined legal obligations to the non-U.S. company. The duplicate
depositories may lead to marketplace confusion because there would be no central
source of information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in
purely domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards (and certain
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currencies may become unavailable for transfer from a foreign currency),
resulting in a Fund's possible inability to convert proceeds realized upon the
sale of portfolio securities of the affected foreign companies immediately into
U.S. currency. The Funds may also invest in European Depository Receipts
("EDRs"), which are receipts issued in bearer form by a European financial
institution and traded in European securities' markets. Investments in EDRs
involve similar risks as ADRs.
Investment in Foreign Securities(ING Intermediate Bond Fund, ING
International Bond Fund and ING High Yield Bond Fund). The Funds may invest in
securities of foreign governmental and private issuers. Investments in foreign
securities involve certain considerations that are not typically associated with
investing in domestic securities. There may be less publicly available
information about a foreign issuer than about a domestic issuer. Foreign issuers
also are not generally subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, interest may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in securities of
issuers located in those countries.
Securities of Foreign Governments and Supranational Organizations(ING
Intermediate Bond Fund and ING International Bond Fund). The Funds may invest in
U.S. dollar-denominated debt securities issued by foreign governments, their
political subdivisions, governmental authorities, agencies and instrumentalities
and supranational organizations. A supranational organization is an entity
designated or supported by the national government of one or more countries to
promote economic reconstruction or development. Examples of supranational
organizations include, among others, the International Bank for Reconstruction
and Development (World Bank), the European Economic Community, the European Coal
and Steel Community, the European Investment Bank, the Inter-American
Development Bank, the Asian Development Bank, and the African Development Bank.
The Funds may also invest in "quasi-government securities" which are debt
obligations issued by entities owned by either a national, state or equivalent
government or are obligations of such a government jurisdiction which are not
backed by its full faith and credit and general taxing powers.
Investing in foreign government and quasi-government securities
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. Government. The values of foreign
investments are affected by changes in governmental administration or economic
or monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. In addition, investments in foreign countries could
be affected by other factors not present in the United States, including
expropriation, confiscatory taxation and lack of uniform accounting and auditing
standards.
Convertible and Exchangeable Securities (All Funds except ING National
Tax-Exempt Fund). The Funds are permitted to invest in convertible and
exchangeable securities, subject to the rating and quality requirements
specified with respect to each such Fund. Convertible securities generally offer
fixed interest or dividend yields and may be converted either at a stated price
or stated rate for common or preferred stock. Exchangeable securities may be
exchanged on specified terms for common or preferred stock. Although to a lesser
extent than with fixed income securities generally, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion or exchange feature, the market value of convertible or
exchangeable securities tends to vary with fluctuations in the market value of
the underlying common or preferred stock. Debt securities that are convertible
into or exchangeable for preferred or common stock are liabilities of the issuer
but are generally subordinated to senior debt of the issuer.
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Domestic and Foreign Bank Obligations (All Funds). These obligations
include but are not restricted to certificates of deposit, commercial paper,
Yankee dollar certificates of deposit, bankers' acceptances, Eurodollar
certificates of deposit and time deposits, promissory notes and medium-term
deposit notes. The Funds will not invest in any obligations of their affiliates,
as defined under the 1940 Act.
Each Fund limits its investment in United States bank obligations to
obligations of United States banks (including foreign branches). Each Fund
limits its investment in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of the Sub-Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds. There is no limitation on the amount of the Funds'
assets which may be invested in obligations of foreign banks meeting the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may
be subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing in more than seven days may not exceed 15% of the value of the net
assets of the Funds.
Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankee dollar obligations involve
additional risks. Most notably, there generally is less publicly available
information about foreign companies; there may be less governmental regulation
and supervision; they may use different accounting and financial standards; and
the adoption of foreign governmental restrictions may adversely affect the
payment of principal and interest on foreign investments. In addition, not all
foreign branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
STRIPS and Zero Coupon Securities (All Funds). Each Fund may invest in
separately traded principal and interest components of securities backed by the
full faith and credit of the United States Treasury. The principal and interests
components of United States Treasury bonds with remaining maturities of longer
than ten years are eligible to be traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are separately
issued by the United States Treasury at the request of depository financial
institutions, which then trade the component parts separately. The interest
component of STRIPS may be more volatile than that of United States Treasury
bills with comparable maturities. The Funds will not actively trade in STRIPS.
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The Funds may invest in zero coupon securities. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to its
face value at maturity. The market prices of zero coupon securities generally
are more volatile than the market prices of securities that pay interest
periodically and are more sensitive to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Municipal Commercial Paper(ING Intermediate Bond Fund and ING National
Tax-Exempt Bond Fund). Municipal commercial paper is a debt obligation with a
stated maturity of one year or less which is issued to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term debt.
Investments in municipal commercial paper are limited to commercial paper which
is rated at the date of purchase at least: (i) "Prime-1" by Moody's or A-1 by
S&P, or (ii) in a comparable rating category by any two of the NRSROs that have
rated commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the Sub-Adviser, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal commercial paper rated "Prime-1" have a "superior
capacity for repayment of short-term promissory obligations." The "A-1" rating
for commercial paper under the S&P classification indicates that the "degree of
safety regarding timely payment is either overwhelming or very strong." See the
Appendix for a more complete description of securities ratings.
Municipal Notes(ING Intermediate Bond Fund and ING National Tax-Exempt
Bond Fund). Municipal notes are generally sold as interim financing in
anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i) MIG 1 or VMIG 1 by Moody's or SP-1 by S&P or
(ii) in a comparable rating category by only one such organization, if it is the
only organization that has rated the notes, or (iii) if not rated, are, in the
opinion of the Sub-Adviser, of comparable investment quality and within the
credit quality policies and guidelines established by the Board of Trustees.
Notes rated "MIG 1" and "VMIG 1" are judged to be of the "best quality"
and carry the smallest amount of investment risk.
Municipal Bonds(ING Intermediate Bond Fund and ING National Tax-Exempt
Bond Fund). Municipal bonds generally have a maturity at the time of issuance of
more than one year. Municipal bonds may be issued to raise money for various
public purposes--such as constructing public facilities and making loans to
public institutions. There are generally two types of municipal bonds: general
obligation bonds and revenue bonds. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the safest type of
municipal bond. Revenue bonds are backed by the revenues of a project or
facility--tolls from a toll road, for example. Certain types of municipal bonds
are issued to obtain funding for privately operated facilities. Industrial
development revenue bonds (which are private activity bonds) are a specific type
of revenue bond backed by the credit and security of a private user, and
therefore investments in these bonds have more potential risk. Investments in
municipal bonds are limited to bonds which are rated at the time of purchase "
BBB" or better by a NRSRO. The ING National Tax-Exempt Bond Fund may invest up
to 20% of its total assets in unrated bonds which are of comparable quality.
municipal bonds rated BBB by S&P or Baa by Moody's.
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Floating Rate Instruments(ING Intermediate Bond Fund and ING National
Tax-Exempt Bond Fund). Certain municipal obligations which the Funds may
purchase have a floating or variable rate of interest. Such obligations bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices, such as a Federal Reserve composite index. Such
obligations may carry a demand or "put" feature which would permit the holder to
tender them back to the issuer (or to a third party) at par value prior to
maturity. The Funds' Sub-Adviser will monitor on an ongoing basis the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
and will similarly monitor the ability of an issuer of a demand instrument to
pay principal and interest on demand. A Fund's right to obtain payment at par on
a demand instrument could be affected by events occurring between the date the
Fund elects to demand payment and the date payment is due, which may affect the
ability of the issuer of the instrument to make payment when due.
Variable rate demand obligations (All Funds). Variable rate demand
obligations have a maturity of five to twenty years but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
on short notice, typically seven days or less. Generally, the remarketing agent
will adjust the interest rate every seven days (or at other intervals
corresponding to the notice period for the put), in order to maintain the
interest rate at the prevailing rate for securities with a seven-day maturity.
The remarketing agent is typically a financial intermediary that has agreed to
perform these services. Variable rate master demand obligations permit a Fund to
invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the Funds, as lender, and the borrower. Because the
obligations are direct lending arrangements between the Funds and the borrower,
they will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the obligation without penalty. While master
demand obligations, as such, are not typically rated by credit rating agencies,
if not so rated, a Fund may, under its minimum rating standards, invest in them
only if, in the opinion of the Sub-Adviser, they are of an investment quality
comparable to other debt obligations in which the Funds may invest and are
within the credit quality policies, guidelines and procedures established by the
Board of Trustees. See the SAI for further details on variable rate demand
obligations and variable rate master demand obligations.
Other Open-End Mutual Funds (All Funds). Each Fund may invest in shares
of other open-end management investment companies, subject to the limitations of
the 1940 Act and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment, provided that any
such purchases will be limited to short-term investments in shares of other
investment companies. The purchase of securities of other mutual funds results
in duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs, and
investment advisory and administrative fees.
Closed-End Investment Companies (All Funds). Each Fund may invest in
securities issued by closed-end investment companies which principally invest in
securities in which the Fund invests. Under the 1940 Act, a Fund's investment in
such securities, subject to certain exceptions, currently is limited to (i) 3%
of the total voting stock of any one investment company, (ii) 5% of the Fund's
total assets with respect to any one investment company and (iii) 10% of the
Fund's total assets in the aggregate. Investments in the securities of other
investment companies may involve duplication of advisory fees and certain other
expenses.
Options on Securities (All Funds). The Funds may purchase put and call
options and write covered put and call options on securities in which each Fund
may invest directly and that are traded on registered
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domestic securities exchanges or that result from separate, privately negotiated
transactions (i.e., over-the-counter ("OTC") options). The writer of a call
option, who receives a premium, has the obligation, upon exercise, to deliver
the underlying security against payment of the exercise price during the option
period. The writer of a put option, who receives a premium, has the obligation
to buy the underlying security, upon exercise, at the exercise price during the
option period.
The Funds may write put and call options on securities only if they are
covered, and such options must remain covered as long as the Fund is obligated
as a writer. A call option is covered if a Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration if the underlying security is held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is covered if a Fund maintains cash, U.S. Treasury bills
or other high grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Funds forego the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retain the risk of loss should the price of the
security decline. In return for the premium received for a put option, the Funds
assume the risk that the price of the underlying security will decline below the
exercise price, in which case the put would be exercised and the Fund would
suffer a loss. The Funds may purchase put options in an effort to protect the
value of a security it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series. OTC options are not generally terminable at the option of the
writer and may be closed out only by negotiation with the holder. There is also
no assurance that a liquid secondary market on an exchange will exist. In
addition, because OTC options are issued in privately negotiated transactions
exempt from registration under the Securities Act of 1933, there is no assurance
that the Funds will succeed in negotiating a closing out of a particular OTC
option at any particular time. If a Fund, as covered call option writer, is
unable to effect a closing purchase transaction in the secondary market or
otherwise, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are generally illiquid
securities. However, the staff has also opined that, to the extent a mutual fund
sells an OTC option to a primary dealer that it considers creditworthy and
contracts with such primary dealer to establish a formula price at which the
fund would have the absolute right to repurchase the option, the fund would only
be required to treat as illiquid the portion of the assets used to cover such
option equal to the formula price minus the amount by which the option is
in-the-money. The Funds will treat such options and, except to the extent
permitted through the procedure described in the preceding sentence, assets as
subject to each such Fund's limitation on investments in securities that are not
readily marketable.
Dollar Roll Transactions (All Funds). The Funds may enter into dollar
roll transactions wherein the Fund sells fixed income securities, typically
mortgage-backed securities, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. Like a forward
commitment, during
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the roll period no payment is made for the securities purchased and no interest
or principal payments on the security accrue to the purchaser, but a Fund
assumes the risk of ownership. A Fund is compensated for entering into dollar
roll transactions by the difference between the current sales price and the
forward price for the future purchase, as well as by the interest earned on the
cash proceeds of the initial sale. Like other when-issued securities or firm
commitment agreements, dollar roll transactions involve the risk that the market
value of the securities sold by the Funds may decline below the price at which a
Fund is committed to purchase similar securities. In the event the buyer of
securities under a dollar roll transaction becomes insolvent, the Funds' use of
the proceeds of the transaction may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. The Funds will engage in roll
transactions primarily for the purpose of acquiring securities for its portfolio
and not for investment leverage.
Swap Agreements (All Funds). To manage its exposure to different types
of investments, the Funds may enter into interest rate, total return, currency
and mortgage (or other asset) swap agreements and may purchase and sell interest
rate "caps," "floors" and "collars." In a typical interest rate swap agreement,
one party agrees to make regular payments equal to a floating interest rate on a
specified amount (the "notional principal amount") in return for payments to a
fixed interest rate on the same amount for a specified period. Total return swap
agreements are similar to interest rate swap agreements, except the numerical
amount is tied to a market-linked return. If a swap agreement provides for
payment in different currencies, the parties may also agree to exchange the
notional principal amount. Mortgage swap agreements are similar to interest rate
swap agreements, except that the notional principal amount is tied to a
reference pool of mortgages. In a cap or floor, one party agrees, usually in
return for a fee, to make payments under particular circumstances. For example,
the purchaser of an interest rate cap has the right to receive payments to the
extent a specified interest rate exceeds an agreed upon level; the purchaser of
an interest rate floor has the right to receive payments to the extent a
specified interest rate falls below an agreed upon level. A collar entitles the
purchaser to receive payments to the extent a specified interest rate falls
outside an agreed upon range.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Fund's performance. Swap agreements involve risks depending upon the
counterparties creditworthiness and ability to perform as well as the Fund's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. The Sub-Advisers monitor the creditworthiness of
counterparties to these transactions and intends to enter into these
transactions only when they believe the counterparties present minimal credit
risks and the income expected to be earned from the transaction justifies the
attendant risks.
Futures, Related Options and Options on Stock Indices (International
Bond Fund). The Fund may attempt to reduce the risk of investments by hedging a
portion of its portfolio through the use of certain futures transactions,
options on futures traded on a board of trade and options on stock indices
traded on national securities exchanges. The Fund may hedge a portion of its
portfolio by purchasing such instruments during a market advance or when the
Sub-Adviser anticipates an advance. In attempting to hedge a portfolio, the Fund
may enter into contracts for the future delivery of securities and futures
contracts based on a specific security, class of securities or an index,
purchase or sell options on any such futures contracts, and engage in related
closing transactions. The Fund will use these instruments primarily as a hedge
against changes resulting from market conditions in the values of securities
held in its portfolio or which it intends to purchase.
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A stock index assigns relative weighing to the common stocks in the
index, and the index generally fluctuates with changes in the market values of
these stocks. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. The Fund will sell stock index futures only if the amount
resulting from the multiplication of the then current level of the indices upon
which such futures contracts are based, and the number of futures contracts
which would be outstanding, do not exceed one-third of the value of the Fund's
net assets.
When a futures contract is executed, each party deposits with a broker
or in a segregated custodial account up to 5% of the contract amount, called the
"initial margin," and during the term of the contract, the amount of the deposit
is adjusted based on the current value of the futures contract by payments of
variation margin to or from the broker or segregated account.
In the case of options on stock index futures, the holder of the option
pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option writer's position
in a stock index futures contract. If the option is exercised by the holder
before the last trading day during the option period, the option writer delivers
the futures position, as well as any balance in the writer's futures margin
account. If it is exercised on the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. In the case of options on stock indexes, the holder of the
option pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to receive cash equal to the dollar
amount of the difference between the closing price of the relevant index and the
option exercise price times a specified multiple, called the "multiplier."
During a market decline or when the Sub-Adviser anticipates a decline,
the Fund may hedge a portion of its portfolio by selling futures contracts or
purchasing puts on such contracts or on a stock index in order to limit exposure
to the decline. This provides an alternative to liquidation of securities
positions and the corresponding costs of such liquidation. Conversely, during a
market advance or when the Sub-Adviser anticipates an advance, the Fund may
hedge a portion of its portfolio by purchasing futures, options on these futures
or options on stock indices. This affords a hedge against the Fund not
participating in a market advance at a time when it is not fully invested and
serves as a temporary substitute for the purchase of individual securities which
may later be purchased in a more advantageous manner. The Fund will sell options
on futures and on stock indices only to close out existing positions.
Interest Rate Futures Contracts (All Funds). The Funds may, to a
limited extent, enter into interest rate futures contracts--i.e., contracts for
the future delivery of securities or index-based futures contracts--that are, in
the opinion of the Sub-Adviser, sufficiently correlated with the Fund's
portfolio. These investments will be made primarily in an attempt to protect a
Fund against the effects of adverse changes in interest rates (i.e., "hedging").
When interest rates are increasing and portfolio values are falling, the sale of
futures contracts can offset a decline in the value of a Fund's current
portfolio securities. The Funds will engage in such transactions primarily for
bona fide hedging purposes.
Options on Interest Rate Futures Contracts (All Funds). The Funds may
purchase put and call options on interest rate futures contracts, which give a
Fund the right to sell or purchase the underlying futures contract for a
specified price upon exercise of the option at any time during the option
period. Each Fund may
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also write (sell) put and call options on such futures contracts. For options on
interest rate futures that a Fund writes, such Fund will receive a premium in
return for granting to the buyer the right to sell to the Fund or to buy from
the Fund the underlying futures contract for a specified price at any time
during the option period. As with futures contracts, each Fund will purchase or
sell options on interest rate futures contracts primarily for bona fide hedging
purposes.
Foreign Exchange Contracts(ING Intermediate Bond Fund, ING
International Bond Fund and ING High Yield Bond Fund). Changes in foreign
currency exchange rates will affect the U.S. dollar values of securities
denominated in currencies other than the U.S. dollar. The rate of exchange
between the U.S. dollar and other currencies fluctuates in response to forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. When
investing in foreign securities, the Fund usually effects currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market. The Fund incurs foreign exchange expenses in converting
assets from one currency to another.
The Fund may enter into foreign currency forward contracts or currency
futures for the purchase or sale of foreign currency to "lock in" the U.S.
dollar price of the securities denominated in a foreign currency or the U.S.
dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which
the Fund has investments may suffer a decline against the U.S. dollar. A forward
currency contract is an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time for the contract. This
method of attempting to hedge the value of the Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline in
the value of the hedged currency, it could also limit the potential gain from an
increase in the value of the currency. The Funds do not intend to maintain a net
exposure to such contracts where the fulfillment of the Fund's obligations under
such contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in the currency. The Fund will not enter into these contracts for
speculative purposes and will not enter into non-hedging currency contracts.
These contracts involve a risk of loss if the Sub-Adviser fails to predict
currency values correctly.
"When-Issued" and "Forward Commitment" Transactions (All Funds). The
Funds may purchase securities on a when-issued and delayed-delivery basis and
may purchase or sell securities on a forward commitment basis. When-issued or
delayed-delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an agreement
by a Fund to purchase or sell securities at a specified future date. When a Fund
engages in these transactions, the Fund relies on the buyer or seller, as the
case may be, to consummate the sale. Failure to do so may result in the Fund
missing the opportunity to obtain a price or yield considered to be
advantageous. When-issued and delayed-delivery transactions and forward
commitment transactions may be expected to occur a month or more before delivery
is due. However, no payment or delivery is made by a Fund until it receives
payment or delivery from the other party to the transaction. A separate account
containing only liquid assets such as cash, equity securities, U.S. Government
securities, or other liquid assets equal to the value of purchase commitments
will be maintained until payment is made. Such securities have
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the effect of leverage on the Funds and may contribute to volatility of a Fund's
net asset value. For further information, see the SAI.
Loans of Portfolio Securities (All Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33 1/3% of each
such Fund's total assets to brokers, dealers and financial institutions,
provided certain conditions are met, including the condition that each loan is
secured continuously by collateral maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities loaned.
These transactions involve a loan by the applicable Fund and are subject to the
same risks as repurchase agreements. For further information, see the SAI.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with any bank and broker-dealer which, in the opinion of the
Trustees, presents a minimal risk of bankruptcy. Under a repurchase agreement a
Fund acquires securities and obtains a simultaneous commitment from the seller
to repurchase the securities at a specified time and at an agreed upon yield.
The agreements will be fully collateralized and the value of the collateral,
including accrued interest, marked-to-market daily. The agreements may be
considered to be loans made by the purchaser, collateralized by the underlying
securities. If the seller should default on its obligation to repurchase the
securities, a Fund may experience a loss of income from the loaned securities
and a decrease in the value of any collateral, problems in exercising its rights
to the underlying securities and costs and time delays in connection with the
disposition of securities. The Funds may not invest more than 15% of its net
assets in repurchase agreements maturing in more than seven business days or in
securities for which market quotations are not readily available. For more
information about repurchase agreements, see "Investment Policies" in the SAI.
Reverse Repurchase Agreements (All Funds). Pursuant to a reverse
repurchase agreement, a Fund will sell portfolio securities and agree to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets in an amount at least equal to
the repurchase price marked to market daily (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. The Fund pays interest on amounts obtained pursuant to reverse
repurchase agreements. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
Portfolio Turnover. The Funds generally will not engage in the trading
of securities for the purpose of realizing short-term profits, but each Fund
will adjust its portfolio as it deems advisable in view of prevailing or
anticipated market conditions or fluctuations in interest rates to accomplish
its respective investment objective. For example, each Fund may sell portfolio
securities in anticipation of an adverse market movement. Other than for tax
purposes, frequency of portfolio turnover will not be a limiting factor if a
Fund considers it advantageous to purchase or sell securities. The Funds do not
anticipate that the respective annual portfolio turnover rates will exceed the
following: ING Intermediate Bond Fund 300%; ING High Yield Bond Fund 150%; ING
International Bond Fund 150%; ING Mortgage Income Fund 200%; and ING National
Tax-Exempt Bond Fund 75%. A high rate of portfolio turnover involves
correspondingly greater transaction expenses than a lower rate, which expenses
must be borne by each Fund and its shareholders.
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RISKS OF INVESTING IN THE FUNDS
CERTAIN RISK CONSIDERATIONS
General. The price per share of each of the Funds will fluctuate with
changes in value of the investments held by the Fund. For example, the value of
a Fund's shares will generally fluctuate inversely with the movements in
interest rates. Shareholders of a Fund should expect the value of their shares
to fluctuate with changes in the value of the securities owned by the Fund.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. In order to
attempt to minimize that risk, the Sub-Adviser monitors developments in the
economy, the securities markets, and with each particular issuer. Also, as noted
earlier, each diversified Fund (i.e. all funds except the International Bond
Fund) is managed within certain limitations that restrict the amount of the
Fund's investment in any single issuer.
Risk Factors Regarding Foreign Securities. Investments by a Fund in
foreign securities, whether denominated in U.S. dollars or foreign currencies,
may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs
or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. rises against the foreign
currency in which the security is denominated, and increases when the value of
the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be as developed as the United States economy
and may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation and limitations on the
removal of funds or other assets could severely affect the value of the Funds'
investments.
Regulatory Risk. Foreign companies are not registered with the
Securities and Exchange Commission and are generally not subject to the
regulatory controls imposed on United States issuers and, as a consequence,
there is generally less publicly available information about foreign securities
than is available about domestic securities. Foreign companies are not subject
to uniform accounting, audition and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Funds may be reduced by a withholding tax at the
source, which tax would reduce dividend income payable to the Fund's
shareholders.
Market Risk. The securities markets in many of the countries in which
the Funds invests will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies may
be less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
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Fixed Income Securities. The market value of a Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Securities with longer
maturities are subject to greater fluctuations in value than securities with
shorter maturities. Changes by a NRSRO in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of a
Fund's securities will not affect cash income derived from these securities but
will affect the Fund's net asset value.
Securities held by a Fund that are guaranteed by the U.S. Government,
its agencies or instrumentalities guarantee only the payment of principal and
interest on the guaranteed securities, and do not guarantee the securities'
yield or value or the yield or value of a Fund's shares.
High Yield Bond Market(ING High Yield Bond Fund). The ING High Yield
Bond Fund normally invests at least 65% of its total assets in high yield, high
risk bonds. Changes in interest rates, the market's perception of the issuers
and the creditworthiness of the parties involved may significantly affect the
value of these bonds. Some of these securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict, causing
their value to be highly volatile. These bonds also may be subject to call risk.
During periods of declining interest rates, call risk tends to accelerate.
Accordingly, any calls on these securities held by the Fund reduces our ability
to maintain positions in high-yielding calls securities and reinvest the
principal at comparable yields.
Certain high yield bonds carry particular market risks. Zero coupon,
deferred interest and PIK bonds, which are issued at deep discounts, may
experience greater volatility in market value. Asset and mortgage-backed
securities, including collateralized mortgage obligations, in addition to
greater volatility, may carry prepayment risks.
In seeking to achieve the Fund's investment objective, there will be
times, such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in the Fund's portfolio will be
unavoidable. Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market conditions.
Such fluctuations after a security is acquired do not affect the cash income
received from that security but will be reflected in the net asset value of the
Fund.
The secondary market for high yield securities may be less liquid than
the markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of the
market may also adversely affect the ability of the Fund to arrive at a fair
value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities. In addition, new laws and
potential new laws may have an adverse effect upon the value of high yield
securities and a concomitant negative impact upon the net asset value of a share
of the Fund.
The Fund may buy high yield, fixed income securities during an initial
underwriting. These securities involve special risks because they are new
issues. Advisers will carefully review their credit and other characteristics.
The Fund has no arrangement with its underwriter or any other person concerning
the acquisition of these securities.
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Risks of Options and Futures Contracts. One risk involved in the
purchase and sale of futures and options is that a Fund may not be able to
effect closing transactions at a time when it wishes to do so. Positions in
futures contracts and options on futures contracts may be closed out only on an
exchange or board of trade that provides an active market for them, and there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. To mitigate this risk, each Fund will ordinarily
purchase and write options only if a secondary market for the options exists on
a national securities exchange or in the over-the-counter market. Another risk
is that during the option period, if a Fund has written a covered call option,
it will have given up the opportunity to profit from a price increase in the
underlying securities above the exercise price in return for the premium on the
option (although the premium can be used to offset any losses or add to a Fund's
income) but, as long as its obligation as a writer continues, such Fund will
have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
The Funds' successful use of stock index futures contracts, options on
such contracts and options on indices depends upon the ability of the
Sub-Adviser to predict the direction of the market and is subject to various
additional risks. The correlation between movements in the price of the futures
contract and the price of the securities being hedged is imperfect and the risk
from imperfect correlation increases in the case of stock index futures as the
composition of the Funds' portfolios diverge from the composition of the
relevant index. Such imperfect correlation may prevent the Funds from achieving
the intended hedge or may expose the Funds to risk of loss. In addition, if the
Funds purchase futures to hedge against market advances before they can invest
in common stock in an advantageous manner and the market declines, the Funds
might create a loss on the futures contract. Particularly in the case of options
on stock index futures and on stock indices, the Funds' ability to establish and
maintain positions will depend on market liquidity. The successful utilization
of options and futures transactions requires skills different from those needed
in the selection of the Funds' portfolio securities. The Funds believe that the
Sub-Adviser possesses the skills necessary for the successful utilization of
such transactions.
The Funds are permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of each Fund's liquidating value after taking
into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Funds will not market, and are not
marketing, themselves as commodity pools or otherwise as vehicles for trading in
futures and related options. The Funds will segregate liquid assets such as
cash, U.S. Government securities or other liquid high grade debt obligations to
cover the futures and options.
Risks of Techniques Involving Leverage. Utilization of leveraging
involves special risks and may involve speculative investment techniques.
Certain Funds may borrow for other than temporary or emergency purposes, lend
their securities, enter reverse repurchase agreements, and purchase securities
on a when issued or forward commitment basis. In addition, certain Funds may
engage in dollar roll transactions. Each of these transactions involve the use
of "leverage" when cash made available to the Fund through the investment
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technique is used to make additional portfolio investments. The Funds use these
investment techniques only when the Sub-Adviser believes that the leveraging and
the returns available to the Fund from investing the cash will provide
shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital
base that exceeds the investment the Fund has invested. Leverage creates the
risk of magnified capital losses which occur when losses affect an asset base,
enlarged by borrowings or the creation of liabilities, that exceeds the equity
base of the Fund. Leverage may involve the creation of a liability that requires
the Fund to pay interest (for instance, reverse repurchase agreements) or the
creation of a liability that does not entail any interest costs (for instance,
forward commitment transactions).
The risks of leverage include a higher volatility of the net asset
value of a Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. So long as a Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, if any, leverage will
result in higher current net investment income being realized by such Fund than
if the Fund were not leveraged. On the other hand, interest rates change from
time to time as does their relationship to each other depending upon such
factors as supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the relationship between the
cost of leveraging and the yield to change so that rates involved in the
leveraging arrangement may substantially increase relative to the yield on the
obligations in which the proceeds of the leveraging have been invested. To the
extent that the interest expense involved in leveraging approaches the net
return on a Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, such Fund's use of leverage would result in a lower rate
of return than if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if a Fund were not leveraged. In an extreme case, if a Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for such Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.
Non-diversified investment companies. The International Bond Fund is
classified as a non-diversified investment company under the 1940 Act, which
means that the Fund is not limited by the 1940 Act in the proportion of its
assets that it may invest in the obligations of a single issuer. The investment
of a large percentage of the Fund's assets in the securities of a small number
of issuers may cause the Funds' share price to fluctuate more than that of a
diversified investment company.
Mortgage-Backed Securities. Mortgage-backed securities are subject to
the risk that the principal on the underlying mortgage loans may be prepaid at
any time. Although the extent of prepayments on a pool of mortgage loans depends
on various economic and other factors, as a general rule prepayments on fixed
rate mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. During periods of rising interest
rates, the rate of prepayment of mortgages underlying mortgage-backed securities
can be expected to decline, extending the projected average maturity of
mortgage-backed securities. A decline in the rate of repayment may effectively
change a security which was
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considered short- or intermediate-term at the time of purchase into a long-term
security. Long-term securities generally fluctuate more widely in response to
changes in interest rates than short- or intermediate-term securities.
Year 2000. Like other funds and business organizations around the
world, the Funds could be adversely affected if the computer systems used by the
Manager and the Funds' other service providers do not properly process and
calculate date-related information for the year 2000 and beyond. The Funds have
been informed that the Manager, and the Funds' other service providers (i.e.,
Sub-Adviser, Administrator, Transfer Agent, Fund Accounting Agent, Distributor
and Custodian) have developed and are implementing clearly defined and
documented plans to minimize the risk associated with the Year 2000 problem.
These plans include the following activities: inventorying of software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems and retesting for Year 2000
readiness. In addition, the service providers are obtaining assurances from
their vendors and suppliers in the same manner. Non-compliant Year 2000 systems
upon which the Fund is dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (1) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (2) the costs currently associated with the implementation
of their plans will have material adverse impact on the business, operations or
financial condition of the Funds or their service providers.
In addition, the Year 2000 problem may adversely affect the companies
in which the Funds invest. For example, these companies may incur substantial
costs to correct the problem and may suffer losses caused by data processing
errors. Since the ultimate costs or consequences of incomplete or untimely
resolution of the Year 2000 problem by the Funds' service providers are unknown
to the Funds at this time, no assurance can be made that such costs or
consequences will not have a material adverse impact on the Funds or their
service providers.
The Funds and the Manager will continue to monitor developments
relating to the Year 2000 problem, including the development of contingency
plans for providing back-up computer services in the event of a systems failure.
European Economic and Monetary Union. Several European countries are
participating in the European Economic and Monetary Union, which will establish
a common European currency for participating countries. This currency will
commonly be known as the "Euro." Each such participating country anticipates
replacing its existing currency with the Euro on January 1, 1999. Other European
countries may participate after that date. This conversion presents unique
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will be ready by the scheduled launch date; the
legal treatment of certain outstanding financial contracts after January 1, 1999
that refer to existing currencies rather than the euro; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement payment systems for the new currency. These or
other factors, including political and economical risks, could cause market
disruptions before or after the interaction of the euro, and could adversely
affect the value of securities held by the Funds.
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The Funds have been informed that the Manager, and the Funds' other
service providers, as applicable, are taking steps to minimize the risk
associated with the conversion. In addition, where appropriate, certain service
providers are obtaining assurances from their vendors in the same manner.
Since the ultimate consequences of the conversion are unknown to the
Funds at this time, no assurance can be made that such consequences will not
have a material adverse impact on the Funds. The Funds and the Manager will
continue to monitor developments relating to the conversion.
OTHER INFORMATION
CAPITALIZATION
ING Funds Trust was organized as a Delaware business trust on July 30,
1998 and currently consists of 20 separately managed portfolios, each of which
is divided into Class A, B, C, and X shares. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Funds consists
solely of an unlimited number of shares of beneficial interest with a par value
of $0.001 each. When issued, shares of the Funds are fully paid, non-assessable
and freely transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Funds are not required to hold
regular annual meetings of shareholders and do not intend to do so.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Funds may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Funds and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the Act. See "OTHER
INFORMATION--Voting Rights" in the SAI.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Funds) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Funds) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund (or
the Funds).
PERFORMANCE INFORMATION
A Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Funds is mandated by the
SEC.
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Quotations of average annual total return for a Fund will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in that Fund over periods of 1, 5 and 10 years (up to the life of
that Fund), reflect the deduction of a proportional share of Fund expenses (on
an annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, Lehman Municipals Index, Salomon Government Bond Non-U.S. Dollar
Index and other entities or organizations which track the performance of
investment companies. Any performance information should be considered in light
of the Fund's investment objectives and policies, characteristics and quality of
the Funds and the market conditions during the time period indicated, and should
not be considered to be representative of what may be achieved in the future.
For a description of the methods used to determine yield and total return for
Funds, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a
quarterly statement for each shareholder. In those cases where a Service
Organization or its nominee is the shareholder of record of shares purchased for
its customer, the Funds have been advised that the statement may be transmitted
to the customer at the discretion of the Service Organization.
DST acts as the Funds' transfer agent pursuant to a Services Agreement
with ING Fund Services. ING Fund Services (not the Funds) compensates DST for
providing personnel and facilities to perform dividend disbursing and transfer
agency-related services for the Funds.
Custodian
Investors Fiduciary Trust Co. acts as the Funds' Custodian. Pursuant to
the Custodian Agreement, the Custodian is responsible for holding each Fund's
cash and portfolio securities. The Custodian may enter into sub-custodian
agreements with certain qualified banks.
Rules adopted under the 1940 Act permit investment companies to
maintain their securities and cash in the custody of certain eligible foreign
banks and depositories. The ING High Yield Bond Fund and the International Bond
Fund's portfolio of non-United States securities are held by sub-custodians
which are approved by the Trustees or a foreign custody manager appointed by the
Trustees in accordance with these rules. The Board has appointed the Custodian
as its foreign custody manager. The determination to place assets with a
particular foreign sub-custodian is made pursuant to these rules which require a
consideration of a number of factors including, but not limited to, the
reliability and financial stability of the sub-custodian; the sub-custodian's
practices, procedures and internal controls; and the reputation and standing of
the sub-custodian in its national market.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the
Trust and from time to time provides advice to the Advisers.
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SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at ING Fund
Services Co., LLC, P.O. Box 9690, Providence, RI 02940-9690.
General and Account Information: 1-877-INFO-ING.
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ING FUNDS TRUST
PROSPECTUS
OCTOBER 30, 1998
ING U.S. Treasury Money Market Fund
/ / ING Money Market Fund
/ /
/ /
<PAGE> 148
ING FUNDS TRUST
ING Fund Services Co., LLC
P.O. Box 9690
Providence, RI 02940-9690
General & Account Information:
1-877-INFO-ING
ING MUTUAL FUNDS MANAGEMENT CO. LLC - Investment Manager
("IMFC" or the "Manager")
ING FUND DISTRIBUTOR INC. - Distributor, Principal Underwriter and Sponsor
("IFD" or the "Distributor")
This prospectus describes two funds (each, a "Fund" or, collectively,
the "Funds"), managed by ING Mutual Funds Management Co. LLC, a Delaware
limited liability company. The Manager has delegated certain of its investment
advisory activities to Sub-Advisers described herein (the "Sub-Advisers"). The
Manager and its Sub-Advisers are wholly-owned subsidiaries of ING Group N.V.
("ING Group"). The Funds and their investment objectives are:
The ING U.S. Treasury Money Market Fund seeks to provide investors with
a high level of current income as is consistent with liquidity, maximum safety
of principal and the maintenance of a stable $1.00 net asset value. The Fund
seeks to achieve its objective by investing in U.S. Treasury Securities.
The ING Money Market Fund seeks to provide investors with a high level
of current income consistent with preservation of capital and liquidity and the
maintenance of a stable $1.00 net asset value. The Fund seeks to achieve its
objective by investing in high quality, short-term obligations.
Shares of the Funds are sold to the public by the Distributor as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
The Funds are separate investment funds of ING Funds Trust (the "Trust"), a
Delaware business trust and registered management investment company. The Trust
also offers the following equity ("Equity Funds") and fixed income funds ("Fixed
Income Funds") under separate prospectuses:
<TABLE>
<CAPTION>
Equity Funds Fixed Income Funds
- --------------------------------------- ---------------------------------
<S> <C>
ING Large Cap Growth Fund ING Intermediate Bond Fund
ING Growth and Income Fund ING High Yield Bond Fund
ING Tax Efficient Equity Fund ING International Bond Fund
ING Mid Cap Growth Fund ING National Tax Exempt Bond Fund
ING Small Cap Growth Fund ING Mortgage Income Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Balanced Fund
ING Global Information Technology Fund
ING Focus Fund
</TABLE>
<PAGE> 149
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Real Estate Fund
Each Fund offers four different classes of shares -- Class A shares,
Class B shares, Class C shares and Class X shares. The different classes of
shares represent investments in the same portfolio of securities but are subject
to different sales charges and expenses. These alternatives permit investors to
choose the most beneficial method of purchasing shares given the amount of the
purchase, the length of time the investor expects to hold shares, and other
circumstances. When you purchase shares of the Funds, be sure to specify the
class of shares of the Fund(s) you wish to purchase. If you do not choose, your
investment will be made in the Class A shares.
See "Purchase of Fund Shares."
AN INVESTMENT IN SHARES OF THE TRUST IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY AND MAY INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Funds and should be read and
retained for information about each Fund.
A Statement of Additional Information (the "SAI"), dated October 30,
1998, containing additional and more detailed information about the Funds, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and phone
number printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 30, 1998
<PAGE> 150
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
HIGHLIGHTS ............................................................. 1
FUND EXPENSES .......................................................... 5
THE FUNDS .............................................................. 7
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS ..................... 7
MANAGEMENT OF THE FUNDS ................................................ 9
FUND SHARE VALUATION ................................................... 12
PRICING OF FUND SHARES ................................................. 13
MINIMUM PURCHASE REQUIREMENTS .......................................... 13
PURCHASE OF FUND SHARES ................................................ 13
PURCHASE PLANS ......................................................... 14
INDIVIDUAL RETIREMENT ACCOUNTS ......................................... 20
REDEMPTION OF FUND SHARES .............................................. 20
EXCHANGE OF FUND SHARES ................................................ 24
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ............................... 26
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES ..................... 28
RISKS OF INVESTING IN THE FUNDS ........................................ 35
OTHER INFORMATION ...................................................... 35
</TABLE>
<PAGE> 151
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two money market funds managed by IMFC and
sub-advised by ING Investment Management, LLC ("IIM"). Each Fund has a
distinct investment objective and policies. There can be no assurance that
either fund will achieve its investment objective.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
THE FUNDS:
ING U.S. Treasury Money Market Fund. The investment objective of the
ING U.S. Treasury Money Market Fund is to provide investors with as high a level
of current income as is consistent with liquidity, maximum safety of principal,
and the maintenance of a stable $1.00 net asset value per share. The Fund seeks
to achieve its objective by investing in U.S. Treasury securities. The Fund
invests in direct short-term obligations of the United States Treasury, which
are backed by the full faith and credit of the United States Government. The ING
U.S. Treasury Money Market Fund may also purchase securities on a "when-issued"
basis and purchase or sell them on a "forward commitment" basis.
ING Money Market Fund. The investment objective of the ING Money Market
Fund is to provide investors with a high level of current income consistent with
preservation of capital and liquidity and the maintenance of a stable $1.00 net
asset value per share. The Fund seeks to achieve its objective by investing in
high quality, U.S. dollar-denominated short-term obligations which are
determined by the Sub-Adviser to present minimal credit risks.
The Fund will invest in obligations permitted to be purchased under
Rule 2a-7 of the Investment Company Act of 1940, as amended (the "1940 Act")
including, but not limited to, (1) obligations of the U.S. Government or its
agencies or instrumentalities; (2) commercial paper, loan participation
interests, medium-term notes, and other promissory notes, including floating or
variable rate obligations; and (3) the following domestic, Yankeedollar and
Eurodollar obligations: certificates of deposit, time deposits, bankers'
acceptances, commercial paper, bearer deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies. The Fund
may invest more than 25% of its total assets in instruments issued by domestic
banks.
The Fund may also purchase securities on a "when-issued" basis and
purchase or sell them on a "forward commitment" basis. The ING Money Market Fund
may also invest in variable rate master demand obligations, which are unsecured
demand notes that permit the indebtedness thereunder to vary, and provide for
periodic adjustments in the interest rate.
The Fund may also enter into repurchase agreements, may purchase
mortgage-backed securities, and may borrow up to 10% of its net assets to
purchase securities and up to 30% of its net assets for temporary purposes.
<PAGE> 152
For additional information concerning the investment policies,
practices and risk consideration of the Funds, see "The Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
AMORTIZED COST METHOD OF VALUATION FOR THE FUNDS
Portfolio investments of each Fund are valued based on the amortized
cost valuation method pursuant to Rule 2a-7 under the 1940 Act. Obligations in
which the Funds invest generally have remaining maturities of 397 days or less,
although upon satisfying certain conditions of Rule 2a-7, the Funds may, to the
extent otherwise permissible, invest in instruments subject to repurchase
agreements and certain variable and floating rate obligations that bear longer
final maturities. The dollar-weighted average portfolio maturity of each Fund
will not exceed 90 days. See the SAI for an explanation of the amortized cost
valuation method.
RISKS OF INVESTING IN THE FUNDS
The Funds attempt to maintain the net asset value of their shares at a
constant $1.00 per share, although there can be no assurance that the Funds will
always be able to do so. The Funds may not achieve as high a level of current
income as other funds that do not limit their investments to the high quality
securities in which the Funds invest.
MANAGEMENT OF THE FUNDS
As Manager of the Funds, IMFC has overall responsibility, subject to
the supervision of the Board of Trustees, for engaging sub-advisers and for
monitoring and evaluating the management of the assets of each Fund by the
Sub-Adviser. IMFC also provides certain administrative services necessary for
the Funds' operations. Pursuant to a Management Agreement, the Trust currently
pays the Adviser for its services a monthly fee at an annual rate. See the fee
table under "Management of the Trust--The Adviser." The Sub-Adviser is a
subsidiary of ING Group and is an affiliate of the Distributor.
ING Investment Management, LLC serves as Sub-Adviser to the
Funds. IIM may be referred to herein as "Sub-Adviser." For its services, the
Sub-Adviser receives a fee from the Manager based on the respective Funds'
average daily net assets. See "Management of the Funds--the Sub-Advisers" in
this Prospectus.
The Sub-Adviser has full investment discretion and makes all
determinations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities consistent with the investment
objectives, policies and restrictions for such Fund. The Sub-Adviser is
compensated by the Manager (and not the Trust).
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated
for certain of its distribution-related expenses. ING Fund Services LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Funds
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting and other services. ING Fund Services
has hired
2
<PAGE> 153
DST Systems, Inc. ("DST") to act as the Funds' transfer agent and fund
accounting agent.
CLASSES OF SHARES
The Funds offer investors a choice among multiple classes of shares
with different sales charges and expenses. In selecting which class of shares
to purchase, you should consider, among other things, (1) the length of time you
expect to hold your investment, (2) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted above, (3) whether you qualify for any reduction or waiver of any
applicable sales charge (e.g., if you are exempt from the sales charge, you must
invest in Class A shares), (4) the various exchange privileges among the
different classes of shares and (5) the fact that Class B and X shares
automatically convert to Class A shares after eight years.
CLASS A SHARES. Class A shares are offered at net asset value without a
sales charge. Class A shares are subject to an annual Rule 12b-1 fee of up to
0.50% of average daily net assets attributable to Class A shares. This fee is
lower than the other classes having Rule 12b-1 fees and therefore Class A shares
have lower expenses and pay higher dividends. See "Purchase of Fund
Shares--Class A Shares."
CLASS B SHARES. Class B shares are subject to a contingent deferred
sales charge ("CDSC") of 5.00% if redeemed within one year of purchase, with
declining charges for redemptions thereafter up to six years after purchase.
Class B shares are also subject to a higher annual Rule 12b-1 fee than Class A
shares--up to 0.75% of the Fund's average daily net assets attributable to
Class B shares. However, after eight years, Class B shares automatically will
be converted to Class A shares at no charge to the investor, resulting in a
lower Rule 12b-1 fee thereafter. Class B shares provide the benefit of putting
all dollars to work from the time of investment, but will have a higher expense
ratio and pay lower dividends than Class A shares due to the higher Rule 12b-1
fee. See "Purchase of Fund Shares--Class B and X Shares."
CLASS C SHARES. Class C shares are sold without an initial sales charge
and are subject to a higher annual Rule 12b-1 fee than the Class A shares--
up to 0.75% of the Fund's average daily net assets attributable to Class C
shares. Class C shares provide the benefit of putting all dollars to work from
the time of investment, but will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher Rule 12b-1 fee. While Class C
shares do not convert to Class A shares, they are subject to a lower CDSC
1.00% and do not have to be held for as long a time (one year) as Class B or X
shares to avoid paying a CDSC. See "Purchase of Fund Shares--Class C Shares."
CLASS X SHARES. Class X shares are sold without an initial sales
charge. In addition, investors purchasing Class X shares will receive, as a
bonus, additional shares having a value equal to 2.50% of the amount invested
("Bonus Shares"). The Distributor has undertaken to pay for Bonus Shares as part
of its services to the Funds. Shares purchased by the reinvestment of dividends
or capital gains distributions are not eligible for Bonus Shares. Class X shares
are subject to a CDSC of 5.00% if redeemed within one year, with declining
charges for redemptions thereafter up to six years after purchase. Class X
shares are also subject to a higher annual Rule 12b-1 fee than Class A shares--
up to 0.75% of the Fund's average daily net assets attributable to Class X
shares. However, after eight years, Class X shares automatically
3
<PAGE> 154
will be converted to Class A shares at no charge to the investor, resulting in a
lower Rule 12b-1 fee thereafter. Class X shares provide the benefit of putting
all dollars to work from the time of investment, but will have a higher expense
ratio and pay lower dividends than Class A shares due to the higher Rule 12b-1
fee. See "Purchase of Fund Shares--Class X Shares." Class X shares are
currently only offered to certain Qualified purchasers (including, but not
limited to, IRAs, Roth IRAs, Education IRAs, SEP IRAs, SIMPLE IRAs and 403(b)(7)
plans).
Each Class of shares is also subject to shareholder servicing fees
of up to 0.25% of average daily net assets and sub-transfer agency fees of up to
0.25% of average daily net assets attributable to such shares. See "Management
of the Fund--Shareholder Servicing Plan and Sub-Transfer Agency Plan."
4
<PAGE> 155
FUND EXPENSES
The purpose of the following table is to assist the shareholder in
understanding the various costs and expenses that an investor in each Fund will
bear, either directly or indirectly. Each Fund's costs and expenses are based
upon estimates of the Fund's operating expenses for the Fund's first fiscal
year:
FEE TABLE
<TABLE>
<CAPTION>
ING U.S. Treasury Money Market Fund ING Money Market Fund
--------------------------------------------- --------------------------------------------
ClassA(1) Class B(2) Class C(2) Class X(2) ClassA(1) ClassB(2) Class C(2) Class X(2)
--------- ---------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on NONE NONE NONE NONE NONE NONE NONE NONE
Reinvested Dividends (as a
percentage of offering price)
Maximum Contingent Deferred Sales NONE 5.00% 1.00% 5.00% NONE 5.00% 1.00% 5.00%
Load (as a percentage of redemption
proceeds)
Annual Fund Operating Expense
(as a percentage of average daily
net assets)
Management Fees (after waivers)* 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06%
12b-1 Fees (after waivers)* 0.00% 0.75% 0.75% 0.75% 0.00% 0.75% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other Expenses**
0.66% 1.41% 1.41% 1.41% 0.66% 1.41% 1.41% 1.41%
Total Portfolio Operating Expenses
(after waivers)***
</TABLE>
- ---------------
(1) Purchases of Class A shares not subject to an initial sales charge but
will be subject to a contingent deferred sales charge if redeemed
within 12 months of the calendar month of purchase. For an additional
discussion of the Class A CDSC, see this Prospectus under "Purchase of
Fund Shares."
(2) If you purchase Class B or X shares, you do not pay an initial sales
charge but you may incur a CDSC if you redeem some or all of your Class
B or X shares before the end of the six year after which you purchased
such shares. The CDSC is 5%, 4%, 4%, 3%,2% and 1% of the lesser of net
asset values of the shares at the time of redemption or the original
amount invested for redemptions occurring in years one through six,
respectively. No CDSC is charged after the sixth year. The CDSC is not
imposed on the amount of any increase in the account over the initial
amount invested. If you purchase Class C shares, you do not pay an
initial sales charge but you may incur a CDSC if you redeem some or all
of your Class C shares within 12 months of the calendar month of
purchase. For a discussion of the Class B, X and C CDSC, see this
Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory fees (before waivers)
would be 0.25% for each Fund. 12b-1 Fees (before waivers) for Class A
shares would be 0.50% for each Fund. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Funds' consent.
5
<PAGE> 156
** Certain organizations providing sub-transfer agency services may
receive fees from a Fund in amounts up to an annual rate of 0.25%
of the average daily net asset value of the Fund shares owned by the
shareholders with whom the organization has a servicing
relationship.
*** Total Portfolio Operating Expenses (before waivers) would be 1.35% for
Class A shares and 1.60% for Class B, C and X shares.
Expense Examples:
<TABLE>
<CAPTION>
Full Redemption(*) No Redemption(**)
----------------- -----------------
ING U.S. Treasury Money Market Fund 1 Year 3 Years 1 Year 3 Years
- ----------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 7 $21 $ 7 $21
Class B Shares $64 $85 $14 $45
Class C Shares $24 $45 $14 $45
Class X Shares(***) $65 $86 $15 $46
</TABLE>
<TABLE>
<CAPTION>
Full Redemption(*) No Redemption(**)
----------------- ----------------
ING Money Market Fund 1 Year 3 Years 1 Year 3 Years
- --------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $ 7 $21 $ 7 $21
Class B Shares $64 $85 $14 $45
Class C Shares $24 $45 $14 $45
Class X Shares(***) $65 $86 $15 $46
</TABLE>
(*) Full Redemption. You would have paid the following expenses on a
$1,000 investment, assuming a hypothetical 5% annual return and full redemption
of your shares at the end of each period shown .
(**) No Redemption. You would have paid the following expenses on a
$1,000 investment, assuming a hypothetical 5% annual return and no redemption of
your shares at the end of each period shown .
(***) Expense examples for purchase of Class X shares of the Funds
reflect the shareholder's receipt of additional "Bonus Shares." For a discussion
of the issuance of "bonus shares," see this Prospectus under "Purchase of Fund
Shares - Class X Shares."
The above tables are provided to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as an
investor in the Fund(s). THE EXAMPLES PROVIDED SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF THE FUNDS' PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5%
ANNUAL RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN THAT IS GREATER OR LESS THAN 5%.
6
<PAGE> 157
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as
a mutual fund. The Funds are portfolios of a Delaware business trust organized
under the laws of the State of Delaware as an open-end management investment
company on July 30, 1998. The Trust's Board of Trustees oversees the overall
management of the Funds and elects the officers of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The "Investment Restrictions" section of the
SAI contains specific investment restrictions (the "Investment Restrictions")
which govern each Fund's investments. The Investment Restrictions and each
Fund's investment objective are fundamental policies which may not be changed
without a majority vote of shareholders of the affected Fund. Except for the
objectives and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental, and may therefore be changed by the Board of Trustees
without shareholder approval.
The ING U.S. Treasury Money Market Fund seeks to provide investors with
a high level of current income as is consistent with liquidity, maximum safety
of principal and the maintenance of a stable $1.00 net asset value. The Fund
seeks to achieve its objective by investing in U.S. Treasury securities. There
can be no assurance that the Fund will achieve its investment objective.
The ING Money Market Fund seeks to provide investors with a high level
of current income consistent with preservation of capital and liquidity and the
maintenance of a stable $1.00 net asset value. The Fund seeks to achieve its
objective by investing in high quality, short-term obligations. There can be no
assurance that the Fund will achieve its investment objective.
The Sub-Adviser selects investments and makes investment decisions
based on the investment objective and policies of each Fund.
ING U.S. Treasury Money Market Fund. In selecting debt securities for
the Fund, the Sub-Adviser seeks to select those instruments that appear best
calculated to achieve the Fund's investment objective within the credit and risk
tolerances established for the Fund. In accordance with those policies, the Fund
invests in direct short-term obligations of the United States Treasury, which
are backed by the full faith and credit of the United States Government. The ING
U.S. Treasury Money Market Fund may also purchase securities on a "when-issued"
basis and purchase and sell them on a "forward commitment" basis.
ING Money Market Fund. In selecting debt securities for the Fund, the
Sub-Adviser seeks to select those instruments that appear best calculated to
achieve the Fund's investment objective within the credit and risk tolerances
established for the Fund. In accordance with those policies, the Fund will
invest in obligations permitted to be purchased under Rule 2a-7 of the 1940 Act
including, but not limited to, (1) obligations of the U.S. Government or its
agencies or instrumentalities; (2) commercial paper, mortgage-backed and
7
<PAGE> 158
asset-backed securities, guaranteed investment contracts, loan participation
interests, medium-term notes, and other promissory notes, including floating or
variable rate obligations; and (3) the following domestic, Yankeedollar and
Eurodollar obligations: certificates of deposit, time deposits, bankers'
acceptances, commercial paper, bearer deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies. The Fund
will invest only in issuers or instruments that at the time of purchase (1) have
received the highest short-term rating by at least two nationally recognized
statistical rating organizations ("NRSROs"), such as "A-1" by Standard & Poor's
Corporation ("S&P") and "Prime-1" by Moody's Investors Service, Inc.
("Moody's"); (2) are single rated and have received the highest short-term
rating by a NRSRO; or (3) are unrated, but are determined to be of comparable
quality by the Sub-Adviser pursuant to guidelines approved by the Fund's Board
of Trustees. The Fund may invest more than 25% of its total assets in
instruments issued by domestic banks. The Fund may also purchase securities on a
"when-issued" basis and purchase or sell them on a "forward commitment" basis.
The Fund may also invest in variable rate master demand obligations,
which are unsecured demand notes that permit the indebtedness thereunder to
vary, and provide for periodic adjustments in the interest rate. Because master
demand obligations are direct lending arrangements between the Fund and the
issuer, they are not normally traded. There is no secondary market for the
notes; however, the period of time remaining until payment of principal and
accrued interest can be recovered under a variable rate master demand obligation
generally will not exceed seven days. To the extent this period is exceeded, the
obligation in question would be considered illiquid. Issuers of variable rate
master demand obligations must satisfy the same criteria as set forth for other
promissory notes (e.g., commercial paper). The Fund will invest in variable rate
master demand obligations only when such obligations are determined by the
Sub-Adviser, pursuant to guidelines established by the Board of Trustees, to be
of comparable quality to rated issuers or instruments eligible for investment by
the Fund. In determining dollar-weighted average portfolio maturity, a variable
rate master demand obligation will be deemed to have a maturity equal to the
shorter of the period of time remaining until the next readjustment of the
interest rate or the period of time remaining until the principal amount can be
recovered from the issuer on demand.
The Fund may also enter into repurchase agreements, may purchase
mortgage-backed securities, and may borrow up to 10% of its net assets to
purchase securities and up to 25% of its net assets for temporary purposes.
In managing the Fund, the Sub-Adviser employs a number of professional
money management techniques, including varying the composition of investments
and the average maturity of the portfolio based upon the Sub-Adviser's
assessment of the relative values of the various money market securities and
future interest rate patterns. These assessments will change in response to
changing economic and money market conditions and to shifts in fiscal and
monetary policy. The Sub-Adviser also seeks to improve yield by taking advantage
of yield disparities that regularly occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. Also, there are frequently differences in the yield between the various
types of money market securities. The Fund seeks to enhance yield by purchasing
and selling securities based upon these yield disparities.
The types of securities and investment practices used by the Funds are
described in greater detail at "DESCRIPTION OF SECURITIES AND INVESTMENT
PRACTICES."
8
<PAGE> 159
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Board of Trustees. Additional information about the Trustees, as well
as the Funds' executive officers, may be found in the SAI under the heading
"MANAGEMENT--Trustees and Officers."
The Manager: ING MUTUAL FUNDS MANAGEMENT CO. LLC
IMFC, 18 Campus Boulevard, Suite 200, Newtown Square, PA 19073,
serves as the Manager of the Funds pursuant to a Management Agreement with the
Trust. IMFC was formed on July 30, 1998, as a Delaware limited liability
company and is a wholly-owned subsidiary of ING Group. IMFC is registered with
the SEC as an investment adviser. IMFC has no prior experience as an investment
adviser to an investment company.
Under the Management Agreement, IMFC has overall responsibility,
subject to the supervision of the Board of Trustees, for engaging sub-advisers
and for monitoring and evaluating the management of the assets of each Fund by
the Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Advisers on a periodic basis, and will consider their performance
records with respect to the investment objectives and policies of each Fund.
IMFC also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
transfer agent, custodian, independent accountants and legal counsel; (ii)
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
(iii) preparation of proxy statements and shareholder reports for the Funds;
(iv) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' Officers and Board of
Trustees; and (v) furnishing office space and certain facilities required for
conducting the business of the Funds.
Pursuant to the Management Agreement, the Manager is authorized to
exercise full investment discretion and make all determinations with respect to
the investment of a Fund's assets and the purchase and sale of portfolio
securities for one or more Funds in the event that at any time no Sub-Adviser is
engaged to manage the assets of a Fund. The Management Agreement may be
terminated without penalty by the vote of the Board of Trustees or the
shareholders of the Fund, or by the Manager, upon 60 days' written notice by the
Board and will terminate automatically if assigned as that term is described in
the 1940 Act.
The Trust pays the Manager for its services under the Management
Agreement a fee, payable monthly, based on the average daily net assets of each
Fund at the following annual rates:
<TABLE>
<CAPTION>
Investment
Advisory
Fee
----------
<S> <C>
Fund:
ING U.S. Treasury Money Market Fund 0.25%
ING Money Market Fund 0.25%
</TABLE>
10
<PAGE> 160
THE SUB-ADVISER: ING INVESTMENT MANAGEMENT LLC
The Manager has retained IIM, located at 5780 Powers Ferry Road, N.W.
Suite 300, Atlanta, Georgia 30327 to act as Sub-Adviser to the Funds. The
Sub-Adviser is a limited liability corporation incorporated in Delaware which is
engaged in the business of providing investment advice to affiliated insurance
companies possessing portfolios which, as of December 31, 1997, were valued at
$22 billion. The Sub-Adviser is a wholly-owned subsidiary of ING Group and is
affiliated with the Manager. The Sub-Adviser is registered with the SEC as an
investment adviser. The Sub-Adviser is also a sub-adviser to other registered
investment companies.
The Manager has entered into a Sub-Advisory Agreement with the
Sub-Adviser. Under the Agreement, the Sub-Adviser has full investment discretion
and makes all determinations with respect to the investment of a Fund's assets
and the purchase and sale of portfolio securities and other investments. The
Sub-Advisory Agreement may be terminated without penalty by the Manager, or
the shareholders of a Fund, or by the Sub-Adviser, on 60 days' written notice by
any party to the Sub-Advisory Agreement and will terminate automatically if
assigned as that term is described in the 1940 Act. The Sub-Adviser is an
affiliate of the Manager. The Manager reserves the right to terminate the
Sub-Advisory Agreement with the Sub-Adviser and either manage the assets itself
or appoint another affiliated Sub-Adviser without shareholder approval.
Under the Sub-Advisory Agreement, the Manager (and not the Trust) pays
IIM a fee, payable monthly, based on the average daily net assets of each
Fund at the following annual rates:
<TABLE>
<CAPTION>
Investment
Sub-Advisory
Fund Fee
- ----------------------------------- ------------
<S> <C>
ING U.S. Treasury Money Market Fund 0.125%
ING Money Market Fund 0.125%
</TABLE>
The figures below show past performance of IIM in managing accounts
with investment objectives, policies, styles and techniques substantially
similar though not identical to those of the ING Money Market Fund. Information
presented is based on performance data provided by IIM. The past performance
does not represent the ING Money Market Fund's performance, as it is newly
organized and has no performance record of its own. The table shows the total
returns for a composite of the actual performance of federal tax exempt accounts
managed by IIM for various periods ended September 30, 1998, as adjusted for the
projected annual expenses for the ING Money Market Fund's Class A, B, C and X
shares during its initial fiscal period as set forth in the Fee Table in this
Prospectus. Included for comparison purposes are performance figures of the
IBC First Tier index, an unmanaged market index. The performance
shown below is calculated in accordance with AIMR.
The composite is made up of unregistered accounts that are not subject
to diversification and other requirements that apply to mutual funds under
applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING Money Market Fund may vary in
some respects. The
10
<PAGE> 161
information should not be considered a prediction of the future performance of
the ING Money Market Fund. The actual performance may be higher or lower than
that shown.
<TABLE>
<CAPTION>
Annualized Rates of Return for
Periods Ending September 30, 1998
----------------------------------------
IIM IBC
------------------------------------- ----------
Class A Class B Class C Class X First Tier
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
1 Year 4.94% -0.83% 3.17% 1.77% 4.94%
3 Years N/A N/A N/A N/A N/A
5 Years N/A N/A N/A N/A N/A
Since Inception 4.90% 2.35% 4.13% 3.56% 4.88%
(12/31/91)
</TABLE>
THE DISTRIBUTOR
IFD acts as Distributor. IFD is located at 18 Campus Boulevard,
Suite 200, Newtown Square, PA 19073. As Distributor, IFD sells shares of each
Fund on behalf of the Trust.
FUND ACCOUNTANT AND TRANSFER AGENT
ING Fund Services has entered into a Fund Services Agreement with the
Funds pursuant to which ING Fund Services will perform or engage third parties
to perform transfer agency, fund accounting and other services. ING Fund
Services has retained DST to act as the Funds' transfer agent and fund
accounting agent. DST is located at 333 W. 11th Street, Kansas City, Missouri
64105. For its services as transfer agent and fund accounting agent, DST
receives a fee from ING Fund Services (and not the Funds), payable monthly,
based upon the average daily net assets of the Funds.
DISTRIBUTION EXPENSES
Pursuant to a Plan of Distribution adopted by each Fund under Rule
12b-1 under the 1940 Act, each Fund pays the Distributor an annual fee of 0.50%
of average daily net assets attributable to that Fund's Class A shares and
0.75% of average daily net assets attributable to that Fund's Class B, X and C
shares.
The higher distribution fee attributable to Class B, X, and C shares is
designed to permit an investor to purchase such shares through registered
representatives of the Distributor and other broker-dealers without the
assessment of an initial sales charge and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution fee
for all classes may be used by the Distributor for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor: (a) to compensate broker-dealers, including the Distributor and
its registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, (b) to pay for interest and borrowing
11
<PAGE> 162
costs incurred by the Distributor, and (c) to pay other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses. If the Distribution Plan is terminated by the Funds, the Board of
Trustees may allow the Funds to continue to pay the 12b-1 fees to the
Distributor for distributing shares before the Plan was terminated.
SHAREHOLDER SERVICING PLAN
The Funds have adopted a Shareholder Servicing Plan pursuant to which
they may pay a service fee at an annual rate of up to 0.25% of a Fund's
average daily net assets to various banks, trust companies, broker-dealers
or other financial organizations, including the Manager and its affiliates
(collectively, "Service Organizations") , that provide certain administrative
and support services to their customers who own shares of the Funds.
SUB-TRANSFER AGENCY PLAN
The Funds have adopted a Sub-Transfer Agency Plan pursuant to which
they may pay a fee at an annual rate of up to 0.25% of a Fund's average daily
net assets to Service Organizations that provide sub-transfer agency services
to their customers who own shares of the Funds.
The Glass-Steagall Act and other applicable laws provide that, among
other things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or part
of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by the Administrator or the Manager. The costs borne by the
Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; custodian ; transfer agent and sub-transfer fees and
expenses; expenses incurred in acquiring or disposing of the Funds' portfolio
securities; expenses of registering and qualifying the Funds' shares for sale
with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Funds' portfolio securities and pricing of the
Funds' shares; expenses of maintaining the Funds' legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. Expenses of the Funds
directly attributable to the Fund are
12
<PAGE> 163
charged to that Fund; other expenses are allocated proportionately among all of
the Funds in relation to the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Sub-Advisory Contracts, the Sub-Adviser places orders
for the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion. In effecting purchases and
sales of equity and debt securities for the account of the Funds, the
Sub-Adviser will seek the best execution of the Funds' orders. Purchases and
sales of portfolio debt securities for the Funds are generally placed by the
Sub-Adviser with primary market makers for these securities on a net basis,
without any brokerage commission being paid by the Funds. Trading of portfolio
debt securities does, however, involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. As permitted by Section 28(e) of the Securities Exchange Act of
1934, the Manager may cause a Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to the Sub-Adviser an
amount of disclosed commissions for executing a securities transaction for the
Funds in excess of the commissions another broker-dealer would have charged if
the Sub-Adviser believes the commission paid is reasonable in relation to the
value of the brokerage and research services received by the Sub-Adviser.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Sub-Adviser. The Sub-Adviser may allocate purchase
and sales orders for portfolio securities to broker-dealers that are affiliated
with the Manager, the Sub-Adviser or Distributor, if the Sub-Adviser believes
the quality of the transaction and commissions are comparable to what they would
be with other qualified brokerage firms.
FUND SHARE VALUATION
The net asset value per share of the ING U.S. Treasury Money Market
Fund is calculated at 12:00 noon (Eastern time) and 3:00 p.m.(Eastern time)
for the ING Money Market Fund, Monday through Friday, on each day the New York
Stock Exchange and the New York Federal Reserve Bank are open for business (a
"Business Day"), which excludes the following business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class is computed by
dividing the value of the net assets of each class (i.e., the value of the
assets less the liabilities) by the total number of outstanding shares of each
class. All expenses, including fees paid to the Manager, the Administrator and
the Distributor, are accrued daily and taken into account for the purpose of
determining the net asset value. Expenses directly attributable to a Fund are
charged to the Fund; other expenses are allocated proportionately among each
Fund within the Trust in relation to the net assets of each Fund, or on another
reasonable basis. These general expenses (e.g., liability insurance premiums)
are allocated among the Funds based on each Fund's relative net asset. Within
each class, the expenses are allocated proportionately based on the net assets
of each class, except class specific expenses which are allocated directly to
the respective class.
The Funds use the amortized cost method to value their portfolio
securities and seek to maintain a constant net asset value of $1.00 per share,
although there may be circumstances under which this goal cannot be achieved.
The amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, regardless of the impact
of fluctuating interest rates on the market
13
<PAGE> 164
value of the security. There can be no assurances that at all times the Funds'
price per share can be maintained. However, the Board of Trustees has
established procedures designed to stabilize, to the extent reasonably possible,
the $1.00 per share price of each Fund. See the SAI for a more complete
description of the amortized cost method.
PRICING OF FUND SHARES
Orders for the purchase of shares will be executed at the net asset
value per share plus any applicable initial sales charges (the "public offering
price") next determined after an order has been received.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in a Fund is $2,000; $1,000 for an
IRA investment. Any subsequent investments must be at least $50, including an
IRA investment. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. A
separate application is required for an IRA. The Funds reserve the right to
reject any purchase order.
PURCHASE OF FUND SHARES
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Trust reserves
the right to reject any purchase. First Data maintains records of each
shareholder's holdings of Fund shares, and each shareholder receives a statement
of transactions, holdings and dividends.
Additional shares may be purchased directly through the Fund or
through any dealer who has entered into an agreement with the Fund. The minimum
investment for subsequent purchases is $50.
All investments may be made using any of the following methods.
Through the Fund by Mail. A completed Account Application together with
a check payable to ING Funds Trust should be forwarded to ING Fund Services
Co., LLC, P.O. Box 9690, Providence, RI 02940-9690. Purchases made by check in
any Fund are not permitted to be redeemed until payment of the purchase has been
collected, which may take up to fifteen calendar days. Third party and foreign
checks will not be accepted. Please include the Fund name and your account
number on all checks.
Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose and sent to the Fund at the above address.
Through an Authorized Broker or Investment Adviser . Shares are
available to new and existing shareholders through authorized brokers and
investment advisers . Authorized brokers and investment advisers may impose
additional requirements and charges for the services rendered.
Please contact your broker or Investment Adviser for instructions on
purchasing shares through their organization.
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<PAGE> 165
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase shares by a Federal funds wire, please first contact ING Fund
Services at 1-877-INFO-ING to obtain a fund account number and reference
number for the wire.
The following wire instructions should be used:
Bank Name
City, State
Beneficiary Bank ABA/Routing #:
Beneficiary Account Number:
Beneficiary Account Name:
Account Number:
OBI:
By Automated Clearing House. You can purchase additional Fund shares by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish this feature, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-877-INFO-ING. Once the form is completed,
returned, and updated to your account, you can initiate a purchase by contacting
the 1-877-INFO-ING with the amount of your purchase and an authorization to
debit your designated account will be issued. The debit to your bank account
will occur ordinarily within two banking days of your request.
PURCHASE PLANS
The Trust offers various purchase plans that make investing in
additional shares of the Funds more convenient than by mail or wire. The
following are the plans offered and the features of the plans. Please contact
ING Fund Services at 1-877-INFO-ING for the appropriate authorization form. All
purchase plans listed will not be offered to shareholders of Class X shares.
ING AUTO-ASSET ACCUMULATION PLAN
This plan permits you to purchase Fund shares (minimum of $100.00 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Auto-Asset Accumulation Plan
account, you must file an authorization form with the Transfer Agent. You may
obtain the necessary authorization form by calling 1-877-INFO-ING. You may
cancel your participation in this privilege or change the amount of purchase at
any time by mailing written notification to ING Fund Services Co., LLC, P.O. Box
9690, Providence, RI 02940-9690, and the notification will be effective three
business days following receipt. The Fund may
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modify or terminate this privilege at any time or charge a service fee. No such
fee currently is contemplated.
ING DIRECTED FEDERAL DEPOSIT PLAN
ING Directed Federal Deposit Plan enables you to purchase Fund shares
(minimum of $100.00 per transaction) by having Federal salary, Social
Security, or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit as
much of such payments as you elect. To enroll in this plan you must file with
the Transfer Agent a completed Directed Deposit Sign-Up Form for each type of
payment that you desire to include in this plan. The appropriate form may be
obtained by calling 1-877-INFO-ING. Death or legal incapacity will terminate
your participation in this plan. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The Fund
may terminate your participation upon 30 days' notice to you.
ING SCHEDULED PAYROLL INVESTMENT PROGRAM
ING Scheduled Payroll Investment Program permits you to purchase Fund
shares (minimum of $100.00 per transaction) automatically on a regular basis.
Depending upon your employer's direct deposit program, you may have part or all
of your paycheck transferred to your existing ING account electronically through
the Automated Clearing House system at each pay period. To establish a ING
Scheduled Payroll Investment Program account, you must file an authorization
form with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to ING Fund Services Co., LLC, P.O. Box
9690, Providence, RI 02940-9690. You may obtain the necessary authorization form
by calling 1-877-INFO-ING. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, the Trust, the Transfer
Agent or any other person, to arrange for transactions under the ING Scheduled
Payroll Investment Program. The Fund may modify or terminate this program at any
time or charge a service fee. No such fee currently is contemplated.
Alternative Purchase Arrangements
Each Fund offers investors the choice between multiple classes of
shares which offer differing sales charges and bear different expenses. These
alternatives permit an investor to choose the more beneficial method of
purchasing shares given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances. The "Highlights"
section of the Prospectus contains a summary of these alternative purchase
arrangements. A broker-dealer may receive different levels of compensation
depending on which class of shares is sold. The Distributor may also provide
additional compensation to dealers in connection with selling shares of the
Funds or for their own company-sponsored sales programs. Additional compensation
or assistance may be provided to dealers and includes payment or reimbursement
for educational, training and sales conferences or programs for their employees.
In some cases, this compensation may only be available to dealers whose
representatives have sold or are expected to sell significant amounts of shares.
The Distributor will make these payments from its own resources and none of the
aforementioned additional compensation is paid for by the applicable Fund or its
shareholders.
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CLASS A SHARES
Class A shares are offered at net asset value without a sales charge.
For each Fund, Class A shares are subject to a Rule 12b-1 fee payable at an
annual rate of 0.50% of the average daily net assets of the Fund attributable to
such shares. For additional information, see "Management--Distribution
Expenses."
Deferred Sales Charges
Although there is no initial sales charge on purchases of Class A
shares of $1,000,000 or more, the Distributor pays broker-dealers out of its own
assets, a fee of up to 1% of the offering price of such shares. If these shares
are redeemed within 12 months, the redemption proceeds will be reduced by 1.00%.
The CDSC will be assessed on the lesser of the net asset value of the shares at
the time of redemption or the original amount invested. The CDSC is not imposed
on the amount of any increase in your account value over the initial amount
invested. For additional information, see "Redemption--Contingent Deferred Sales
Charge."
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating $1
million or more will be waived in the following cases if shares are redeemed and
the Transfer Agent is notified: (1) redemption of shares when a Fund exercises
its right to liquidate accounts which are less than the minimum account size;
(2) redemption to pay for optional insurance coverage described in the
Prospectus under "Optional Benefits"; (3) the death or post-purchase disability,
as defined in Section 72(m)(7) of the Code (if satisfactory evidence is provided
to the Fund); (4) the portion of a mandated minimum distribution from an IRA,
SIMPLE IRA or an individual type 403(b)(7) plan equal to the percentage of your
plan assets held in Class A shares of the Fund; (5) reinvested dividends and
capital gains and (6) a Systematic Withdrawal Plan of 10% per year where the
minimum distribution is $500 per month with an initial account of $20,000 or
greater.
CLASS B AND X SHARES--CONTINGENT DEFERRED SALES CHARGE ALTERNATIVES
CLASS B SHARES. The public offering price of Class B shares is the net
asset value of the applicable Fund's shares. Such shares are sold without an
initial sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC will be imposed if shares are redeemed within six
years of purchase. The Class B CDSC will not apply to redemptions of shares
purchased by the reinvestment of dividends or capital gains distributions and
may be waived under certain circumstances described below. The Class B CDSC will
be assessed on the lesser of the net asset value of the shares at the time of
redemption or the original amount invested. The Class B CDSC is not imposed on
the amount of any increase in your account value over the initial amount
invested. The Class B CDSC is paid to the Distributor to reimburse expenses
incurred in providing distribution-related services to the Fund in connection
with the sale of Class B . Although Class B shares are sold without an initial
sales charge, the Distributor normally pays a sales commission of 4.00% of the
purchase price of Class B shares to the dealer from its own resources at the
time of the sale. The Distributor has assigned its right to receive any Class B
CDSC, as well as any distribution and service fee to an unaffiliated third party
that provides funding for up-front sales commission payments.
To determine whether the Class B CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares held for over six
years; and (3) shares in the order they were purchased (such that shares held
the longest are
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<PAGE> 168
redeemed first). The amount of the Class B CDSC will depend on the number of
years since the time you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class B CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class B shares, such as the
payment of compensation to selected broker-dealers, and for selling such shares.
The combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell such
shares without deduction of a sales charge at the time of purchase. Although
such shares are sold without an initial sales charge, the Distributor pays a
dealer concession equal to 4% of the amount invested to broker-dealers who
sell Class B shares.
Waiver of Class B CDSC. The Class B CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class B
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B shares are subject to higher annual Rule
12b-1 fees as described below.
CLASS X SHARES. Class X shares are currently only offered to certain
"Qualified" purchasers (including, but not limited to, IRAs, Roth IRAs,
Education IRAs, SEP IRAs, SIMPLE IRAs and 403(b)(7) plans). Any request for
"Non-Qualified" purchases of Class X shares up to $1,000,000 will normally be
considered as a purchase request for Class B shares or declined. Any request for
"Non-Qualified" purchases of Class X shares above $1,000,000 will be considered
as a purchase request for Class A shares or declined. Because it is more
advantageous for an investor to purchase Class A shares for amounts in excess of
$1,000,000, a request to purchase Class X shares for $1,000,000 or more will
normally be considered as a purchase request for Class A shares or declined.
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<PAGE> 169
The public offering price of Class X shares is the net asset value of
the applicable Fund's shares. In addition, investors purchasing Class X shares
will receive, as a bonus, additional shares having a value equal to 2.50% of the
amount invested. The Distributor has undertaken to pay for Bonus Shares as part
of its services to the Funds. The Distributor expects to recover costs
associated with its purchases of Bonus Shares through fees received under the
Class X Distribution and Service Plan discussed below. Shares purchased by the
reinvestment of dividends or capital gains distributions are not eligible for
Bonus Shares.
Although Class X shares are sold without an initial sales charge, if
Class X shares are redeemed within six years of their purchase, a CDSC will be
deducted from the redemption proceeds. The Class X CDSC will not apply to
redemptions of Bonus Shares or shares purchased by the reinvestment of dividends
or capital gains distributions and may be waived under certain circumstances
described below. The Class X CDSC will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original amount
invested. The Class X CDSC is not imposed on the amount of any increase in your
account value over the initial amount invested. The Class X CDSC is paid to the
Distributor to reimburse expenses incurred in providing distribution-related
services to the Fund in connection with the sale of Class X shares. Although
Class X shares are sold without an initial sales charge, the Distributor
normally pays a sales commission of 4.00% of the purchase price of Class X
shares to the dealer from its own resources at the time of the sale. During the
initial offering period of the Class X shares, the Distributor intends to pay a
4.00% up-front sales commission to the dealer. The Distributor has assigned its
right to receive any Class X CDSC, as well as any distribution and service fee
to an unaffiliated third party that provides funding for up-front sales
commission payments.
To determine whether the Class X CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions; (2) shares (including Bonus Shares)
held for over six years; (3) shares (not including Bonus Shares) in the order
they were purchased (such that shares held the longest are redeemed first); and
(4) Bonus Shares in the order they were acquired (such that Bonus Shares held
the longest are redeemed first). The amount of the Class X CDSC will depend on
the number of years since the time you invested and the dollar amount being
redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Redemption During: Class X CDSC:
<S> <C>
lst year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 4%
4th year after purchase 3%
5th year after purchase 2%
6th year after purchase 1%
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first business day of the month in which the
purchase was made.
Waiver of Class X CDSC. The Class X CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is
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<PAGE> 170
provided to the Fund); (4) the portion of a mandated minimum distribution from
an IRA, SIMPLE IRA or an individual type 403(b)(7) plan equal to the percentage
of your plan assets held in Class X shares of the Fund; (5) reinvested dividends
and capital gains and (6) a Systematic Withdrawal Plan of 10% per year where the
minimum distribution is $500 per month with an initial account of $20,000 or
greater.
For additional information, see "Redemption--Contingent Deferred Sales
Charge." In addition, Class B and X shares are subject to higher annual Rule
12b-1 fees as described below.
Rule 12b-1 Fees. Class B and X shares are subject to a Rule 12b-1 fee
payable at an annual rate of 0.75% of the average daily net assets of the Fund
attributable to such shares. The higher Rule 12b-1 fee will cause Class B and X
shares to have a higher expense ratio and to pay lower dividends than Class A
shares. For additional information about this fee, see "Management--Distribution
Expenses."
Conversion to Class A Shares. Eight years after you purchase Class B
or X shares of a Fund, those shares will automatically convert to Class A shares
of that Fund. This conversion feature relieves Class B and X shareholders of the
higher asset-based distribution charges that applies to these shares. The
conversion is based on the relative net asset value, and no sales load or other
charge is imposed. At the time of conversion, a portion of the Class B or Class
X shares, as applicable, purchased through the reinvestment of dividends or
capital gains ("Dividend Shares") will also convert to Class A shares. The
portion of Dividend Shares that will convert is determined by the ratio of your
converting Class B or X non-Dividend Shares to your total Class B or X
non-Dividend Shares. Under Section 1036 of the Code, the automatic conversion of
Class X shares will not result in a gain or loss to the Fund or to affected
shareholders.
CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE
The public offering price of Class C shares is the net asset value of
such shares. Class C shares are sold without an initial sales charge so that the
applicable Fund receives the full amount of the investor's purchase. While Class
C shares do not convert to Class A shares, they are subject to a lower
contingent deferred sales charge (1.00%) and do not have to be held for as long
a time (one year) as Class B or X shares to avoid paying a contingent deferred
sales charge. For additional information, see "Redemption--Contingent Deferred
Sales Charge." In addition, Class C shares are subject to higher annual Rule
12b-1 fees as described below. Class C shares do not convert to Class A shares.
Proceeds from the CDSC are paid to the Distributor and are used to
defray its expenses related to providing distribution-related services to the
applicable Fund in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers, and for selling Class C
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Fund to
sell the Class C shares without deduction of a sales charge at the time of
purchase. Although Class C shares are sold without an initial sales charge, the
Distributor pays a dealer concession equal to 1.00% of the amount invested to
broker-dealers who sell Class C shares at the time the shares are sold and an
annual fee of 1.00% of the amount invested that begins to accrue one year after
the shares are sold.
Waiver of Class C CDSC. The Class C CDSC will be waived in the
following cases if shares are redeemed and the Transfer Agent is notified: (1)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (2) redemption to pay for optional
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<PAGE> 171
insurance coverage described in the Prospectus under "Optional Benefits"; (3)
the death or post-purchase disability, as defined in Section 72(m)(7) of the
Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class C
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
Rule 12b-1 Fees. For each Fund, Class C shares are subject to a Rule
12b-1 fee payable at an annual rate of 0.75% of the average daily net assets
of the Fund attributable to such shares. The higher Rule 12b-1 fee will cause
Class C shares to have a higher expense ratio and to pay lower dividends than
Class A shares. For additional information about this fee, see
"Management--Distribution Expenses."
Minimum Account Balance
If (1) an account opened in a fund has been in effect for at
least one year and the shareholder has not made an additional purchase in that
account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the Fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a Fund determines that a shareholder has provided incorrect information
in opening an account with a Fund or in the course of conducting subsequent
transactions with the Fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. In addition, an IRA
may be established through a custodial account with Investors Fiduciary Trust
Co. Completion of a special application is required in order to create such an
account, and the minimum initial investment for an IRA is $1,000. Contributions
to IRAs are subject to prevailing amount limits set by the Internal Revenue
Service. For more information and IRA information, call the Funds at
1-877-INFO-ING. Additional account level fees may be imposed for IRA accounts.
OPTIONAL BENEFITS
ING Group or its affiliates--each an "affiliated person" of the Trust
and the Manager within the meaning of the 1940 Act--may make certain life
insurance coverage available to certain persons on whose behalf shares of the
Funds are purchased. The benefits of this coverage payable at death will be
related to the amounts paid to purchase shares and to the value of the shares
held for the benefit of the insured persons. Therefore, coverage will terminate
if all shares are redeemed.
Purchasers of the life insurance coverage will be required to authorize
periodic redemptions of Fund shares to pay the premiums for such coverage. Such
redemptions will not be subject to contingent deferred sales charges, but will
have the same tax consequences as any other Fund redemptions.
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<PAGE> 172
The above life insurance coverage will be available to eligible persons
who enroll for the coverage within a limited time period after shares in any
Fund are initially purchased or transferred. In addition, coverage cannot be
made available unless ING Group knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides ING Group with information
regarding the beneficial owners of such shares. Other restrictions on the
coverage will apply, such as the age of the persons upon whose life the coverage
is issued. This insurance coverage may not be available in all states and may be
subject to additional restrictions or limitations on coverage. Purchasers of
shares should also make themselves familiar with the impact on the life coverage
of purchasing additional shares, reinvestment of dividends and capital gains
distributions and redemptions. Please call 1-800-INFO-ING for more information
and application forms for any of the above programs and privileges.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day
the Fund is valued. Shares will be redeemed without charge (except any
applicable contingent deferred sales charge) at the net asset value next
determined after a redemption request in good order has been received by the
applicable Fund. See "DETERMINATION OF NET ASSET VALUE" in the SAI.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 calendar days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the shares are redeemed, dividends on the shares will continue to
accrue and be payable and the shareholder will be entitled to exercise all other
beneficial rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds
by check to the shareholder at the address of record on the next business day.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. No
interest to or additional dividends will be earned on amounts represented by
uncashed redemption checks or misapplied wire payments.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the Trust, the Distributor, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of
ING Funds. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in
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previously designated wiring instructions; and (8) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
These requirements may be waived or modified upon notice to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guarantees with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact ING Fund Services, Inc.
Redemption Methods. To ensure acceptance of your redemption request, it
is important to follow the procedures described below. Although the Funds have
no present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Funds may modify or terminate their
services and provisions at any time. If the Funds terminate any particular
service, they will do so only after giving written notice to shareholders.
Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your Authorized Broker or
Investment Adviser or Service Organization and instructing him or her to redeem
your shares. He or she will then contact ING Fund Services and place a
redemption trade on your behalf.
By Mail. You may redeem your shares by sending a letter directly to ING
Fund Services Co. LLC, P.O. Box 9690, Providence, RI 02940-9690. To be
accepted, a letter requesting redemption must include: (i) the Fund name and
account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed and (iv) the signatures of all
registered owners. A signature guarantee may be required as indicated in the
beginning of this section. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your shares by calling the Funds at
1-877-INFO-ING. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Funds. Telephone redemptions are available unless the shareholder
specifically declines this option on the Purchase Application and may only be
sent to the address of record or preassigned wire instructions. The Funds employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Funds fail
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<PAGE> 174
to employ such reasonable procedures, they may be liable for any loss, damage or
expense arising out of any telephone transactions purporting to be on a
shareholder's behalf. In order to assure the accuracy of instructions received
by telephone, the Funds require some form of personal identification prior to
acting upon instructions received by telephone, record telephone instructions
and provide written confirmation to investors of such transactions. Telephone
redemptions will be suspended for a period of 10 days following a telephone
address change. You may instruct the Funds to send your redemption proceeds via
a wire transmission to your personal bank. Your instructions should include: (i)
your account number, social security number and account registration; (ii) the
Fund name from which you are redeeming shares; and (iii) the amount to be
redeemed.
Wire redemptions can be made only if the "yes" box has been checked in
the "Telephone Redemption Authorization" section on your Purchase Application,
and you have attached a copy of a voided check or a letter summarizing the
wiring instructions of the account where proceeds are to be wired. Your bank may
charge you a fee for receiving a wire payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available. Checks are free and a Checkwriting Authorization and Signature Card
may be obtained from the Fund by contacting ING Fund Services Co. LLC at 1-
877-INFO-ING. It is not possible to use a check to close out your account since
additional shares accrue daily. Checks will be issued upon receipt of a properly
completed Authorization and Signature Card. There will be a $20.00 charge for
each returned check debited from your account. Checks will be mailed by the
Transfer Agent by first class mail.
The above-mentioned redemption services may not be available for
clients of Authorized Brokers, Investment Advisers or Service Organizations or
for IRAs. These clients should contact their representative.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $10,000 or more of a Fund may elect to have periodic
redemptions from his or her account to be paid on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic payment is $50. A sufficient
number of shares to make the scheduled redemption will normally be processed
on the selected day of the selected month(s). Depending on the size of the
payment requested and fluctuation in the net asset value, if any, of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account. A shareholder may request that these payments be sent to a
predesignated bank or other designated party. Capital gains and dividend
distributions paid to the account will automatically be reinvested at net asset
value on the distribution payment date.
ING "BANK TO BANK" TRANSFER PLAN
You may request by telephone that redemption proceeds (minimum $500 per
day) be transferred between your Fund account and your bank account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House member may be designated. Redemption proceeds will be on deposit
in your account at an Automated Clearing House member bank ordinarily two days
after receipt of the redemption request. Holders of jointly registered Fund or
bank accounts may redeem through the plan for transfer to their bank account not
more than $250,000 within any 30-day period.
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REDEMPTION IN KIND
All redemptions of shares of the Funds shall be made in cash, except
that the commitment to redeem shares in cash extends only to redemption requests
made by each shareholder of a Fund during any 90-day period of up to the lesser
of $250,000 or 1% of the net asset value of that Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC and
is a fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Funds make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities he or she may receive more or less
than the value of such securities as determined above, and might incur brokerage
charges.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY)
Within 90 days of a redemption, a shareholder may invest all or part of
the redemption proceeds in Class A shares of any ING Fund at the net asset value
next computed after receipt by the Transfer Agent of the funds to be reinvested;
provided, however, if the redemption was made from Class A shares of either ING
U.S. Treasury Money Market Fund or ING Money Market Fund, reinvested proceeds
will be subject to the difference in sales charge between the shares redeemed
and the shares the proceeds are reinvested in. The shareholder must ask the
Transfer Agent for such privilege at the time of reinvestment. A realized gain
on the redemption is taxable, and reinvestment may alter any capital gains
payable. If there has been a loss on the redemption and shares of the same fund
are repurchased, all of the loss may not be tax deductible, depending on the
timing and amount reinvested. Under the Code, if the redemption proceeds of fund
shares on which a sales charge was paid are reinvested in (or exchanged for)
shares of another ING Fund at a reduced sales charge within 90 days of the
payment of the sales charge, the shareholder's basis in the fund shares redeemed
may not include the amount of the sales charge paid, thereby reducing the loss
or increasing the gain recognized from the redemption; however, the
shareholder's basis in the fund shares purchased will include the sales charge.
Each ING Fund may amend, suspend or cease offering this privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each ING Fund.
Shareholders who are assessed a contingent deferred sales charge in
connection with the redemption of Class A shares and who subsequently reinvest a
portion or all of the value of the redeemed shares in Class A shares of any ING
Fund within 90 days after such redemption may do so at net asset value if such
privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B, C or X shares.
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EXCHANGE OF FUND SHARES
The Funds offer several convenient ways to exchange shares in one Fund
for shares in the same class of another Fund in the Trust. Before engaging in an
exchange transaction, a shareholder should read carefully the Prospectus
describing the Fund into which the exchange will occur, which is available
without charge and can be obtained by writing to ING Funds Services Co. LLC,
P.O. Box 9690, Providence, RI 02940-9690 or by calling the Funds at
1-877-INFO-ING. A shareholder may not exchange shares of one Fund for shares of
another Fund if the new Fund is not qualified for sale in the state of the
shareholder's residence. The Trust may terminate or amend the terms of the
exchange privilege at any time upon at least 60 days' prior written notice to
shareholders of any modification or termination of the exchange privilege.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in good order, plus any applicable sales
charge.
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders will receive written confirmation of the
exchange following completion of the transaction.
EXCHANGE BY MAIL
To exchange Fund shares by mail, simply send a letter of instruction to
the Fund. The letter of instruction must include: (i) your account number; (ii)
the Fund from and the Fund into which you wish to exchange your investment;
(iii) the dollar or share amount you wish to exchange; and (iv) the signatures
of all registered owners or authorized parties.
EXCHANGE BY TELEPHONE
To exchange Fund shares by telephone or if you have any questions
simply call the Funds at 1-877-INFO-ING. You should be prepared to give the
telephone representative the following information: (i) your account number,
social security or tax identification number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. Telephone
exchanges are available unless the shareholder specifically declines this option
on the Purchase Application. Telephone exchanges will be suspended for a period
of ten days following a telephone address change. See "REDEMPTION OF FUND
SHARES--By Telephone" for a discussion of telephone transactions generally.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of the
Fund, in shares of certain other funds in the ING Family of Funds of which you
are a shareholder. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sale load may be charged with respect to exchanges into
funds sold with a sales load. See "Shareholder Services" in the SAI. The right
to exercise this privilege may be modified or
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canceled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this privilege at any time by mailing written notification to the
ING Fund Services Co. LLC, P.O. Box 9690, Providence, RI 02940-9690. The Fund
may charge a service fee for the use of this privilege. No such fee currently is
contemplated. For more information concerning this privilege and the funds in
the ING Family of Funds eligible to participate in this privilege, or to obtain
a Auto-Exchange Authorization Form, please call toll free 1-877-INFO-ING.
ING AUTOMATIC DIVIDEND DIRECTION OPTION
This option enables you to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in shares of another
Fund in the Trust of which you are a shareholder. Shares of the other Fund
will be purchased at the then-current net asset value; however, a sales load may
be charged with respect to investments in shares of a fund sold with a sales
load. If you are investing in a Fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect a
reduced sales load. If you are investing in a fund that charges a contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the SAI. ING Automatic Dividend Direction Option
permits you to transfer electronically dividends or dividends and capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
CONTINGENT DEFERRED SALES CHARGE
CLASS A
Each Fund imposes a CDSC on Class A shares in certain circumstances.
Under the CDSC arrangement, for sales of shares of $1,000,000 or more (including
right of accumulation and statements of intention (see "Purchase of Fund
Shares")), the front-end sales charge ("FESC") will not be imposed (although the
Distributor intends to pay its registered representatives and other dealers that
sell Fund shares, out of its own assets, a fee of up to 1% of the offering price
of such sales except on purchases exempt from the FESC). However, if such
shares are redeemed within twelve months after their purchase date (the "CDSC
Period"), the redemption proceeds will be reduced by the 1.00% CDSC.
The CDSC will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original amount invested. The CDSC is
not imposed on the amount of any increase in your account value over the initial
amount invested. The CDSC will not be applied to shares acquired through
reinvestment of income dividends or capital gain distributions or shares held
for longer than the applicable CDSC Period. In determining which shares to
redeem, unless instructed otherwise, shares that are not subject to the CDSC
will be redeemed first and shares subject to the CDSC then will be redeemed in
the order purchased.
Waiver of Class A CDSC. The Class A CDSC for purchases aggregating
$1 million or more will be waived in the following cases if shares are redeemed
and the Transfer Agent is notified: (1) redemption of shares when a Fund
exercises its right to liquidate accounts which are less than the minimum
account size; (2) redemption to pay for optional insurance coverage described in
the Prospectus under "Optional Benefits"; (3) the death or post-purchase
disability, as defined in Section 72(m)(7) of the
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Code (if satisfactory evidence is provided to the Fund); (4) the portion of a
mandated minimum distribution from an IRA, SIMPLE IRA or an individual type
403(b)(7) plan equal to the percentage of your plan assets held in Class A
shares of the Fund; (5) reinvested dividends and capital gains and (6) a
Systematic Withdrawal Plan of 10% per year where the minimum distribution is
$500 per month with an initial account of $20,000 or greater.
CLASS B, X, AND C SHARES
The CDSC on Class B, X, and C shares will be calculated on the lesser
of the net asset value of the shares at the time of redemption or the original
amount invested. The Class B CDSC is not imposed on the amount of any increase
in your account value over the initial amount invested. No charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions or on shares held for longer than the applicable CDSC Period.
Upon any request for redemption of shares of any class of shares that
imposes a CDSC, it will be assumed, unless otherwise requested, that shares
subject to no CDSC will be redeemed first in the order purchased and all
remaining shares that are subject to a CDSC will be redeemed in the order
purchased. With respect to the redemption of shares subject to no CDSC where the
shareholder owns more than one class of shares, those shares with the highest
Rule 12b-1 fee will be redeemed in full prior to any redemption of shares with a
lower Rule 12b-1 fee.
The CDSC does not apply to: (1) redemption of shares when a Fund
exercises its right to liquidate accounts which are less than the minimum
account size; (2) redemption to pay for optional insurance coverage described
in this Prospectus under "Optional Benefits"; (3) redemptions following death or
post-purchase disability (as defined by Section 72(m)(7) of the Code); (4) the
portion of a mandated minimum distribution from an IRA, SIMPLE IRA or an
individual type 403(b)(7) plan equal to the percentage of your plan assets held
in Class X shares of the Fund; (5) reinvested dividends and capital gains and
(6) a Systematic Withdrawal Plan of 10% per year while the minimum
distribution is $500 per month with an initial account of $20,000 or greater.
As an illustration of CDSC calculations, assume that Shareholder X
purchases on Year 1/Day 1 100 shares at $10 per share. Assume further that, on
Year 2/Day 1, Shareholder X purchased an additional 100 shares at $12 per share.
Finally, assume that, on Year 3/Day 1, Shareholder X wishes to redeem shares
worth $1,300, and that the net asset value per share as of the close of business
on such day is $13. To effect Shareholder X's redemption request, 100 shares at
$13 per share (totaling $1,300) would be redeemed. The CDSC would be waived in
connection with the redemption of that number of shares equal in value (at the
time of redemption) to $220 (10% of $1,000--the purchase amount of the shares
purchased by Shareholder X on Year 1/Day 1--plus 10% of $1,200--the purchase
amount of the shares purchased by Shareholder X on Year 2/Day 1). In addition,
no CDSC would apply to the $400 in capital appreciation on Shareholder X's
shares ($2,600 Year 3 value minus $2,200 purchase cost of shares). If a
shareholder exchanges shares subject to a CDSC for Class B, X, or C shares of a
different Fund, the transaction will not be subject to a CDSC. However, when
shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC
Period and applying the CDSC.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
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Each Fund intends to qualify and elect to be treated as a regulated
investment company and intends to continue to qualify to be treated as a
regulated investment company for each taxable year pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying and electing, each Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net realized capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all
of its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). The Funds will declare distributions of such income daily and pay those
dividends monthly. Each Fund intends to distribute, at least annually,
substantially all net capital gains (the excess of net long-term capital gains
over net short-term capital losses). In determining amounts of capital gains to
be distributed, any capital loss carryovers from prior years will be applied
against capital gains.
The amount declared each day as a dividend may be based on projections
of estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
For all distributions, the shareholder may elect in writing, not less
than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
period will be paid within five business days after the end of the period.
Unless the shareholder chooses to receive dividend and/or capital gain
distributions in cash, distributions will be automatically reinvested in
additional shares of the respective Fund at net asset value. If you elect to
receive distributions in cash and checks (1) if returned and marked as
"undeliverable" or (2) remain uncashed for six months, your cash election will
be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a
dividend payment date will be entitled on the next dividend payment date to all
dividends declared but unpaid on those shares at the time of their redemption.
Distributions of net investment company taxable income (regardless of
whether derived from dividends, interest or short-term capital gains) generally
will be taxable to shareholders as ordinary income. Distributions of net
long-term capital gains designated by a Fund as capital gain distributions will
be taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares. This is true for distributions from net gains on
securities held for more than one year, but not more than 18 months, and from
net gains on securities held more than 18 months. The Funds do not anticipate
realizing a substantial amount of net long-term capital gains. Distributions are
taxable in the same manner whether received in additional shares or in cash.
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Earnings of the Funds not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including exemptive interest dividend, will be treated
as paid on December 31 of the calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders (and therefore
taxable) in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.
A Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term generally depending upon the shareholder's holding
period of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of a Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term capital loss to the extent of
such capital gain dividends.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Funds as to the Federal
tax status of distributions made by the Funds in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISERS AS TO THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF OWNERSHIP OF SHARES OF THE FUNDS IN THEIR PARTICULAR
CIRCUMSTANCES.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Treasury Obligations (Both Funds). Each Fund may invest in U.S.
Treasury obligations, whose principal and interest are backed by the full faith
and credit of the United States Government. U.S. Treasury obligations consist of
bills, notes and bonds, and separately traded interest and principal component
parts of such obligations known as STRIPS, which generally differ in their
interest rates and maturities. U.S. Treasury
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bills, which have original maturities of up to one year, notes, which have
maturities ranging from two years to 10 years, and bonds, which have original
maturities of 10 to 30 years, are direct obligations of the United States
Government.
U.S. Government Securities (ING Money Market Fund Only). U.S.
Government securities are obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. U.S. Government securities
include debt securities issued or guaranteed by U.S. Government-sponsored
enterprises and federal agencies and instrumentalities. Some types of U.S.
Government securities are supported by the full faith and credit of the United
States Government or U.S. Treasury guarantees, such as mortgage-backed
certificates guaranteed by the Government National Mortgage Association
("GNMA"). Other types of U.S. Government securities, such as obligations of the
Student Loan Marketing Association, provide recourse only to the credit of the
agency or instrumentality issuing the obligation. In the case of obligations not
backed by the full faith and credit of the United States Government, the
investor must look to the agency issuing or guaranteeing the obligation for
ultimate repayment.
Commercial Paper (ING Money Market Fund Only). Commercial paper
includes short-term unsecured promissory notes, variable rate demand notes and
variable rate master demand notes issued by both domestic and foreign bank
holding companies, corporations and financial institutions and United States
Government agencies and instrumentalities. All commercial paper purchased by the
Fund is, at the time of investment (1) given the highest short-term rating by at
least two Nationally Recognized Securities Ratings Organizations ("NRSROs"),
such as "A-1" by S&P and "Prime-1" by Moody's; (2) single rated and given the
highest short-term rating by a NRSRO; or (3) unrated, but determined to be of
comparable quality by the Manager pursuant to guidelines approved by the Fund's
Board of Trustees.
Corporate Debt Securities (ING Money Market Fund Only). The Fund may
purchase corporate debt securities, subject to the rating and quality
requirements specified above. The Fund may invest in both rated commercial paper
and rated corporate debt obligations of foreign issuers that meet the same
quality criteria applicable to investments by the Fund in commercial paper and
corporate debt obligations of domestic issuers. These investments, therefore,
are not expected to involve significant additional risks as compared to the
risks of investing in comparable domestic securities. Generally, all foreign
investments carry with them both opportunities and risks not applicable to
investments in securities of domestic issuers, such as risks of foreign
political and economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital, changes in foreign governmental attitudes
toward private investment (possibly leading to nationalization, increased
taxation, or confiscation of foreign assets) and added difficulties inherent in
obtaining and enforcing a judgment against a foreign issuer of securities should
it default.
Domestic and Foreign Bank Obligations (ING Money Market Fund Only).
These obligations include but are not limited to certificates of deposit,
commercial paper, Yankeedollar certificates of deposit, bankers' acceptances,
Eurodollar certificates of deposit and time deposits, promissory notes and
medium-term deposit notes. The Fund will not invest in any obligations of its
affiliates, as defined under the 1940 Act.
The Fund limits its investment in United States bank obligations to
obligations of United States banks (including foreign branches). The Fund limits
its investment in foreign bank obligations to United States dollar-denominated
obligations of foreign banks (including United States branches of foreign banks)
which, in
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the opinion of the Manager, are of an investment quality comparable to
obligations of United States banks which may be purchased by the Fund. There is
no limitation on the amount of the Fund's assets which may be invested in
obligations of foreign banks meeting the conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may
be subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing from two days through seven days may not exceed 10% of the value of the
total assets of the Fund.
Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of the United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions, such as exchange controls, may be adopted which might adversely
affect the payment of principal and interest on those obligations, that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankeedollar obligations involve
additional risks. Most notably, there generally is less publicly available
information about foreign companies; there may be less governmental regulation
and supervision; they may use different accounting and financial standards; and
the adoption of foreign governmental restrictions may adversely affect the
payment of principal and interest on foreign investments. In addition, not all
foreign branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
STRIPS and Zero Coupon Securities (Both Funds). Each Fund may invest in
separately traded principal and interest components of securities backed by the
full faith and credit of the United States Treasury. The principal and interest
components of United States Treasury bonds with remaining maturities of longer
than ten years are eligible to be traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are separately
issued by the United States Treasury at the request of depository financial
institutions, which then trade the component parts separately. The interest
component of STRIPS may be more volatile than that of United States Treasury
bills with comparable maturities. In accordance with Rule 2a-7, the Fund's
investments in STRIPS are limited to those with maturity components not
exceeding 13 months (397 days).
Each Fund may invest in zero coupon securities. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to its
face value at maturity. The market prices of zero coupon securities generally
are more volatile than the market prices of securities that pay interest
periodically and are more sensitive to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
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Variable Rate Demand Obligations (ING Money Market Fund Only).
Variable rate demand obligations have a maturity of 397 days or less, but carry
with them the right of the holder to put the securities to a remarketing agent
or other entity on short notice, typically seven days or less. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
intervals corresponding to the notice period for the put), in order to maintain
the interest rate at the prevailing rate for securities with a seven-day
maturity. The remarketing agent is typically a financial intermediary that has
agreed to perform these services. Variable rate master demand obligations permit
the Fund to invest fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. Because the
obligations are direct lending arrangements between the Fund and the borrower,
they will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the obligation without penalty. While master
demand obligations, as such, are not typically rated by credit rating agencies,
if not so rated, the Fund may, under its minimum rating standards, invest in
them only if, in the opinion of the Manager, they are of an investment quality
comparable to other debt obligations in which the Fund may invest and are within
the credit quality policies, guidelines and procedures established by the Fund's
Board of Trustees. See the SAI for further details on variable rate demand
obligations and variable rate master demand obligations.
Mortgage-Backed Securities/Mortgage Pass-Through Securities (ING
Money Market Fund Only). Many mortgage-backed securities are mortgage
pass-through securities, which are securities representing interests in "pools"
of mortgages in which payments of both interest and principal on the securities
are made periodically, in effect "passing through" periodic payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities and
possibly others). Such instruments differ from typical bonds because principal
is repaid monthly over the term of the loan rather than returned in a lump sum
at maturity.
Timely payment of principal and interest on some mortgage pass-through
securities may be guaranteed by the full faith and credit of the U.S.
Government, as in the case of securities guaranteed by the GNMA, or guaranteed
by agencies or instrumentalities of the U.S. Government, as in the case of
securities guaranteed by the Federal National Mortgage Association ("FNMA") or
the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported only
by the discretionary authority of the U.S. Government to purchase the agency's
obligations and not by the full faith and credit of the U.S. Government. For
more information on GNMA certificates and FNMA and FHLMC mortgage-backed
obligations, see "Mortgage-Backed Securities" in the SAI.
Other Mortgage-Backed Securities (ING Money Market Fund Only). The
Fund may purchase mortgage-backed securities issued by financial institutions
such as commercial banks, savings and loan associations, mortgage banks, and
securities broker-dealers (or affiliates of such institutions established to
issue these securities) in the form of either collateralized mortgage
obligations ("CMOs") or mortgage-backed bonds. CMOs are obligations fully
collateralized directly or indirectly by a pool of mortgages on which payments
of principal and interest are dedicated to payment of principal and interest on
the CMOs. Payments are passed through to the holders, although not necessarily
on a pro rata basis, on the same schedule as they are received. Mortgage-backed
bonds are general obligations of the issuer fully collateralized directly or
indirectly by a pool of mortgages. The mortgages serve as collateral for the
issuer's payment obligations on the bonds but interest and principal payments on
the mortgages are not passed through either directly (as with GNMA certificates
and
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FNMA and FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages could
change the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds can provide that they are
callable by the issuer prior to maturity).
Although the mortgage-related securities securing these obligations may
be subject to a government guarantee or third-party support, the obligation
itself is not so guaranteed. Therefore, if the collateral securing the
obligation is insufficient to make payment on the obligation, a holder could
sustain a loss.
Risk Of Mortgage-Backed Securities (ING Money Market Fund Only).
Although mortgage loans constituting a pool of mortgages, such as those
underlying GNMA certificates, may have maturities of up to 30 years, the actual
average life of a mortgage-backed security typically will be substantially less
because the mortgages will be subject to normal principal amortization and may
be prepaid prior to maturity. In the case of mortgage pass-through securities
such as GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or
modified pass-through securities such as collateralized mortgage obligations
issued by various financial institutions, early repayment of principal arising
from prepayments of principal on the underlying mortgage loans due to the sale
of the underlying property, the refinancing of the loan, or foreclosure may
expose a security to a lower rate of return upon reinvestment of the principal.
Prepayment rates vary widely and may be affected by changes in market interest
rates. In periods of falling interest rates, the rate of prepayment tends to
increase, thereby shortening the actual average life of the mortgage-backed
security.
Conversely, when interest rates are rising, the rate of prepayment
tends to decrease, thereby lengthening the actual average life of the
mortgage-backed security. Accordingly, it is not possible to accurately predict
the average life of a particular pool. Reinvestment of prepayments may occur at
higher or lower rates than the original yield on the certificates. Therefore,
the actual maturity and realized yield on pass-through or modified pass-through
mortgage-backed securities will vary based upon the prepayment experience of the
underlying pool of mortgages.
With respect to GNMA certificates, although GNMA guarantees timely
payment even if homeowners delay or default, tracking the "pass-through"
payments may, at times, be difficult. Expected payments may be delayed due to
the delays in registering the newly traded paper securities. The custodian's
policies for crediting missed payments while errant receipts are tracked down
may vary. Other mortgage-backed securities such as those of FHLMC and FNMA trade
in book-entry form and are not subject to this risk of delays in timely payment
of income.
Asset-Backed Securities (ING Money Market Fund Only). The Fund is
permitted to invest in asset-backed securities, subject to the rating and
quality requirements specified with respect to the Fund. Through the use of
trusts and special purpose subsidiaries, various types of assets, primarily home
equity loans and automobile and credit card receivables, are being securitized
in pass-through structures similar to the mortgage pass-through structures
described above. Consistent with the Fund's investment objectives, policies and
quality standards, the Fund may invest in these and other types of asset-backed
securities which may be developed in the future.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete
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<PAGE> 185
security interest in the related collateral. For example, credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and Federal consumer credit laws, some of which
may reduce the ability to obtain full payment. In the case of automobile
receivables, due to various legal and economic factors, proceeds from
repossessed collateral may not always be sufficient to support payments on these
securities. The risks associated with asset-backed securities are often reduced
by the addition of credit enhancements such as a letter of credit from a bank,
excess collateral or a third-party guarantee.
Other Mutual Funds (ING Money Market Fund Only). The Fund may invest
in shares of other open-end management investment companies, subject to the
limitations of the 1940 Act and subject to such investments being consistent
with the overall objective and policies of the Fund, provided that any such
purchases will be limited to short-term investments in shares of unaffiliated
investment companies, and will not, in the aggregate, exceed 10% of the Fund's
net assets. The purchase of securities of other mutual funds results in
duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs and
investment advisory and administrative fees.
Guaranteed Investment Contracts (ING Money Market Fund Only). The Fund
may also make limited investments in guaranteed investment contracts ("GLES")
issued by U.S. insurance companies. The Fund will purchase a GIC only when the
Adviser has determined, under guidelines established by the Board of Trustees,
that the GIC presents minimal credit risks to the Fund and is of comparable
quality to instruments that are rated high quality by certain nationally
recognized statistical rating organizations.
"When-Issued" and "Forward Commitment" Transactions (Both Funds). Each
Fund may purchase securities on a when-issued and delayed-delivery basis and may
purchase or sell securities on a forward commitment basis. When-issued or
delayed-delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an agreement
by a Fund to purchase or sell securities at a specified future date. When a Fund
engages in these transactions, the Fund relies on the buyer or seller, as the
case may be, to consummate the sale. Failure to do so may result in the Fund
missing the opportunity to obtain a price or yield considered to be
advantageous. When-issued and delayed-delivery transactions and forward
commitment transactions may be expected to occur a month or more before delivery
is due. However, no payment or delivery is made by a Fund until it receives
payment or delivery from the other party to the transaction. A separate account
containing only liquid assets, such as cash, U.S. Government securities, or
other liquid assets equal to the value of purchase commitments will be
maintained until payment is made. Such transactions have the effect of leverage
on the Fund and may contributed to volatility of a Fund's net asset value. For
further information, see the SAI.
Loans of Portfolio Securities (Both Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33% of each such
Fund's total assets to brokers, dealers and financial institutions, provided
certain conditions are met, including the condition that each loan is secured
continuously by collateral maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned.
These transactions involve a loan by the applicable Fund and are subject to the
same risks as repurchase agreements. For further information, see the SAI.
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<PAGE> 186
Repurchase Agreements (Both Funds). The Funds may enter into
repurchase agreements with any bank and broker-dealer which, in the opinion
of the Trustees, presents a minimal risk of bankruptcy. Under a repurchase
agreement a Fund acquires securities and obtains a simultaneous commitment
from the seller to repurchase the securities at a specified time and at an
agreed upon yield. The agreements will be fully collateralized and the value
of the collateral, including accrued interest, marked-to-market daily. The
agreements may be considered to be loans made by the purchaser, collateralized
by the underlying securities. If the seller should default on its obligation to
repurchase the securities, a Fund may experience a loss of income from the
loaned securities and a decrease in the value of any collateral, problems in
exercising its rights to the underlying securities and costs and time delays in
connection with the disposition of securities. The Funds may not invest more
than 10% of its net assets in repurchase agreements maturing in more than seven
business days or in securities for which market quotations are not readily
available. For more information about repurchase agreements, see "Investment
Policies" in the SAI.
Reverse Repurchase Agreements (All Funds). Pursuant to a reverse
repurchase agreement, a Fund will sell portfolio securities and agree to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets in an amount at least equal to
the repurchase price marked to market daily (including accrued interest),
and will subsequently monitor the account to ensure that such equivalent value
is maintained. The Fund pays interest on amounts obtained pursuant to reverse
repurchase agreements. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
Borrowing (ING Money Market Fund Only). The Fund may borrow up to 10%
of its net assets to purchase securities and up to 25% of its net assets for
temporary purposes. Leveraging by means of borrowing will exaggerate the effect
of any increase or decrease in the value of portfolio securities on the Fund's
net asset value; money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances), which may or may not exceed the income received from the
securities purchased with borrowed funds. The use of borrowing tends to result
in a faster than average movement, up or down, in the net asset value of the
Fund's shares. The Fund also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
Reverse repurchase agreements, short sales of securities, and short
sales of securities against the box will be included as borrowing subject to the
borrowing limitations described above. Securities purchased on a when-issued or
delayed delivery basis will not be subject to the Fund's borrowing limitations
to the extent that the Fund establishes and maintains liquid assets in a
segregated account with the Trust's custodian equal to the Fund's obligations
under the when-issued or delayed delivery arrangement.
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<PAGE> 187
RISKS OF INVESTING IN THE FUNDS
CERTAIN RISK CONSIDERATIONS
The Funds attempt to maintain a constant net asset value of $1.00 per
share, although there can be no assurance that they will always be able to do
so. The Funds may not achieve as high a level of current income as other funds
that do not limit their investment to the high quality securities in which the
Funds invest.
There is, of course, no assurance that a Fund will achieve its
investment objective or be successful in preventing or minimizing the risk of
loss that is inherent in investing in particular types of investment products.
In order to attempt to minimize that risk, the Sub-Adviser monitors developments
in the economy, the securities markets, and with each particular issuer. Also,
as noted earlier, each diversified Fund is managed within certain limitations
that restrict the amount of the Fund's investment in any single issuer.
YEAR 2000
Like other funds and business organizations around the world, the Funds
could be adversely affected if the computer systems used by the Manager and the
Fund's other service providers do not properly process and calculate
date-related information for the year 2000 and beyond. The Funds have been
informed that the Manager, and the Funds' other service providers (i.e.,
Sub-Adviser, Administrator, Transfer Agent, Fund Accounting Agent, Distributor
and Custodian) have developed and are implementing clearly defined and
documented plans to minimize the risk associated with the Year 2000 problem.
These plans include the following activities: inventorying of software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems and retesting for Year 2000
readiness. In addition, the service providers are obtaining assurances from
their vendors and suppliers in the same manner. Non-compliant Year 2000 systems
upon which the Fund is dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (1) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (2) the costs currently associated with the implementation
of their plans will have material adverse impact on the business, operations or
financial condition of the Funds or their service providers.
In addition, the Year 2000 problem may adversely affect the companies
in which the Funds invest. For example, these companies may incur substantial
costs to correct the problem and may suffer losses caused by data processing
errors. Since the ultimate costs or consequences of incomplete or untimely
resolution of the Year 2000 problem by the Funds' service providers are unknown
to the Funds at this time, no assurance can be made that such costs or
consequences will not have a material adverse impact on the Funds or their
service providers.
The Funds and the Manager will continue to monitor developments
relating to the Year 2000 problem, including the development of contingency
plans for providing back-up computer services in the event of a systems failure.
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<PAGE> 188
OTHER INFORMATION
CAPITALIZATION
ING Funds Trust was organized as a Delaware business trust on July
30, 1998 and currently consists of 20 separately managed portfolios, each
of which is divided into Class A, B, C, and X shares. The Board of Trustees may
establish additional portfolios in the future. The capitalization of the Funds
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Funds are not required to hold
regular annual meetings of shareholders and do not intend to do so.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Funds may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Funds and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the Act. See "OTHER
INFORMATION--Voting Rights" in the SAI.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Funds) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Funds) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund (or
the Funds).
Performance Information
A Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Funds is mandated by the
SEC.
Quotations of "yield" for a Fund will be based on the investment income
per share during a particular 7 day period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share on the last day of the period.
Quotations of yield reflect only a Fund's performance during the
particular period on which the calculations are based. Yield for a Fund will
vary based on changes in market conditions, the level of interest
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<PAGE> 189
rates and the level of that Fund's expenses, and no reported performance figure
should be considered an indication of performance which may be expected in the
future.
Quotations of average annual total return for a Fund will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in that Fund over periods of 1, 5 and 10 years (up to the life of
that Fund), reflect the deduction of a proportional share of Fund expenses (on
an annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar and other entities or organizations which track the performance of
investment companies. Any performance information should be considered in light
of the Fund's investment objectives and policies, characteristics and quality of
the Funds and the market conditions during the time period indicated, and should
not be considered to be representative of what may be achieved in the future.
For a description of the methods used to determine yield and total return for
Funds, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a
quarterly statement for each shareholder. In those cases where a Service
Organization or its nominee is the shareholder of record of shares purchased for
its customer, the Funds have been advised that the statement may be transmitted
to the customer at the discretion of the Service Organization.
DST acts as the Funds' transfer agent pursuant to a Services Agreement
with ING Fund Services. ING Fund Services (not the Funds) compensates DST for
providing personnel and facilities to perform dividend disbursing and transfer
agency-related services for the Funds.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at ING
Fund Services Co., LLC, P.O. Box 9690, Providence, RI 02940-9690.
General and Account Information: 1-877-INFO-ING.
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<PAGE> 190
STATEMENT OF ADDITIONAL INFORMATION
ING Funds Trust
P.O. Box 9690
Providence, RI 02940-9690
General and Account Information: 1-877-INFO-ING
ING MUTUAL FUNDS MANAGEMENT CO. LLC, Investment Manager
("IMFC" or the "Manager")
ING FUNDS DISTRIBUTOR, INC., Distributor and Principal Underwriter
("IFD" or the "Distributor")
This Statement of Additional Information ("SAI") describes the
shares of 20 funds (each, a "Fund" or, collectively, the "Funds") managed by
IMFC. Each Fund is a portfolio of ING Funds Trust (the "Trust"). The Funds are:
<TABLE>
<CAPTION>
Equity Funds Bond Funds Money Market Funds
- --------------------------------- ----------------------------- ------------------------
<S> <C> <C>
ING Large Cap Growth Fund ING Intermediate Bond Fund ING U.S. Treasury Money
ING Growth and Income Fund ING High Yield Bond Fund Market Fund
ING Mid Cap Growth Fund ING International Bond Fund ING Money Market Fund
ING Small Cap Growth Fund ING Mortgage Income Fund
ING Balanced Fund ING National Tax-Exempt Bond
ING Global Brand Names Fund Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Focus Fund
ING Global Information
Technology Fund
ING Global Real Estate Fund
</TABLE>
<PAGE> 191
The SAI is not a prospectus and is only authorized for
distribution when preceded or accompanied by the prospectus for shares of the
Funds dated October 30, 1998 (the "Prospectus"). This SAI contains additional
and more detailed information than that set forth in the Prospectus and should
be read in conjunction with the Prospectus. The Prospectus may be obtained
without charge by writing or calling the Funds at the address and information
number printed above.
October 30, 1998
<PAGE> 192
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the
Funds and the policies to be employed to achieve those objectives. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Funds may invest, the investment policies and
portfolio strategies that the Funds may utilize, and certain risks attendant to
such investments, policies and strategies.
U.S. TREASURY OBLIGATIONS (All Funds). Each Fund may invest in
U.S. Treasury obligations, whose principal and interest are backed by the full
faith and credit of the United States Government. U.S. Treasury obligations
consist of bills, notes and bonds, and separately traded interest and principal
component parts of such obligations known as STRIPS, which generally differ in
their interest rates and maturities. U.S. Treasury bills, which have original
maturities of up to one year, notes, which have maturities ranging from two
years to 10 years and bonds, which have original maturities of 10 to 30 years,
are direct obligations of the United States Government.
U.S. GOVERNMENT SECURITIES (All Funds). U.S. Government
securities are obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. U.S. Government securities include debt
securities issued or guaranteed by U.S. Government-sponsored enterprises and
federal agencies and instrumentalities. Some types of U.S. Government securities
are supported by the full faith and credit of the United States Government or
U.S. Treasury guarantees, such as mortgage-backed certificates guaranteed by the
Government National Mortgage Association ("GNMA"). Other types of U.S.
Government securities, such as obligations of the Student Loan Marketing
Association, provide recourse only to the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States Government, the investor must
look to the agency issuing or guaranteeing the obligation for ultimate
repayment.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES (All Funds). The
Funds may purchase securities on a when-issued or delayed-delivery basis. For
example, delivery of and payment for these securities can take place a month or
more after the date of the transaction. The securities so purchased are subject
to market fluctuation during this period and no income accrues to the Fund until
settlement takes place. To facilitate such acquisitions, the Funds will maintain
with the custodian a separate account with a segregated portfolio of liquid
assets in an amount at least equal to the value of such commitments. On the
delivery dates for such transactions, each Fund will meet obligations from
maturities or sales of the securities held in the separate account and/or from
cash flow. While the Funds normally enter into these transactions with the
intention of actually receiving or delivering the securities, they may sell
these securities before the settlement date or enter into new commitments to
extend the delivery date into the future, if the Sub-Adviser or Portfolio
Sub-Advisers consider such action advisable as a matter of investment strategy.
Such securities have the effect of leverage on the Funds and may contribute to
volatility of a Fund's net asset value.
<PAGE> 193
2
COMMERCIAL PAPER (All Funds except ING U.S. Treasury Money
Market Fund). Commercial paper includes short-term unsecured promissory notes,
variable rate demand notes and variable rate master demand notes issued by
domestic and foreign bank holding companies, corporations and financial
institutions and similar taxable instruments issued by government agencies and
instrumentalities. All commercial paper purchased by the Money Market Fund is,
at the time of investment, (i) rated in the highest rating categories by
at least two nationally recognized statistical rating organizations ("NRSROs"),
(ii) issued or guaranteed as to principal and interest by issuers having an
existing debt security rating in the highest rating categories by a least
two NRSROs, or (iii) securities which, if not rated or single rated, are, in the
opinion of the Fund's Sub-Adviser, of an investment quality comparable to rated
commercial paper in which the Fund may invest. See "Variable Rate Demand
Obligations and Floating Rate Instruments."
CORPORATE DEBT SECURITIES (All Funds except ING U.S. Treasury
Money Market Fund). Fund investment in these securities is limited to corporate
debt securities (corporate bonds, debentures, notes and similar corporate debt
instruments) which meet the rating criteria established for each Fund.
The ratings of Standard & Poor's Corporation, Moody's
Investors Service, Inc., and other NRSROs represent their respective opinions as
to the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices. After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, each Fund's
Sub-Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by an
NRSRO may change as a result of changes in such organizations or their rating
systems, the Sub-Adviser will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the
Prospectus and in this SAI.
It is possible that unregistered securities purchased by a
Fund in reliance upon Section 4(2) or Rule 144A under the Securities Act of 1933
could have the effect of increasing the level of the Fund's illiquidity to the
extent that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.
MORTGAGE-RELATED SECURITIES. (All Funds except ING U.S.
Treasury Money Market Fund). To the extent permitted by the Funds' policies, the
Funds may invest in mortgage-backed securities, including those which represent
undivided ownership interests in pools of mortgages. The U.S. Government or the
issuing agency or instrumentality guarantees the payment of interest on and
principal of these securities. However, the guarantees do not extend to the
yield or value of the securities nor do the guarantees extend to the yield or
value of a Fund's shares. Consistent with the Funds' respective investment
objective and policies, mortgages backing the securities which may be
<PAGE> 194
3
purchased by the Funds include conventional thirty-year fixed-rate mortgages,
graduated payment mortgages, fifteen-year mortgages, adjustable rate mortgages
and balloon payment mortgages. A balloon payment mortgage-backed security is an
amortized mortgage security with installments of principal and interest, the
last installment of which is predominantly principal. All of these mortgages can
be used to create pass-through securities. A pass-through security is formed
when mortgages are pooled together and undivided interests in the pool or pools
are sold. The cash flow from the mortgages is passed through to the holders of
the securities in the form of periodic payments of interest, principal and
prepayments (net of a service fee). Prepayments occur when the holder of an
undivided mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal then their stated maturity would
indicate. The remaining expected average life of a pool of mortgage loans
underlying a mortgage-backed security is a prediction of when the mortgage loans
will be repaid and is based upon a variety of factors, such as the demographic
and geographic characteristics of the borrowers and the mortgaged properties,
the length of time that each of the mortgage loans has been outstanding, the
interest rates payable on the mortgage loans and the current interest rate
environment.
During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When mortgage obligations are prepaid, the Funds reinvest the prepaid amounts in
securities, the yields of which reflect interest rates prevailing at that time.
Therefore, a Fund's ability to maintain a portfolio of high-yielding
mortgage-backed securities will be adversely affected to the extent that
prepayments of mortgages are reinvested in securities which have lower yields
than the prepaid mortgages. Moreover, prepayments of mortgages which underlie
securities purchased at a premium generally will result in capital losses.
GNMA CERTIFICATES. (All Funds except ING U.S. Treasury Money
Market Fund). Certificates of the Government National Mortgage Association (GNMA
Certificates) are mortgage-backed securities which evidence an undivided
interest in a pool or pools of mortgages. GNMA Certificates that the Funds may
purchase are the "modified pass-through" type, which entitle the holder to
receive timely payment of all interest and principal payments due on the
mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of whether
or not the mortgagor actually makes the payment. The GNMA Certificates will
represent a pro rata interest in one or more pools of the following types of
mortgage loans: (i) fixed rate level payment mortgage loans; (ii) fixed rate
graduated payment mortgage loans; (iii) fixed rate growing equity mortgage
loans; (iv) fixed rate mortgage loans secured by manufactured (mobile) homes;
(v) mortgage loans on multifamily residential properties under construction;
(vi) mortgage loans on completed multifamily projects; (vii) fixed rate mortgage
loans as to which escrowed funds are used to reduce the borrower's monthly
payments during the early years of the mortgage loans ("buydown" mortgage
loans); (viii) mortgage loans that provide for adjustments in payments based on
periodic changes in interest rates or in other payment terms of the mortgage
loans; and (ix) mortgage-backed serial notes. All of these mortgage loans will
be FHA Loans or VA Loans and, except as otherwise specified above, will be
fully-amortizing loans secured by first liens
<PAGE> 195
4
on one- to-four-family housing units. Legislative changes may be proposed from
time to time in relation to the Department of Housing and Urban Development
which, if adopted, could alter the viability of investing in GNMAs.
FNMA CERTIFICATES. (All Funds except ING U.S. Treasury Money
Market Fund). FNMA is a federally chartered and privately owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act. FNMA provides funds to the mortgage market primarily by purchasing home
mortgage loans from local lenders, thereby replenishing their funds for
additional lending. FNMA acquires funds to purchase home mortgage loans from
many capital market investors that may not ordinarily invest in mortgage loans
directly.
Each FNMA Certificate will entitle the registered holder
thereof to receive amounts, representing such holder's pro rata interest in
scheduled principal payments and interest payments (at such FNMA Certificate's
pass-through rate, which is net of any servicing and guarantee fees on the
underlying mortgage loans), and any principal prepayments on the mortgage loans
in the pool represented by such FNMA Certificate and such holder's proportionate
interest in the full principal amount of any foreclosed or otherwise finally
liquidated mortgage loan. The full and timely payment of principal and interest
on each FNMA Certificate will be guaranteed by FNMA, which guarantee is not
backed by the full faith and credit of the U.S. Government.
Each FNMA Certificate will represent a pro rata interest in
one or more pools of FHA Loans, VA Loans or conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by any governmental agency) of
the following types: (i) fixed rate level payment mortgage loans; (ii) fixed
rate growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate mortgage loans secured by multifamily
projects.
FHLMC SECURITIES (All Funds except ING U.S. Treasury Money
Market Fund). The Federal Home Loan Mortgage Corporation (FHLMC) was created in
1970 through enactment of Title III of the Emergency Home Finance Act of 1970
(FHLMC Act). Its purpose is to promote development of a nationwide secondary
market in conventional residential mortgages.
The FHLMC issues two types of mortgage pass-through
securities, mortgage participation certificates (PCs) and guaranteed mortgage
certificates (GMCs). PCs resemble GNMA Certificates in that each PC represents a
pro rata share of all interest and principal payments made and owned on the
underlying pool. The FHLMC guarantees timely monthly payment of interest on PCs
and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected average life
of these securities is approximately ten years.
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FHLMC CERTIFICATES (All Funds except ING U.S. Treasury Money
Market Fund). FHLMC is a corporate instrumentality of the United States created
pursuant to the FHLMC Act. The principal activity of FHLMC consists of the
purchase of first lien, conventional, residential mortgage loans and
participation interests in such mortgage loans and the resale of the mortgage
loans so purchased in the form of mortgage securities, primarily FHLMC
Certificates.
FHLMC guarantees to each registered holder of the FHLMC
Certificate the timely payment of interest at the rate provided for by such
FHLMC Certificate, whether or not received. FHLMC also guarantees to each
registered holder of a FHLMC Certificate ultimate collection of all principal on
the related mortgage loans, without any offset or deduction, but does not,
generally, guarantee the timely payment of scheduled principal. FHLMC may remit
the amount due on account of its guarantee of collection of principal at any
time after default on an underlying mortgage loan, but not later than 30 days
following (i) foreclosure sale, (ii) payment of a claim by any mortgage insurer
or (iii) the expiration of any right of redemption, whichever occurs later, but
in any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. The obligations of FHLMC under
its guarantee are obligations solely of FHLMC and are not backed by the full
faith and credit of the U.S. Government.
FHLMC Certificates represent a pro rata interest in a group of
mortgage loans (a FHLMC Certificate group) purchased by FHLMC. The mortgage
loans underlying the FHLMC Certificates will consist of fixed rate or adjustable
rate mortgage loans with original terms to maturity of between ten and thirty
years, substantially all of which are secured by first liens on one- to
four-family residential properties or multifamily projects. Each mortgage loan
must meet the applicable standards set forth in the FHLMC Act. An FHLMC
Certificate group may include whole loans, participation interests in whole
loans and undivided interests in whole loans and participation comprising
another FHLMC Certificate group.
The market value of mortgage securities, like other
securities, will generally vary inversely with changes in market interest rates,
declining when interest rates rise and rising when interest rates decline.
However, mortgage securities, while having comparable risk of decline during
periods of rising rates, usually have less potential for capital appreciation
than other investments of comparable maturities due to the likelihood of
increased prepayments of mortgages as interest rates decline. In addition, to
the extent such mortgage securities are purchased at a premium, mortgage
foreclosures and unscheduled principal prepayments generally will result in some
loss of the holders' principal to the extent of the premium paid. On the other
hand, if such mortgage securities are purchased at a discount, an unscheduled
prepayment of principal will increase current and total returns and will
accelerate the recognition of income which when distributed to shareholders will
be taxable as ordinary income.
NON-AGENCY MORTGAGE-BACKED SECURITIES (All Funds except ING
U.S. Treasury Money Market Fund). Certain non-agency private entities also issue
mortgage-backed securities. Other than lacking the guarantee by the full faith
and credit of
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the United States, the mortgage-backed securities issued by private issuers
generally have characteristics and risks comparable to those issued by GNMA, as
discussed above. Some mortgage-backed securities issued by non-agency private
issuers may be supported by a pool of mortgages not acceptable to the agency
issuers and thus may carry greater risks. Consistent with the Funds'
respective investment objective and policies, the Funds may invest in these
mortgage-backed securities issued by non-agency private issuers if they are
rated at least A by Moody's Investors Service, Inc. (Moody's) or Standard &
Poor's Ratings Group (S&P).
ADJUSTABLE RATE MORTGAGE SECURITIES (All Funds except ING U.S.
Treasury Money Fund). Adjustable rate mortgage securities (ARMS) are
pass-through mortgage securities collateralized by mortgages with adjustable
rather than fixed rates. Generally, ARMS have a specified maturity date and
amortize principal over their life. In periods of declining interest rates,
there is a reasonable likelihood that ARMS will experience increased rates of
prepayment of principal. However, the major difference between ARMS and fixed
rate mortgage securities is that the interest rate and the rate of amortization
of principal of ARMS can and do change in accordance with movements in a
particular, pre-specified, published interest rate index.
The amount of interest on an ARM is calculated by adding a
specified amount, the "margin," to the index, subject to limitations on the
maximum and minimum interest that can be charged to the mortgagor during the
life of the mortgage or to maximum and minimum changes to that interest rate
during a given period. Because the interest rate on ARMS generally moves in
the same direction as market interest rates, the market value of ARMS tends
to be more stable than that of long-term fixed rate securities.
There are two main categories of indices which serve as
benchmarks for periodic adjustments to coupon rates on ARMS: those based on U.S.
Treasury securities and those derived from a calculated measure such as a cost
of funds index or a moving average of mortgage rates. Commonly utilized indices
include the one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost
of Funds, the National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a specific bank, or commercial
paper rates. Some indices, such as the one-year constant maturity Treasury Note
rate, closely mirror changes in market interest rate levels. Others, such as the
11th District Home Loan Bank Cost of Funds index (often related to ARMS issued
by FNMA), tend to lag changes in market rate levels and tend to be somewhat less
volatile.
COLLATERALIZED MORTGAGE OBLIGATIONS (All Funds except ING U.S.
Treasury Money Market Fund). Certain issuers of collateralized mortgage
obligations (CMOs), including certain CMOs that have elected to be treated as
Real Estate Mortgage Investment Conduits (REMICs), are not considered investment
companies pursuant to a rule recently adopted by the Securities and Exchange
Commission (Commission), and the Funds may invest in the securities of such
issuers without the limitations imposed by the 1940 Act, on investments by the
Funds in other investment companies. In addition, in reliance on an
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7
earlier Commission interpretation, a Fund's investments in certain other
qualifying CMOs, which cannot or do not rely on the rule, are also not subject
to the limitation of the 1940 Act on acquiring interests in other investment
companies. In order to be able to rely on the Commission's interpretation, these
CMOs must be unmanaged, fixed asset issuers, that (a) invest primarily in
mortgage-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that a Fund selects CMOs or REMICs that cannot rely on
the rule or do not meet the above requirements, the Fund may not invest more
than 10% of its assets in all such entities and may not acquire more than 3% of
the voting securities of any single such entity.
REAL ESTATE SECURITIES(ING Global Real Estate, ING Emerging
Markets Equity, ING Balanced, ING Intermediate Bond, ING High Yield Bond, ING
International Bond, ING Mortgage Income, and ING National Tax-Exempt Bond
Funds). The Funds may invest in REITs and other real estate industry operating
companies ("REOCs"). For purposes of a Fund's investments, an REOC is a company
that derives at least 50% of its gross revenues or net profits from either (1)
the ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate, or (2) products or services
related to the real estate industry, such as building supplies or mortgage
servicing. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Although
the Funds will not invest directly in real estate, the fund may invest in equity
securities of issuers primarily engaged in or related to the real estate
industry. Therefore, an investment in REITs is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying the REITs' investments are
concentrated geographically, by property type or in certain other respects, the
REITs may be subject to certain of the foregoing risks to a greater extent.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the U.S. Internal Revenue Code
and failing to maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest
rate risks. When interest rates decline, the value of a REIT's investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of a REIT's investment in
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8
fixed rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investment in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and may
be subject to more abrupt or erratic price movements than larger company
securities.
Investments in mortgage-related securities involve certain
risks. In periods of declining interest rates, prices of fixed income securities
tend to rise. However, during such periods, the rate of prepayment of mortgages
underlying mortgage-related securities tends to increase, with the result that
such prepayments must be reinvested by the issuer at lower rates. In addition,
the value of such securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers of mortgage-related securities
owned by the Fund. Because investments in mortgage-related securities are
interest sensitive, the ability of the issuer to reinvest or to reinvest
favorably in underlying mortgages may be limited by government regulation or tax
policy. For example, action by the Board of Governors of the Federal Reserve
System to limit the growth of the nation's money supply may cause interest rates
to rise and thereby reduce the volume of new residential mortgages.
Additionally, although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantees and/or insurance,
there is no assurance that private guarantors or insurers will be able to meet
their obligations.
ASSET-BACKED SECURITIES (All Funds except ING National
Tax-Exempt Bond Fund and all Equity Funds except ING Growth and Income, ING
Balanced Fund, and ING U.S. Treasury Money Market Funds). The Funds are
permitted to invest in asset-backed securities. Through the use of trusts and
special purpose subsidiaries, various types of assets, primarily home equity
loans and automobile and credit card receivables, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above. Consistent with the Funds' investment objectives, policies and
quality standards, the Funds may invest in these and other types of asset-backed
securities which may be developed in the future.
Asset-backed securities involve certain risks that are not
posed by mortgage-related securities, resulting mainly from the fact that
asset-backed securities do not usually contain the benefit of a complete
security interest in the related collateral. For example, credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and Federal consumer credit laws, some of which
may reduce the ability to obtain full payment. In the case of automobile
receivables, due to various legal and economic factors, proceeds from
repossessed collateral may not always be sufficient to support payments on these
securities. The risks associated with asset-backed securities are often reduced
by the addition of credit
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9
enhancements such as a letter of credit from a bank, excess collateral or a
third-party guarantee.
FOREIGN SECURITIES(ING International Equity, ING Tax
Efficient Equity Fund, ING Emerging Markets Equity, ING European Equity, ING
International Bond and ING Global Brand Names Funds). As described in the
Prospectus, changes in foreign exchange rates will affect the value of
securities denominated or quoted in currencies other than the U.S.
dollar.
Since Funds may invest in securities denominated in currencies
other than the U.S. dollar, and since those Funds may temporarily hold funds in
bank deposits or other money market investments denominated in foreign
currencies, a Fund may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates will influence values within
the Fund from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
The Funds may enter into foreign currency exchange contracts
in order to protect against uncertainty in the level of future foreign exchange
rates. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are entered into in the
interbank market conducted between currency traders (usually large commercial
banks) and their customers. Forward foreign currency exchange contracts may be
bought or sold to protect a Fund against a possible loss resulting from an
adverse change in the relationship between foreign currencies and the U.S.
dollar, or between foreign currencies. Although such contracts are intended to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.
CONVERTIBLE SECURITIES (All Funds except ING National
Tax-Exempt Bond, ING U.S. Treasury Money Market and ING Money Market Funds).
Convertible securities may be converted at either a stated price or stated rate
into underlying shares of common stock and, therefore, are deemed to be equity
securities for purposes of the Funds' management policies. Convertible
securities have characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated to other similar
but nonconvertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar nonconvertible securities.
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10
Although to a lesser extent than with fixed-income securities,
the market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a
stable stream of income with generally higher yields than common stocks. There
can be no assurance of current income because the issuers of the convertible
securities may default on their obligations. A convertible security, in addition
to providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
VARIABLE RATE DEMAND OBLIGATIONS AND FLOATING RATE INSTRUMENTS
(All Funds). The Funds may acquire variable rate demand obligations. The ING
Intermediate Bond and ING National Tax-Exempt Bond Funds may acquire floating
rate instruments as described in the Prospectus. Variable and floating rate
instruments are frequently not rated by credit rating agencies; however, unrated
variable and floating rate instruments purchased by a Fund will be determined by
the Sub-Adviser to be of comparable quality at the time of purchase to rated
instruments eligible for purchase by the Funds. In making such determinations,
the Sub-Adviser will consider the earning power, cash flows and other liquidity
ratios of the issuers of such instruments (such issuers include financial,
merchandising, investment banking, bank holding and other companies) and will
continuously monitor their financial condition. There may not be an active
secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund. The absence of such an active secondary market
could make it difficult for a Fund to dispose of the variable or floating rate
instrument involved. In the event the issuer of the instrument defaulted on its
payment obligations, a Fund could, for this or other reasons, suffer a loss to
the extent of the default. Variable and floating rate instruments may be secured
by bank letters of credit, guarantees or lending commitments.
GUARANTEED INVESTMENT CONTRACTS (ING Money Market Fund). As
stated in the Prospectus, the ING Money Market Fund may invest in Government
Investment Contracts ("GICs") issued by insurance companies. Pursuant to
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11
such contracts, the Fund makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company then credits to the
Fund on a monthly basis guaranteed interest which is based on an index. The GICs
provide that this guaranteed interest will not be less than a certain minimum
rate. The insurance company may assess periodic charges against a GIC for
expense and service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. The Fund will only purchase a GIC when the
Adviser has determined, under guidelines established by the Board of Trustees,
that the GIC presents minimal credit risks to the Fund and is of comparable
quality to instruments that are rated high quality by Rating Agencies. The
Fund's investments in GICs will not exceed 10% of the Fund's net assets. In
addition, because the Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less, the GIC is considered an
illiquid investment, and, together with other instruments in the Fund which are
not readily marketable, will not exceed 10% of the Fund's net assets. The term
of a GIC will be one year or less. In determining average weighted portfolio
maturity, a GIC will be deemed to have a maturity equal to the period of time
remaining until the next readjustment of the guaranteed interest rate.
CLOSED-END INVESTMENT COMPANIES (ING Emerging Markets Equity,
ING High Yield Bond and ING National Tax-Exempt Bond Funds). The Fund may invest
in securities issued by closed-end investment companies. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), the Fund's investment in such
securities, subject to certain exceptions, currently is limited to (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Fund's total
assets with respect to any one investment company and (iii) 10% of the Fund's
total assets in the aggregate. Investments in the securities of other investment
companies may involve duplication of advisory fees and certain other expenses.
PRIVATE FUNDS (ING Large Cap Growth, ING Growth and Income,
ING Mid Cap Growth, ING Small Cap Growth, ING Balanced, ING Global Brand Names,
ING International Equity, ING Emerging Markets Equity, ING European Equity Fund,
ING Tax Efficient Equity Fund, ING Focus Fund, ING Global Information Technology
and ING Real Estate Funds). The Funds may invest in U.S. or foreign private
limited partnerships or other investment funds ("Private Funds"). Investments in
Private Funds may be highly speculative and volatile. Because Private Funds
generally are investment companies for purposes of the Investment Company Act of
1940, as amended (the "1940 Act"), the Fund's ability to invest in them will be
limited. In addition, Fund shareholders will remain subject to the Fund's
expenses while also bearing their pro rata share of the operating expenses of
the Private Funds. The ability of the Fund to dispose of interests in Private
Funds is very limited and involve risks, including loss of the Fund's entire
investment in the Private Fund.
OPTIONS ON SECURITIES (All Funds except ING U.S. Treasury
Money Market, Money Market and ING National Tax-Exempt Bond Funds). Each Fund
may write (sell) "covered" call options on securities as long as it owns the
underlying securities subject to the option or an option to purchase the same
underlying securities, having an
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12
exercise price equal to or less than the exercise price of the "covered" option,
or will establish and maintain for the term of the option a segregated account
consisting of cash or other liquid securities ("eligible securities") to the
extent required by applicable regulation in connection with the optioned
securities. A Fund may write "covered" put options provided that, as long as the
Fund is obligated as a writer of a put option, the Fund will own an option to
sell the underlying securities subject to the option, having an exercise price
equal to or greater than the exercise price of the "covered" option, or it will
deposit and maintain in a segregated account eligible securities having a value
equal to or greater than the exercise price of the option. A call option gives
the purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during or at the end of the option
period. A put option gives the purchaser the right to sell, and the writer has
the obligation to buy, the underlying security at the exercise price during or
at the end of the option period. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the price
volatility of the underlying security, the option period, supply and demand and
interest rates. The Funds may write or purchase spread options, which are
options for which the exercise price may be a fixed dollar spread or yield
spread between the security underlying the option and another security that is
used as a bench mark. The exercise price of an option may be below, equal to or
above the current market value of the underlying security at the time the option
is written. The buyer of a put who also owns the related security is protected
by ownership of a put option against any decline in that security's price below
the exercise price less the amount paid for the option. The ability to purchase
put options allows a Fund to protect capital gains in an appreciated security it
owns, without being required to actually sell that security. At times a Fund
would like to establish a position in a security upon which call options are
available. By purchasing a call option, a Fund is able to fix the cost of
acquiring the security, this being the cost of the call plus the exercise price
of the option. This procedure also provides some protection from an unexpected
downturn in the market because a Fund is only at risk for the amount of the
premium paid for the call option which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the
potential for capital appreciation above the exercise price should the
underlying asset rise in value, and the secured put writer retains the risk of
loss should the underlying security decline in value. For the covered call
writer, substantial appreciation in the value of the underlying asset would
result in the security being "called away." For the secured put writer,
substantial depreciation in the value of the underlying security would result in
the security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer
realizes a gain from the amount of the premium. If the secured put writer has to
buy the underlying security because of the exercise of the put option, the
secured put writer incurs an unrealized loss to the extent that the current
market value of the underlying security is less than the exercise price
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13
of the put option. However, this would be offset in whole or in part by gain
from the premium received.
OVER-THE-COUNTER OPTIONS (All Funds except ING U.S. Treasury
Money Market, ING Money Market and ING National Tax-Exempt Bond Funds). As
indicated in the prospectus (see "Description of Securities and Investment
Practices"), each Fund may deal in over-the-counter traded options ("OTC
options"). OTC options differ from exchange traded options in several respects.
They are transacted directly with dealers and not with a clearing corporation,
and there is a risk of nonperformance by the dealer as a result of the
insolvency of such dealer or otherwise, in which event a Fund may experience
material losses. However, in writing options the premium is paid in advance by
the dealer. OTC options are available for a greater variety of securities, and a
wider range of expiration dates and exercise prices, than are exchange traded
options. Since there is no exchange, pricing is normally done by reference to
information from market makers, which information is carefully monitored by the
investment manager and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of OTC
options, there can be no assurance that a continuous liquid secondary market
will exist for any particular option at any specific time. Consequently, a Fund
may be able to realize the value of an OTC option it has purchased only by
exercising it or entering into a closing sale transaction with the dealer that
issued it. Similarly, when a Fund writes an OTC option, it generally can close
out that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Funds understand the position of the staff of the
Securities and Exchange Commission ("SEC") to be that purchased OTC options and
the securities used as "cover" for written OTC options are illiquid securities.
The investment manager disagrees with this position and has found the dealers
with which it engages in OTC options transactions generally agreeable to and
capable of entering into closing transactions. The Funds have adopted procedures
for engaging in OTC options for the purpose of reducing any potential adverse
effect of such transactions upon the liquidity of the Funds' portfolios. A brief
description of such procedures is set forth below.
A Fund will only engage in OTC options transactions with
dealers approved by the investment manager pursuant to procedures adopted by the
Fund's Board of Trustees. The investment manager believes that the approved
dealers should be able to enter into closing transactions if necessary and,
therefore, present minimal credit risks to a Fund. The investment manager will
monitor the creditworthiness of the approved dealers on an ongoing
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14
basis. A Fund currently will not engage in OTC options transactions if the
amount invested by the Fund in OTC options, plus a "liquidity charge" related to
OTC options written by the Fund, plus the amount invested by the Fund in
illiquid securities, would exceed 15% of the Fund's net assets. The "liquidity
charge" referred to above is computed as described below.
The Funds anticipate entering into agreements with dealers to
which a Fund sells OTC options. Under these agreements a Fund would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow the Fund to repurchase a specific OTC
option written by the Fund, the "liquidity charge" will be the current market
value of the securities serving as "cover" for such OTC option.
OPTIONS ON SECURITIES INDICES (All Funds except ING U.S.
Treasury Money Market, ING Money Market and ING National Tax-Exempt Bond Funds).
Each Fund also may purchase and write call and put options on securities indices
in an attempt to hedge against market conditions affecting the value of
securities that the Fund owns or intends to purchase, and not for speculation.
Through the writing or purchase of index options, a Fund can achieve many of the
same objectives as through the use of options on individual securities. Options
on securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the securities
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to the difference between the closing price of the index and
the exercise price of the option. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike
security options, all settlements are in cash and gain or loss depends upon
price movements in the market generally (or in a particular industry or segment
of the market), rather than upon price movements in individual securities. Price
movements in securities that the Fund owns or intends to purchase will probably
not correlate perfectly with movements in the level of an index since the prices
of such securities may be affected by somewhat different factors and, therefore,
the Fund bears the risk that a loss on an index option would not be completely
offset by movements in the price of such securities.
When a Fund writes an option on a securities index, it will
segregate and mark-to-market eligible securities to the extent required by
applicable regulation. In addition, where the Fund writes a call option on a
securities index at a time when the contract value exceeds the exercise price,
the Fund will segregate and mark-to-market, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess.
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Each Fund may also purchase and sell options on other
appropriate indices, as available, such as foreign currency indices. Options on
a securities index involve risks similar to those risks relating to transactions
in financial futures contracts described above. Also, an option purchased by a
Fund may expire worthless, in which case the fund would lose the premium paid
therefor.
FOREIGN CURRENCY OPTIONS (All Funds except ING U.S. Treasury
Money Market, ING Money Market and ING National Tax-Exempt Bond Funds). Each
Fund may engage in foreign currency options transactions. A foreign currency
option provides the option buyer with the right to buy or sell a stated amount
of foreign currency at the exercise price at a specified date or during the
option period. A call option gives its owner the right, but not the obligation,
to buy the currency, while a put option gives its owner the right, but not the
obligation, to sell the currency. The option seller (writer) is obligated to
fulfill the terms of the option sold if it is exercised. However, either seller
or buyer may close its position during the option period in the secondary market
for such options any time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, the
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
DOLLAR ROLL TRANSACTIONS (ING Growth and Income, ING Balanced,
ING Emerging Markets Equity, ING Intermediate Bond, ING High Yield Bond, ING
International Bond and ING Mortgage Income Funds). In connection with their
ability to purchase securities on a when-issued or forward commitment basis, the
Funds may enter into "dollar rolls" in which the Funds sell securities for
delivery in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity) but not
identical securities on a specified future date. The Funds give up the right to
receive principal and interest paid on the securities sold. However, the Funds
would benefit to the extent of any difference between the price received for the
securities sold and the lower forward price for the future purchase plus any fee
income received. Unless such benefits exceed the income and capital appreciation
that would have been realized on the securities sold as part of the dollar roll,
the use of this technique will diminish the investment performance of the Funds
compared with what such performance would have been without the use of dollar
rolls. The Funds will hold and maintain in a segregated account until the
settlement date liquid assets in an amount equal to the value of the when-issued
or forward
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commitment securities. The benefits derived from the use of dollar
rolls may depend, among other things, upon the Sub-Advisers' ability to predict
interest rates correctly. There is no assurance that dollar rolls can be
successfully employed. In addition, the use of dollar rolls by the Funds while
remaining substantially fully invested increases the amount of a Fund's assets
that are subject to market risk to an amount that is greater than the Fund's net
asset value, which could result in increased volatility of the price of the
Fund's shares.
FOREIGN CURRENCY FUTURES TRANSACTIONS (All Funds except ING
U.S. Treasury Money Market, ING Money Market and ING National Tax-Exempt Bond
Funds). As part of its financial futures transactions, each Fund may use foreign
currency futures contracts and options on such futures contracts. Through the
purchase or sale of such contracts, a Fund may be able to achieve many of the
same objectives as through forward foreign currency exchange contracts more
effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of trade
and commodities exchanges. It is anticipated that such contracts may provide
greater liquidity and lower cost than forward foreign currency exchange
contracts.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL
ENTITIES (ING International Bond, ING Intermediate Bond Fund, ING High Yield
Bond ING International Equity, ING Tax Efficient Equity Fund, ING Emerging
Markets Equity, ING Global Brand Names and ING European Equity Funds only). A
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable quality
to the other obligations in which the Fund may invest. Such securities also
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
INTEREST RATE FUTURES CONTRACTS (All Funds except ING
National Tax-Exempt Bond, ING U.S. Treasury Money Market, and ING Money Market
Funds). The Funds may purchase and sell interest rate futures contracts
("futures contracts") as a hedge against changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a security for a
set price on a future date. Future contracts are traded on designated "contracts
markets" which, through their clearing corporations, guarantee
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performance of the contracts. Currently, there are futures contracts based on
securities such as long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). Entering into a futures
contract for the sale of securities has an effect similar to the actual sale of
securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if a Fund holds long-term U.S. Government
securities and the Sub-Adviser anticipates a rise in long-term interest rates,
it could, in lieu of disposing of its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of a Fund's portfolio securities declined, the value of a Fund's
futures contracts would increase, thereby protecting the Fund by preventing its
net asset value from declining as much as it otherwise would have. Similarly,
entering into futures contracts for the purchase of securities has an effect
similar to actual purchase of the underlying securities, but permits the
continued holding of securities other than the underlying securities. For
example, if the Sub-Adviser expects long-term interest rates to decline, a Fund
might enter into futures contracts for the purchase of long-term securities, so
that it could gain rapid market exposure that may offset anticipated increases
in the cost of securities it intends to purchase, while continuing to hold
higher-yielding short-term securities or waiting for the long-term market to
stabilize. Futures transactions may fail as hedging techniques where price
movements of the underlying securities do not follow price movements of the
portfolio securities subject to the hedge. The loss with respect to futures
transactions is potentially unlimited. Also, the Funds may be unable to control
losses by closing its position where a liquid secondary market does not exist.
SHORT SALES (ING Emerging Markets Equity Fund, ING
Intermediate Bond, ING High Yield Bond and ING International Equity). The Funds
may sell a security it does not own in anticipation of a decline in the market
value of that security (short sales). To complete such a transaction, the Fund
must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at market price at
the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any dividends or interest
which accrue during the period of the loan. To borrow the security, the Fund
also may be required to pay a premium, which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out. Until the Fund replaces a borrowed security, the Funds will maintain
daily a segregated account with the Funds' custodian, liquid assets, at such a
level that (i) the amount deposited in the account plus the amount deposited
with the broker as collateral will equal the current value of the security sold
short and (ii) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market value
of the security at the time it was sold short. The Fund will incur a loss as a
result of the short sale if the price of the security increases between the date
of the short sale and the date on which the Fund replaces the borrowed
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security. The Funds will realize a gain if the security declines in price
between those dates. This result is the opposite of what one would expect from a
cash purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium,
dividends or interest the Fund may be required to pay in connection with a short
sale. No more than 25% of a Fund's net assets will be, when added together: (i)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales; and (ii) allocated to segregated accounts in connection with
short sales. Short sales against-the-box are not subject to this 25% limit.
In a short sale "against-the-box," a Fund enters into a short
sale of a security which the Fund owns or has the right to obtain at no added
cost. Not more than 25% of a Fund's net assets (determined at the time of the
short sale against-the-box) may be subject to such sales.
LOANS OF PORTFOLIO SECURITIES (All Funds). The Funds may lend
their portfolio securities to brokers, dealers and financial institutions,
provided: (1) the loan is secured continuously by collateral consisting of U.S.
Government securities or cash or letters of credit maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned; (2) the Funds may at any time call the loan and obtain
the return of the securities loaned within five business days; (3) the Funds
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed
one-third of the total assets of a particular Fund.
The Funds will earn income for lending their securities
because cash collateral pursuant to these loans will be invested in short-term
money market instruments. In connection with lending securities, the Funds may
pay reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
REPURCHASE AGREEMENTS (All Funds) The Funds may invest in
securities subject to repurchase agreements with U.S. banks or broker-dealers.
Such agreements may be considered to be loans by the Funds for purposes of the
Investment Company Act of 1940, as amended (the "1940 Act"). A repurchase
agreement is a transaction in which the seller of a security commits itself at
he time of the sale to repurchase that security from the buyer at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. Each Fund's Sub-Adviser will monitor the value
of the underlying security at the time the transaction is entered into and at
all times during the term of the repurchase agreement to ensure that the value
of the security always equals or exceeds the repurchase price. In the event of
default by the seller under the repurchase agreement, the Funds may have
problems in exercising their rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities.
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BORROWING (All Funds). The Fund may borrow from banks up to 33
1/3% of the current value of its net assets for temporary or emergency purposes
and those borrowings may be secured by the pledge of not more than 15% of the
current value of that Fund's net assets (but investments may not be purchased by
a Fund while any such borrowings exist).
REVERSE REPURCHASE AGREEMENTS (All Funds). A Fund may borrow
funds by selling portfolio securities to financial institutions such as banks
and broker/dealers and agreeing to repurchase them at a mutually specified date
and price ("reverse repurchase agreements"). Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the repurchase price. A Fund will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, a Fund will maintain in a segregated account, other liquid
assets (as determined by the Board) of an amount at least equal to the market
value of the securities, plus accrued interest, subject to the agreement.
LOWER-RATED SECURITIES. (ING Emerging Markets Equity and ING
High Yield Bond Funds). Lower-rated securities are lower-rated bonds commonly
referred to as junk bonds or high-yield/high-risk securities. These securities
are rated Baa or lower by Moody's Investors Service, Inc. (Moody's) or BBB or
lower by Standard & Poor's Corporation (S&P). As described in the Prospectus,
certain of the Funds may invest in lower rated and unrated securities of
comparable quality subject to the restrictions stated in the Prospectus.
Growth of High-Yield High-Risk Bond Market. The widespread
expansion of government, consumer and corporate debt within the U.S. economy has
made the corporate sector more vulnerable to economic downturns or increased
interest rates. Further, an economic downtown could severely disrupt the market
for lower-rated bonds and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest. The market for
lower-rated securities may be less active, causing market price volatility and
limited liquidity in the secondary market. This may limit the Funds' ability to
sell such securities at their market value. In addition, the market for these
securities may be adversely affected by legislative and regulatory developments.
Credit quality in the junk bond market can change suddenly and unexpectedly, and
even recently issued credit ratings may not fully reflect the actual risks
imposed by a particular security.
Sensitivity to Interest Rate and Economic Changes. Lower rated
bonds are very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay interest
or principal or entered into bankruptcy proceedings, the Fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic
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uncertainty and change can be expected to result in increased volatility of
market prices of high-yield, high-risk bonds and the Fund's net asset value.
Payment Expectations. High-yield, high-risk bonds may contain
redemption or call provisions. If an issuer exercised these provisions in a
declining interest rate market, the Fund would have to replace the security with
a lower yielding security, resulting in a decreased return for investors.
Conversely, a high-yield, high-risk bond's value will decrease in a rising
interest rate market, as will the value of the Fund's assets. If the Fund
experiences significant unexpected net redemptions, this may force it to sell
high-yield, high-risk bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing the Fund's rate of return.
Liquidity and Valuation. There may be a little trading in the
secondary market for particular bonds, which may affect adversely the Fund's
ability to value accurately or dispose of such bonds. Adverse publicity and
investor perception, whether or not based on fundamental analysis, may decrease
the values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
ILLIQUID SECURITIES (All Funds). Each Fund has adopted a
non-fundamental policy with respect to investments in illiquid securities.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities that have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could imped such a public offering
of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on either an efficient institutional market in which the unregistered
security can be readily resold or on the issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
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21
Each Fund may also invest in restricted securities issued
under Section 4(2) of the Securities Act ("Section 4(2)"), which exempts from
registration "transactions by an issuer not involving any public offering."
Section 4(2) instruments are restricted in the sense that they can only be
resold through the issuing dealer and only to institutional investors; they
cannot be resold to the general public without registration. Restricted
securities issued under Section 4(2) (other than certain commercial paper issued
pursuant to Section 4(2) discussed below) will be treated as illiquid and
subject to the Fund's investment restriction on illiquid securities.
Pursuant to procedures adopted by the Board of Trustees, the
Funds may treat certain commercial paper issued pursuant to Section 4(2) as a
liquid security and not subject to the Funds' investment restriction on illiquid
investments. Section 4(2) commercial paper may be considered liquid only if all
of the following conditions are met: (i) the Section 4(2) commercial paper must
not be traded flat (i.e. without accrued interest) or be in default as to
principal or interest; and (ii) the Section 4(2) commercial paper must be rated
in one of the two highest rating categories by at least two NRSROs, or if only
NRSRO rates the security, by that NRSRO, or if the security is unrated, the
security has been determined to be of equivalent quality.
The Commission has adopted Rule 144A, which allows a broader
institutional trading market for securities otherwise subject to restrictions on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act applicable to resales of certain
securities to qualified institutional buyers. It is the intent of the Funds to
invest, pursuant to procedures established by the Board of Trustees and subject
to applicable investment restrictions, in securities eligible for resale under
Rule 144A which are determined to be liquid based upon the trading markets for
the securities.
Pursuant to guidelines set forth by and under the supervision
of the Board of Trustees, as applicable, the Sub-Adviser will monitor the
liquidity of restricted securities in a Fund's portfolio. In reaching liquidity
decisions, the Sub-Adviser will consider, among other things, the following
factors: (1) the frequency of trades and quotes for the security over the course
of six months or as determined in the discretion of the Sub-Adviser; (2) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers over the course of six months or as determined in the
discretion of the Sub-Adviser; (3) dealer undertakings to make a market in the
security; (4) the nature of the security and the marketplace in which it trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer); and (5) other factors, if any, which
the Sub-Adviser deems relevant. Rule 144A securities which are determined to be
liquid based upon their trading markets will not, however, be required to be
included among the securities considered to be illiquid for purposes of
Investment Restriction No. 9. Investments in Rule 144A securities could have the
effect of increasing Fund illiquidity.
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INVESTMENT RESTRICTIONS
The Funds have adopted investment restrictions numbered 1
through 8 as fundamental policies, which cannot be changed without approval by
the holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
voting shares. Investment restriction number 9 is not a fundamental policy and
may be changed by vote of a majority of a Fund's board members at any time.
Each Fund, except as indicated, may not:
(1) Borrow money, except to the extent permitted under the
1940 Act (which currently limits borrowing to no more than 33-1/3% of the value
of a Fund's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
(2) Issue senior securities, except insofar as a Fund may be
deemed to have issued a senior security in connection with any repurchase
agreement or any permitted borrowing;
(3) Make loans, except loans of portfolio securities and
except that a Fund may enter into repurchase agreements with respect to its
portfolio securities and may purchase the types of debt instruments described in
its Prospectus or the SAI;
(4) Invest in companies for the purpose of exercising control
or management;
(5) Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development programs, but a Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate or real estate investment trusts.
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(7) Purchase securities on margin, except that a Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
(8) Purchase a security if, as a result, more than 25% of the
value of its total assets would be invested in securities of one or more issuers
conducting their principal business activities in the same industry, provided
that (a) this limitation shall not apply to obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents;
(c) utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be
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considered a separate industry;(d) the ING Money Market Fund will not be limited
in its investments in obligations issued by domestic banks; and (e) the ING
Global Information Technology Fund and the ING Real Estate Fund will concentrate
their investments as described in the Prospectus.
(9) Invest more than 15%, 10% in the case of the Money Market
Funds, of the value of its net assets in investments which are illiquid
(including repurchase agreements having maturities of more than seven calendar
days, variable and floating rate demand and master demand notes not requiring
receipt of principal note amount within seven days' notice and securities of
foreign issuers which are not listed on a recognized domestic or foreign
securities exchange).
In addition, all Funds except for the ING Global Brand Names
Funds, ING Focus Fund, ING Real Estate Fund and ING International Bond
Fund are diversified funds. As such, each will not, with respect to 75% (100%
with respect to the Money Market Funds) of their total assets, invest more than
5% of its total assets in the securities of any one issuer (except for U.S.
Government securities) or purchase more than 10% of the outstanding voting
securities of any one issuer. The Money Market Funds may invest up to 25% of
their total assets in the first tier securities of a single issuer for a period
of up to three business days after the acquisition thereof provided that the
Fund may not invest in the securities of more than one issuer in accordance with
this provision at any time.
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's investments will not constitute a violation of
such limitation, except that any borrowing by a Fund that exceeds the
fundamental investment limitations stated above must be reduced to meet such
limitations within the period required by the 1940 Act (currently three days).
Otherwise, a Fund may continue to hold a security even though it causes the Fund
to exceed a percentage limitation because of fluctuation in the value of the
Fund's assets.
MANAGEMENT
Trustees and Officers
The principal occupations of the Trustees and executive
officers of the Funds for the past five years are listed below. The address of
each, unless otherwise indicated, is 18 Campus Blvd., Suite 200, Newtown
Square, Pennsylvania 19073. Trustees deemed to be "interested persons" of the
Funds for purposes of the 1940 Act are indicated by an asterisk.
Trustees Biographies
John J. Pileggi*, Trustee, Chairman of the Board and
President - Age 39. President and Chief Executive Officer of ING Mutual Funds
Management Co. LLC (1998 - present); Director of Furman Selz LLC (1994 -
present); Senior Managing Director of Furman Selz LLC (1992 - 1994); Managing
Director of Furman Selz LLC (1984 - 1992).
Dr. Joseph N. Hankin, Trustee - Age 58. President of
Westchester Community College (1971 - present); Adjunct Professor of Columbia
Teachers College (1976 - present).
Jack D. Rehm, Trustee - Age 65. Chairman of the Board
(Retired) of Meredith Corp. (1992 - 1997); President and Chief Executive
Officer of Meredith Corp. (1986 - 1996).
Blaine E. Rieke, Trustee - Age 65. General Partner of
Huntington Partners (1997 - present); Chairman and Chief Executive Officer of
Firstar Trust Company (1973 - 1996).
Richard A. Wedemeyer, Trustee - Age 62. Vice President of The
Channel Corp. (1996 - present); Vice President of Performance Advantage (1992 -
1996); Vice President, Operations and Administration of Jim Henson Productions
(1979 - 1997).
Dr. Alexander H.G. Rinnooy Kan*, Trustee - Age 49. Member,
Executive Board of ING Groep. N.V. (1996 - present); President of VNO/NVO-NCW
(1991 - 1996).
Officers Biographies
John J. Pileggi, President and Chief Executive Officer - Age
39. See above.
Donald Brostrom, Treasurer - Age 39. Executive Vice President
and Chief Financial Officer, ING Mutual Funds Management Co. LLC (1998 -
present); Managing Director, Furman Selz LLC (1984 - 1998).
Louis S. Cirron, Vice President - Age 33. Senior Vice
President and General Counsel, ING Mutual Funds Management Co. LLC (1998 -
present); Attorney at Kramer, Levin, Naftalis & Frankel (1994 - 1998); Attorney
at Reid & Priest (1991 - 1994).
Rachelle I. Rehner, Secretary - Age 36. Fund Legal Manager,
ING Mutual Funds Management Co. LLC (1998 - present); Senior Legal Assistant,
Kramer, Levin, Naftalis & Frankel (1995 - 1998); Compliance Administrator, BISYS
Fund Services (1994 - 1995); Senior Legal Assistant, Battle Fowler (1989 -
1994).
Charles Eng, Assistant Treasurer - Age 34, Fund Accounting
Manager, ING Mutual Funds Management Co. LLC (1998 - present); Assistant
Manager, Chase Manhattan Bank (1997 - 1998); BISYS Fund Services, (1996 -
1997); Associate Director, Furman Selz LLC (1992 - 1996).
Amy Lau, Assistant Treasurer - Age 32, Fund Administration
Manager, ING Mutual Funds Management Co. LLC (1998 - present); Assistant Vice
President, Smith Barney Asset Management (1996 - 1998); Associate Director,
Furman Selz LLC (1992 - 1995).
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Trustees of the Funds not affiliated with ING or IFD receive from the Funds an
annual retainer of $5,000.00 and a fee of $835.00 for each Board of
Trustees meeting and Board committee meeting of the Funds attended and are
reimbursed for all out-of-pocket expenses relating to attendance at such
meetings. Trustees who are affiliated with ING or IFD do not receive
compensation from the Funds.
Investment Manager
ING Mutual Funds Management Co. LLC ("IMFC"), 18 Campus Blvd.,
Suite 200, Newtown Square, Pennsylvania 19073, acts as the investment adviser to
the Funds. IMFC is a wholly owned subsidiary of ING Group N.V. ("ING Group")
Under the Management Agreement, IMFC has overall responsibility, subject to the
supervision of the Board of Trustees, for engaging sub-advisers and for
monitoring and evaluating the management of the assets of each Fund by the
Sub-Adviser. The Manager is also responsible for monitoring and evaluating the
Sub-Advisers on a periodic basis, and will consider their performance records
with respect to the investment objectives and policies of each Fund. The
Sub-Advisers are affiliated with the Manager. The Manager has reserved the right
to terminate the advisory agreement with an affiliated Sub-Adviser and either
manage the assets itself or appoint another Sub-Adviser without shareholder
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approval, although the Manager does not expect to make frequent changes in
Sub-Advisers as a matter of operating procedure for the Funds. IMFC also
provides certain administrative services necessary for the Funds' operations
including; (i) coordination of the services performed by the Funds' transfer
agent, custodian, independent accountants and legal counsel; (ii) regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions; (iii)
preparation of proxy statements and shareholder reports for the Funds; (iv)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' Officers and Board of
Trustees; and (v) furnishing office space and certain facilities required for
conducting the business of the Funds.
Pursuant to the Management Agreement, the Manager is
authorized to exercise full investment discretion and make all determinations
with respect to the investment of a Fund's assets and the purchase and sale of
portfolio securities for one or more Funds in the event that at any time no
Sub-Adviser is engaged to manage the assets of a Fund. The Management Agreement
may be terminated without penalty by the vote of the Board of Trustees or the
shareholders of the Fund upon 60 days' written notice by the Board, or by the
Manager and will terminate automatically if assigned as that term is described
in the Investment Company Act of 1940.
The Management Agreement provides that the investment manager
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Funds in connection with its performance of services pursuant to
the Management Agreement, except loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the investment adviser in the
performance of its obligations under the Advisory Agreement.
Sub-Advisers
ING Investment Management, LLC ("IIM") serves as Sub-Adviser
to the two Money Market Funds and the ING Intermediate Bond, ING High Yield
Bond, ING Mortgage Income Funds, and acts as co-Sub-Adviser to the ING Growth
and Income Fund. Located in Atlanta, Georgia, IIM is a limited liability
corporation incorporated in Delaware which is engaged in the business of
providing investment advice to affiliated insurance companies possessing
portfolios which, as of December 31, 1997, were valued at $22 billion.
Baring International Investment Limited ("BIIL") serves as
co-Sub-Adviser to the ING International Bond, ING International Equity and
ING Emerging Markets Funds. Located in London, BIIL is a wholly-owned subsidiary
of Baring Asset Management Holdings Limited, the parent of the worldwide group
of investment management companies that operate under the collective name,
Baring Asset Management. As of December 31, 1997, Baring Asset Management
managed approximately $36.1 billion of assets.
Furman Selz Capital Management LLC ("FSCM") serves as
Sub-Adviser to the ING National Tax-Exempt Bond, ING Mid Cap Growth, ING
Balanced, and the ING Focus Funds. Located at 230 Park Avenue, New York, New
York 10169,
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FSCM is a Delaware limited liability company which is engaged in the business of
providing investment advice to institutional and individual clients which, as of
December 31, 1997, were valued at $10 billion.
Baring Asset Management, Inc. ("BAM") serves as Sub-Adviser to
the ING Large Cap Growth Fund and ING Small Cap Growth Fund and acts as
co-Sub-Adviser to the ING International Bond, ING International Equity and ING
Emerging Markets Funds. Located at 125 High Street, Boston, Massachusetts 02110,
BAM is a wholly-owned subsidiary of Baring Asset Management Holdings Limited,
the parent of the worldwide group of investment management companies that
operate under the collective name, Baring Asset Management. As of December 31,
1997, Baring Asset Management managed approximately $36.1 billion of assets.
Baring International Investment (Far East) Limited acts as
Co-Sub-Adviser to the ING International Bond Fund, ING International Equity Fund
and ING Emerging Markets Fund. BIFL is located at 19/F Edinburgh Tower, 15
Queens Road, The Landmark Central, Hong Kong. BIFL is a wholly-owned subsidiary
of Baring Asset Management Holding Limited, and ING Investment Management
Advisors, B.V. ("IIMA"), serves as Sub-Adviser to the ING Global Brand Names,
ING European Equity, ING Global Information Technology, and ING Global Real
Estate Funds and acts as co-Sub-Adviser to the ING Growth and Income Fund.
Located at Schenkade 65, 2595 AS The Hague, IIMA operates under the collective
management of ING Investment Management. As of June 30 1998, IIMA managed
approximately $ of assets.
Delta Asset Management ("Delta") serves as Sub-Adviser to the
ING Tax Efficient Equity Fund. Located at 333 South Grand Avenue, Los Angeles,
California, Delta is a division of Furman Selz Capital Management. As of June,
1998 Delta managed approximately $ of assets.
Distribution of Fund Shares
ING Funds Distributor, Inc. ("IFD"), 18 Campus Blvd., Suite
200, Pennsylvania 19073, serves as Distributor and Principal Underwriter of
the Funds. IFD also serves as administrator and distributor of other mutual
funds. As distributor, IFD acts as the Funds' agent to underwrite, sell and
distribute shares in a continuous offering.
Bookkeeping and Pricing Agent
ING Fund Services Co., LLC has entered into a Fund Services
Agreement with the Funds pursuant to which ING Fund Services will perform or
engage third parties to perform transfer agency, fund accounting and other
services. ING Fund Services has retained DST Systems, Inc. ("DST") to act as the
Funds' transfer agent and fund accounting agent. DST is located at 333 W. 11th
Street, Kansas City, Missouri 64105. For its services as transfer agent and fund
accounting agent, DST receives a fee from ING Fund Services (and not the Funds),
payable monthly, based upon the average daily net assets of the Funds.
Rule 12b-1 Distribution Plan
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Pursuant to a Plan of Distribution adopted by each Fund
under Rule 12b-1 under the 1940 Act, each Fund pays the Distributor an annual
fee of 0.50% of average net assets attributable to that Fund's Class A shares,
0.75% of average net assets attributable to that Fund's Class B, Class X and C
shares.
The higher distribution fee attributable to Class B, X, and C
shares is designed to permit an investor to purchase such shares through
registered representatives of the Distributor and other broker-dealers without
the assessment of an initial sales charge and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution fee
for all classes may be used by the Distributor for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor: (a) to compensate broker-dealers, including the Distributor and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, (b) to pay for interest and other
borrowing costs incurred by the distributor; and (c) to pay other advertising
and promotional expenses in connection with the distribution of Fund shares.
These advertising and promotional expenses include, by way of example but not by
way of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses. If the distribution plan is terminated by the Funds, the Board of
Trustees may allow the Funds to pay the 12b-1 Fees to the Distributor for
distributing shares before the plan was terminated.
Shareholder Servicing Plan
The Funds have adopted a Shareholder Servicing Plan pursuant
to which it may pay a service fee up to an annual rate of 0.25% of Fund average
daily net assets to various banks, trust companies, broker-dealers (other than
the Distributor) or other financial organizations including the Manager
and its affiliates (collectively, "Service Organizations") that provide
certain administrative and support services to their customers who own shares
of the Funds.
Sub-Transfer Agency Plan
The Funds have adopted a Sub-Transfer Agency Plan pursuant to
which it may pay a fee of up to an annual rate of 0.25% of Fund average daily
net assets to service organizations who provide sub-transfer agency services
to their customers who own shares of the Funds.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
the minimum initial or
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subsequent investments specified by the Funds or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Funds and alternative
means for continuing the servicing of such shareholders would be sought. In that
event, changes in the operation of the Funds might occur and a shareholder
serviced by such a bank might no longer be able to avail itself to any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
DETERMINATION OF NET ASSET VALUE
As indicated under "Fund Share Valuation" in the applicable
Prospectus, the Money Market Funds use the amortized cost method to determine
the value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act.
The amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity regardless of the impact
of fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
which the Fund would receive if the security were sold. During these periods,
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund which utilizes a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in lower value of a Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using
the amortized cost method, the Money Market Funds must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
securities having remaining maturities of 397 days or less and invest only in
U.S. dollar denominated eligible securities determined by the Trust's Board of
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Trustees to be of minimal credit risks and which (1) have received the highest
short-term rating by at least two Nationally Recognized Statistical Rating
Organizations ("NRSROs"), such as "A-1" by Standard & Poor's and "P-1" by
Moody's; (2) are single rated and have received the highest short-term rating by
a NRSRO; or (3) are unrated, but are determined to be of comparable quality by
the Sub-Adviser or the Sub-Adviser pursuant to guidelines approved by the Board
and subject to the ratification of the Board.
In addition, the Money Market Funds will not invest more than
5% of their total assets in the securities (including the securities
collateralizing a repurchase agreement) of a single issuer, except that, the
Funds may invest in U.S. Government securities or repurchase agreements that are
collateralized by U.S. Government securities without any such limitation. The
Money Market Funds may invest up to 25% of its total assets in the first tier
securities of a single issuer for a period of up to three business days after
the acquisition thereof provided that the Fund may not invest in the securities
of more than one issuer in accordance with this provision at any time.
Pursuant to Rule 2a-7, the Board of Trustees is also required
to establish procedures designed to stabilize, to the extent reasonably
possible, the price per share of the Funds, as computed for the purpose of sales
and redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Trustees, at such intervals as it may deem appropriate,
to determine whether the net asset value of the Funds calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Trustees. If
such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider
what action, if any, will be initiated. In the event the Board of Trustees
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, the Board of
Trustees will take such corrective action as it regards as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
The Non-Market Funds value their portfolio securities in
accordance with the procedures described in the Prospectus.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Prospectus contains a general description of how investors
may buy shares of the Funds and states whether the Funds offer more than one
class of shares. This SAI contains additional information which may be of
interest to investors. Class A Shares are generally sold with a sales charge
payable at the time of purchase (with the exception of the Money Market Fund
which charges no sales charge). The prospectuses contain a table of applicable
sales charges. Certain purchases of Class A shares may be exempt from a sales
charge. Class B and X shares may be subject to a contingent deferred sales
charge (CDSC) payable upon redemption within a specified period after purchase.
The prospectuses contain a table of applicable CDSCs. Class B and X shares will
automatically convert into
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Class A shares which are not subject to sales charges or a CDSC and which are
available only to certain investors. Class C shares are offered without an
initial sales charge.
The Funds may sell shares without a sales charge or CDSC
pursuant to several different Special Purchase Plans.
The obligation of each Fund to redeem its shares when called
upon to do so by the shareholder is mandatory with certain exceptions. The Funds
will pay in cash all redemption requests by any shareholder of record, limited
in amount during any 90-day period to the lesser of 250,000 or 1% of the net
asset value of a Fund at the beginning of such period. When redemption requests
exceed such amount, however, the Funds reserve the right to make part or all of
the payment in the form of readily marketable securities or other assets of the
Fund. An example of when this might be done is in case of emergency, such as in
those situations enumerated in the following paragraph, or at any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. Any securities being so distributed would be valued in
the same manner as the portfolio of the Fund is valued. If the recipient sold
such securities, he or she probably would incur brokerage charges.
Redemption of shares, or payment, may be suspended at times
(a) when the Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by a Fund of securities owned by it is not
reasonably practicable, or it is not reasonably practicable for a Fund fairly to
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. The Exchange
is not open for business on the following holidays (nor on the nearest Monday or
Friday if the holiday falls on a weekend), on which the Funds will not redeem
shares: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other
investment advisory clients of the Sub-Adviser are made with a view to achieving
their respective investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in the
Sub-Adviser's opinion is equitable to each and in accordance with the amount
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31
being purchased or sold by each. There may be circumstances when purchases or
sales of portfolio securities for one or more clients will have an adverse
effect on other clients.
The Funds have no obligation to deal with any dealer or group
of dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Funds' Boards of Trustees, the Sub-Adviser is
primarily responsible for portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Funds to obtain the
best results taking into account the broker-dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities. While the Sub-Adviser
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available. The
reasonableness of such spreads or brokerage commissions will be evaluated by
comparing spreads or commissions among brokers or dealers in consideration of
the factors listed immediately above and research services described below.
Purchases and sales of securities will often be principal
transactions in the case of debt securities and equity securities traded
otherwise than on an exchange. The purchase or sale of equity securities will
frequently involve the payment of a commission to a broker-dealer who effects
the transaction on behalf of a Fund. Debt securities normally will be purchased
or sold from or to issuers directly or to dealers serving as market makers for
the securities at a net price. Generally, money market securities are traded on
a net basis and do not involve brokerage commissions. Under the 1940 Act,
persons affiliated with the Funds or the Sponsor are prohibited from dealing
with the Funds as a principal in the purchase and sale of securities except in
limited situations permitted by SEC regulations, unless a permissive order
allowing such transactions is obtained from the SEC.
The cost of executing portfolio securities transactions for
the Money Market Funds primarily consists of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with the Funds or the
Sponsor are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC.
The Sub-Adviser may, in circumstances in which two or more
broker-dealers are in a position to offer comparable results, give preference to
a dealer which has provided statistical or other research services to the
Sub-Adviser. By allocating transactions in this manner, the Sub-Adviser is able
to supplement its research and analysis with the views and information of
securities firms. These items, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
the Sub-Adviser in advising various of its clients (including the Funds),
although not all of these services are necessarily useful and of value in
managing the Funds. The management fee paid by the Funds is not reduced because
the Sub-Adviser and its affiliates receive such services.
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As permitted by Section 28(e) of the Securities Exchange Act
of 1934 (the "Act"), the Sub-Adviser may cause the Funds to pay a broker-dealer
which provides "brokerage and research services" (as defined in the Act) to the
Sub-Adviser an amount of disclosed commission for effecting a securities
transaction for the Funds in excess of the commission which another
broker-dealer would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Sub-Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Sub-Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
Portfolio Turnover
Changes may be made in the portfolio consistent with the
investment objectives and policies of the Funds whenever such changes are
believed to be in the best interests of the Funds and their shareholders. It is
anticipated that the annual portfolio turnover rate normally will not exceed the
amounts stated in the Funds' Prospectuses and financial statements. Portfolio
turnover rate is, in general, the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding securities with a maturity
date of one year or less at the time of acquisition) for the period and dividing
it by the monthly average of the market value of such securities during the
period.
For purposes of this calculation, portfolio securities exclude
all securities having a maturity when purchased of one year or less.
TAXATION
The Funds intend to qualify and elect annually to be treated
as regulated investment companies under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a regulated investment
company, a Fund must (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive in each taxable year at least 90% of its
gross income from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; and (c) diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and
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33
cash items (including receivables), U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies). In addition, a Fund earning tax-exempt
interest must, in each year, distribute at least 90% of its net tax-exempt
income. By meeting these requirements, the Funds generally will not be subject
to Federal income tax on its investment company taxable income and net capital
gains which are distributed to shareholders. If the Funds do not meet all of
these Code requirements, they will be taxed as ordinary corporations and their
distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a
timely basis in accordance with a calendar year distribution requirement are
subject to a nondeductible 4% excise tax. To prevent imposition of the excise
tax, each Fund must distribute for each calendar year an amount equal to the sum
of (1) at least 98% of its ordinary income (excluding any capital gains or
losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses (adjusted for certain ordinary losses) for the
one-year period ending October 31 of such year, and (3) all ordinary income and
capital gain net income (adjusted for certain ordinary losses) for previous
years that were not distributed during such years. A distribution, including an
"exempt-interest dividend," will be treated as paid on December 31, of a
calendar year if it is declared by a Fund during October, November or December
of that year to shareholders of record on a date in such a month and paid by the
Fund during January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Some Funds may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC under the Code if at least
one-half of its assets constitutes investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock. A
Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with
respect to PFIC stock. Under an election that currently may be available, a Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
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apply. In addition, other elections may become available that would affect the
tax treatment of PFIC stock held by a Fund. Each Fund's intention to qualify
annually as a regulated investment company may limit its elections with respect
to PFIC stock.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss and the timing
of the recognition of income with respect to PFIC stock, as well as subject a
Fund itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders and that will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not invest in PFIC stock. Investors should consult
their own tax advisors in this regard.
Distributions of investment company taxable income generally
are taxable to shareholders as ordinary income. Distributions from certain of
the Funds may be eligible for the dividends-received deduction available to
corporations. To the extent dividends received by a Fund are attributable to
foreign corporations, a corporation that owns shares will not be entitled to the
dividends-received deduction with respect to its pro rata portion of such
dividends, since the dividends-received deduction is generally available only
with respect to dividends paid by domestic corporations. Proposed legislation,
if enacted, would reduce the dividends-received deduction from 70 to 50 percent.
Distributions of net long-term capital gains, if any,
designated by the Funds as long-term capital gain dividends are taxable to
shareholders as long-term capital gain, regardless of the length of time the
Funds' shares have been held by a shareholder. All distributions are taxable to
the shareholder in the same manner whether reinvested in additional shares or
received in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
Distributions by a Fund reduce the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution, nevertheless, would be taxable to
the shareholder as ordinary income or capital gain as described above, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution by the Funds. The
price of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will receive a
distribution which nevertheless generally will be taxable to them.
Upon the taxable disposition (including a sale or redemption)
of shares of a Fund, a shareholder may realize a gain or loss depending upon his
basis in his shares. Such gain or loss generally will be treated as capital gain
or loss if the shares are capital assets in the shareholders' hands. Such gain
or loss will be long-term or short-term, generally depending upon the
shareholder's holding period for the shares. However, a loss realized by a
shareholder on the disposition of Fund shares with respect to which capital gain
dividends have been paid will, to the extent of such capital gain dividends, be
treated as long-term capital loss if such shares have been held by the
shareholder for six months or less. A loss
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realized on the redemption, sale or exchange of Fund shares will be disallowed
to the extent an exempt interest dividend was received with respect to those
shares if the shares have been held by the shareholder for six months or less.
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Shareholders receiving
distributions in the form of additional shares will have a cost basis for
Federal income tax purposes in each share received equal to the net asset value
of a share of the Funds on the reinvestment date.
The taxation of equity options is governed by Code section
1234. Pursuant to Code section 1234, the premium received by a Fund for selling
a put or call option is not included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to the Fund. If the Fund
enters into a closing transaction, the difference between the amount paid to
close out its position and the premium received is short-term capital gain or
loss. If a call option written by a Fund is exercised, thereby requiring the
Fund to sell the underlying security, the premium will increase the amount
realized upon the sale of such security and any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-term depending upon the
holding period of the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-term, depending upon the
holding period of the option. If the option expires, the resulting loss is a
capital loss and is long-term or short-term, depending upon the holding period
of the option. If the option is exercised, the cost of the option, in the case
of a call option, is added to the basis of the purchased security and in the
case of a put option, reduces the amount realized on the underlying security in
determining gain or loss.
Certain of the options, futures contracts, and forward foreign
currency exchange contracts that several of the Funds may invest in are
so-called "section 1256 contracts." With certain exceptions, gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"). Also, section 1256 contracts held by a Fund
at the end of a taxable year (and, generally, for purposes of the 4% excise tax,
on October 31 of each year) are "marked-to market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as 60/40 gain or loss. Investors should
consult their own tax advisors in this regard.
Generally, the hedging transactions undertaken by a Fund may
result in "straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on a position that is part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. Hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to stockholders.
<PAGE> 227
36
A Fund may make one or more of the elections available under
the Code which are applicable to straddles. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under the rules
according to the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to shareholders and which will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not engage in such hedging transactions. Investors
should consult their own tax advisors in this regard.
Certain requirements that must be met under the Code in order
for a Fund to qualify as a regulated investment company, may limit the extent to
which a Fund will be able to engage in transactions in options, futures, and
forward contracts.
Under the Code, gains or losses attributable to fluctuations
in exchange rates which occur between the time a Fund accrues interest,
dividends or other receivables, or accrues expenses or other liabilities
denominated in a foreign currency, and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain options and forward and futures
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase, decrease, or eliminate the amount of a Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.
Investors should consult their own tax advisors in this regard.
Income received by a Fund from sources within foreign
countries may be subject to withholding and other similar income taxes imposed
by the foreign country. If more than 50% of the value of a Fund's total assets
at the close of its taxable year consists of securities of foreign corporations,
the Fund will be eligible and intends to elect to "pass-through" to its
shareholders the amount of such foreign taxes paid by the Fund. Pursuant to this
election, a shareholder would be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign taxes paid by a Fund and would be entitled either to deduct his pro rata
share of foreign taxes in computing his taxable income or to use it as a foreign
tax credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit (see below). Each shareholder will be notified within 60 days
after the close of a Fund's taxable year whether the foreign taxes paid by a
Fund will "pass-through" for that year and, if so, such notification will
designate (a) the shareholder's
<PAGE> 228
37
portion of the foreign taxes paid to each such country, and (b) the portion of
the dividend which represents income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
total foreign source taxable income. For this purpose, if a Fund makes the
election described in the preceding paragraph, the source of the Fund's income
flows through to its shareholders. With respect to a Fund, gains from the sale
of securities will be treated as derived from U.S. sources and certain currency
fluctuations gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit) including foreign source passive income of a
Fund. The foreign tax credit may offset only 90% of the alternative minimum tax
imposed on corporations and individuals, and foreign taxes generally may not be
deducted in computing alternative minimum taxable income.
The Funds are required to report to the Internal Revenue
Service ("IRS") all distributions except in the case of certain exempt
shareholders. All such distributions generally are subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the case of
non-exempt shareholders if (1) the shareholder fails to furnish the Funds with
and to certify the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the Funds or a shareholder that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions, whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld. Backup withholding is not an
additional tax. Any amount withheld may be credited against the shareholder's
U.S. Federal income tax liability. Investors may wish to consult their tax
Sub-Advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax
law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local income taxes in certain states. Shareholders should consult
their tax Sub-Advisers with respect to particular questions of Federal, state
and local taxation. Shareholders who are not U.S. persons should consult their
tax Sub-Advisers regarding U.S. and foreign tax consequences of ownership of
shares of the Funds including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or at a lower rate under a
tax treaty).
ING National Tax-Exempt Bond Fund. This Fund intends to
manage its portfolio so that it will be eligible to pay "exempt-interest
dividends" to shareholders. The
<PAGE> 229
38
Fund will so qualify if, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consists of state, municipal, and
certain other securities, the interest on which is exempt from the regular
Federal income tax. To the extent that the Fund's dividends distributed to
shareholders are derived from such interest income and are designated as
exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends, however, must be taken into account by shareholders in determining
whether their total incomes are large enough to result in taxation of up to 85%
of their Social Security benefits and certain railroad retirement benefits. The
Fund will inform shareholders annually as to the portion of the distributions
from the Fund which constitute except-interest dividends. In addition, for
corporate shareholders of the Fund, exempt interest dividends may comprise part
or all of an adjustment to alternative minimum taxable income. Exempt-interest
dividends that are attributable to certain private activity bonds, while not
subject to the regular Federal income tax, may constitute an item of tax
preference for purposes of the alternative minimum tax.
To the extent that the Fund's dividends are derived from its
investment company taxable income (which includes interest on its temporary
taxable investments and the excess of net short-term capital gain over net
long-term capital loss), they are considered ordinary (taxable) income for
Federal income tax purposes. Such dividends will not qualify for the
dividends-received deduction for corporations. Distributions, if any, of net
long-term capital gains (the excess of net long-term capital gain over net
short-term capital loss) designated by a Fund as long-term capital gain
dividends are taxable to shareholders as long-term capital gain regardless of
the length of time the shareholder has owned shares of the Fund.
OTHER INFORMATION
Capitalization
The Trust is a Delaware business trust established under a
Trust Instrument dated July 30, 1998 and currently consists of twenty separately
managed portfolios, all of which are discussed in this SAI. Each portfolio is
comprised of four different classes of shares -- Class A shares, Class B shares,
Class C shares and Class X shares.
The capitalization of the Funds consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. The Board of Trustees may establish additional Funds (with different
investment objectives and fundamental policies) at any time in the future.
Establishment and offering of additional Funds will not alter the rights of the
shareholders. When issued, shares are fully paid, non-assessable, redeemable and
freely transferable. Shares do not have preemptive rights or subscription
rights. In any liquidation of a Fund, each shareholder is entitled to receive
his pro rata share of the net assets of that Fund.
<PAGE> 230
39
In the event of a liquidation or dissolution of the Funds or
an individual Fund, shareholders of a particular Fund would be entitled to
receive the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution. Shareholders of a Fund are entitled to
participate in the net distributable assets of the particular Fund involved in
liquidation, based on the number of shares of the Fund that are held by each
shareholder.
Voting Rights
Under the Trust Instrument, the Funds are not required to hold
annual meetings of each Fund's shareholders to elect Trustees or for other
purposes. It is not anticipated that the Funds will hold shareholders' meetings
unless required by law or the Trust Instrument. In this regard, the Trust will
be required to hold a meeting to elect Trustees to fill any existing vacancies
on the Board if, at any time, fewer than a majority of the Trustees have been
elected by the shareholders of the Funds. In addition, the Declaration of Trust
provides that the holders of not less than two-thirds of the outstanding shares
of the Funds may remove persons serving as Trustee either by declaration in
writing or at a meeting called for such purpose. The Trustees are required to
call a meeting for the purpose of considering the removal of persons serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Funds. To the extent required by applicable law,
the Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
The Funds' shares do not have cumulative voting rights, so
that the holder of more than 50% of the outstanding shares may elect the entire
Board of Trustees, in which case the holders of the remaining shares would not
be able to elect any Trustees.
Shareholders of all of the Funds, as well as those of any
other investment portfolio now or hereafter offered by the Fund, will vote
together in the aggregate and not separately on a Fund-by-Fund basis, except as
otherwise required by law or when permitted by the Board of Trustees. Rule 18f-2
under the 1940 Act provides that any matter required to be submitted to the
holders of the outstanding voting securities of an investment company such as
the Funds shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by the matter. A Fund is affected by a matter unless it is clear that
the interests of each Fund in the matter are substantially identical or that the
matter does not affect any interest of the Fund. Under the Rule, the approval of
an investment advisory agreement or any change in a fundamental investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, the Rule also
provides that the ratification of the appointment of independent auditors, the
approval of principal underwriting contracts and the election of trustees may be
effectively acted upon by shareholders of the Funds voting together in the
aggregate without regard to a particular Fund.
Custodian, Transfer Agent and Dividend Disbursing Agent
<PAGE> 231
40
Investors Fiduciary Trust Company acts as custodian of the
Trust's assets. DST acts as transfer agent for the Funds. The Adviser
compensates DST for providing personnel and facilities to perform transfer
agency related services for the Trust at a rate intended to represent the cost
of providing such services. The Trustees of the Funds have reviewed and approved
custodial arrangements for securities held outside of the United States in
accordance with Rule 17f-5 of the 1940 Act.
Yield and Performance Information
The Funds may, from time to time, include their yields,
effective yields, tax equivalent yields and average annual total returns in
advertisements or reports to shareholders or prospective investors.
Current yields for the Money Market Funds will be based on the
change in the value of a hypothetical investment (exclusive of capital changes
such as gains or losses from the sale of securities and unrealized appreciation
and depreciation) over a particular seven-day period, less a pro rata share of
each Fund's expenses accrued over that period (the "base period"), and stated as
a percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for each Money Market Fund assumes that all dividends
received during the base period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" used in the calculation of
yield, which is then annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return +1) [(RAISED TO THE (365/7) POWER]] - 1.
Quotations of yield for the Non-Money Market Funds will be
based on the investment income per share earned during a particular 30-day
period, less expenses accrued during a period ("net investment income") and will
be computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
a-b 6
YIELD = 2[( ---- +1 ) -1]
cd
where a = dividends and interest earned during the period, b =
expenses accrued for the period (net of any reimbursements), c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and d = the maximum offering price per share on the last day
of the period.
<PAGE> 232
41
Quotations of the tax-equivalent yield for the Federal
Tax-Exempt Bond Fund will be calculated according to the following formula:
TAX EQUIVALENT YIELD = ( E )
1-p
E = Tax-Exempt yield
p = stated income tax rate
Quotations of average annual total return will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), calculated pursuant to the following formula:
n
P(l+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures will reflect a proportional share of Fund
expenses (net of certain reimbursed expenses) on an annual basis, and will
assume that all dividends and distributions are reinvested when paid.
Quotations of yield and total return will reflect only the
performance of a hypothetical investment in the Funds during the particular time
period shown. Yield and total return for the Funds will vary based on changes in
the market conditions and the level of a Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In connection with communicating its yields or total return to
current or prospective shareholders, the Funds also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in
reports and promotional literature, to: (i) the Standard & Poor's 500 Stock
Index, Dow Jones Industrial Average, or other unmanaged indices so that
investors may compare the Funds' results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
<PAGE> 233
Investors who purchase and redeem shares of the Funds through
a customer account maintained at a Service Organization may be charged one or
more of the following types of fees as agreed upon by the Service Organization
and the investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors. Investors who maintain
accounts with the Trust as transfer agent will not pay these fees.
Independent Accountants
Ernst & Young LLP serves as the independent auditors for
the Funds. Ernst & Young LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of SEC filings.
Ernst & Young LLP's address is 787 Seventh Avenue, New York, NY 10019
Registration Statement
This SAI and the Prospectus do not contain all the information
included in the Funds' Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of the
SEC. The Registration Statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION ............................................ 1
INVESTMENT POLICIES ............................................................ 1
COMMERCIAL PAPER ...................................................... 1
CORPORATE DEBT SECURITIES ............................................. 1
MORTGAGE-RELATED SECURITIES ........................................... 1
GNMA CERTIFICATES ..................................................... 2
FNMA CERTIFICATES ..................................................... 3
</TABLE>
i
<PAGE> 234
<TABLE>
<CAPTION>
Page
<S> <C>
FHLMC SECURITIES ...................................................... 3
FHLMC CERTIFICATES .................................................... 4
NON-AGENCY MORTGAGE-BACKED SECURITIES
(All Funds except ING U.S. Treasury Money Market Fund) ........ 5
ADJUSTABLE RATE MORTGAGE SECURITIES
(All Funds except ING U.S. Treasury Money Fund) ............... 5
COLLATERALIZED MORTGAGE OBLIGATIONS
(All Funds except ING U.S. Treasury Money Market Fund) ........ 6
REAL ESTATE SECURITIES ................................................ 6
FOREIGN SECURITIES .................................................... 8
CONVERTIBLE SECURITIES ................................................ 8
VARIABLE RATE DEMAND OBLIGATIONS ...................................... 9
CLOSED-END INVESTMENT COMPANIES ....................................... 10
OPTIONS ON SECURITIES ................................................. 10
OVER-THE-COUNTER OPTIONS .............................................. 12
OPTIONS ON SECURITIES INDICES ......................................... 13
FOREIGN CURRENCY OPTIONS .............................................. 14
DOLLAR ROLL TRANSACTIONS .............................................. 14
FOREIGN CURRENCY FUTURES TRANSACTIONS ................................. 15
FOREIGN GOVERNMENT OBLIGATIONS;
SECURITIES OF SUPRANATIONAL ENTITIES ......................... 15
INTEREST RATE FUTURES CONTRACTS ....................................... 15
LOANS OF PORTFOLIO SECURITIES ......................................... 17
REPURCHASE AGREEMENTS ................................................. 17
BORROWING ............................................................. 17
REVERSE REPURCHASE AGREEMENTS ......................................... 18
INVESTMENT RESTRICTIONS ............................................... 20
MANAGEMENT ............................................................ 22
Trustees and Officers ........................................ 22
Investment Manager ........................................... 23
Distribution of Fund Shares .................................. 25
Bookkeeping and Pricing Agent ................................ 25
DETERMINATION OF NET ASSET VALUE ...................................... 27
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ........................ 28
PORTFOLIO TRANSACTIONS ................................................ 29
Portfolio Turnover ........................................... 31
TAXATION .............................................................. 31
OTHER INFORMATION ..................................................... 37
Capitalization ............................................... 37
Voting Rights ................................................ 37
Custodian, Transfer Agent and Dividend Disbursing Agent ...... 38
Yield and Performance Information ............................ 38
</TABLE>
ii
<PAGE> 235
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Accountants ...................................... 40
Registration Statement ....................................... 41
</TABLE>
iii
<PAGE> 236
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
ING Funds Trust
We have audited the accompanying statements of assets, liabilities and capital
of ING Money Market Fund, ING Intermediate Bond Fund, ING High Yield Bond Fund,
ING International Bond Fund, ING Large Cap Growth Fund, ING Growth and Income
Fund, ING Mid Cap Growth Fund, ING Small Cap Growth Fund, ING Global Brand Names
Fund, ING International Equity Fund, ING European Equity Fund, ING Tax Efficient
Equity Fund, ING Focus Fund and ING Global Information Technology Fund (the
"Portfolios") (fourteen of the portfolios comprising ING Mutual Funds Trust) as
of October 27, 1998. These statements of assets, liabilities and capital are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these statements of assets, liabilities and capital based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets, liabilities and
capital are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statements of
assets, liabilities and capital. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statements of assets, liabilities and capital
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statements of assets, liabilities and capital referred to
above present fairly, in all material respects, the financial position of the
Portfolios of ING Funds Trust at October 27, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
-------------------------------
ERNST & YOUNG LLP
New York, New York
October 27, 1998
<PAGE> 237
ING FUNDS TRUST
Statements of Assets, Liabilities and Capital
October 27, 1998
<TABLE>
<CAPTION>
ING ING ING
ING Money Intermediate High Yield International
Market Fund Bond Fund Bond Fund Bond Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.86
---------------------------------------------------------------------------------
LIABILITIES: $ - $ - $ - $ -
---------------------------------------------------------------------------------
CAPITAL:
Shares of benificial interest
outstanding (par value of
$0.001per share); unlimited
amount of shares authorized $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.86
=================================================================================
SHARES OUTSTANDING:
Class A 2,380.960 238.096 238.096 238.096
Class B 2,380.950 238.095 238.095 238.095
Class C 2,380.950 238.095 238.095 238.095
NET ASSET VALUE:
Class A (and redemption price) $ 1.00 $ 10.00 $ 10.00 $ 10.00
Class B $ 1.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 1.00 $ 10.00 $ 10.00 $ 10.00
OFFERING PRICE(a):
Class A $ 1.00 $ 10.50 $ 10.50 $ 10.50
Class B $ 1.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 1.00 $ 10.00 $ 10.00 $ 10.00
</TABLE>
<TABLE>
<CAPTION>
ING Large ING Growth ING ING ING Global
Cap Growth and Income Mid Cap Small Cap Brand Names
Fund Fund Growth Fund Growth Fund Fund
- ------------------------------------------ ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.85
----------------------------------------------------------------------------------
LIABILITIES: $ - $ - $ - $ - $ -
----------------------------------------------------------------------------------
CAPITAL:
Shares of benificial interest
outstanding (par value of
$0.001per share); unlimited
amount of shares authorized $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.86 $ 7,142.85
==================================================================================
SHARES OUTSTANDING:
Class A 238.096 238.096 238.096 238.096 238.095
Class B 238.095 238.095 238.095 238.095 238.095
Class C 238.095 238.095 238.095 238.095 238.095
NET ASSET VALUE:
Class A (and redemption price) $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class B $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
OFFERING PRICE(a):
Class A $ 10.61 $ 10.61 $ 10.61 $ 10.61 $ 10.61
Class B $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
</TABLE>
<TABLE>
<CAPTION>
ING
ING ING ING ING Global Information
International European Tax Efficient Focus Technology
Equity Fund Equity Fund Equity Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash $ 7,142.85 $ 7,142.85 $ 7,142.86 $ 7,142.86 $ 7,142.85
------------------------------------------------------------------------------------
LIABILITIES: $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
CAPITAL:
Shares of benificial interest
outstanding (par value of
$0.001per share); unlimited
amount of shares authorized $ 7,142.85 $ 7,142.85 $ 7,142.86 $ 7,142.86 $ 7,142.85
====================================================================================
SHARES OUTSTANDING:
Class A 238.095 238.095 238.096 238.096 238.095
Class B 238.095 238.095 238.095 238.095 238.095
Class C 238.095 238.095 238.095 238.095 238.095
NET ASSET VALUE:
Class A (and redemption price) $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class B $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
OFFERING PRICE(a):
Class A $ 10.61 $ 10.61 $ 10.61 $ 10.61 $ 10.61
Class B $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class C $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
</TABLE>
(a) Maximum sales load is 4.75% for ING Intermediate Bond Fund, ING High Yield
Bond Fund and ING International Bond Fund, respectively, and is 5.75% for
the ING Large Cap Growth Fund, ING Growth and Income Fund, ING Mid Cap
Growth Fund, ING Small Cap Growth Fund, ING Global Brand Names Fund, ING
International Equity Fund, ING European Equity Fund, ING Tax Efficient
Equity Fund, ING Focus Fund and ING Global Information Technology Fund,
respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 238
ING FUNDS TRUST
Notes to Financial Statements
October 27, 1998
1. DESCRIPTION
ING Funds Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company,
and was organized as a Delaware business trust on July 30, 1998. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.001 each. The Trust has twenty
separate investment portfolios and has initially seeded fourteen investment
portfolios: ING Money Market Fund, ING Intermediate Bond Fund, ING High Yield
Bond Fund, ING International Bond Fund, ING Large Cap Growth Fund, ING Growth
and Income Fund, ING Mid Cap Growth Fund, ING Small Cap Growth Fund, ING Global
Brand Names Fund, ING Intermediate Equity Fund, ING European Equity Fund, ING
Tax Efficient Equity Fund, ING Focus Fund, and ING Global Information Technology
Fund (each, a "Fund," collectively, the "Funds"). Other investment portfolios
not yet seeded are ING U.S. Treasury Money Market Fund, ING Mortgage Income
Fund, ING National Tax-Exempt Bond Fund, ING Balanced Fund, ING Emerging Markets
Equity Fund and ING Global Real Estate Fund. The Trust has had no operations
since July 30, 1998 other than matters relating to its organization and
registration.
2. MANAGEMENT AND DISTRIBUTION AGREEMENTS
ING Mutual Funds Management Co. LLC ("IMFC"), a wholly owned subsidiary
of ING Groep NV ("ING Group"), acts as the investment manager to the Funds. As
the investment manager of the Funds, IMFC has overall responsibility, subject to
the supervision of the Board of Trustees, for engaging sub-advisers and for
monitoring and evaluating the management of the assets of each Fund by the
sub-adviser. IMFC also provides certain administrative services necessary for
the Funds' operations. Pursuant to a Management Agreement, the Trust will pay
IMFC a fee applied to the average daily net assets of the Funds, computed daily
and paid monthly, at an annual rate as follows:
FUND ANNUAL RATE
- ---------------------------------------------------- ---------------------------
ING Money Market Fund 0.25%
ING Intermediate Bond Fund 0.50%
ING High Yield Bond Fund 0.65%
ING International Bond Fund 1.00%
ING Large Cap Growth Fund 0.75%
ING Growth and Income Fund 0.75%
ING Mid Cap Growth Fund 1.00%
ING Small Cap Growth Fund 1.00%
ING Global Brand Names Fund 1.00%
ING International Equity Fund 1.25%
ING European Equity Fund 1.15%
ING Tax Efficient Equity Fund 0.80%
ING Focus Fund 1.00%
ING Global Information Technology Fund 1.25%
The Trust also has entered into a Distribution Agreement under which
the Trust's shares will be continuously offered by ING Fund Distributor Inc., an
affiliate of IMFC.
3. FEDERAL INCOME TAXES
Each of the Funds intend to qualify as a "regulated investment company"
and as such (and by complying with the applicable provisions of the Internal
Revenue Code of 1986, as amended) will not be subject to Federal income tax on
taxable income (including realized capital gains) that is distributed to
shareholders.
<PAGE> 239
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (1) Financial Statement included in Part A: None
(2) Financial Information incorporated by reference in Part B:
Statement of Assets and Liabilities
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
1 -- Declaration of Trust.
2 -- By-Laws of Registrant.
3 -- None.
4 -- None.
5(a) -- Form of Management Agreement between Registrant and
ING Mutual Funds Management Co. LLC
5(b)(i) -- Form of Sub-Advisory Agreement between Manager and
Baring Asset Management, Inc.
5(b)(ii) -- Form of Sub-Advisory Agreements between Manager and
Baring International Investment Limited
5(b)(iii) -- Form of Sub-Advisory Agreement between Manager and
ING Investment Management Advisors, B.V.
5(b)(iv) -- Form of Sub-Advisory Agreement between Manager and
ING Investment Management, LLC
5(b)(v) -- Form of Sub-Advisory Agreement between Manager and
Furman Selz Capital Management LLC
5(b)(vi) -- Form of Sub-Advisory Agreement between Manager and
Furman Selz Capital Management LLC on behalf of Delta
Asset Management.
6 -- Form of Distribution Agreement between Registrant and
ING Funds Distributor, Inc.
8 -- Form of Custodian Agreement between Registrant and
Investors Fiduciary Trust Company.
9(a) -- Form of Sub-Transfer Agency Agreement between
Registrant and Participants
9(b) -- Form of Fund Services Agreement between Registrant
and ING Fund Services Co. LLC
9(c) -- Form of Shareholder Servicing Plan
9(d) -- Form of Sub-Transfer Agency Plan
9(e) -- Form of Delegation Agreement between Registrant and
Investors Fiduciary Trust Company
10 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
11 -- Consent of Ernst & Young
13 -- Subscription Agreement
15(a) -- Form of Rule 12b-1 Distribution Plan and Agreement
with respect to Class A Shares
15(b) -- Form of Rule 12b-1 Distribution Plan and Agreement
with respect to Class B, C and X Shares
</TABLE>
<PAGE> 240
<TABLE>
<S> <C> <C>
15(c) -- Form of Dealer Agreement.
*l6 -- Schedule for Computation of Performance Quotations.
*17 -- Financial Data Schedules
18 -- Form of Rule 18F-3 Plan
Other Exhibits
(A) -- Power of Attorney
</TABLE>
* To be filed by Amendment.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities at October 27, 1998.
Fund No. of Shareholders
---- -------------------
ING Money Market Fund 1
ING U.S. Treasury Money Market Fund 1
ING Intermediate Bond Fund 1
ING High Yield Bond Fund 1
ING International Bond Fund 1
ING Mortgage Income Fund 1
ING National Tax-Exempt Bond Fund 1
ING Large Cap Growth Fund 1
ING Growth and Income Fund 1
ING Mid Cap Growth Fund 1
ING Small Cap Growth Fund 1
ING Balanced Fund 1
ING Global Brand Names Fund 1
ING International Equity Fund 1
ING Emerging Markets Equity Fund 1
ING European Equity Fund 1
ING Tax Efficient Equity Fund 1
ING Focus Fund 1
ING Global Information Technology Fund 1
ING Global Real Estate Fund 1
Item 27. Indemnification.
Reference is made to Article IX of Registrants By-Laws and
paragraphs 1.11 of the Distribution Agreement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant
understands that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its
officers and trustees against liabilities, and certain costs of
defending claims against such officers and trustees, to the extent
such officers and trustees are not found to have committed conduct
constituting
<PAGE> 241
willful misfeasance, bad faith, gross negligence or reckless
disregard in the performance of their duties. The insurance policy
also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 12 of the Management Agreement between Registrant and
Manager, Section 8 of the Sub-Advisory Agreement and Section 1.11
of the Distribution Contract between Registrant and Distributor
limit the liability of Manager, the Sub-Adviser and the
Distributor to liabilities arising from willful misfeasance, bad
faith or gross negligence in the performance of their respective
duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Trust Instrument, By-Laws,
Management Agreement and Distribution Contract in a manner
consistent with Release No. 11330 of the Securities and Exchange
Commission under the 1940 Act so long as the interpretations of
Section 17(h) and 17(i) of such Act remain in effect and are
consistently applied.
Item 28. Business and Other Connections of ING Mutual Funds Management Co.,
LLC.
ING Mutual Funds Management Company is an indirect wholly-owned
subsidiary of ING Groep N.V. ("ING Group"). The principal place
of business address of the Manager is 18 Campus Boulevard, Suite
200, Newtown Square, PA 19073. The executive officers of the
Manager and such executive officers' positions during the past
two years are as follows:
Name Position and Office
John J. Pileggi, President, Director of the Manager; Senior
Managing Director and Member of Board of Directors of Furman Selz
LLC May 1984 to September 1998.
Donald E. Brostrom, Vice President, Treasurer of the Manager;
Manager of Furman Selz LLC, February 1986 to September 1998.
Louis S. Citron, Vice President, Secretary of the Manager;
Attorney, Kramer, Levin, Naftalis & Frankel, September 1994 to
July 1998.
Alan G. Holden, Vice President of the Manager; Marketing Director
of Oppenheimer Funds, Inc., October 1992 to August 1998.
Alexander H. Rinnooy-Kan, Director of the Manager; Member of
Executive Board of ING Groep N.V. since September 1996.
Glenn Hilliard, Director of the Manager. Chairman and Chief
Executive Officer of ING North America Insurance, January 1993 to
present.
Frederick S. Hubbell, Director of the Manager; General Manager
ING Financial Services, International since September 1997.
President and CEO of Equitable of Iowa Company May 1987 to
September 1997.
Item 29. Principal Underwriter
(a) Officers and Directors
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Registrant Underwriter
-------------------- ------------- -------------------
Edward J. Berkson None President & CEO
Karl Lindberg None Vice President &
Secretary
James R. Mumford None General Counsel &
Asst. Secretary
G. Thomas Sullivan None Asst. Secretary
Susan K. Wheat None Treasurer
Christopher R. Welp None Vice President
Todd E. Nevenhoven None Asst. Vice President-Tax
Dennis D. Hargens None Asst. Treasurer
Kent A. Christensen None Asst. Treasurer
(b) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder are maintained at the offices of the Manager.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
<PAGE> 242
(a) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the removal of a Trustee
if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares.
(b) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940 Act
as though that Section applied to the Registrant.
<PAGE> 243
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on July 23,
1998.
ING FUNDS TRUST
(Registrant)
By: /s/ John J. Pileggi
---------------------
John J. Pileggi
Trustee, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ John J. Pileggi Trustee, President and October 27, 1998
- ---------------------- Chief Executive Officer
John J. Pileggi
<PAGE> 244
EXHIBIT INDEX
Exhibit 1 Trust Instrument
Exhibit 2 By-Laws
Exhibit 5(a) Form of Management Agreement between Registrant and
ING Mutual Funds Management Co. LLC
Exhibit 5(b)(i) Form of Sub-Advisory Agreement between Manager and
Baring Asset Management, Inc.
Exhibit 5(b)(ii) Form of Sub-Advisory Agreements between Manager and
Baring International Investment Limited
Exhibit 5(b)(iii) Form of Sub-Advisory Agreement between Manager and
ING Investment Management Advisors, B.V.
Exhibit 5(b)(iv) Form of Sub-Advisory Agreement between Manager and
ING Investment Management, LLC
Exhibit 5(b)(v) Form of Sub-Advisory Agreement between Manager and
Furman Selz Capital Management LLC
Exhibit 5(b)(vi) Form of Sub-Advisory Agreement between Manger and
Furman Selz Capital Management LLC on behalf of Delta
Asset Management.
Exhibit 6 Form of Distribution Agreement between Registrant and
ING Funds Distributor, Inc.
Exhibit 8 Form of Custodian Agreement between Registrant and
Investors Fiduciary Trust Company.
Exhibit 9(a) Form of Sub-Transfer Agency Agreement between
Registrant and Participants
Exhibit 9(b) Form of Fund Services Agreement between Registrant
and ING Fund Services Co. LLC
Exhibit 9(c) Form of Shareholder Servicing Plan
Exhibit 9(d) Form of Sub-Transfer Agency Plan
Exhibit 9(e) Form of Delegation Agreement between Registrant and
Investors Fiduciary Trust Company
Exhibit 10 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit 11 Consent of Ernst & Young
Exhibit 13 Subscription Agreement
Exhibit 15(a) Form of Rule 12b-1 Distribution Plan and Agreement
with respect to Class A Shares
Exhibit 15(b) Form of Rule 12b-1 Distribution Plan and Agreement
with respect to Class B, C and X Shares
Exhibit 15(c) Form of Dealer Agreement
Exhibit 18 Form of Rule 18f-3 Plan
<PAGE> 1
Exhibit 1
ING FUNDS TRUST
DATED JULY 30, 1998
TRUST INSTRUMENT, made July 30, 1998 by John J. Pileggi (the
"Trustees"). The registered agent's name and address is Corporation Service
Company, 1013 Centre Road, Wilmington, DE, 19805.
WHEREAS, the Trustees desire to establish a business trust for
the investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust hereunder shall be held and managed in trust
under this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The name of the trust created hereby is "ING
Funds Trust."
Section 1.2 Definitions. Wherever used herein, unless
otherwise required by the context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article
IV, Section 4.1(e) hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in
the 1940 Act (as defined below). The terms "Affiliated Person," "Assignment,"
"Interested Person" and "Principal Underwriter" shall have the meanings given
them in the 1940 Act, as modified by or interpreted by any applicable order or
orders of the
<PAGE> 2
2
Commission or any rules or regulations adopted or interpretive releases of the
Commission thereunder. "Majority Shareholder Vote" shall have the same meaning
as the term "vote of a majority of the outstanding voting securities" is given
in the 1940 Act, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted or interpretive releases
of the Commission thereunder.
(c) The "Delaware Act" refers to Chapter 38 of Title
12 of the Delaware Code entitled "Treatment of Delaware Business Trusts," as it
may be amended from time to time.
(d) "Net Asset Value" means the net asset value of
each Series (as defined below) of the Trust determined in the manner provided in
Article IX, Section 9.3 hereof;
(e) "Outstanding Shares" means those Shares shown
from time to time in the books of the Trust or its Transfer Agent as then issued
and outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust;
(f) "Series" means a series of Shares (as defined
below) of the Trust established in accordance with the provisions of Article II,
Section 2.6 hereof.
(g) "Shareholder" means a record owner of Outstanding
Shares of the Trust;
(h) "Shares" means the equal proportionate
transferable units of beneficial interest into which the beneficial interest of
each Series of the Trust or
<PAGE> 3
3
class thereof shall be divided and may include fractions of Shares as well as
whole Shares;
(i) The "Trust" refers to all ING Funds Trust Funds
and reference to a Fund, when applicable to one or more Series of the Trust,
shall refer to any such Series;
(j) The "Trustees" means the person or persons who
has or have signed this Trust Instrument, so long as he or they shall continue
in office in accordance with the terms hereof, and all other persons who may
from time to time be duly qualified and serving as Trustees in accordance with
the provisions of Article III hereof and reference herein to a Trustee or to the
Trustees shall refer to the individual Trustees in their capacity as Trustees
hereunder;
(k) "Trust Property" means any and all property, real
or personal, tangible or intangible, which is owned or held by or for the
account of one or more of the Trust or any Series, or the Trustees on behalf of
the Trust or any Series.
(l) The "1940 Act" refers to the Investment Company
Act of 1940, as amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial
interest in the Trust shall be divided into such transferable Shares of one or
more separate and distinct Series or classes of a Series as the Trustees shall
from time to time create and establish. The number of Shares of each Series, and
class thereof, authorized hereunder is unlimited. Each Share shall have a par
value of $0.001. All Shares issued
<PAGE> 4
4
hereunder, including without limitation, Shares issued in connection with a
dividend in Shares or a split or reverse split of Shares, shall be fully paid
and nonassessable.
Section 2.2 Issuance of Shares. The Trustees in their
discretion may, from time to time, without vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, subject to applicable law, including cash or securities, at such
time or times and on such terms as the Trustees may deem appropriate, and may in
such manner acquire other assets (including the acquisition of assets subject
to, and in connection with, the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in the treasury. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000th
of a Share or integral multiples thereof.
Section 2.3 Register of Shares and Share Certificates. A
register shall be kept at the principal office of the Trust or an office of the
Trust's transfer agent which shall contain the names and addresses of the
Shareholders of each Series, the number of Shares of that Series (or any class
or classes thereof) held by them respectively and a record of all transfers
thereof. As to Shares for which no certificate has been issued, such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or other distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to
<PAGE> 5
5
receive payment of any dividend or other distribution, nor to have notice
given to him as herein or in the Bylaws provided, until he has given his address
to the transfer agent or such other officer or agent of the Trustees as shall
keep the said registrar for entry thereon. The Trustees, in their discretion,
may authorize the issuance of share certificates and promulgate appropriate
rules and regulations as to their use. Such certificates may be issuable for any
purpose limited in the Trustees discretion. In the event that one or more
certificates are issued, whether in the name of a shareholder or a nominee, such
certificate or certificates shall constitute evidence of ownership of Shares for
all purposes, including transfer, assignment or sale of such Shares, subject to
such limitations as the Trustees may, in their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided
by the Trustees, Shares shall be transferable on the records of the Trust only
by the record holder thereof or by his agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Trust's transfer agent of a duly
executed instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the registrar of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury
shall, until reissued pursuant to Section 2.2 hereof, not confer any voting
rights on the Trustees,
<PAGE> 6
6
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 2.6 Establishment of Series. The Trust created hereby
shall consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, right and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide and combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any issued
Shares or any Series or classes thereof into one or more Series or classes of
Shares, and to take such other action with respect to the Shares as the Trustees
may deem desirable. The establishment and designation of any Series shall be
effective upon the adoption of a resolution by a majority of the Trustees
setting forth such establishment and designation and the relative rights and
preferences of the Shares of such Series. A Series may issue any number of
Shares and need not issue shares. The Trustees may by a majority vote abolish
that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be
deemed to be Shares of any or all Series, or classes thereof, as the context may
require. All
<PAGE> 7
7
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains, if any, made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the funds
and property of such Series of the Trust.
Section 2.7 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.3 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
the Trustees may, in their sole discretion, (a) fix the Net Asset Value per
Share of the initial capital contribution, (b) impose a sales charge upon
investments in the Trust in such manner and at such time determined by the
Trustees or (c) issue fractional Shares.
Section 2.8 Assets and Liabilities of Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange
<PAGE> 8
8
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be held
and accounted for separately from the other assets of the Trust and of every
other Series and may be referred to herein as "assets belonging to" that Series.
The assets belonging to a particular Series shall belong to that Series for all
purposes, and to no other Series, subject only to the rights of creditors of
that Series. In addition, any assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto, which are not readily identifiable
as belonging to any particular Series shall be allocated by the Trustees between
and among one or more of the Series in such manner as the Trustees, in their
sole discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all purposes, and
such assets, income, earnings, profits or funds, or payments and proceeds with
respect thereto shall be assets belonging to that Series. The assets belonging
to a particular Series shall be so recorded upon the books of the Trust, and
shall be held by the Trustees in trust for the benefit of the holders of Shares
of that Series. The assets belonging to each particular Series shall be charged
with the liabilities of that Series and all expenses, costs, charges and
reserves attributable to that Series. Any general liabilities, expenses, costs,
changes or reserves of the Trust which are not readily identifiable as belonging
to a particular Series shall be allocated and changed by the Trustees belonging
to any one or more of the Series in such manner as the Trustees in their sole
discretion deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes. Without limitation
of the foregoing provisions of this Section 2.8, but subject to the right of the
Trustees in
<PAGE> 9
9
their discretion to allocate general liabilities, expenses, costs, charges or
reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally. Notice of this contractual limitation
on inter-Series liabilities may, in the Trustee's sole discretion, be set forth
in the certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contracting with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise existing
with respect to that Series. No Shareholder or former Shareholder of any Series
shall have a claim on or any right to any assets allocated or belonging to any
other Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 Personal Liability of Shareholders. Each
Shareholder of the Trust and of each Series shall not be personally liable for
the debts, liabilities, obligations and expenses incurred by, contracted for, or
otherwise existing with respect to, the Trust or by or on behalf of any Series.
The Trustees shall have no power to
<PAGE> 10
10
bind any Shareholder personally or to call upon any Shareholder for the payment
of any sum of money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust or to a Series shall
include a recitation limiting the obligation represented thereby to the Trust or
to one or more Series and its or their assets (but the omission of such a
recitation shall not operate to bind any Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by
virtue of having purchased a Share shall become a Shareholder and shall be held
to have expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
Section 3.1 Management of the Trust. The Trustees shall have
exclusive and absolute control over the Trust Property and over the business of
the Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, but with such powers of
delegation as may be permitted by this Trust Instrument. The Trustees shall have
power to conduct the business of the Trust and carry on its operations in any
and all of its branches and maintain offices both within and without the State
of Delaware, in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories, dependencies,
colonies, or possessions of the United States of America, and in any foreign
jurisdiction and to do all such other things and execute all such instruments as
<PAGE> 11
11
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this Trust
Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power in this Trust Instrument
shall not be construed as limiting the aforesaid power. The powers of the
Trustees may be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill
vacancies pursuant to Section 3.4 of this Article III, the Trustees shall be
elected by the Shareholders owning of record a plurality of the Shares voting at
a meeting of Shareholders. Such a meeting shall be held on a date fixed by the
Trustees. In the event that less than a majority of the Trustees holding office
have been elected by Shareholders, the Trustees then in office will call a
Shareholders' meeting for the election of Trustees.
Section 3.2 Initial Trustees. The initial Trustees shall be
the persons named herein. On a date fixed by the Trustees, the Shareholders
shall elect at least one but not more than twelve Trustees, as specified by the
Trustees pursuant to Section 3.6 of this Article III.
<PAGE> 12
12
Section 3.3 Term of Office of Trustees. The Trustees shall
hold office, subject to mandatory retirement at age 72, during the lifetime of
this Trust, and until its termination as herein provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein; (b) that any Trustee may be removed at any
time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired or
who has died, become physically or mentally incapacitated by reason of disease
or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the outstanding Shares.
Section 3.4 Vacancies and Appointment of Trustees. In case of
the declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, the other Trustees shall have all the powers hereunder and
the certificate of the other Trustees of such vacancy shall be conclusive. In
the case of an existing vacancy, the remaining Trustees shall fill such vacancy
by appointing such other person as they in their discretion shall see fit
consistent with the limitations under the 1940 Act. Such appointment shall be
<PAGE> 13
13
evidenced by a written instrument signed by a majority of the Trustees in office
or by resolution of the Trustees, duly adopted, which shall be recorded in the
minutes of a meeting of the Trustees, whereupon the appointment shall take
effect.
An appointment of a Trustee may be made by the Trustees then
in office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee appointed pursuant to this Section 3.4 shall
have accepted this trust, the trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder. The power to appoint a
Trustee pursuant to this Section 3.4 is subject to the provisions of Section
16(a) of the 1940 Act.
Section 3.5 Temporary Absence of Trustee. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees, provided that in no case shall
less than two Trustees personally exercise the other powers hereunder except as
herein otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall
be at least one (1), and thereafter shall be such number as shall be fixed from
time to time by a majority of the Trustees, provided, however, that the number
of Trustees shall in no event be more than twelve (12).
<PAGE> 14
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Section 3.7 Effect of Death, Resignation, Etc. of a Trustee.
The declination to serve, death, resignation, retirement, removal, incapacity,
or inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. The assets of
the Trust and of each Series shall be held separate and apart from any assets
now or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. Legal title in all of the assets of the
Trust and the right to conduct any business shall at all times be considered as
vested in the Trustees on behalf of the Trust, except that the Trustees may
cause legal title to any Trust Property to be held by, or in the name of the
Trust, or in the name of any person as nominee. No Shareholder shall be deemed
to have a severable ownership in any individual asset of the Trust or of any
Series or any right of partition or possession thereof, but each Shareholder
shall have, except as otherwise provided for herein, a proportionate undivided
beneficial interest in the Trust or Series. The Shares shall be personal
property giving only the rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be
<PAGE> 15
15
bound or limited by present or future laws or customs in regard to trust
investments, but shall have full authority and power to make any and all
investments which they, in their sole discretion, shall deem proper to
accomplish the purpose of this Trust without recourse to any court or other
authority. Subject to any applicable limitation in this Trust Instrument or the
Bylaws of the Trust, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property,
and to hold cash or other property uninvested, without in any event being bound
or limited by any present or future law or custom in regard to investments by
trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an
investment company, and exercise all the powers necessary and appropriate to the
conduct of such operations;
(c) To borrow money and in this connection issue
notes or other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to endorse,
guarantee, or undertake the performance of an obligation or engagement of any
other Person and to lend Trust Property;
(d) To provide for the distribution of interests of
the Trust either through a principal underwriter in the manner hereinafter
provided for or by the Trust itself, or both, or otherwise pursuant to a plan of
distribution of any kind;
<PAGE> 16
16
(e) To adopt Bylaws not inconsistent with this Trust
Instrument providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders; such Bylaws shall be deemed incorporated and included in this
Trust Instrument;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or
companies that are members of a national securities exchange or such other
entities as the Commission may permit as custodians of any assets of the Trust
subject to any conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and
shareholder servicing agents, or both;
(i) To set record dates in the manner provided herein
or in the Bylaws;
(j) To delegate such authority as they consider
desirable to any officers of the Trust and to any investment adviser, manager,
custodian, underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of
the Trust, subject to the provisions of Article XI, Section 11.4(b) hereof;
(l) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver powers of attorney to such person or persons as the Trustees shall
deem proper,
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granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(n) To hold any security or property in a form not
indicating any trust, whether in bearer, book entry, unregistered or other
negotiable form; or either in the name of the Trust or in the name of a
custodian or a nominee or nominees, subject in either case to proper safeguards
according to the usual practice of Delaware business trusts or investment
companies;
(o) To establish separate and distinct Series with
separately defined investment objectives and policies and distinct investment
purposes in accordance with the provisions of Article II hereof and to establish
classes of such Series having relative rights, powers and duties as they may
provide consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the
Delaware Act, to allocate assets, liabilities and expenses of the Trust to a
particular Series or to apportion the same between or among two or more Series,
provided that any liabilities or expenses incurred by a particular Series shall
be payable solely out of the assets belonging to that Series as provided for in
Article II hereof;
(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or
<PAGE> 18
18
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust
claims in favor of or against the Trust or any matter in controversy including,
but not limited to, claims for taxes;
(s) To make distributions of income and of capital
gains to Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum
investment for Shareholders in the Trust or in one or more Series or class, and
to require the redemption of the Shares of any Shareholders whose investment is
less than such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate
any of the powers of the Trustees to said committees and to adopt a committee
charter providing for such responsibilities, membership (including Trustees,
officers or other agents of the Trust therein) and any other characteristics of
said committees as the Trustees may deem proper. Notwithstanding the provisions
of this Article IV, and in addition to such provisions or any other provision of
this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which shall be
<PAGE> 19
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pending or threatened to be brought before any court, administrative agency or
other adjudicatory body;
(v) To interpret the investment policies, practices
or limitations of any Series;
(w) To establish a registered office and have a
registered agent in the state of Delaware; and
(x) In general to carry on any other business in
connection with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or thing
incidental or appurtenant to or growing out of or connected with the aforesaid
business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
power, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees. Any action
by one or more of the Trustees in their capacity as such hereunder shall be
deemed an action on behalf of the Trust or the applicable Series, and not an
action in an individual capacity.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
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Section 4.2 Issuance and Repurchase of Shares. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, and otherwise deal in Shares and,
subject to the provisions set forth in Article II and Article IX, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the Trust, or the particular Series of the
Trust, with respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any
Trustee, officer or other agent of the Trust may acquire, own and dispose of
Shares to the same extent as if he were not a Trustee, officer or agent; and the
Trustees may issue and sell or cause to be issued and sold Shares to and buy
such Shares from any such person or any firm or company in which he is
interested, subject only to the general limitations herein contained as to the
sale and purchase of such Shares; and all subject to any restrictions which may
be contained in the Bylaws.
Section 4.4 Action by the Trustees. The Trustees shall act by
majority vote at a meeting duly called or by unanimous written consent without a
meeting or by telephone meeting provided a quorum of Trustees participate in any
such telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman
and/or Trustees or by any two other Trustees. Notice of the time, date and place
of all meetings of the Trustees shall be given by the party calling the meeting
to each Trustee by telephone, telefax, or telegram sent to his home or business
address at least twenty-four hours in advance of
<PAGE> 21
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the meeting or by written notice mailed to his home or business address at least
seventy-two hours in advance of the meeting. Notice need not be given to any
Trustee who attends the meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Any meeting
conducted by telephone shall be deemed to take place at the principal office of
the Trust, as determined by the Bylaws or by the Trustees. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to any
one or more of their number their authority to approve particular matters or
take particular actions on behalf of the Trust. Written consents or waivers of
the Trustees may be executed in one or more counterparts. Execution of a written
consent or waiver and delivery thereof to the Trust may be accomplished by
telefax.
Section 4.5 Chairman of the Trustees. The Trustees shall
appoint one of their number to be Chairman of the Board of Trustees. The
Chairman shall preside at all meetings of the Trustees, shall be responsible for
the execution of policies established by the Trustees and the administration of
the Trust, and may be (but is not required to be) the chief executive, financial
and/or accounting officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent
prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust to,
any Trustees or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with any
investment adviser, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker,
<PAGE> 22
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legal counsel, registrar, investment adviser, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon customary
terms.
ARTICLE V
EXPENSES OF THE TRUST
Section 5.1 Trustee Reimbursement. Subject to the provisions
of Article II, Section 2.8 hereof, the Trustees shall be reimbursed from the
Trust estate or the assets belonging to the appropriate Series for their
expenses and disbursement, including, without limitation, fees and expenses of
Trustees who are not Interested Persons of the Trust, interest expense, taxes,
fees and commissions of every kind, expenses of pricing Trust portfolio
securities, expenses of issue, repurchase and redemption of shares, including
expenses attributable to a program of periodic repurchases or redemptions,
expenses of registering and qualifying the Trust and its Shares under Federal
and State laws and regulations or under the laws of any foreign jurisdiction,
charges of third parties, including investment advisers, managers, custodians,
transfer agents, portfolio accounting and/or pricing agents, and registrars,
expenses of preparing and setting up in type prospectuses and statements of
additional information and other related Trust documents, expenses of printing
and distributing prospectuses sent to existing Shareholders, auditing and legal
expenses, reports to Shareholders, expenses of meetings of Shareholders and
proxy solicitations therefor, insurance expenses, association membership dues
and for such non-recurring items as may arise, including litigation to which the
Trust (or a Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the payment of
such expenses, disbursements, losses and liabilities the Trustees
<PAGE> 23
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shall have a lien on the assets belonging to the appropriate Series, or in the
case of an expense allocable to more than one Series, on the assets of each such
Series, prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL
UNDERWRITER AND TRANSFER AGENT
Section 6.1 Investment Adviser. The Trustees may in their
discretion, from time to time, enter into an investment advisory or management
contract or contracts with respect to the Trust or any Series whereby the other
party or parties to such contract or contracts shall undertake to furnish the
Trustees with such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and all
upon such terms and conditions, as the Trustees may in their discretion
determine; provided, however, that the initial approval and entering into of
such contract or contracts shall be subject to a Majority Shareholder Vote.
Notwithstanding any other provision of this Trust Instrument, the Trustees may
authorize any investment adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities, other investment instruments of the
Trust, or other Trust Property on behalf of the Trustees, or may authorize any
officer, agent, or Trustee to effect such purchases, sales or exchanges pursuant
to recommendations of the investment adviser (and all without further action by
the Trustees). Any such
<PAGE> 24
24
purchases, sales and exchanges shall be deemed to have been authorized by all of
the Trustees.
The Trustees may authorize, subject to applicable requirements
of the 1940 Act, including those relating to Shareholder approval, the
investment adviser to employ, from time to time, one or more sub-advisers to
perform such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser and
sub-adviser. Any reference in this Trust Instrument to the investment adviser
shall be deemed to include such sub-advisers, unless the context otherwise
requires.
Section 6.2 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions, if any, as may be prescribed in
the Bylaws, and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article VI, or
of the Bylaws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust.
Section 6.3 Transfer Agent. The Trustees may in their
discretion from time to time enter into one or more transfer agency and
shareholder service contracts whereby the other party or parties shall undertake
to furnish the Trustees with transfer agency and shareholder services. The
contract or contracts shall be on such
<PAGE> 25
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terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Trust Instrument or of the Bylaws.
Section 6.4 Parties to Contract. Any contract of the character
described in Sections 6.1, 6.2 and 6.3 of this Article VI or any contract of the
character described in Article VIII hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered void or voidable by reason of the existence of
any relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust
or association) may be the other party to contracts entered into pursuant to
Sections 6.1, 6.2 and 6.3 of this Article VI or pursuant to Article VIII hereof,
and any individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this Section
6.4.
Section 6.5 Provisions and Amendments. Any contract entered
into pursuant to Sections 6.1 or 6.2 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act or other
applicable Act of Congress
<PAGE> 26
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hereafter enacted with respect to its continuance in effect, its termination,
and the method of authorization and approval of such contract or renewal
thereof, and no amendment to any contract, entered into pursuant to Section 6.1
of this Article VI shall be effective unless assented to in a manner consistent
with the requirements of said Section 15, as modified by any applicable rule,
regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.1 Voting Powers. The Shareholders shall have power
to vote only (i) for the election of Trustees as provided in Article III,
Sections 3.1 and 3.2 hereof, (ii) for the removal of Trustees as provided in
Article III, Section 3.3(d) hereof, (iii) with respect to any investment
advisory or management contract as provided in Article VI, Sections 6.1 and 6.5
hereof, and (iv) with respect to such additional matters relating to the Trust
as may be required by law, by this Trust Instrument, or the Bylaws or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider desirable.
On any matter submitted to a vote of the Shareholders, all
Shares shall be voted separately by individual Series, except (i) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a matter
affects only the interests of one or more classes of a Series, in which case any
such matter shall be voted on by such class or classes. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote,
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and each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy or in any manner provided for in the Bylaws. A proxy
may be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
Section 7.2 Meetings. The first Shareholders' meeting shall be
held in order to elect Trustees as specified in Section 3.2 of Article III
hereof at the principal office of the Trust or such other place as the Trustees
may designate. Meetings may be held within or without the State of Delaware.
Special meetings of the Shareholders of any Series may be called by the Trustees
and shall be called by the Trustees upon the written request of Shareholders
owning at least one-tenth of the Outstanding Shares entitled to vote. Whenever
ten or more Shareholders meeting the qualifications set forth in Section 16(c)
of the 1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view to
obtaining signatures on such a request for a meeting, the Trustees shall comply
with the
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provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record, subject to any rights provided to
the Trust or any Trustees provided by said Section 16(c). Notice shall be sent,
by First Class Mail or such other means determined by the Trustees, at least 15
days prior to any such meeting.
Section 7.3 Quorum and Required Vote. One-third of Shares entitled to vote in
person or by proxy shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series or, if required by law, a Majority Shareholder Vote of
that Series (or class), voted on the matter in person or by proxy shall decide
that matter insofar as that Series (or class) is concerned. Shareholders may act
by unanimous written consent.
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Actions taken by Series (or class) may be consented to unanimously in writing by
Shareholders of that Series.
ARTICLE VIII
CUSTODIAN
Section 8.1 Appointment and Duties. The Trustees shall at all
times employ a bank, a company that is a member of a national securities
exchange, or a trust company, each having capital, surplus and undivided profits
of at least two million dollars ($2,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and
deliver the same upon written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of
any Series or class and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the
Trustees, the Net Asset Value of any Series, or class thereof, in
accordance with the provisions hereof; all upon such basis of
compensation as may be agreed upon between the Trustees and the
custodian.
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The Trustees may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank, a company that
is a member of a national securities exchange, or a trust company organized
under the laws of the United States or one of the states thereof and having
capital, surplus and undivided profits of at least two million dollars
($2,000,000) or such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act.
Section 8.2 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, subcustodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
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Section 9.1 Distributions.
(a) The Trustees may from time to time declare and
pay dividends or other distributions with respect to any Series. The amount of
such dividends or distributions and the payment of them and whether they are in
cash or any other Trust Property shall be wholly in the discretion of the
Trustees.
(b) Dividends and other distributions may be paid or
made to the Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or time or
dates or times as the Trustees shall determine, which dividends or
distributions, at the election of the Trustees, may be paid pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Section (b)
hereof.
Section 9.2 Redemptions. In case any holder of record of
Shares of a particular Series desires to dispose of his Shares or any portion
thereof, he may deposit at the office of the transfer agent or other authorized
agent of that Series a written request or such other form of request as the
Trustees may from time to time authorize, requesting that the Series purchase
the shares in accordance with this Section 9.2; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the
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Series or the principal underwriter of the Series shall purchase his said
Shares, but only at the Net Asset Value thereof (as described in Section 9.3 of
this Article IX). The Series shall make payment for any shares to be redeemed,
as aforesaid, in cash or property from the assets of that Series and payment for
such Shares shall be made by the Series or the principal underwriter of the
Series to the Shareholder of record within seven (7) days after the date upon
which the request is effective. Upon redemption, shares shall become Treasury
shares and may be re-issued from time to time.
Section 9.3 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.3 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total
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number of shares of that Series outstanding at the time and the quotient so
obtained shall be the Net Asset Value per Share of that Series. At any time the
Trustees may cause the Net Asset Value per Share last determined to be
determined again in similar manner and may fix the time when such redetermined
value shall become effective. If, for any reason, the net income of any Series
determined at any time, is a negative amount, the Trustees shall have the power
with respect to that Series (i) to offset each Shareholder's pro rata share of
such negative amount from the accrued dividend account of such Shareholder, or
(ii) to reduce the number of Outstanding Shares of such Series by reducing the
number of Shares in the account of each Shareholder by a pro rata portion of the
number of full and fractional Shares which represents the amount of such excess
negative net income, or (iii) to cause to be recorded on the books of such
Series an asset account in the amount of such negative net income (provided that
the same shall thereupon become the property of such Series with respect to such
Series and shall not be paid to any Shareholder), which account may be reduced
by the amount, of dividends declared thereafter upon the Outstanding Shares of
such Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (iv) to combine the methods described in clauses (i)
and (ii) and (iii) of the sentence; or (v) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or
<PAGE> 34
34
amend the practice of maintaining the Net Asset Value per Share of the Series at
a constant amount.
Section 9.4 Suspension of the Right of Redemption. The
Trustees may declare a suspension of the right of redemption or postpone the
date of payment as permitted under the 1940 Act. Such suspension shall take
effect at such time as the Trustees shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment until the
Trustees shall declare the suspension at an end. In the case of a suspension of
the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the Net Asset Value per Share next
determined after the termination of the suspension. In the event that any Series
are divided into classes, the provisions of this Section 9.3, to the extent
applicable as determined in the discretion of the Trustees and consistent with
applicable law, may be equally applied to each such class.
Section 9.5 Redemption of Shares in Order to Qualify as
Regulated Investment Company. If the Trustees shall, at any time and in good
faith, be of the opinion that direct or indirect ownership of Shares of any
Series has or may become concentrated in any Person to an extent which would
disqualify any Series as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power (but not the obligation) by
lot or other means deemed equitable by them (i) to call for redemption by any
such person of a number, or principal amount, of Shares sufficient to maintain
or bring the direct or indirect ownership of Shares into conformity with the
requirements for such qualification and (ii) to refuse to transfer or
<PAGE> 35
35
issue Shares to any person whose acquisition of the Shares in question would
result in such disqualification. The redemption shall be effected at the
redemption price and in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the provisions
of the Internal Revenue Code, or to comply with the requirements of any other
taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.1 Limitation of Liability. A Trustee, when acting
in such capacity, shall not be personally liable to any person other than the
Trust or a beneficial owner for any act, omission or obligation of the Trust or
any Trustee. A Trustee shall not be liable for any act or omission or any
conduct whatsoever in his capacity as Trustee, provided that nothing contained
herein or in the Delaware Act shall protect any Trustee against any liability to
the Trust or to Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
Section 10.2 Indemnification.
(a) Subject to the exceptions and limitations
contained in Section (b) below:
(i) every Person who is, or has been, a
Trustee or officer of the Trust (hereinafter referred to as a "Covered
Person") shall be
<PAGE> 36
36
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened
while in office or thereafter, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to
a Covered Person:
(i) who shall have been adjudicated by a
court or body before which the proceeding was brought (A) to be liable
to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless
there has been a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office,
<PAGE> 37
37
(A) by the court or other body
approving the settlement;
(B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor
are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of
independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may
be insured against by policies maintained by the trust, shall be severable,
shall not be exclusive of or affect any other rights to which any Covered Person
may now or hereafter be entitled, shall continue as to a person who has ceased
to be a Covered Person and shall inure to the benefit of the heirs, executors
and administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 10.2 may be paid by the
Trust or Series from time to time prior to final disposition thereof upon
receipt of an undertaking by or on
<PAGE> 38
38
behalf of such Covered Person that such amount will be paid over by him to the
Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to indemnification
under this Section 10.2.
Section 10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally liable solely by reason
of his being or having been a Shareholder of such Series and not because of his
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives, or, in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Trust, on behalf of the affected
Series, shall, upon request by the Shareholder, assume the defense of any claim
made against the Shareholder for any act or obligation of the Series and satisfy
any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
<PAGE> 39
39
Section 11.1 Trust Not a Partnership. It is hereby expressly
declared that a trust and not a partnership is created hereby. No Trustee
hereunder shall have any power to bind personally either the Trust's officers or
any Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
Section 11.2 Trustee's Good Faith Action, Expert Advice, No
Bond or Surety. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances then
prevailing shall be binding upon everyone interested. Subject to the provisions
of Article X hereof and to Section 11.1 of this Article XI, the Trustees shall
not be liable for errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of Article X
hereof and Section 11.1 of this Article XI, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is obtained.
<PAGE> 40
40
Section 11.3 Establishment of Record Dates. The Trustees may
close the Share transfer books of the Trust for a period not exceeding sixty
(60) days preceding the date of any meeting of Shareholders, or the date for the
payment of any dividends or other distributions, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares shall
go into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
Section 11.4 Termination of Trust.
(a) This Trust shall continue without limitation of
time but subject to the provisions of sub-section (b) of this Section 11.4.
(b) By a vote of a majority of Trustees, the Trustees
may,
(i) liquidate or dissolve the Trust, or any
Series.
<PAGE> 41
41
(ii) sell and convey all or substantially
all of the assets of the Trust or any affected Series to another trust,
partnership, association or corporation, or to a separate series of
shares thereof, organized under the laws of any state which trust,
partnership, association or corporation is an open-end management
investment company as defined in the 1940 Act, or is a series thereof,
for adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and which may include
shares of beneficial interest, stock or other ownership interests of
such trust, partnership, association or corporation or of a series
thereof.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the
remaining proceeds or the remaining assets as provided in sub-section (b), the
Trust or any affected Series shall terminate and the Trustees and the Trust
shall be discharged of any and all further liabilities and duties hereunder and
the right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding
up of its business, the Trustees shall cause a certificate of cancellation of
the Trust's certificate of trust to be filed in accordance with the Delaware
Act, which certificate of cancellation may be signed by any one Trustee.
<PAGE> 42
42
Section 11.5 Reorganization. Notwithstanding anything else
herein, the Trustees, in order to change the form of organization of the Trust,
may, without prior Shareholder approval, (i) cause the Trust to merge or
consolidate with or into one or more trusts, partnerships, associations or
corporations so long as the surviving or resulting entity is an open-end
management investment company under the 1940 Act, or is a series thereof, that
will succeed to or assume the Trust's registration under that Act and which is
formed, organized or existing under the laws of a state, commonwealth possession
or colony of the United States or (ii) cause the Trust to incorporate under the
laws of Delaware. Any agreement of merger or consolidation or certificate of
merger may be signed by a majority of Trustees and facsimile signatures conveyed
by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Trust Instrument, an agreement of merger or consolidation
approved by the Trustees in accordance with this Section 11.5 may effect any
amendment to the Trust Instrument or effect the adoption of a new trust
instrument of the Trust if it is the surviving or resulting trust in the merger
or consolidation.
Section 11.6 Filing of Copies, References, Headings. The
original or a copy of this Trust Instrument and of each amendment hereof or
Trust Instrument supplemental hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether or not
any such amendments or supplements have been made and as to any matters in
connection with the Trust hereunder, and with the
<PAGE> 43
43
same effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this Trust Instrument or of any
such amendment or supplemental Trust Instrument, references to this Trust
Instrument, and all expressions like "herein," "hereof" and "hereunder," shall
be deemed to refer to this Trust Instrument as amended or affected by any such
supplemental Trust Instrument. All expressions like "his," "he" and "him," shall
be deemed to include the feminine and neuter, as well as masculine, genders.
Headings are placed herein for convenience of reference only and in case of any
conflict, the text of this Trust Instrument, rather than the headings, shall
control. This Trust Instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 11.7 Applicable Law. The trust set forth in this
instrument is made in the State of Delaware, and the Trust and this Trust
Instrument, and the rights and obligations of the Trustees and Shareholders
hereunder, are to be governed by and construed and administered according to the
Delaware Act and the laws of said State; provided, however, that there shall not
be applicable to the Trust, the Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or
<PAGE> 44
44
employees of a trust, (v) the allocation of receipts and expenditures to income
and principal, (vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to the
titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers or privileges afforded to trusts or actions that may be
engaged in by trusts under the Delaware Act, and the absence of a specific
reference herein to any such power, privilege or action shall not imply that the
Trust may not exercise such power or privilege or take such actions.
Section 11.8 Amendments. Except as specifically provided
herein, the Trustees may, without shareholder vote, amend or otherwise
supplement this Trust Instrument by making an amendment, a Trust Instrument
supplemental hereto or an amended and restated trust instrument. Shareholders
shall have the right to vote (i) on any amendment which would affect their right
to vote granted in Section 7.1 of Article VII hereof, (ii) on any amendment to
this Section 11.8, (iii) on any amendment as may be required by law or by the
Trust's registration statement filed with the Commission and (iv) on any
amendment submitted to them by the Trustees. Any amendment required or permitted
to be submitted to Shareholders which, as the Trustees determine, shall affect
the Shareholders of one or more Series shall be authorized by vote of the
Shareholders of each Series affected and no vote of shareholders of a Series not
affected
<PAGE> 45
45
shall be required. Notwithstanding anything else herein, any amendment to
Article 10 hereof shall not limit the rights to indemnification or insurance
provided therein with respect to action or omission of Covered Persons prior to
such amendment.
Section 11.9 Fiscal Year. The fiscal year of the Trust shall
end on a specified date as set forth in the Bylaws, provided, however, that the
Trustees may, without Shareholder approval, change the fiscal year of the Trust.
Section 11.10 Name Reservation. The Trustees on behalf of the
Trust acknowledge that ING Mutual Funds Management Company has licensed to the
Trust the non-exclusive right to use the words "ING" as part of the name of the
Trust, and has reserved the right to grant the non-exclusive use of the words
"ING" or any derivative thereof the any other party. In addition, ING Mutual
Funds Management Company reserves the right to grant the non-exclusive use of
the words "ING" to, and to withdraw such right from, any other business or other
enterprise. ING Mutual Funds Management Company reserves the right to withdraw
from the Trust the right to use said words "ING" and will withdraw such right if
the Trust ceases to employ, for any reason, ING Mutual Funds Management Company,
an affiliate or any successor as adviser of the Trust.
Section 11.11 Provisions in Conflict with Law. The provisions
of this Trust Instrument are severable, and if the Trustees shall determine,
with the advice of counsel, that any of such provisions is in conflict with the
1940 Act, the regulated investment company provisions of the Revenue Code or
with other applicable laws and regulations, the conflicting provision shall be
deemed never to have constituted a part of this Trust Instrument; provided,
however, that such determination shall not affect
<PAGE> 46
46
any of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction, such invalidity or unenforceability shall attach
only to such provision in such jurisdiction and shall not in any manner affect
such provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial
Trustees of the Trust, have executed this instrument this 30th day of July,
1998.
John J. Pileggi, as Trustee and
not individually
<PAGE> 47
ING FUNDS TRUST
TRUST INSTRUMENT
DATED JULY 30, 1998
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I NAME AND DEFINITIONS...........................................................................1
Section 1.1 Name.........................................................................1
Section 1.2 Definitions..................................................................1
ARTICLE II BENEFICIAL INTEREST...........................................................................3
Section 2.1 Shares of Beneficial Interest................................................3
Section 2.2 Issuance of Shares...........................................................4
Section 2.3 Register of Shares and Share Certificates....................................4
Section 2.4 Transfer of Shares...........................................................5
Section 2.5 Treasury Shares..............................................................5
Section 2.6 Establishment of Series......................................................6
Section 2.7 Investment in the Trust......................................................7
Section 2.8 Assets and Liabilities of Series.............................................7
Section 2.9 No Preemptive Rights.........................................................9
Section 2.10 Personal Liability of Shareholders...........................................9
Section 2.11 Assent to Trust Instrument..................................................10
ARTICLE III THE TRUSTEES................................................................................10
Section 3.1 Management of the Trust.....................................................10
Section 3.2 Initial Trustees............................................................11
Section 3.3 Term of Office of Trustees..................................................11
Section 3.4 Vacancies and Appointment of Trustees.......................................12
Section 3.5 Temporary Absence of Trustee................................................13
Section 3.6 Number of Trustees..........................................................13
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee.............................13
Section 3.8 Ownership of Assets of the Trust............................................13
ARTICLE IV POWERS OF THE TRUSTEES.......................................................................14
Section 4.1 Powers......................................................................14
Section 4.2 Issuance and Repurchase of Shares...........................................19
Section 4.3 Trustees and Officers as Shareholders.......................................19
Section 4.4 Action by the Trustees......................................................19
Section 4.5 Chairman of the Trustees....................................................20
Section 4.6 Principal Transactions......................................................21
ARTICLE V EXPENSES OF THE TRUST.........................................................................21
Section 5.1 Trustee Reimbursement.......................................................21
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT.................................22
Section 6.1 Investment Adviser..........................................................22
Section 6.2 Principal Underwriter.......................................................23
Section 6.3 Transfer Agent..............................................................24
Section 6.4 Parties to Contract.........................................................24
Section 6.5 Provisions and Amendments...................................................25
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS....................................................25
Section 7.1 Voting Powers...............................................................25
Section 7.2 Meetings....................................................................26
Section 7.3 Quorum and Required Vote....................................................27
ARTICLE VIII CUSTODIAN..................................................................................28
Section 8.1 Appointment and Duties......................................................28
Section 8.2 Central Certificate System..................................................29
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS................................................................30
Section 9.1 Distributions...............................................................30
Section 9.2 Redemptions.................................................................31
Section 9.3 Determination of Net Asset Value and Valuation of Portfolio Assets..........31
Section 9.4 Suspension of the Right of Redemption.......................................33
Section 9.5 Redemption of Shares in Order to Qualify as Regulated
Investment Company..........................................................33
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION...................................................34
Section 10.1 Limitation of Liability.....................................................34
Section 10.2 Indemnification.............................................................35
Section 10.3 Shareholders................................................................37
ARTICLE XI MISCELLANEOUS................................................................................38
Section 11.1 Trust Not a Partnership.....................................................38
Section 11.2 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety......................................................................38
Section 11.3 Establishment of Record Dates...............................................39
Section 11.4 Termination of Trust........................................................40
Section 11.5 Reorganization..............................................................41
Section 11.6 Filing of Copies, References, Headings......................................41
Section 11.7 Applicable Law..............................................................42
Section 11.8 Amendments..................................................................43
Section 11.9 Fiscal Year.................................................................44
Section 11.10 Name Reservation............................................................44
Section 11.11 Provisions in Conflict with Law............................................44
</TABLE>
<PAGE> 50
Page III
<PAGE> 51
Page IV
<PAGE> 1
Exhibit 2
BY-LAWS
OF
ING FUNDS TRUST
These Bylaws of ING Funds Trust (the "Trust"), a Delaware
business trust, are subject to the Trust's Instrument of Trust dated July , 1998
as from time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in
_____________, Pennsylvania or such other location as the Trustees may, from
time to time, determine. The Trust may establish and maintain such other offices
and places of business as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.1 Officers. The officers of the Trust shall be
President, a Treasurer, a Secretary, and such other officers as the Trustees may
from time to time elect. The Trustees may delegate to any officer or committee
the power to appoint any subordinate officers or agents. It shall not be
necessary for any Trustee or other officer to be a holder of Shares in the
Trust.
<PAGE> 2
2
Section 2.2 Election of Officers. The President, Treasurer and
Secretary shall be chosen by the Trustees. Two or more offices may be held by a
single person except the offices of President and Secretary. Subject to the
provisions of Section 12 hereof, the President, the Treasurer and the Secretary
shall each hold office until their successors are chosen and qualified and all
other officers shall hold office at the pleasure of the Trustees.
Section 2.3 Resignations. Any officer of the Trust may resign,
notwithstanding Section 2 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.1 Management of The Trust-General. The business and
affairs of the Trust shall be managed by, or under the direction of, the
Trustees, and they shall have all powers necessary and desirable to carry out
their responsibilities, so far as such powers are not inconsistent with the laws
of the State of Delaware, the Trust Instrument or with these Bylaws.
Section 3.2 Executive and Other Committees. The Trustees may
elect from their own number an executive committee, which shall have any or all
the powers of the Trustees while the Trustees are not in session. The Trustees
may also elect from their own number other committees from time to time. The
number composing such
<PAGE> 3
3
committees and the powers conferred upon the same are to be determined by vote
of a majority of the Trustees. All members of such committees shall hold such
offices at the pleasure of the Trustees. The Trustees may abolish any such
committee at any time. Any committee to which the Trustees delegate any of their
powers or duties shall keep records of its meetings and shall report its actions
to the Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.
Section 3.3 Compensation. Each Trustee and each committee
member may receive such compensation for his services and reimbursement for his
expenses as may be fixed from time to time by resolution of the Trustees.
Section 3.4 Chairman of the Trustees. The Trustees shall
appoint from among their number a Chairman who shall serve as such at the
pleasure of the Trustees. When present, he shall preside at all meetings of the
Shareholders and the Trustees, and he may, subject to the approval of the
Trustees, appoint a Trustee to preside at such meetings in his absence. He shall
perform such other duties as the Trustees may from time to time designate.
Section 3.5 President. The President shall be the chief
executive officer of the Trust and, subject to the direction of the Trustees,
shall have general administration of the business and policies of the Trust.
Except as the Trustees may otherwise order, the President shall have the power
to grant, issue, execute or sign such powers of attorney, proxies, agreements or
other documents as may be deemed advisable or necessary in the furtherance of
the interests of the Trust or any Series
<PAGE> 4
4
thereof. He shall also have the power to employ attorneys, accountants and other
advisers and agents and counsel for the Trust. The President shall perform such
duties additional to all of the foregoing as the Trustees may from time to
designate.
Section 3.6 Treasurer. The Treasurer shall be the principal
financial and accounting officer of the Trust. He shall deliver all funds and
securities of the Trust which may come into his hands to such company as the
Trustees shall employ as Custodian in accordance with the Trust Instrument and
applicable provisions of law. He shall make annual reports regarding the
business and condition of the Trust, which reports shall be preserved in Trust
records, and he shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees may from time to
time designate.
Section 3.7 Secretary. The Secretary shall record in books
kept for the purpose all votes and proceedings of the Trustees and the
Shareholders at their respective meetings. He shall have the custody of the seal
of the Trust. The Secretary shall perform such additional duties as the Trustees
may from time to time designate.
Section 3.8 Vice President. Any Vice President of the Trust
shall perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
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Section 3.9 Assistant Treasurer. Any Assistant Treasurer of
the Trust shall perform such duties as the Trustees or the Treasurer may from
time to time designate, and, in the absence of the Treasurer, the senior
Assistant Treasurer, present and able to act, may perform all the duties of the
Treasurer.
Section 3.10 Assistant Secretary. Any Assistant Secretary of
the Trust shall perform such duties as the Trustees or the Secretary may from
time to time designate, and, in the absence of the Secretary, the senior
Assistant Secretary, present and able to act, may perform all the duties of the
Secretary.
Section 3.11 Subordinate Officers. The Trustees from time to
time may appoint such other officers or agents as they may deem advisable, each
of whom shall have such title, hold office for such period, have such authority
and perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or committees of Trustees the power to
appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.
Section 3.12 Surety Bonds. The Trustees may require any
officer or agent of the Trust to execute a bond (including, without limitation,
any bond required by the Investment Company Act of 1940, as amended ("the 1940
Act") and the rules and regulations of the Securities and Exchange Commission
("Commission")) to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his duties
to the Trust including
<PAGE> 6
6
responsibility for negligence and for the accounting of any of the Trust's
property, funds or securities that may come into his hands.
Section 3.13 Removal. Any officer may be removed from office
whenever in the judgment of the Trustees the best interest of the Trust will be
served thereby, by the vote of a majority of the Trustees given at any regular
meeting or any special meeting of the Trustees. In addition, any officer or
agent appointed in accordance with the provisions of Section 10 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Trustees.
Section 3.14 Remuneration. The salaries or other compensation,
if any, of the officers of the Trust shall be fixed from time to time by
resolution of the Trustees.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 4.1 Special Meetings. A special meeting of the
shareholders shall be called by the Secretary whenever (i) ordered by the
Trustees or (ii) requested in writing by the holder or holders of at least 10%
of the Outstanding Shares entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than 30 days to call such special
meeting, the Trustees or the Shareholders so requesting, may, in the name of the
Secretary, call the meeting by giving notice thereof in the manner required when
notice is given by the Secretary. If the meeting is a meeting of
<PAGE> 7
7
the Shareholders of one or more Series or classes of Shares, but not a meeting
of all Shareholders of the Trust, then only special meetings of the Shareholders
of such one or more Series or any Classes thereof shall be entitled to notice of
and to vote at such meeting.
Section 4.2 Notices. Except as above provided, notices of any
meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed with
the record of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting and reasonable notice is given to persons present at the meeting and
the adjourned meeting is held within a reasonable time after the date set for
the original meeting.
Section 4.3 Voting-Proxies. Subject to the provisions of the
Trust Instrument, shareholders entitled to vote may vote either in person or by
proxy, provided that either (i) an instrument authorizing such proxy to act is
executed by the Shareholder in writing and dated not more than eleven months
before the meeting, unless this instrument specifically provides for a longer
period or (ii) the Trustees adopt by resolution an electronic, telephonic,
computerized or other alternative to execution
<PAGE> 8
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of a written instrument authorizing the proxy to act which authorization is
received no more than eleven months before the meeting. Proxies shall be
delivered to the Secretary of the Trust or other persons responsible for
recording the proceedings before being voted. A proxy with respect to Shares
held in the name of two or more persons shall be valid if executed by one of
them unless at or prior to exercise of such proxy the Trust receives specific
written notice to the contrary from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder thereof to
vote at any adjournment of a meeting. A proxy purporting to be exercised by or
on behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden in proving invalidity shall rest on the
challenger. At all meetings of the Shareholders, unless the voting is conducted
by inspectors, all questions relating to the qualifications of voting, the
validity of proxies, and the acceptance or rejection of votes shall be decided
by the Chairman of the meeting. Except as otherwise provided herein or in the
Trust Instrument, as these By-laws or such Trust Instrument may be amended or
supplemented from time to time, all matters relating to the giving, voting or
validity or proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
Section 4.4 Place of Meeting. All special meetings of the
Shareholders shall be held at the principal place of business of the Trust or at
such other place in the United States as the Trustees may designate.
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Section 4.5 Action Without a Meeting. Any action to be taken
by Shareholders may be taken without a meeting if all shareholders entitled to
vote on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Trustees held at
the principal place of business of the Trust.
ARTICLE V
TRUSTEES' MEETINGS
Section 5.1 Special Meetings. Special meetings of the Trustees
may be called orally or in writing by the Chairman of the Board of Trustees or
any two other Trustees.
Section 5.2 Regular Meetings. Regular meetings of the Trustees
may be held at such places and at such times as the Trustees may from time to
time determine; each Trustee present at such determination shall be deemed a
party calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
Section 5.3 Quorum. A majority of the Trustees shall
constitute a quorum for the transaction of business and an action of a majority
of the quorum shall constitute action of the Trustees.
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Section 5.4 Notice. Except as otherwise provided, notice of
any special meeting of the Trustees shall be given by the party calling the
meeting to each Trustee, as provided for in Section 4.04 of the Trust
Instrument. A written notice may be mailed, postage prepaid, addressed to him at
his address as registered on the books of the Trust or if not so registered, at
his last known address.
Section 5.5 Place Of Meeting. All special meetings of the
Trustees shall be held at the principal place of business of the Trust or such
other place as the Trustees may designate. Any meeting may adjourn to any place.
Section 5.6 Special Action. When all the Trustees shall be
present at any meeting, however called or wherever held, or shall assent to the
holding of the meeting without notice, or shall sign a written assent thereto
filed with the record of such meeting, the acts of such meeting shall be valid
as if such meeting had been regularly held.
Section 5.7 Action By Consent. Any action by the Trustees may
be taken without a meeting if a written consent thereto is signed by all the
Trustees and filed with the records of the Trustees' meeting. Such consent shall
be treated, for all purposes, as a vote at a meeting of the Trustees held at the
principal place of business of the Trustees.
Section 5.8 Participation in Meetings By Conference Telephone.
Except when presence in person is required at a meeting under the 1940 Act or
other applicable laws, Trustees may participate in a meeting of Trustees by
conference telephone or similar communications equipment by means of which all
persons
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participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting. Any meeting conducted by
telephone shall be deemed to take place at and from the principal office of the
Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into such transferable Shares of one or
more separate and distinct Series, or classes thereof, as the Trustees shall
from time to time create and establish. The number of Shares is unlimited, and
each Share of each Series or class thereof shall be without par value and shall
represent an equal proportionate interest with each other Share in the Series,
none having priority or preference over another, except to the extent that such
priorities or preferences are established with respect to one or more classes of
shares consistent with applicable law and any rule or order to the Commission.
Section 6.2 Transfer of Shares. The Shares of the Trust shall
be transferable, so as to affect the rights of the Trust, only by transfer
recorded on the books of the Trust, in person or by attorney.
Section 6.3 Equitable Interest Not Recognized. The Trust shall
be entitled to treat the holder of record of any Share or Shares of beneficial
interest as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim or interest in such Share or Shares on the part of any
other person except as may be otherwise expressly provided by law.
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Section 6.4 Share Certificate. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In the
event that the Trustees authorize the issuance of Share certificates, such
certificate shall be in the form prescribed from time to time by the Trustees
and shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder services
agent or by a registrar, other than a Trustee, officer or employee of the Trust.
In case any officer who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if he or she
were such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or
the transfer or shareholder services agent may either issue receipts therefor or
may keep accounts upon the books of the Trust for the record holders of such
Shares, who shall in either case be deemed, for all purposes hereunder, to be
holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Section 6.5 Loss of Certificate. In the case of the alleged
loss or destruction or the mutilation of a Share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as the Trustees may
prescribe.
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Section 6.6 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of Share certificates and may,
by written notice to each Shareholder, require the surrender of Share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in the Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be
deemed to hold legal and beneficial ownership of any income earned on securities
held by the Trust issued by any business entity formed, organized or existing
under the laws of any jurisdiction other than a state, commonwealth, possession
or colony of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
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ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any
Covered Person or employee of the Trust, including any Covered Person or
employee of the Trust who is or was serving at the request of the Trust as a
Trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether or not
the Trustees would have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance
that protects or purports to protect any Trustee or officer of the Trust against
any liability to the Trust or its Shareholder to which he would otherwise be
subject by reason or willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"ING FUNDS TRUST
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the
Trustees and the seal my be used by causing it or a facsimile to be impressed or
affixed or printed or otherwise reproduced.
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Any officer or Trustee of the trust shall have authority to
affix the seal of the Trust to any document, instrument or other paper executed
and delivered by or on behalf of the Trust; however, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on and its absence
shall not impair the validity of any document, instrument, or other paper
executed by or on behalf of the Trust.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Trust shall end on such date as the
Trustees shall from time to time determine.
ARTICLE XII
AMENDMENTS
These Bylaws may be amended at any meeting of the Trustees of
the Trust by a majority vote.
ARTICLE XIII
REPORT TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the Trust including financial
statements which shall be certified at least annually by independent public
accountants.
ARTICLE XIV
HEADINGS
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Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather than
the headings shall control.
<PAGE> 1
Exhibit 5(a)
MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between the
ING FUNDS TRUST, a Delaware business trust (the "Trust"), on behalf of each of
its series as listed in Schedule 1 (each, a "Fund", and collectively, the
"Funds"), and ING MUTUAL FUNDS MANAGEMENT CO. LLC, a Delaware limited liability
company (the "Investment Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and the rules and regulations promulgated thereunder; and
WHEREAS, the Investment Manager is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), and engages in
the business of acting as an investment adviser; and
WHEREAS, the Trust and the Investment Manager desire to enter into an
agreement to provide for the management of the assets of each Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
Management. The Investment Manager shall act as investment adviser for the
Funds of the Trust and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising each Fund's
assets, subject at all times to the policies and control of the Trust's Board of
Trustees. The Investment Manager shall give each Fund the benefit of its best
judgment, efforts and facilities in rendering its services as investment
adviser. The Investment Manager shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided or
authorized, no authority to act for or represent the Trust, on behalf of the
Funds, in any way or otherwise be deemed an agent of the Trust.
Duties of Investment Manager. In carrying out its obligation under
paragraph 1 hereof, the Investment Manager shall: (a) supervise and manage all
aspects of the Funds' operations; (b) provide the Funds or obtain for each, and
thereafter supervise, such executive, administrative, clerical and shareholder
servicing services as are deemed advisable by the Trust's Board of Trustees; (c)
arrange, but not pay for, the periodic updating of prospectuses and supplements
thereto, proxy material, tax returns, reports to the Funds' shareholders and
reports to and filings with the Securities and Exchange Commission and state
Blue Sky authorities; (d) provide the Funds with, or obtain for each, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Funds'
<PAGE> 2
principal office; (e) provide the Board of Trustees of the Trust on a regular
basis with financial reports and analyses on the Funds' operations and the
operations of comparable investment companies; (f) obtain and evaluate pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Funds, and whether concerning the individual issuers whose
securities are included in the Funds or the activities in which they engage, or
with respect to securities which the Investment Manager considers desirable for
inclusion in the Funds; (g) determine what issuers and securities shall be
represented in the Funds' respective portfolios and regularly report them to the
Board of Trustees of the Trust; (h) formulate and implement continuing programs
for the purchases and sales of the securities of such issuers and regularly
report thereon to the Board of Trustees of the Trust; and (i) take, on behalf of
the Funds, all actions which appear necessary to carry into effect such purchase
and sale programs and supervisory functions as aforesaid, including the placing
of orders for the purchase and sale of portfolio securities.
Broker-Dealer Relationships. The Investment Manager is responsible for
decisions to buy and sell securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates. The Investment Manager may select any
affiliated person of the Trust or the Investment Manager to the extent permitted
pursuant to the Trust's procedures for securities transactions with affiliated
brokers pursuant to Section 17(e)(2) and Rule 17e-1 under the Investment Company
Act.
The Investment Manager's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Investment Manager will take the following into consideration: the best net
price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Investment Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused a Fund to pay a broker or dealer that provides
brokerage and research services to the Investment Manager for the Fund's use an
amount of
<PAGE> 3
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Investment Manager determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Investment Manager's overall
responsibilities with respect to the Fund. The Investment Manager is further
authorized to allocate the orders placed by it on behalf of a Fund to such
brokers and dealers who also provide research or statistical material, or other
services to the Fund or the Investment Manager for the Fund's use. Such
allocation shall be in such amounts and proportions as the Investment Manager
shall determine and the Investment Manager will report on said allocations
regularly to the Board of Trustees of the Trust indicating the brokers to whom
such allocations have been made and the basis therefor.
Control by Board of Trustees. Any investment program undertaken by the
Investment Manager pursuant to this Agreement, as well as any other activities
undertaken by the Investment Manager on behalf of the Funds pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust.
Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Investment Manager shall at all times conform to: (a)
all applicable provisions of the Investment Company Act and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933, as amended, and the Investment Company Act; and (c) the
provisions of the Trust Instrument of the Trust, as amended; and (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Expenses. The expenses connected with the Funds shall be allocable between
the Funds and the Investment Manager as follows:
The Investment Manager shall furnish, at its expense and without cost to
the Funds, the services of a President, Secretary and one or more Vice
Presidents of the Trust, to the extent that such additional officers may be
required by the Trust for the proper conduct of its affairs;
The Investment Manager shall further maintain, at its expense and without
cost to the Funds, a trading function in order to carry out its obligations
under subparagraph (h) of paragraph 2 hereof to place orders for the purchase
and sale of portfolio securities for the Funds;
Nothing in subparagraph (a) hereof shall be construed to require the
Investment Manager to bear: (i) any of the costs (including applicable office
space, facilities and equipment) of the services of a principal financial
officer of the Trust whose normal
<PAGE> 4
duties consist of maintaining the financial accounts and books and records of
the Funds; including the review of calculations of net asset value and preparing
tax returns; or (ii) any of the costs (including applicable office space,
facilities and equipment) of the services of any of the personnel operating
under the direction of such principal financial officer. Notwithstanding the
obligation of the Funds to bear the expense of the functions referred to in
clauses (i) and (ii) of this subparagraph (c), the Investment Manager may pay
the salaries, including any applicable employment or payroll taxes and other
salary costs, of the principal financial officer and other personnel carrying
out such functions and the Funds shall reimburse the Investment Manager therefor
upon proper accounting.
All of the ordinary business expenses incurred in the operations of the
Funds and the offering of shares shall be borne by the Fund unless specifically
provided otherwise in this paragraph 6. These expenses include, but are not
limited to, brokerage commissions, legal, auditing, taxes or governmental fees,
networking servicing costs, fund accounting servicing costs, fulfillment
servicing costs, the cost of preparing share certificates, custodian,
depository, transfer and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, insurance premiums on property or personnel
(including officers and trustees if available) of the Funds which inure to each
Funds benefit, expenses relating to trustee and shareholder meetings, the cost
of preparing and distributing reports and notices to shareholders, the fees and
other expenses incurred by the Trust in connection with membership in investment
company organizations and the cost of printing copies of prospectuses and
statements of additional information distributed to shareholders.
Delegation of Responsibilities. The Investment Manager may delegate the
performance of certain investment advisory services, as described hereunder, to
a sub-adviser.
Compensation. For the services provided and the expenses assumed pursuant
to this Agreement, each Fund will pay the Investment Manager and the Investment
Manager will accept as full compensation therefor a fee computed daily and paid
monthly in arrears at the annual rate set forth on Schedule A, based on each
Fund's average daily net assets, computed in the manner set forth in the
Registration Statement of the Trust. If the fees payable to the Investment
Manager begin to accrue before the end of any month, or if this Agreement
terminates before the end of any month, then such fees for such month shall be
prorated according to the proportion which the partial period bears to the full
month in which such effectiveness or termination occurs. The Investment Manager
may from time to time and for such periods as it deems appropriate voluntarily
reduce its compensation hereunder (and/or voluntarily assume expenses) for a
Fund.
Non-Exclusivity. The services of the Investment Manager to the Funds are
not to be deemed to be exclusive, and the Investment Manager shall be free to
render
<PAGE> 5
investment advisory and corporate administrative or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or members of the Investment Manager may
serve as officers or trustees of the Trust, and that officers or trustees of the
Trust may serve as officers or members of the Investment Manager to the extent
permitted by law; and that the officers and members of the Investment Manager
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, officers or
partners of any other firm or corporation, including other investment companies.
Term and Approval. This Agreement shall become effective as it pertains to
a Fund at the close of business on the date opposite the Fund's name on Schedule
1 and shall remain in force and effect for two years for the Fund and thereafter
from year to year, provided that such continuance is specifically approved at
least annually: (a) (i) by the Trust's Board of Trustees or (ii) by the vote of
a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the Investment Company Act); and (b) by the affirmative vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of a party to this Agreement (other than as Trust trustees), by votes
cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains
to a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
or by the Investment Manager, on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate as it pertain to all Funds in the event
of its assignment, the term "assignment" for the purpose having the meaning
defined in Section 2(a)(4) of the Investment Company Act.
Liability of Investment Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Investment Manager or any of
its officers, trustees or employees, the Investment Manager shall not be subject
to liability to the Trust or to the Funds or to any shareholder of the Funds for
any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Investment Manager or any officer, director or employee of the Investment
Manager, the Trust hereby agrees to indemnify and hold the Investment Manager
harmless from and against all claims, actions, suits, and proceedings at law or
in equity whether brought or asserted by a private party or a governmental
agency, instrumentality or entity of any kind, relating to the sale, purchase,
pledge of, advertisement of, or solicitation of sales or purchases of any
security (whether of a Fund or otherwise) by the Trust, its officers, directors,
<PAGE> 6
employees or agents in alleged violation of applicable federal, state or foreign
laws, rules or regulations.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational documentation, to which reference is hereby made. The obligations
of the "ING Funds Trust" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
14. License Agreement. The Trust shall have the non-exclusive right to use
the name "ING" to designate itself and any current or future series of shares
only so long as ING Mutual Fund Management Co. LLC serves as investment manager
or adviser to the Trust with respect to such series of shares. In the event that
the Investment Manager ceases to act as the investment manager to the Funds, the
Trust shall cease using the name "ING" upon the Investment Manager's written
request.
15. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Further, any material amendment, as
determined by the parties hereto with the assistance of legal counsel, shall not
be effective until approved: (a) (i) by the Trust's Board of Trustees and (ii)
by the vote of a majority of the Fund's or Funds', as applicable, outstanding
voting securities (as defined in Section 2(a)(42) of the Investment Company
Act); and (b) by the affirmative vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Trust trustees), by votes cast in person at a meeting
specifically called for such purpose.
Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and that of the
Investment Manager shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In
<PAGE> 7
addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ING FUNDS TRUST, ING MUTUAL FUNDS MANAGEMENT, CO. LLC
on behalf each of its series listed on Schedule 1
By:____________________________ By:____________________________
Title:_________________________ Title:_________________________
Attest By:_____________________ Attest By:_______________________
Title:_________________________ Title:_________________________
<PAGE> 8
Schedule 1
<TABLE>
<CAPTION>
Organizational
Name of Fund Fee Rate* Approval Date
- ------------ --------- -------------
<S> <C> <C>
ING Large Cap Growth Fund 0.75% October 30, 1998
ING Small Cap Growth Fund 1.00% October 30, 1998
ING Emerging Markets Equity Fund 1.25% October 30, 1998
ING International Equity Fund 1.25% October 30, 1998
ING International Bond Fund 1.00% October 30, 1998
ING Tax Efficient Equity Fund 0.80% October 30, 1998
ING National Tax-Exempt Bond Fund 0.50% October 30, 1998
ING Mid Cap Growth Fund 1.00% October 30, 1998
ING Balanced Fund 0.80% October 30, 1998
ING Focus Fund 1.00% October 30, 1998
ING Growth and Income Fund 0.75% October 30, 1998
ING U.S. Treasury Money
Market Fund 0.25% October 30, 1998
ING Money Market Fund 0.25% October 30, 1998
ING Intermediate Bond Fund 0.50% October 30, 1998
ING High Yield Bond Fund 0.65% October 30, 1998
ING Mortgage Income Fund 0.50% October 30, 1998
ING Global Brand Names Fund 1.00% October 30, 1998
</TABLE>
- ----------
* For the first year of operations, the fee rate will be one-quarter (1/4) of
the annual fee rate reflected herein. For the second year of operations, the fee
rate will be one-half (1/2) of the annual fee rate reflected herein.
<PAGE> 9
<TABLE>
<CAPTION>
Organizational
Name of Fund Fee Rate* Approval Date
- ------------ --------- -------------
<S> <C> <C>
ING European Equity Fund 1.15% October 30, 1998
ING Global Information
Technology Fund 1.25% October 30, 1998
ING Global Real Estate Fund 1.00% October 30, 1998
</TABLE>
- ----------
* For the first year of operations, the fee rate will be one-quarter (1/4) of
the annual fee rate reflected herein. For the second year of operations, the fee
rate will be one-half (1/2) of the annual fee rate reflected herein.
<PAGE> 1
5(b)(i)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Baring Asset Management, Inc. (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of
the Investment Adviser and the Trust's Board of Trustees, the
Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the portions of the Funds allocated to it by
the Investment Adviser, and place all orders for the purchase and sale
of securities for such portions of the Funds. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Trust's
organizational documentation, and the respective stated investment
objective, policies and restrictions of the Funds, as amended, will use
its best efforts to safeguard and promote the welfare of the Funds, and
will comply with other policies which the Trust's Board of Trustees or
the Investment Adviser, as the case may be, may from time to time
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds either
directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request.
The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 adopted under the Investment Company Act all records
required to be maintained by Sub-Adviser on behalf of the Investment
Adviser under Rule 3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the
Sub-Adviser and the Sub-Adviser will accept as full compensation
therefor a fee computed daily and paid monthly in arrears at the annual
rate set forth on Schedule A, based on each Fund's average daily net
assets, computed in the manner set forth in the Registration Statement
of the Trust. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each
payment of sub-advisory fees is due hereunder. Further, if the fees
payable to the Sub-Adviser begin to accrue before the end of any month,
or if this Agreement terminates before the end of any month, then such
fees for such month shall be prorated according to the proportion which
the partial period bears to the full month in which such effectiveness
or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of the Sub-Adviser shall be 125 High Street, Boston, MA
02110.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
BARING ASSET MANAGEMENT, INC. ING MUTUAL FUNDS MANAGEMENT
CO. LLC
By:____________________________ By:________________________
Title:_________________________ Title:_____________________
Attest By:_____________________ Attest By:_________________
Title:_________________________ Title:_____________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational
Approval Date
<S> <C> <C>
ING Large Cap Growth Fund 0.375% October 30, 1998
------------------------- ------ ----------------
ING Small Cap Growth Fund 0.500% October 30, 1998
------------------------- ------ ----------------
</TABLE>
---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
<PAGE> 1
5(b)(ii)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Baring International Investment Limited
(the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of
the Investment Adviser and the Trust's Board of Trustees, the
Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the portions of the Funds allocated to it by
the Investment Adviser, and place all orders for the purchase and sale
of securities for such portions of the Funds. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Trust's
organizational documentation, and the respective stated investment
objective, policies and restrictions of the Funds, as amended, will use
its best efforts to safeguard and promote the welfare of the Funds, and
will comply with other policies which the Trust's Board of Trustees or
the Investment Adviser, as the case may be, may from time to time
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds either
directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request.
The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 adopted under the Investment Company Act all records
required to be maintained by Sub-Adviser on behalf of the Investment
Adviser under Rule 3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the
Sub-Adviser and the Sub-Adviser will accept as full compensation
therefor a fee computed daily and paid monthly in arrears at the annual
rate set forth on Schedule A, based on each Fund's average daily net
assets, computed in the manner set forth in the Registration Statement
of the Trust. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each
payment of sub-advisory fees is due hereunder. Further, if the fees
payable to the Sub-Adviser begin to accrue before the end of any month,
or if this Agreement terminates before the end of any month, then such
fees for such month shall be prorated according to the proportion which
the partial period bears to the full month in which such effectiveness
or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of the Sub-Adviser shall be 155 Bishopsgate, London,
England.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
BARING INTERNATIONAL INVESTMENT ING MUTUAL FUNDS MANAGEMENT
LIMITED CO. LLC
By:____________________________ By:________________________
Title:_________________________ Title:_____________________
Attest By:_____________________ Attest By:_________________
Title:_________________________ Title:_____________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational
Approval Date
<S> <C> <C>
ING Emerging Markets Equity Fund 0.625% October 30, 1998
-------------------------------- ------ ----------------
ING International Equity Fund 0.625% October 30, 1998
-------------------------------- ------ ----------------
ING International Bond Fund 0.500% October 30, 1998
-------------------------------- ------ ----------------
</TABLE>
---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
<PAGE> 1
5(b)(iii)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and ING Investment Management Advisors, B.V. (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of
the Investment Adviser and the Trust's Board of Trustees, the
Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the portions of the Funds allocated to it by
the Investment Adviser, and place all orders for the purchase and sale
of securities for such portions of the Funds. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Trust's
organizational documentation, and the respective stated investment
objective, policies and restrictions of the Funds, as amended, will use
its best efforts to safeguard and promote the welfare of the Funds, and
will comply with other policies which the Trust's Board of Trustees or
the Investment Adviser, as the case may be, may from time to time
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds either
directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request.
The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 adopted under the Investment Company Act all records
required to be maintained by Sub-Adviser on behalf of the Investment
Adviser under Rule 3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the
Sub-Adviser and the Sub-Adviser will accept as full compensation
therefor a fee computed daily and paid monthly in arrears at the annual
rate set forth on Schedule A, based on each Fund's average daily net
assets, computed in the manner set forth in the Registration Statement
of the Trust. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each
payment of sub-advisory fees is due hereunder. Further, if the fees
payable to the Sub-Adviser begin to accrue before the end of any month,
or if this Agreement terminates before the end of any month, then such
fees for such month shall be prorated according to the proportion which
the partial period bears to the full month in which such effectiveness
or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of the Sub-Adviser shall be Schenkkade 65, 2595 AS The
Hague, The Netherlands.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
ING INVESTMENT MANAGEMENT ING MUTUAL FUNDS MANAGEMENT CO. LLC
ADVISORS, B.V.
By: _________________________ By:________________________________
Title: ______________________ Title:_____________________________
Attest By:___________________ Attest By:_________________________
Title: ______________________ Title: ____________________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
------------ --------- ----------------------------
<S> <C> <C>
ING Global Brand Names Fund 0.500% October 30, 1998
--------------------------- ------ ----------------
ING European Equity Fund 0.575% October 30, 1998
------------------------ ------ ----------------
ING Global Information
-----------------------
Technology Fund 0.625% October 30, 1998
--------------- ------ ----------------
ING Global Real Estate Fund 0.500% October 30, 1998
--------------------------- ------ ----------------
</TABLE>
---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
<PAGE> 1
Exhibit 5(b)(iv)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING
MUTUAL FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the
"Investment Adviser"), and ING Investment Management, LLC (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), and engages in
the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered during
the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions
for, the portions of the Funds allocated to it by the Investment Adviser,
and place all orders for the purchase and sale of securities for such
portions of the Funds. In the performance of its duties, the Sub-Adviser
will comply with the provisions of the Trust's organizational
documentation, and the respective stated investment objective, policies
and restrictions of the Funds, as amended, will use its best efforts to
safeguard and promote the welfare of the Funds, and will comply with other
policies which the Trust's Board of Trustees or the Investment Adviser, as
the case may be, may from time to time determine and communicate to the
Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds
either directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule
3la-2 adopted under the Investment Company Act all records required to be
maintained by Sub-Adviser on behalf of the Investment Adviser under Rule
3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed pursuant
to this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears at the annual rate set forth on Schedule A,
based on each Fund's average daily net assets, computed in the manner set
forth in the Registration Statement of the Trust. In the event that
investment advisory fees charged to a Fund by the Investment Adviser are
waived, deferred or reduced, then sub-advisory fees payable in accordance
with this Paragraph 7 shall be proportionally waived, deferred or reduced.
Such fee reduction, if applicable, shall be applied on a monthly basis at
the time each payment of sub-advisory fees is due hereunder. Further, if
the fees payable to the Sub-Adviser begin to accrue before the end of any
month, or if this Agreement terminates before the end of any month, then
such fees for such month shall be prorated according to the proportion
which the partial period bears to the full month in which such
effectiveness or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of the Sub-Adviser shall be 5780 Powers Ferry Road, N.W.
Suite 300, Atlanta, GA 30327.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ING INVESTMENT MANAGEMENT, LLC ING MUTUAL FUNDS MANAGEMENT CO. LLC
By:___________________________ By:___________________________
Title:________________________ Title:________________________
Attest By:____________________ Attest By:____________________
Title:________________________ Title:________________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Organizational
Name of Fund Fee Rate* Approval Date
- ------------ --------- -------------
<S> <C> <C>
ING Growth and Income Fund 0.375% October 30, 1998
ING U.S. Treasury Money Market Fund 0.125% October 30, 1998
ING Money Market Fund 0.125% October 30, 1998
ING Intermediate Bond Fund 0.250% October 30, 1998
ING High Yield Bond Fund 0.325% October 30, 1998
ING Mortgage Income Fund 0.250% October 30, 1998
</TABLE>
- ----------
* For the first year of operations, the fee rate will be one-quarter (1/4) of
the annual fee rate reflected herein. For the second year of operations, the fee
rate will be one-half (1/2) of the annual fee rate reflected herein.
<PAGE> 1
5(b)(v)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Furman Selz Capital Management LLC (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of
the Investment Adviser and the Trust's Board of Trustees, the
Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the portions of the Funds allocated to it by
the Investment Adviser, and place all orders for the purchase and sale
of securities for such portions of the Funds. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Trust's
organizational documentation, and the respective stated investment
objective, policies and restrictions of the Funds, as amended, will use
its best efforts to safeguard and promote the welfare of the Funds, and
will comply with other policies which the Trust's Board of Trustees or
the Investment Adviser, as the case may be, may from time to time
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds either
directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request.
The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 adopted under the Investment Company Act all records
required to be maintained by Sub-Adviser on behalf of the Investment
Adviser under Rule 3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the
Sub-Adviser and the Sub-Adviser will accept as full compensation
therefor a fee computed daily and paid monthly in arrears at the annual
rate set forth on Schedule A, based on each Fund's average daily net
assets, computed in the manner set forth in the Registration Statement
of the Trust. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each
payment of sub-advisory fees is due hereunder. Further, if the fees
payable to the Sub-Adviser begin to accrue before the end of any month,
or if this Agreement terminates before the end of any month, then such
fees for such month shall be prorated according to the proportion which
the partial period bears to the full month in which such effectiveness
or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of the Sub-Adviser shall be 230 Park Avenue, New York, NY
10169.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
FURMAN SELZ CAPITAL MANAGEMENT LLC ING MUTUAL MANAGEMENT FUNDS CO. LLC
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
Attest By:________________________ Attest By: _______________________
Title: ___________________________ Title: ___________________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational
Approval Date
<S> <C> <C>
ING National Tax-Exempt Bond Fund 0.250% October 30, 1998
--------------------------------- ------ ----------------
ING Mid Cap Growth Fund 0.500% October 30, 1998
----------------------- ------ ----------------
ING Balanced Fund 0.400% October 30, 1998
----------------- ------ ----------------
ING Focus Fund 0.500% October 30, 1998
-------------- ------ ----------------
</TABLE>
---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
<PAGE> 1
Exhibit 5(b)(vi)
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Furman Selz Capital Management LLC, on behalf of Delta Asset
Management (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Funds Trust (the "Trust"); and
WHEREAS, Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
Sub-Investment Advisory Services. Subject always to the supervision of
the Investment Adviser and the Trust's Board of Trustees, the
Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the portions of the Funds allocated to it by
the Investment Adviser, and place all orders for the purchase and sale
of securities for such portions of the Funds. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Trust's
organizational documentation, and the respective stated investment
objective, policies and restrictions of the Funds, as amended, will use
its best efforts to safeguard and promote the welfare of the Funds, and
will comply with other policies which the Trust's Board of Trustees or
the Investment Adviser, as the case may be, may from time to time
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
will use the same skill and care in providing such services as it uses in
providing services to other accounts for which it has investment management
responsibilities;
will place orders pursuant to its investment determinations for the Funds either
directly with the issuer or with any broker or dealer;
will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the purpose
of reviewing with representatives of the Investment Adviser on a regular basis
the management of the Funds, including, without limitation, review of the
general investment strategy of the Funds, interest rate considerations and
general conditions affecting the marketplace;
will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be maintained
and will furnish the Trust's Board of Trustees such periodic and special reports
as are required by applicable laws and regulations to be furnished or as the
Board may reasonably request;
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and will not use records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust;
will receive the recommendations as to guidelines and benchmarks of the
Investment Adviser with respect to the investment and reinvestment of the assets
of the Funds and perform its duties hereunder in accordance therewith;
in making investment recommendations for the Funds, the Sub-Adviser's personnel
will not inquire as to or take into consideration whether the issuers of
securities proposed for purchase or sale for a Fund's accounts are clients of
the Sub-Adviser or of its affiliates. In dealing with such clients, the
Sub-Adviser and its affiliates will not inquire as to or take into consideration
whether securities of those customers are held by the Trust; and
will provide advice and recommendations with respect to other aspects of the
business and affairs of the Funds and perform such other functions related to
the provision of investment management services as the Investment Adviser may
reasonably request.
<PAGE> 3
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
Compliance with Applicable Requirements. In carrying out its obligations under
this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust
<PAGE> 4
under the Securities Act of 1933, as amended, and the Investment Company Act;
(c) the provisions of the Trust Instrument of the Trust, as amended; (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
Books and Records. In compliance with Rule 3la-3 under the Investment
Company Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust on behalf of the Investment Adviser are the
property of the Trust and further agrees to surrender promptly to the
Trust or to the Investment Adviser any of such records upon request.
The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 adopted under the Investment Company Act all records
required to be maintained by Sub-Adviser on behalf of the Investment
Adviser under Rule 3la-1 under the Investment Company Act.
Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the
Sub-Adviser and the Sub-Adviser will accept as full compensation
therefor a fee computed daily and paid monthly in arrears at the annual
rate set forth on Schedule A, based on each Fund's average daily net
assets, computed in the manner set forth in the Registration Statement
of the Trust. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each
payment of sub-advisory fees is due hereunder. Further, if the fees
payable to the Sub-Adviser begin to accrue before the end of any month,
or if this Agreement terminates before the end of any month, then such
fees for such month shall be prorated according to the proportion which
the partial period bears to the full month in which such effectiveness
or termination occurs.
Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses than may be sustained in the purchase, holding or
sale of any security.
Limit of Liability. The terms the "ING Funds Trust" and "Trustees" (of the
Trust) refer, respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the Trust's
organizational
<PAGE> 5
documentation, to which reference is hereby made. The obligations of the "ING
Funds Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Funds,
and all persons dealing with the Funds or other series of the Trust must look
solely to the assets of the Funds for the enforcement of any claims against the
Trust.
Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule 1 and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
Termination. This Agreement may be terminated at any time as it pertains to a
Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 18 Campus Blvd., Suite 200, Newtown Square, PA
19073, and the address of Furman Selz Capital Management LLC shall be 230 Park
Avenue, New York, NY 10169.
Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations
<PAGE> 6
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
FURMAN SELZ CAPITAL MANAGEMENT LLC ING MUTUAL FUNDS
MANAGEMENT CO. LLC,
on behalf of Delta Asset
Management
By: ______________________________ By: _____________________________
Title: ___________________________ Title: __________________________
Attest By: _______________________ Attest By: ______________________
Title: ___________________________ Title: __________________________
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Organizational
Name of Fund Fee Rate* Approval Date
- ------------ --------- ----------------
<S> <C> <C>
ING Tax Efficient Equity Fund 0.400% October 30, 1998
</TABLE>
- ---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
Agreement made as of October 30, 1998, between ING Funds Trust, a
Delaware business trust (the "Trust"), on behalf of each of its investment
company portfolios listed in Schedule A attached, which may be amended from time
to time (each a "Fund" and collectively the "Funds") and ING Funds Distributor,
Inc., (the "Distributor").
WHEREAS, the Trust is an open-end management investment company,
organized as a Delaware business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the each Fund's
Class A, Class B, Class C and Class X shares (the "Shares") from and after the
date hereof in order to promote the growth of the Funds and facilitate the
distribution of their Shares; and
WHEREAS, it is contemplated that the Trust on behalf of the Funds will
adopt a plan of distribution pursuant to Rule 12b-1 under the 1940 Act (the
"Rule 12b-1 Plan") authorizing the payment by the Funds to the Distributor with
respect to the distribution of their Shares and the maintenance of shareholder
accounts.
NOW THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor (i) will act as agent for the distribution of
the Shares covered by the registration statement of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act") and (ii)
will perform such additional services as are provided in this Section 1
(collectively, the "Services"). As used in this Agreement, the term
"registration statement" shall mean Parts A (the prospectus), B (the statement
of additional information) and C of each registration statement that is filed on
Form N-1A, or any successor thereto, with the Commission, together with any
amendments thereto. The term "Prospectus" for purposes of this Agreement shall
mean each form of Prospectus and statement of additional information used by the
Funds for delivery to shareholders and prospective shareholders after the
effective dates of
<PAGE> 2
the above-referenced registration statements, together with any amendments and
supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor may in the future be the distributor of the
shares of several investment companies or series (together, "Investment
Companies") including Investment Companies having investment objectives similar
to those of the Funds. The Trust further understands that investors and
potential investors in the Funds may invest in shares of such other Investment
Companies. The Trust agrees that Distributor's duties to such Investment
Companies shall not be deemed in conflict with its duties to the Trust under
this paragraph 1.2.
To the extent not compensated by the Trust's Rule 12b-1 Plan,
the Distributor shall, at its own expense, finance appropriate activities which
it deems reasonable, which are primarily intended to result in the sale of the
Shares, including, but not limited to, advertising, compensation of
broker-dealers and sales personnel, the printing and mailing of prospectuses to
other than current Shareholders, and the printing and mailing of sales
literature.
1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
all rules and regulations promulgated by the Commission under the 1940 Act and
1934 Act, thereunder and all rules and regulations adopted by any securities
association.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Funds of the Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Trust's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
2
<PAGE> 3
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to
the Shares, the registration statement, and amendments thereto, filed by the
Trust with the Commission under the Securities Act have been carefully prepared
in conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and amendments thereto,
contain all statements required to be stated therein in conformity with said Act
and the rules and regulations of said Commission and all statements of fact
contained in any such registration statement are true and correct. Furthermore,
the registration statement does not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading to a purchaser of the Shares. The
Trust may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any Prospectus as, in the light of future developments, may, in
the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any Prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any Prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
Prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any Prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any Prospectus or necessary to make the
statements in either thereof not misleading; provided,
3
<PAGE> 4
however, that the Trust's agreement to indemnify Distributor, its partners or
employees, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations as are contained in any Prospectus and in such financial and
other statements as are furnished in writing to the Trust by Distributor and
used in the answers to the registration statement or in the corresponding
statements made in the Prospectus, or arising out of or based upon any omission
or alleged omission to state a material fact in connection with the giving of
such information required to be stated in such answers or necessary to make the
answers not misleading; and further provided that the Trust's agreement to
indemnify Distributor and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Trust or its Shareholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties under this Agreement.
The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Trust, the Trust will reimburse Distributor, its partners and employees,
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by Distributor or them.
The Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers or
Trustees or any such controlling person, may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers or Trustees or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
4
<PAGE> 5
information furnished in writing by Distributor to the Trust and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Trust required to be stated in such answers or necessary to make such
information not misleading. Distributor shall have the right of first control of
the defense of any action brought against the Trust, its officers or Trustees,
or any such controlling person, with counsel of its own choosing, satisfactory
to the Trust, if such action is based solely upon such alleged misstatement or
omission on Distributor's part, and in any other event the Trust, its officers
or Trustees or such controlling person shall each have the right to participate
in the defense or preparation of the defense of any such action.
1.13 No Shares shall be offered by either Distributor or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current Prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.13 shall in any way restrict
or have an application to or bearing upon the Trust's obligation to repurchase
Shares from any Shareholder in accordance with the provisions of the Trust's
Prospectus, Trust Instrument or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for
amendments to the registration statement or
Prospectus then in effect or for additional
information;
(b) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement
or Prospectus then in effect or the
initiation by service of process on the
Trust of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement of a material fact made
in the registration statement or Prospectus
then in effect or which requires the making
of a change in such registration statement
or Prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect
to any amendment to any registration
statement or Prospectus which may from time
to time be filed with the Commission.
5
<PAGE> 6
For purposes of this section, informal requests by or acts of
the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State
of New York.
2. Fee.
Distributor shall receive from the Funds identified in
Schedule A hereto (the "Distribution Plan Funds") all amounts received as sales
charges as described in the Funds' most current Prospectus. Out of such sales
charges, the Distributor may allow such concessions or reallowances to dealers
as it may from time to time determine. The distribution fee shall be accrued
daily and shall be paid on the first business day of each month, or at such
time(s) as the Distributor shall reasonably request.
3. Sale and Payment.
Shares of a Fund may be subject to a sales load and may be
subject to the imposition of a distribution fee pursuant to the Rule 12b-1
Distribution Plan. To the extent that Shares of a Fund are sold at an offering
price which includes a sales load or at net asset value subject to a contingent
deferred sales load with respect to certain redemptions (either within a single
class of Shares or pursuant to two or more classes of Shares), such Shares shall
hereinafter be referred to collectively as "Load Shares". Under this Agreement,
the following provisions shall apply with respect to the sale of, and payment
for, Load Shares.
3.1 Distributor shall have the right to purchase Load Shares
at their net asset value and to sell such Load Shares to the public against
orders therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Load Fund or to its order
6
<PAGE> 7
an amount in Boston or New York clearing house funds equal to the applicable net
asset value of such Shares. Distributor may retain so much of any sales charge
or underwriting discount as is not allowed by Distributor as a concession to
dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net
asset value of such Load Share, plus any applicable sales charge, all as set
forth in the current Prospectus of the Load Fund. The net asset value of Shares
shall be determined in accordance with the provisions of the Trust Instrument
and Bylaws of the Trust and the then-current Prospectus of the Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Trust or the Load Fund(s) with any other investment company or the
acquisition by the Trust or the Load Fund(s) of all or substantially all of the
assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in the
nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Load Shares pursuant to any exchange and reinvestment
privileges described in any then-current Prospectus of the Load Fund; and (e)
otherwise in accordance with any then-current Prospectus of the Load Fund.
6. Term, Duration and Termination.
The initial term of this Agreement (the "Initial Term") shall
be for a period of one year commencing on the date this Agreement is executed by
both parties. Thereafter, if not terminated, this Agreement shall continue with
respect to a particular Fund automatically for successive one-year terms,
provided that such continuance is specifically approved at least annually by (a)
by the vote of a majority of those members of the Trust's Board of Trustees who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting for the purpose of voting on such approval and (b) by the
vote of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of such Fund. This Agreement is terminable without
penalty, on not less than sixty days' prior written notice, by the Trust's Board
of Trustees, by vote of a majority of the outstanding voting securities of the
Trust or by the Distributor. This Agreement will also terminate automatically in
the event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested persons" and "assignment" shall
have the same meanings as ascribed to such terms in the 1940 Act.) In the event
this Agreement is terminated by the Trust, the Distributor shall be entitled to
be paid any applicable contingent deferred sales charges (as
7
<PAGE> 8
contemplated by Section 2 of this Agreement) on the redemption of shares sold
prior to the effective date of such termination.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
ING FUNDS TRUST ING FUNDS DISTRIBUTOR, INC.
By: By:
Title: Title:
Date: Date:
9
<PAGE> 10
SCHEDULE A
ING Money Market Fund
ING U.S. Treasury Money Market Fund
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Fixed Income Fund
ING Mortgage Income Fund
ING Federal Tax-Exempt Bond Fund
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Best Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
A-1
<PAGE> 11
ING FUNDS TRUST
CLASS A
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the distribution Plan
for the Class A shares of the portfolio series (each a "Fund" and collectively
the "Funds") of ING Funds Trust, a Delaware business trust (the "Trust"),
adopted pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act") and the related agreement between the Trust and ING
Funds Distributor Inc. (the "Distributor"). During the effective term of this
Plan, the Fund may incur expenses primarily intended to result in the sale of
its Class A shares upon the terms and conditions hereinafter set forth:
SECTION 1. The Fund shall pay to the Distributor a monthly fee at the annual
rate of 0.50% of the average net asset value of the Class A shares of the Fund,
as determined at the close of each business day during the month (the "Monthly
Limitation"), to compensate the Distributor for services provided and expenses
incurred by it in connection with the offering of the Fund's Class A shares,
which may include, without limitation, (i) the payment by the Distributor to
investment dealers of commissions on the sale of Class A shares as set forth in
the then current Prospectus or Statement of Additional Information of the Fund;
(ii) paying compensation to and expenses of personnel of the Distributor who
support distribution of Class A shares; (iii) paying of or reimbursing the
Distributor for interest and other borrowing costs on its unreimbursed Carry
Forward Expenses (as hereinafter defined) at the rate paid by the Distributor
or, if such amounts are financed by the Distributor by its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which shall mean
the most preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of the Wall
Street Journal (or if such prime rate is no longer so reported, such other rate
as may be designated from time to time by the Distributor with the approval of
the Qualified Trustees, as defined below); and (iv) other direct distribution
costs of the type approved by the Board of Trustees, including without
limitation the costs of sales literature, advertising and prospectuses, (other
than those furnished to current shareholders) and state "blue sky" registration
expenses. Such fees shall be payable for each month within 15 days after the
close of such month. The Distributor's cost of providing the above mentioned
services are hereinafter collectively referred to as "Distribution Costs". Carry
Forward Expenses are Distribution Costs that are not paid in the fiscal month in
which they arise because they exceed the Monthly Limitation. A majority of the
Qualified Trustees, may, from time to time, reduce the amount of such payments,
or may suspend the operation of the Plan for such period or periods of time as
they may determine.
SECTION 2. This Plan shall not take effect until: (a) it has been approved by a
vote of a majority of the outstanding Class A shares of the Fund; (b) it has
been approved,
<PAGE> 12
together with any related agreements, by votes of the majority (or whatever
greater ercentage may, from time to time, be required by Section 12(b) of the
Act or the rules and regulations thereunder) of both (i) the Trustees of the
Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting
called for the purpose of voting on this Plan or such agreement; and (c) the
Fund has received the proceeds of the initial public offering of its Class A
shares.
SECTION 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
SECTION 4. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by vote of the majority of the outstanding Class A shares
of the Fund. In the event of such termination, the Board and its Qualified
Trustees shall determine whether the Distributor is entitled to payment from the
Fund of all Carry Forward Expenses and related costs properly incurred in
respect of Shares sold prior to the effective date of such termination, and
whether the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under Section 1 hereof, until such time as
the Distributor has been reimbursed for all such amounts by the Fund and by
retaining CDSC payments.
SECTION 6. All agreements with any person relating to implementation of this
Plan shall be in writing, and any agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Class A shares of the Fund, on not more than 60
days' written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 7. This Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding Class A shares of the Fund and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it, and (b) the term "majority of the outstanding
Class A shares of the Fund" means the affirmative vote, at a duly called and
held meeting of shareholders of the Fund, (i) of the holders of 67% or more of
the Class A shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the
<PAGE> 13
outstanding Class A shares of the Fund entitled to vote at such meeting are
present in person or by proxy, or (ii) of the holders of more than 50% of he
outstanding shares of the Class of shares of the Fund entitled to vote at such
meeting, whichever is less, and (c) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
SECTION 9. So long as the Plan is in effect, the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of such
Qualified Trustees. This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Funds, and the Distributor
as evidenced by their execution hereof.
Executed as of October 30, 1998
ING FUNDS TRUST. ING FUNDS DISTRIBUTOR, INC.
By: ------------------- By: -----------------------
<PAGE> 14
ING FUNDS TRUST
CLASS B
CLASS C
CLASS X
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the distribution Plan
for the Class B, C and X shares of the portfolio series (each a "Fund" and
collectively the "Funds") of ING Funds Trust, a Delaware business trust (the
"Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") and the related agreement between the Trust and
ING Funds Distributor Inc. (the "Distributor"). During the effective term of
this Plan, the Fund may incur expenses primarily intended to result in the sale
of its Class B, C and X shares upon the terms and conditions hereinafter set
forth:
SECTION 1. The Fund shall pay to the Distributor a monthly fee at the annual
rate of 0.75% of the average net asset value of the Class B, C and X shares of
the Fund, as determined at the close of each business day during the month (the
"Monthly Limitation"), to compensate the Distributor for services provided and
expenses incurred by it in connection with the offering of the Fund's Class B, C
and X shares, which may include, without limitation, (i) the payment by the
Distributor to investment dealers of commissions on the sale of Class B, C or X
shares as set forth in the then current Prospectus or Statement of Additional
Information of the Fund; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Class B, C or X shares; (iii)
paying of or reimbursing the Distributor for interest and other borrowing costs
on its unreimbursed Carry Forward Expenses (as hereinafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the Distributor by
its own resources or by an affiliate, at the rate of 1% per annum above the
prime rate (which shall mean the most preferential interest rate on corporate
loans at large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is no longer
so reported, such other rate as may be designated from time to time by the
Distributor with the approval of the Qualified Trustees, as defined below); and
(iv) other direct distribution costs of the type approved by the Board,
including, without limitation, the costs of sales literature, advertising and
prospectuses, (other than those furnished to current shareholders) and state
"blue sky" registration expenses. Such fees shall be payable for each month
within 15 days after the close of such month. The Distributor's cost of
providing the above mentioned services are hereinafter collectively referred to
as "Distribution Costs". Carry Forward Expenses are Distribution Costs that are
not paid in the fiscal month in which they arise because they exceed the Monthly
Limitation. A majority of the Qualified Trustees, may, from time to time, reduce
the amount of such payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until: (a) it has been approved by a
vote of a majority of the outstanding Class B, Class C and Class X shares of the
Fund; (b) it
<PAGE> 15
has been approved, together with any related agreements, by votes of the
majority (or whatever greater percentage may, from time to time, be required by
Section 12(b) of the Act or the rules and regulations thereunder) of both (i)
the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in
person at a meeting called for the purpose of voting on this Plan or such
agreement; and (c) the Fund has received the proceeds of the initial public
offering of its Class B, Class C and Class X shares.
SECTION 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
SECTION 4. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by vote of the majority of the outstanding Class B, Class
C or Class X shares of the Fund. In the event of such termination, the Board and
its Qualified Trustees shall determine whether the Distributor is entitled to
payment from the Fund of all Carry Forward Expenses and related costs properly
incurred in respect of Shares sold prior to the effective date of such
termination, and whether the Fund shall continue to make payment to the
Distributor in the amount the Distributor is entitled to retain under Section 1
hereof, until such time as the Distributor has been reimbursed for all such
amounts by the Fund and by retaining CDSC payments.
SECTION 6. All agreements with any person relating to implementation of this
Plan shall be in writing, and any agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Class B, Class C or Class X shares of the Fund, on
not more than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
SECTION 7. This Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding Class B, Class C or Class X shares of
the Fund and all material amendments to this Plan shall be approved in the
manner provided for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it, and (b) the term "majority of the outstanding
Class B and Class X shares of the Fund" means the affirmative vote, at a duly
called and held meeting of shareholders of the Fund, (i) of the holders of 67%
or more of the Class B or Class X shares of the Fund present (in person or by
proxy) and entitled to vote at such meeting, if the holders of
<PAGE> 16
more than 50% of the outstanding Class B, Class C or Class X shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (ii) of
the holders of more than 50% of the outstanding shares of the Class of shares of
the Fund entitled to vote at such meeting, whichever is less, and (c) the terms
"assignment" and "interested person" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange Commission.
SECTION 9. So long as the Plan is in effect, the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of such
Qualified Trustees. This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Funds, and the Distributor
as evidenced by their execution hereof.
Executed as of October 30, 1998
ING FUNDS TRUST. ING FUNDS DISTRIBUTOR, INC.
By: ---------------- By: ------------------------
<PAGE> 1
Exhibit 8
CUSTODY AGREEMENT
THIS AGREEMENT is made effective the ___ day of __________, 19__, by
and between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under
the laws of the state of Missouri, having its trust office located at 801
Pennsylvania Avenue, Kansas City, Missouri 64105 ("IFTC"), and
___________________, a ______________________________ (CORPORATION,/TRUST,)
having its principal office and place of business at ________________ ("Fund").
(EACH REGISTERED INVESTMENT COMPANY LISTED ON SCHEDULE A HERETO, AS IT MAY BE
AMENDED FROM TIME TO TIME, INCORPORATED HEREIN BY REFERENCE, EACH HAVING ITS
PRINCIPAL OFFICE AND PLACE OF BUSINESS AT _____________ (EACH A "FUND").
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as custodian of the assets of
the Fund's investment portfolio or portfolios (each a "Portfolio", and
collectively the "Portfolios"); and
WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
- - APPOINTMENT OF CUSTODIAN AND AGENT. Fund hereby constitutes and appoints IFTC
as custodian of the investment securities, interests in loans and other
non-cash investment property, and monies at any time owned by each of the
Portfolios and delivered to IFTC as custodian hereunder ("Assets").
- - REPRESENTATIONS AND WARRANTIES.
- - Fund hereby represents, warrants and acknowledges to IFTC:
- - That it is a (CORPORATION/TRUST) duly organized and existing and in good
standing under the laws of its state of organization, and that it is
registered under the 1940 Act; and
- - That it has the requisite power and authority under applicable law (ITS
ARTICLES OF INCORPORATION AND ITS BYLAWS/AND ITS DECLARATION OF TRUST) to
enter into this Agreement; it has taken all requisite action necessary to
appoint IFTC as custodian for the Portfolios; this Agreement has been duly
executed and delivered by Fund; and this Agreement constitutes a legal, valid
and binding obligation of Fund, enforceable in accordance with its terms.
- - IFTC hereby represents, warrants and acknowledges to Fund:
- - That it is a trust company duly organized and existing and in good standing
under the laws of the State of Missouri; and
- - That it has the requisite power and authority under applicable law, its
charter and its bylaws to enter into and perform this Agreement; this
Agreement has been duly executed and delivered by IFTC; and this Agreement
constitutes a legal, valid and binding obligation of IFTC, enforceable in
accordance with its terms.
- - DUTIES AND RESPONSIBILITIES OF THE PARTIES.
- - Delivery of Assets. Except as permitted by the 1940 Act, Fund will deliver or
cause to be delivered to IFTC on the effective date hereof, or as soon
thereafter as practicable, and from time to time thereafter, all Assets acquired
by, owned by or from time to time coming into the possession of each of the
Portfolios during the
<PAGE> 2
term hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.
- - Delivery of Accounts and Records. Fund will turn over or cause to be turned
over to IFTC all of each Portfolio's relevant accounts and records needed by
IFTC to perform its duties and responsibilities hereunder fully and properly .
IFTC may rely conclusively on the completeness and correctness of such
accounts and records.
- - Delivery of Assets to Third Parties. IFTC will receive delivery of and keep
safely the Assets of each Portfolio segregated in a separate account. Upon
delivery of any such Assets to a subcustodian appointed pursuant hereto
(hereinafter referred to as "Subcustodian"), IFTC will create and maintain
records identifying such Assets as belonging to the applicable Portfolio. IFTC
is responsible for the safekeeping of the Assets only until they have been
transmitted to and received by other persons as permitted under the terms
hereof, except for Assets transmitted to Subcustodians, for which IFTC remains
responsible to the extent provided herein. IFTC may participate directly or
indirectly through a subcustodian in the Depository Trust Company (DTC),
Treasury/Federal Reserve Book Entry System (Fed System), Participant Trust
Company (PTC) or other depository approved by Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and collectively
the "Depositories"). IFTC will be responsible to Fund for any loss, damage or
expense suffered or incurred by Fund resulting from the actions or omissions
of any Depository only to the same extent such Depository is responsible to
IFTC.
- - Registration. IFTC will at all times hold registered Assets in the name of
IFTC as custodian, the applicable Portfolio, or a nominee of either of them,
unless specifically directed by Instructions, as hereinafter defined, to hold
such registered Assets in so-called "street name;" provided that, in any
event, IFTC will hold all such Assets in an account of IFTC as custodian
containing only Assets of the applicable Portfolio, or only assets held by
IFTC as a fiduciary or custodian for customers; and provided further, that
IFTC's records at all times will indicate the Portfolio or other customer for
which such Assets are held and the respective interests therein. If, however,
Fund directs IFTC to maintain Assets in "street name", notwithstanding
anything contained herein to the contrary, IFTC will be obligated only to
utilize its best efforts to timely collect income due the Portfolio on such
Assets and to notify the Portfolio of relevant information, such as maturities
and pendency of calls, and corporate actions including, without limitation,
calls for redemption, tender or exchange offers, declaration, record and
payment dates and amounts of any dividends or income, reorganization,
recapitalization, merger, consolidation, split-up of shares, change of par
value, or conversion ("Corporate Actions"). All Assets and the ownership
thereof by Portfolio will at all times be identifiable on the records of IFTC.
Fund agrees to hold IFTC and its nominee harmless for any liability as a
shareholder of record of securities held in custody.
- - Exchange. Upon receipt of Instructions, IFTC will exchange, or cause to be
exchanged, Assets held for the account of a Portfolio for other Assets issued
or paid in connection with any Corporate Action or otherwise, and will deposit
any such Assets in accordance with the terms of any such Corporate Action.
Without Instructions, IFTC is authorized to exchange Assets in temporary form
for Assets in definitive form, to effect an exchange of shares when the par
value of stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to surrendering
any convertible security.
- - Purchases of Investments -- Other Than Options and Futures. On each business
day on which a Portfolio makes a purchase of Assets other than options and
futures, Fund will deliver to IFTC Instructions specifying with respect to
each such purchase:
- - If applicable, the name of the Portfolio making such purchase;
- - The name of the issuer and description of the Asset;
- - The number of shares and the principal amount purchased, and accrued interest,
if any;
<PAGE> 3
- - The trade date;
- - The settlement date;
- - The purchase price per unit and the brokerage commission, taxes and other
expenses payable in connection with the purchase;
- - The total amount payable upon such purchase;
- - The name of the person from whom or the broker or dealer through whom the
purchase was made; and
- - Whether the Asset is to be received in certificated form or via a specified
Depository.
In accordance with such Instructions, IFTC will pay for out of monies held for
the purchasing Portfolio, but only insofar as such monies are available for such
purpose, and receive the Assets so purchased by or for the account of such
Portfolio, except that IFTC, or a Subcustodian, may in its sole discretion
advance funds to such Portfolio which may result in an overdraft because the
monies held on behalf of such Portfolio are insufficient to pay the total amount
payable upon such purchase. Except as otherwise instructed by Fund, IFTC will
make such payment only upon receipt of Assets: (a) by IFTC; (b) by a clearing
corporation of a national exchange of which IFTC is a member; or (c) by a
Depository. Notwithstanding the foregoing, (i) IFTC may release funds to a
Depository prior to the receipt of advice from the Depository that the Assets
underlying a repurchase agreement have been transferred by book-entry into the
account maintained with such Depository by IFTC on behalf of its customers;
provided that IFTC's instructions to the Depository require that the Depository
make payment of such funds only upon transfer by book-entry of the Assets
underlying the repurchase agreement in such account; (ii) IFTC may make payment
for time deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options, before receipt of
an advice or confirmation evidencing said deposit or entry into such
transaction; and (iii) IFTC may make, or cause a Subcustodian to make, payment
for the purchase of Assets the settlement of which occurs outside of the United
States of America in accordance with generally accepted local custom and market
practice.
- - Sales and Deliveries of Investments -- Other Than Options and Futures. On each
business day on which a Portfolio makes a sale of Assets other than options
and futures, Fund will deliver to IFTC Instructions specifying with respect to
each such sale:
- - If applicable, the name of the Portfolio making such sale;
- - The name of the issuer and description of the Asset;
- - The number of shares and principal amount sold, and accrued interest, if any;
- - The date on which the Assets sold were purchased or other information
identifying the Assets sold and to be delivered;
- - The trade date;
- - The settlement date;
- - The sale price per unit and the brokerage commission, taxes or other expenses
payable in connection with such sale;
- - The total amount to be received by the Portfolio upon such sale; and
- - The name and address of the broker or dealer through whom or person to whom
the sale was made.
IFTC will deliver or cause to be delivered the Assets thus designated as sold
for the account of the selling Portfolio as specified in the Instructions.
Except as otherwise instructed by Fund, IFTC will make such delivery upon
receipt of: (a) payment therefor in such form as is satisfactory to IFTC; (b)
credit to the account of IFTC with a clearing corporation of a national
securities exchange of which IFTC is a member; or (c) credit to the account
maintained by IFTC on behalf of its customers with a Depository. Notwithstanding
the foregoing: (i) IFTC will deliver Assets held in physical form in accordance
with "street delivery custom" to a broker or its clearing agent; or (ii) IFTC
may make, or cause a Subcustodian to make,
<PAGE> 4
delivery of Assets the settlement of which occurs outside of the United States
of America upon payment therefor in accordance with generally accepted local
custom and market practice.
- - Purchases or Sales of Options and Futures. On each business day on which a
Portfolio makes a purchase or sale of the options and/or futures listed below,
Fund will deliver to IFTC Instructions specifying with respect to each such
purchase or sale:
- - If applicable, the name of the Portfolio making such purchase or sale;
- - In the case of security options:
- - The underlying security;
- - The price at which purchased or sold;
- - The expiration date;
- - The number of contracts;
- - The exercise price;
- - Whether the transaction is an opening, exercising, expiring or closing
transaction;
- - Whether the transaction involves a put or call;
- - Whether the option is written or purchased;
- - Market on which option traded; and
- - Name and address of the broker or dealer through whom the sale or
purchase was made.
- - In the case of options on indices:
- - The index;
- - The price at which purchased or sold;
- - The exercise price;
- - The premium;
- - The multiple;
- - The expiration date;
- - Whether the transaction is an opening, exercising, expiring or closing
transaction;
- - Whether the transaction involves a put or call;
- - Whether the option is written or purchased; and
- - The name and address of the broker or dealer through whom the sale or purchase
was made, or other applicable settlement instructions.
- - In the case of security index futures contracts:
- - The last trading date specified in the contract and, when available, the
closing level, thereof;
- - The index level on the date the contract is entered into;
- - The multiple;
- - Any margin requirements;
- - The need for a segregated margin account (in addition to Instructions, and if
not already in the possession of IFTC, Fund will deliver a substantially
complete and executed custodial safekeeping account and procedural agreement,
incorporated herein by reference); and
- - The name and address of the futures commission merchant through whom the sale
or purchase was made, or other applicable settlement instructions.
- - In the case of options on index future contracts:
- - The underlying index future contract;
- - The premium;
- - The expiration date;
- - The number of options;
- - The exercise price;
- - Whether the transaction involves an opening, exercising, expiring or closing
transaction;
- - Whether the transaction involves a put or call;
<PAGE> 5
- - Whether the option is written or purchased; and
- - The market on which the option is traded.
- - Assets Pledged or Loaned. If specifically allowed for in the prospectus of a
Portfolio, and subject to such additional terms and conditions as IFTC may
require:
- - Upon receipt of Instructions, IFTC will release or cause to be released Assets
to the designated pledgee by way of pledge or hypothecation to secure any loan
incurred by a Portfolio; provided, however, that IFTC will release Assets only
upon payment to IFTC of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, further
Assets may be released or caused to be released for that purpose. Upon receipt
of Instructions, IFTC will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the Assets pledged or
hypothecated therefor and upon surrender of the note or notes evidencing such
loan.
- - Upon receipt of Instructions, IFTC will release Assets to the designated
borrower; provided, however, that the Assets will be released only upon
deposit with IFTC of full cash collateral as specified in such Instructions,
and that the lending Portfolio will retain the right to any dividends,
interest or distribution on such loaned Assets. Upon receipt of Instructions
and the loaned Assets, IFTC will release the cash collateral to the borrower.
- - Routine Matters. IFTC will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with the Assets except as may be otherwise
provided herein or upon Instruction from Fund.
- - Deposit Accounts. IFTC will open and maintain one or more special purpose
deposit accounts for each Portfolio in the name of IFTC in such banks or trust
companies (including, without limitation, affiliates of IFTC) as may be
designated by it or Fund in writing ("Accounts"), subject only to draft or
order by IFTC upon receipt of Instructions. IFTC will deposit all monies
received by IFTC from or for the account of a Portfolio in an Account
maintained for such Portfolio. Subject to Section 5.J hereof, IFTC agrees:
1. To make Fed Funds available to the applicable Portfolio at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into an
Account, in the amount of the check;
2. To make funds available immediately upon a deposit made by Federal Reserve
wire; and
3. To make funds available on the next business day after deposit of ACH wires.
- - Income and Other Payments. IFTC will:
- - Collect, claim and receive and deposit for the account of the applicable
Portfolio all income (including income from the Accounts) and other payments
which become due and payable on or after the effective date hereof with
respect to the Assets, and credit the account of such Portfolio in accordance
with the schedule attached hereto as Exhibit A. If, for any reason, a
Portfolio is credited with income that is not subsequently collected, IFTC may
reverse that credited amount. If monies are collected after such reversal,
IFTC will credit the Portfolio in that amount;
- - Execute ownership and other certificates and affidavits for all federal, state
and local tax purposes in connection with the collection of bond and note
coupons; and
- - Take such other action as may be necessary or proper in connection with (a)
the collection, receipt and deposit of such income and other payments,
including but not limited to the presentation for payment of all coupons and
other income items requiring presentation; and all other Assets which may
mature or be called,
<PAGE> 6
redeemed, retired or otherwise become payable and regarding which IFTC
has actual knowledge, or should reasonably be expected to have knowledge; and
(b) the endorsement for collection, in the name of Fund or a Portfolio, of all
checks, drafts or other negotiable instruments.
IFTC, however, will not be required to institute suit or take other
extraordinary action to enforce collection except upon receipt of Instructions
and upon being indemnified to its satisfaction against the costs and expenses of
such suit or other actions. IFTC will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the same pursuant
to Instructions.
- - Proxies and Notices. IFTC will promptly deliver or mail (or have delivered or
mailed) to Fund all proxies properly signed, all notices of meetings, all
proxy statements and other notices, requests or announcements affecting or
relating to Assets and will, upon receipt of Instructions, execute and deliver
or mail (or cause its nominee to execute and deliver or mail) such proxies or
other authorizations as may be required. Except as provided herein or pursuant
to Instructions hereafter received by IFTC, neither it nor its nominee will
exercise any power inherent in any such Assets, including any power to vote
the same, or execute any proxy, power of attorney, or other similar instrument
voting any of such Assets, or give any consent, approval or waiver with
respect thereto, or take any other similar action.
- - Disbursements. IFTC will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other obligations of each
Portfolio (including but not limited to obligations in connection with the
conversion, exchange or surrender of Assets, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal fees, auditors'
fees, transfer agents' fees, brokerage commissions, compensation to personnel,
and other operating expenses of such Portfolio) pursuant to Instructions
setting forth the name of the person to whom payment is to be made, and the
amount and purpose of the payment.
- - Daily Statement of Accounts. IFTC will, within a reasonable time, render to
Fund a detailed statement of the amounts received or paid and of Assets
received or delivered for the account of each Portfolio during each business
day. IFTC will maintain such books and records as are necessary to enable it
to render, from time to time upon request by Fund, a detailed statement of the
Assets. IFTC will permit, and upon Instruction will cause any Subcustodian to
permit, such persons as are authorized by Fund, including Fund's independent
public accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if demanded, IFTC
will permit, and will cause any Subcustodian to permit, federal and state
regulatory agencies to examine the Assets, books and records of the
Portfolios.
- - Appointment of Subcustodians. Notwithstanding any other provisions hereof:
- - All or any of the Assets may be held in IFTC's own custody or in the custody
of one or more other banks or trust companies (including, without limitation,
affiliates of IFTC) acting as Subcustodians as may be selected by IFTC. Any
such Subcustodian selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the applicable
Portfolio for any loss, damage or expense suffered or incurred by such
Portfolio resulting from the actions or omissions of any Subcustodians
selected and appointed by IFTC (except Subcustodians appointed at the request
of Fund and as provided in Subsection 2 below) to the same extent IFTC would
be responsible to Fund hereunder if it committed the act or omission itself.
2. Upon request of Fund, IFTC will contract with other Subcustodians reasonably
acceptable to IFTC for purposes of (a) effecting third-party repurchase
transactions with banks, brokers, dealers, or other entities through the use
of a common custodian or subcustodian, or (b) providing depository and
clearing agency services with respect to certain variable rate demand note
securities, or (c) for other reasonable purposes specified by Fund; provided,
however, that IFTC will be responsible to Fund for any loss, damage or
expense suffered or incurred by Fund resulting from the actions or omissions
of any such Subcustodian only
<PAGE> 7
to the same extent such Subcustodian is responsible to IFTC. Fund may review
IFTC's contracts with such Subcustodians.
Q. Foreign Custody Manager.
1. Delegation to IFTC as FCM- The Fund, pursuant to resolution adopted by its
Board of Trustees or Directors (the "Board"), hereby delegates to IFTC,
subject to Section (b) of Rule 17f-5, the responsibilities set forth in this
Section Q with respect to Foreign Assets held outside the United States, and
IFTC hereby accepts such delegation, as Foreign Custody Manager ("FCM") of
each Portfolio. It is understood and agreed that IFTC will sub-contract the
performance of its responsibilities hereunder with State Street Bank & Trust
Company. IFTC will be responsible to the applicable Portfolio for any loss,
damage or expense suffered or incurred by such Portfolio resulting from the
actions or omissions of State Street Bank & Trust Company to the same extent
IFTC would be responsible to Fund hereunder if it committed the act or
omission itself. References herein to "FCM" shall include IFTC and State
Street Bank & Trust Company.
2. Definitions. Capitalized terms in this Section Q have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory Securities
Depositories operating in the country); prevailing or developing custody and
settlement practices; and laws and regulations applicable to the safekeeping
and recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of
Rule 17f-5, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and
such cash and cash equivalents in amounts deemed by Fund to be reasonably
necessary to effect the Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning set forth in section
(a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if
the Fund determines to place Foreign Assets in a country outside the United
States (i) because required by law or regulation; (ii) because securities
cannot be withdrawn from such foreign securities depository or clearing
agency; or (iii) because maintaining or effecting trades in securities
outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
3. Countries Covered. The FCM is responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Exhibit C hereto , which may be
amended from time to time by the FCM. The FCM will list on Exhibit C the
Eligible Foreign Custodians selected by the FCM to maintain the assets of
each Portfolio. Mandatory Securities Depositories are listed on Exhibit D
hereto, which Exhibit D may be amended from time to time by the FCM. The FCM
will provide amended versions of Exhibits C and D in accordance with
subsection 7 of this Section Q.
Upon the receipt by the FCM of Instructions to open an account, or to place
or maintain Foreign Assets, in a country listed on Exhibit C, and the
fulfillment by the Fund of the applicable account opening requirements for
such country, the FCM is deemed to have been delegated by the Board
responsibility as FCM with respect to that country and to have accepted such
delegation. Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian selected by
the FCM in a designated country, the delegation by the Board to IFTC as FCM
for that country is deemed to have been
<PAGE> 8
withdrawn and IFTC will immediately cease to be the FCM of the Portfolio with
respect to that country.
The FCM may withdraw its acceptance of delegated responsibilities with
respect to a designated country upon written notice to the Fund. Thirty days
(or such longer period as to which the parties agree in writing) after
receipt of any such notice by the Fund, IFTC will have no further
responsibility as FCM to a Portfolio with respect to the country as to which
IFTC's acceptance of delegation is withdrawn.
4. Scope of Delegated Responsibilities.
a. Selection of Eligible Foreign Custodians. Subject to the provisions of
this Section Q, the FCM may place and maintain the Foreign Assets in the care of
the Eligible Foreign Custodian selected by the FCM in each country listed on
Exhibit C, as amended from time to time.
In performing its delegated responsibilities as FCM to place or maintain
Foreign Assets with an Eligible Foreign Custodian, the FCM will determine
that the Foreign Assets will be subject to reasonable care, based on the
standards applicable to custodians in the country in which the Foreign Assets
will be held by that Eligible Foreign Custodian, after considering all
factors relevant to the safekeeping of such assets, including, without
limitation, those set forth in Rule 17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians. The FCM will determine that the
contract (or the rules or established practices or procedures in the case of
an Eligible Foreign Custodian that is a foreign securities depository or
clearing agency) governing the foreign custody arrangements with each
Eligible Foreign Custodian selected by the FCM will provide reasonable care
for the Foreign Assets held by that Eligible Foreign Custodian based on the
standards applicable to custodians in the particular country. Each such
contract will include the provisions set forth in Rule 17f-5(c)(2)(I)(A)
through (F), or, in lieu of any or all of the provisions set forth in said
(A) through (F), such other provisions that the FCM determines will provide,
in their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in said (A) through (F) in their
entirety.
c. Monitoring. In each case in which the FCM maintains Foreign Assets with an
Eligible Foreign Custodian selected by the FCM, the FCM will establish a
system to monitor (a) the appropriateness of maintaining the Foreign Assets
with such Eligible Foreign Custodian and (b) the contract governing the
custody arrangements established by the FCM with the Eligible Foreign
Custodian. In the event the FCM determines that the custody arrangements with
an Eligible Foreign Custodian it has selected are no longer appropriate, the
FCM will notify the Board in accordance with subsection 7 of this Section Q.
5. Guidelines for the Exercise of Delegated Authority. For purposes of this
Section Q, the Board will be solely responsible for considering and
determining to accept such Country Risk as is incurred by placing and
maintaining the Foreign Assets in each country for which IFTC is serving as
FCM of a Portfolio, and the Board will be solely responsible for monitoring
on a continuing basis such Country Risk to the extent that the Board
considers necessary or appropriate. The Fund, on behalf of the Portfolios,
and IFTC each expressly acknowledge that the FCM will not be delegated any
responsibilities under this Section Q with respect to Mandatory Securities
Depositories.
6. Standard of Care as FCM of a Portfolio. In performing the responsibilities
delegated to it, the FCM agrees to exercise reasonable care, prudence and
diligence such as a person having responsibility for the safekeeping of
assets of management investment companies registered under the 1940 Act would
exercise.
7. Reporting Requirements. The FCM will report the withdrawal of the Foreign
Assets from an Eligible
<PAGE> 9
Foreign Custodian and the placement of such Foreign Assets with another
Eligible Foreign Custodian by providing to the Board amended Exhibits C and D
at the end of the calendar quarter in which an amendment to either Schedule
has occurred. The FCM will make written reports notifying the Board of any
other material change in the foreign custody arrangements of a Portfolio
described in this Section Q after the occurrence of the material change.
8. Representations with Respect to Rule 17f5. The FCM represents to the Fund
that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5.
The Fund represents to IFTC that the Board has determined that it is
reasonable for the Board to rely on IFTC and State Street Bank & Trust
Company to perform the responsibilities delegated pursuant to this Contract
to IFTC and State Street Bank & Trust Company as the FCM of each Portfolio
and that IFTC has been granted the authority by Fund to delegate to State
Street Bank & Trust Company the FCM functions to which IFTC has been
appointed by Fund.
9. Effective Date and Termination of IFTC as FCM. The Board's delegation to IFTC
as FCM of a Portfolio will be effective as of the date hereof and will remain
in effect until terminated at any time, without penalty, by written notice
from the terminating party to the non-terminating party. Termination will
become effective thirty days after receipt by the non-terminating party of
such notice. The provisions of subsection 3 of this Section Q govern the
delegation to and termination of IFTC as FCM of the Fund with respect to
designated countries.
R. Accounts and Records Property of Fund. IFTC acknowledges that all of the
accounts and records maintained by IFTC pursuant hereto are the property of
Fund, and will be made available to Fund for inspection or reproduction
within a reasonable period of time, upon demand. IFTC will assist Fund's
independent auditors, or upon the prior written approval of Fund, or upon
demand, any regulatory body, in any requested review of Fund's accounts and
records, provided that Fund will reimburse IFTC for all expenses and employee
time invested in any such review outside of routine and normal periodic
reviews. Upon receipt from Fund of the necessary information or instructions,
IFTC will supply information from the books and records it maintains for Fund
that Fund may reasonably request for tax returns, questionnaires, periodic
reports to shareholders and such other reports and information requests as
Fund and IFTC may agree upon from time to time.
S. Adoption of Procedures. IFTC and Fund hereby adopt the Funds Transfer
Operating Guidelines attached hereto as Exhibit B. IFTC and Fund may from
time to time adopt such additional procedures as they agree upon, and IFTC
may conclusively assume that no procedure approved or directed by Fund,
Fund's or Portfolio's accountants or other advisors conflicts with or
violates any requirements of the prospectus, (ARTICLES OF INCORPORATION,
BYLAWS,/DECLARATION OF TRUST) any applicable law, rule or regulation, or any
order, decree or agreement by which Fund may be bound. Fund will be
responsible for notifying IFTC of any changes in statutes, regulations,
rules, requirements or policies which may impact IFTC's responsibilities or
procedures under this Agreement.
T. Advances. Fund will pay on demand any advance of cash or securities made by
IFTC or any Subcustodian, in its sole discretion, for any purpose (including
but not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio. Any such cash advance will be subject to an
overdraft charge at the rate set forth in the then-current fee schedule from
the date advanced until the date repaid. As security for each such advance,
Fund hereby grants IFTC and such Subcustodian a lien on and security interest
in all Assets at any time held for the account of the applicable Portfolio,
including without limitation all Assets acquired with the amount advanced.
Should Fund fail to promptly repay the advance, IFTC and such Subcustodian
may utilize available cash and to dispose of such Portfolio's Assets pursuant
to applicable law to the extent necessary to
<PAGE> 10
obtain reimbursement of the amount advanced and any related overdraft
charges.
U. Exercise of Rights; Tender Offers. Upon receipt of Instructions, IFTC will:
(1) deliver warrants, puts, calls, rights or similar securities to the issuer
or trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new Assets, if any, are to be
delivered to IFTC; and (2) deposit securities upon invitations for tenders
thereof, provided that the consideration for such securities is to be paid or
delivered to IFTC or the tendered securities are to be returned to IFTC.
V. Fund Shares.
1. Fund will deliver to IFTC Instructions with respect to the declaration and
payment of any dividend or other distribution on the shares of capital stock
of a Portfolio ("Fund Shares") by a Portfolio. On the date specified in such
Instruction, IFTC will pay out of the monies held for the account of the
Portfolio, insofar as it is available for such purposes, and credit to the
account of the Dividend Disbursing Agent for the Portfolio, the amount
specified in such Instructions.
2. Whenever Fund Shares are repurchased or redeemed by a Portfolio, Portfolio or
its agent will give IFTC Instructions regarding the aggregate dollar amount
to be paid for such shares. Upon receipt of such Instruction, IFTC will
charge such aggregate dollar amount to the account of the Portfolio and
either deposit the same in the account maintained for the purpose of paying
for the repurchase or redemption of Fund Shares or deliver the same in
accordance with such Instruction. IFTC has no duty or responsibility to
determine that Fund Shares have been removed from the proper shareholder
accounts or that the proper number of Fund Shares have been canceled and
removed from the shareholder records.
3. Whenever Fund Shares are purchased from Fund, Fund will deposit or cause to
be deposited with IFTC the amount received for such shares. IFTC has no duty
or responsibility to determine that Fund Shares purchased from Fund have been
added to the proper shareholder account or that the proper number of such
shares have been added to the shareholder records.
- - INSTRUCTIONS.
- - The term "Instructions", as used herein, means written (including telecopied,
telexed, or electronically transmitted) or oral instructions which IFTC
reasonably believes were given by a designated representative of Fund. Fund
will deliver to IFTC, prior to delivery of any Assets to IFTC and thereafter
from time to time as changes therein are necessary, written Instructions
naming one or more designated representatives to give Instructions in the
name and on behalf of Fund, which Instructions may be received and accepted
by IFTC as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full force and
effect until receipt by IFTC of notice to the contrary. Unless such written
Instructions delegating authority to any person to give Instructions
specifically limit such authority to specific matters or require that the
approval of anyone else will first have been obtained, IFTC will be under no
obligation to inquire into the right of such person, acting alone, to give
any Instructions whatsoever. If Fund fails to provide IFTC any such
Instructions naming designated representatives, any Instructions received by
IFTC from a person reasonably believed to be an appropriate representative of
Fund will constitute valid and proper Instructions hereunder. The term
"designated representative" may include Fund's or a Portfolio's employees and
agents, including investment managers and their employees.
- - No later than the next business day immediately following each oral
Instruction, Fund will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via telephone,
each such recording identifying the
<PAGE> 11
date and the time of the beginning and ending of such oral Instruction.
- - Fund will provide, upon IFTC's request a certificate signed by an officer or
designated representative of Fund, as conclusive proof of any fact or matter
required to be ascertained from Fund hereunder. Fund will also provide IFTC
Instructions with respect to any matter concerning this Agreement requested
by IFTC. If IFTC reasonably believes that it could not prudently act
according to the Instructions, or the instruction or advice of Fund's or a
Portfolio's accountants or counsel, it may in its discretion, with notice to
Fund, not act according to such Instructions.
- - LIMITATION OF LIABILITY OF IFTC. IFTC is not responsible or liable for, and
Fund will indemnify and hold IFTC harmless from and against, any and all
costs, expenses, losses, damages, charges, counsel fees (including, without
limitation, disbursements and the allocable cost of in-house counsel),
payments and liabilities which may be asserted against or incurred by IFTC or
for which IFTC may be held to be liable, arising out of or attributable to:
A. IFTC's action or failure to act pursuant hereto; provided that IFTC has acted
in good faith and with reasonable care; and provided further, that, in no
event is IFTC liable for consequential, special, or punitive damages;
B. IFTC's payment of money as requested by Fund, or the taking of any action
which might make it or its nominee liable for payment of monies or in any
other way; provided, however, that nothing herein obligates IFTC to take any
such action or expend its own monies except in its sole discretion;
C. IFTC's action or failure to act hereunder upon any Instructions, advice,
notice, request, consent, certificate or other instrument or paper appearing
to it to be genuine and to have been properly executed, including any
Instruction, communications, data or other information received by IFTC by
means of the Systems, as hereinafter defined, or any electronic system of
communication;
D. IFTC's action or failure to act in good faith reliance on the advice or
opinion of counsel for Fund or of its own counsel with respect to questions
or matters of law, which advice or opinion may be obtained by IFTC at the
expense of Fund, or on the Instruction, advice or statements of any officer
or employee of Fund, or Fund's accountants or other authorized individuals,
and other persons believed by it in good faith to be expert in matters upon
which they are consulted;
E. The purchase or sale of any securities or foreign currency positions. Without
limiting the generality of the foregoing, IFTC is under no duty or obligation
to inquire into:
1. The validity of the issue of any securities purchased by or for any
Portfolio, or the legality of the purchase thereof or of foreign currency
positions, or evidence of ownership required by Fund to be received by IFTC,
or the propriety of the decision to purchase or the amount paid therefor;
2. The legality of the sale of any securities or foreign currency positions by
or for any Portfolio, or the propriety of the amount for which the same are
sold; or
3. The legality of the issue or sale of any Fund Shares, or the sufficiency of
the amount to be received therefor, the legality of the repurchase or
redemption of any Fund Shares, or the propriety of the amount to be paid
therefor, or the legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock dividend.
F. Any error, omission, inaccuracy or other deficiency in any Portfolio's
accounts and records or other information provided to IFTC by or on behalf of
a Portfolio, or the failure of Fund to provide, or provide in a timely
manner, any accounts, records, or information needed by IFTC to perform its
duties hereunder;
<PAGE> 12
G. Fund's refusal or failure to comply with the terms hereof (including without
limitation Fund's failure to pay or reimburse IFTC under Section 5 hereof),
Fund's negligence or willful misconduct, or the failure of any representation
or warranty of Fund hereunder to be and remain true and correct in all
respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the Systems or any
electronic system of communication used hereunder, by Fund or by any person
who acquires access to the Systems or such other systems through the terminal
device, passwords, access instructions or other means of access to such
Systems or such other system which are utilized by, assigned to or otherwise
made available to Fund, except to the extent attributable to any negligence
or willful misconduct by IFTC;
I. Any money represented by any check, draft, wire transfer, clearinghouse
funds, uncollected funds, or instrument for the payment of money to be
received by IFTC on behalf of a Portfolio until actually received; provided,
however, that IFTC will advise Fund promptly if it fails to receive any such
money in the ordinary course of business and will cooperate with Fund toward
the end that such money is received;
J. Except as provided in Section 3.P hereof, loss occasioned by the acts,
omissions, defaults or insolvency of any broker, bank, trust company,
securities system or any other person with whom IFTC may deal; and
K. The failure or delay in performance of its obligations hereunder, or those of
any entity for which it is responsible hereunder, arising out of or caused,
directly or indirectly, by circumstances beyond the affected entity's
reasonable control, including, without limitation: any interruption, loss or
malfunction of any utility, transportation, computer (hardware or software)
or communication service; inability to obtain labor, material, equipment or
transportation, or a delay in mails; governmental or exchange action,
statute, ordinance, rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism, explosions, labor
disputes, freezes, floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrection.
- - COMPENSATION. In consideration for its services hereunder, Fund will pay to
IFTC the compensation set forth in a separate fee schedule, incorporated
herein by reference, to be agreed to by Fund and IFTC from time to time, and,
upon demand, reimbursement for IFTC's cash disbursements and reasonable
out-of-pocket costs and expenses, including attorney's fees and
disbursements, incurred by IFTC in connection with the performance of
services hereunder. IFTC may charge such compensation against monies held by
it for the account of the Portfolios. IFTC will also be entitled to charge
against any monies held by it for the account of the Portfolios the amount of
any loss, damage, liability, advance, overdraft or expense for which it is
entitled to reimbursement from Fund, including but not limited to fees and
expenses due to IFTC for other services provided to Fund by IFTC. IFTC will
be entitled to reimbursement by Fund for the losses, damages, liabilities,
advances, overdrafts and expenses of Subcustodians only to the extent that
(a) IFTC would have been entitled to reimbursement hereunder if it had
incurred the same itself directly, and (b) IFTC is obligated to reimburse the
Subcustodian therefor.
- - TERM AND TERMINATION. The initial term of this Agreement is for a period of
one (1) year. Thereafter, either Fund or IFTC may terminate this Agreement by
notice in writing, delivered or mailed, postage prepaid, to the other party
and received not less than ninety (90) days prior to the date upon which such
termination will take effect. Upon termination hereof:
A. Fund will pay IFTC its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or incurred to such date;
B. Fund will designate a successor custodian by Instruction to IFTC by the
termination date. In the event no such Instruction has been delivered to IFTC
on or before the date when such termination becomes effective, then IFTC may,
at its option, (i) choose as successor custodian a bank or trust company
meeting the
<PAGE> 13
qualifications for custodian set forth in the 1940 Act and having not less
than Two Million Dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report, or (ii) apply to a
court of competent jurisdiction for the appointment of a successor or other
proper relief, or take any other lawful action under the circumstances;
provided, however, that Fund will reimburse IFTC for its costs and expenses,
including reasonable attorney's fees, incurred in connection therewith; and
C. IFTC will, upon payment of all sums due to IFTC from Fund hereunder or
otherwise, deliver all Assets, duly endorsed and in form for transfer, to the
successor custodian, or as specified by the court, at IFTC's office. IFTC
will co-operate in effecting changes in book-entries at all Depositories.
Upon delivery to a successor or as specified by the court, IFTC will have no
further obligations or liabilities hereunder. Thereafter such successor will
be the successor hereunder and will be entitled to reasonable compensation
for its services.
In the event that Assets remain in the possession of IFTC after the date of
termination hereof for any reason other than IFTC's failure to deliver the
same, IFTC is entitled to compensation as provided in the then-current fee
schedule for its services during such period, and the provisions hereof
relating to the duties and obligations of IFTC will remain in full force and
effect.
- - NOTICES. Notices, requests, instructions and other writings addressed to Fund
at the address set forth above, or at such other address as Fund may have
designated to IFTC in writing, will be deemed to have been properly given to
Fund hereunder. Notices, requests, Instructions and other writings addressed
to IFTC at the address set forth above, Attention: Custody Department, or to
such other address as it may have designated to Fund in writing, will be
deemed to have been properly given to IFTC hereunder.
- - THE SYSTEMS; CONFIDENTIALITY.
A. If IFTC provides Fund direct access to the computerized investment portfolio
custody systems used by IFTC ("Systems") or if IFTC and Fund agree to utilize
any electronic system of communication, Fund agrees to implement and enforce
appropriate security policies and procedures to prevent unauthorized or
improper access to or use of the Systems or such other system.
B. Fund will preserve the confidentiality of the Systems and the tapes, books,
reference manuals, instructions, records, programs, documentation and
information of, and other materials relevant to, the Systems and the business
of IFTC or its affiliates ("Confidential Information"). Fund agrees that it
will not voluntarily disclose any such Confidential Information to any other
person other than its own employees who reasonably have a need to know such
information pursuant hereto. Fund will return all such Confidential
Information to IFTC upon termination or expiration hereof.
C. Fund has been informed that the Systems are licensed for use by IFTC and its
affiliates from one or more third parties ("Licensors"), and Fund
acknowledges that IFTC and Licensors have proprietary rights in and to the
Systems and all other IFTC or Licensor programs, code, techniques, know-how,
data bases, supporting documentation, data formats, and procedures, including
without limitation any changes or modifications made at the request or
expense or both of Fund (collectively, the "Protected Information"). Fund
acknowledges that the Protected Information constitutes confidential material
and trade secrets of IFTC and Licensors. Fund will preserve the
confidentiality of the Protected Information, and Fund hereby acknowledges
that any unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a computer,
computer system, or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer, computer system, or
computer network, may be subject to civil liabilities and criminal penalties
under applicable law. Fund will so inform
<PAGE> 14
employees and agents who have access to the Protected Information or to any
computer equipment capable of accessing the same. Licensors are intended to
be and are third party beneficiaries of Fund's obligations and undertakings
contained in this Section.
D. Fund hereby represents and warrants to IFTC that it has determined to its
satisfaction that the Systems are appropriate and suitable for its use. THE
SYSTEMS ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. IFTC EXPRESSLY
DISCLAIMS ALL WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, EXCEPT
THOSE WARRANTIES STATED EXPRESSLY HEREIN.
- - MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio, the
following provisions apply:
A. Each Portfolio will be regarded for all purposes hereunder as a separate
party apart from each other Portfolio. Unless the context otherwise requires,
with respect to every transaction covered hereby, every reference herein to
Fund is deemed to relate solely to the particular Portfolio to which such
transaction relates. Under no circumstances will the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of this
single document to memorialize the separate agreement as to each Portfolio is
understood to be for clerical convenience only and will not constitute any
basis for joining the Portfolios for any reason.
B. Fund may appoint IFTC as its custodian for additional Portfolios from time to
time by written notice, provided that IFTC consents to such addition. Rates
or charges for each additional Portfolio will be as agreed upon by IFTC and
Fund in writing.
- - MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights and liabilities
of the parties hereto will be governed by, the laws of the State of Missouri,
without reference to the choice of laws principles thereof.
B. All terms and provisions hereof will be binding upon, inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.
C. The representations and warranties, the indemnifications extended hereunder,
and the provisions of Section 9 hereof are intended to and will continue
after and survive the expiration, termination or cancellation hereof.
D. No provisions hereof may be amended or modified in any manner except by a
written agreement properly authorized and executed by each party hereto.
E. The failure of either party to insist upon the performance of any terms or
conditions hereof or to enforce any rights resulting from any breach of any
of the terms or conditions hereof, including the payment of damages, will not
be construed as a continuing or permanent waiver of any such terms,
conditions, rights or privileges, but the same will continue and remain in
full force and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder will be
effective unless contained in a written instrument signed by the party sought
to be charged.
F. The captions herein are included for convenience of reference only, and in no
way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
G. This Agreement may be executed in two or more counterparts, each of which is
deemed an original but all of which together constitute one and the same
instrument.
<PAGE> 15
H. If any provision hereof is determined to be invalid, illegal, in conflict
with any law or otherwise unenforceable, the remaining provisions hereof will
be considered severable and will not be affected thereby, and every remaining
provision hereof will remain in full force and effect and will remain
enforceable to the fullest extent permitted by applicable law.
I. The benefits of this Agreement may not be assigned by either party nor may
either party delegate all or a portion of its duties hereunder without the
prior written consent of the other party. Notwithstanding the foregoing, Fund
agrees that IFTC may delegate all or a portion of its duties to an affiliate
of IFTC, provided that such delegation will not reduce the obligations of
IFTC under this Agreement.
J. Neither the execution nor performance hereof will be deemed to create a
partnership or joint venture by and between IFTC and Fund or any Portfolio.
K. Except as specifically provided herein, this Agreement does not in any way
affect any other agreements entered into among the parties hereto and any
actions taken or omitted by either party hereunder will not affect any rights
or obligations of the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement and all
amendments thereto is on file with the Secretary of State of the state of its
organization; that this Agreement has been executed on behalf of Fund by the
undersigned duly authorized representative of Fund in his/her capacity as
such and not individually; and that the obligations of this Agreement are
binding only upon the assets and property of Fund and not upon any trustee,
officer of shareholder of Fund individually.
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY (FUND NAME)
By: By: --DRAFT--
------------------------------ --------------------------------
Title: Title:
--------------------------- -----------------------------
<PAGE> 17
EXHIBIT A -- INCOME AVAILABILITY SCHEDULE
FOREIGN--Income will be credited contractually on pay day in the markets noted
with Contractual Income Policy. The markets noted with Actual income policy will
be credited income when it is received.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MARKET INCOME POLICY MARKET INCOME POLICY MARKET INCOME POLICY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentina Actual Hong Kong Contractual Poland Actual
- ----------------------------------------------------------------------------------------------------------------------------
Australia Contractual Hungary Actual Portugal Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Austria Contractual India Actual Russia Actual
- ----------------------------------------------------------------------------------------------------------------------------
Bahrain Actual Indonesia Actual Singapore Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Bangladesh Actual Ireland Actual Slovak Republic Actual
- ----------------------------------------------------------------------------------------------------------------------------
Belgium Contractual Israel Actual South Africa Actual
- ----------------------------------------------------------------------------------------------------------------------------
Bermuda Actual Italy Contractual South Korea Actual
- ----------------------------------------------------------------------------------------------------------------------------
* Bolivia Actual Ivory Coast Actual Spain Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Botswana Actual * Jamaica Actual Sri Lanka Actual
- ----------------------------------------------------------------------------------------------------------------------------
Brazil Actual Japan Contractual Swaziland Actual
- ----------------------------------------------------------------------------------------------------------------------------
Canada Contractual Jordan Actual Sweden Contractual
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C>
Chile Actual Kenya Actual Switzerland Contractual
- ----------------------------------------------------------------------------------------------------------------------------
China Actual Lebanon Actual Taiwan Actual
- ----------------------------------------------------------------------------------------------------------------------------
Colombia Actual Luxembourg Actual Thailand Actual
- ----------------------------------------------------------------------------------------------------------------------------
Cyprus Actual Malaysia Actual * Trinidad & Actual
Tobago
- ----------------------------------------------------------------------------------------------------------------------------
Czech Republic Actual Mauritius Actual * Tunisia Actual
- ----------------------------------------------------------------------------------------------------------------------------
Denmark Contractual Mexico Actual Turkey Actual
- ----------------------------------------------------------------------------------------------------------------------------
Ecuador Actual Morocco Actual UnitedKingdom Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Egypt Actual Namibia Actual United States See Attached
- ----------------------------------------------------------------------------------------------------------------------------
**Euroclear Contractual/ Netherlands Contractual Uruguay Actual
Actual
- ----------------------------------------------------------------------------------------------------------------------------
Euro CDs Actual New Zealand Contractual Venezuela Actual
- ----------------------------------------------------------------------------------------------------------------------------
Finland Contractual Norway Contractual Zambia Actual
- ----------------------------------------------------------------------------------------------------------------------------
France Contractual Oman Actual Zimbabwe Actual
- ----------------------------------------------------------------------------------------------------------------------------
Germany Contractual Pakistan Actual
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
Ghana Actual Peru Actual
- --------------------------------------------------------------------------
Greece Actual Philippines Actual
- --------------------------------------------------------------------------
</TABLE>
* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with
Income Policy of Contractual.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES--
- -----------------------------------------------------------------------------------------------------------------------------
INCOME TYPE DTC FED PTC PHYSICAL
- -----------------------------------------------------------------------------------------------------------------------------
Dividends Contractual N/A N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------
Fixed Rate Interest Contractual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------
Variable Rate Interest Contractual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------
GNMA I N/A N/A Contractual PD +1 N/A
- -----------------------------------------------------------------------------------------------------------------------------
GNMA II N/A N/A Contractual PD *** N/A
- -----------------------------------------------------------------------------------------------------------------------------
Mortgages Actual Contractual Contractual Actual
- -----------------------------------------------------------------------------------------------------------------------------
Maturities Actual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exceptions to the above Contractual Income Policy include securities that are:
Involved in a trade whose settlement either failed, or is pending over the
record date, (excluding the United States);
On loan under a self directed securities lending program other than IFTC's own
vendor lending program;
Known to be in a condition of default, or suspected to present a risk of default
or payment delay;
In the asset categories, without limitation, of Private Placements, Derivatives,
Options, Futures, CMOs, and Zero Coupon Bonds.
<PAGE> 20
Securities whose amount of income and redemption cannot be calculated in advance
of payable date, or determined in advance of actual collection, examples include
ADRs;
Payments received as the result of a corporate action, not limited to, bond
calls, mandatory or optional puts, and tender offers.
*** For GNMA II securities, if the 19th day of the month is a business day,
Payable/Distribution Date is the next business day. If the 19th is not a
business day, but the 20th is a business day, Payable/Distribution date is the
first business day after the 20th. If both the 19th and 20th are not business
days, Payable/Distribution will be the next business day thereafter.
<PAGE> 21
EXHIBIT B -- FUNDS TRANSFER OPERATING GUIDELINES
- - OBLIGATION OF THE SENDER: IFTC is authorized to promptly debit Fund's
("Client's") account(s) upon the receipt of a payment order in compliance
with any of the Security Procedures chosen by the Client, from those offered
on the attached selection form (and any updated selection forms hereafter
executed by the Client), for funds transfers and in the amount of money that
IFTC has been instructed to transfer. IFTC is hereby instructed to accept
funds transfer instructions only via the delivery methods and Security
Procedures indicated on the attached selection form (and any updated executed
by the Client). The Client agrees that the Security Procedures are reasonable
and adequate for its wire transfer transactions and agrees to be bound by any
payment orders, amendments and cancellations, whether or not authorized,
issued in its name and accepted by IFTC after being confirmed by any of the
selected Security Procedures. The Client also agrees to be bound by any other
valid and authorized payment order accepted by IFTC. IFTC shall execute
payment orders in compliance with the selected Security Procedures and with
the Client's/Investment Manager's instructions on the execution date provided
that such payment order is received by the customary deadline for processing
such a request, unless the payment order specifies a later time. IFTC will
use reasonable efforts to execute on the execution date payment orders
received after the customary deadline, but if it is unable to execute any
such payment order on the execution date, such payment order will be deemed
to have been received on the next business day.
- - SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by
IFTC. The Client shall restrict access to confidential information relating
to the Security Procedures to authorized persons as communicated in writing
to IFTC. The Client must notify IFTC immediately if it has reason to believe
unauthorized persons may have obtained access to such information or of any
change in the Client's authorized personnel. IFTC shall verify the
authenticity of all instructions according to the selected Security
Procedures.
- - ACCOUNT NUMBERS: IFTC shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number, the
account number shall take precedence and govern. Financial institutions that
receive payment orders initiated by IFTC at the instruction of the Client may
also process payment orders on the basis of account numbers, regardless of
any name included in the payment order. IFTC will also rely on any financial
institution identification numbers included in any payment order, regardless
of any financial institution name included in the payment order.
- - REJECTION: IFTC reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance
in the account to be charged at the time of IFTC's receipt of such payment
order; (b) if initiating such payment order would cause IFTC, in IFTC's sole
judgment, to exceed any applicable volume, aggregate dollar, network, time,
credit or similar limits upon wire transfers; or (c) if IFTC, in good faith,
is unable to satisfy itself that the transaction has been properly
authorized.
- - CANCELLATION OR AMENDMENT: IFTC shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in compliance
with the selected Security Procedures provided that such requests are
received in sufficient time to afford IFTC a reasonable opportunity to act
prior to executing the payment order. However, IFTC assumes no liability if
the request for amendment or cancellation cannot be satisfied by IFTC's
reasonable efforts.
- - ERRORS: IFTC shall assume no responsibility for failure to detect any
erroneous payment order provided that IFTC complies with the payment order
instructions as received and IFTC complies with the selected
<PAGE> 22
Security Procedures. The Security Procedures are established for the purpose
of authenticating payment orders only and not for the detection of errors in
payment orders.
- - INTEREST AND LIABILITY LIMITS: IFTC shall assume no responsibility for lost
interest with respect to the refundable amount of any unauthorized payment
order, unless IFTC is notified of the unauthorized payment order within
thirty (30) days of notification by IFTC of the acceptance of such payment
order. In no event (including but not limited to failure to execute a payment
order) shall IFTC be liable for special, indirect or consequential damages,
even if advised of the possibility of such damages.
- - AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the Mid-America Payment Exchange or other similar body, IFTC
or its agent will act as an Originating Depository Financial Institution
and/or Receiving Depository Financial Institution, as the case may be, with
respect to such entries. Credits given with respect to an ACH credit entry
are provisional until final settlement for such entry is received from the
Federal Reserve Bank. If such final settlement is not received, the Client
agrees to promptly refund the amount credited to the Client in connection
with such entry, and the party making payment to the Client via such entry
shall not be deemed to have paid the amount of the entry.
- - CONFIRMATIONS: Confirmation of IFTC's execution of payment orders shall
ordinarily be provided within 24 hours. Notice may be delivered through
IFTC's account statements, advices, information systems, or by facsimile or
callback. The Client must report any objections to the execution of a payment
order within 30 days.
- - MISCELLANEOUS: IFTC may use the Federal Reserve System Fedwire to execute
payment orders, and any payment order carried in whole or in part through
Fedwire will be subject to applicable Federal Reserve Board rules and
regulations. IFTC and the Client agree to cooperate to attempt to recover any
funds erroneously paid to wrong parties, regardless of any fault of IFTC or
the Client, but the party responsible for the erroneous payment shall bear
all costs and expenses incurred in trying to effect such recovery. These
Guidelines may not be amended except by a written agreement signed by the
parties.
<PAGE> 23
SECURITY PROCEDURES SELECTION FORM
Please select one or more of the funds transfer security
procedures indicated below.
[] SWIFT SWIFT (Society for Worldwide Interbank Financial Telecommunication) is
a cooperative society owned and operated by member financial institutions
that provides telecommunication services for its membership. Participation is
limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment management
institutions. SWIFT provides a number of security features through encryption
and authentication to protect against unauthorized access, loss or wrong
delivery of messages, transmission errors, loss of confidentiality and
fraudulent changes to messages. Selection of this security procedure would be
most appropriate for existing SWIFT members.
[] REMOTE BATCH TRANSMISSION Wire transfer instructions are delivered via
Computer-to-Computer (CPU-CPU) data communications between the Client and/or
its agent and IFTC and/or its agent. Security procedures include encryption
and/or the use of a test key by those individuals authorized as Automated
Batch Verifiers or a callback procedure to those individuals. Clients
selecting this option should have an existing facility for completing CPU-CPU
transmissions. This delivery mechanism is typically used for high-volume
business such as shareholder redemptions and dividend payments.
[] TELEPHONE CONFIRMATION (CALL BACK) This procedure requires Clients to
designate individuals as authorized initiators and authorized verifiers. IFTC
will verify that the instruction contains the signature of an authorized
person and prior to execution of the payment order, will contact someone
other than the originator at the Client's location to authenticate the
instruction. Selection of this alternative is appropriate for Clients who do
not have the capability to use other security procedures.
[] TEST KEY Test Key confirmation will be used to verify all non-repetitive
funds transfer instructions received via facsimile or phone. IFTC will
provide test keys if this option is chosen. IFTC will verify that the
instruction contains the signature of an authorized person and prior to
execution of the payment order, will authenticate the test key provided with
the corresponding test key at IFTC. Selection of this alternative is
appropriate for Clients who do not have the capability to use other security
procedures.
[] REPETITIVE WIRES For situations where funds are transferred periodically from
an existing authorized account to the same payee (destination bank and
account number) and only the date and currency amount are variable, a
repetitive wire may be implemented. Repetitive wires will be subject to a $10
million limit. If the payment order exceeds the $10 million limit, the
instruction will be confirmed by telephone or test key prior to execution.
Repetitive wire instructions must be reconfirmed annually. Clients may
establish Repetitive Wires by following the agreed upon security procedures
as described by Telephone Confirmation (Call Back) or Test Key. This
alternative is recommended whenever funds are frequently transferred between
the same two accounts.
<PAGE> 24
[] STANDING INSTRUCTIONS Funds are transferred by IFTC to a counter party on the
Client's established list of authorized counter parties. Only the date and
the dollar amount are variable. Clients may establish Standby Instructions by
following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key. This option is used for transactions
that include but are not limited to Foreign Exchange Contracts, Time Deposits
and Tri-Party Repurchase Agreements.
[] AUTOMATED CLEARING HOUSE (ACH) IFTC or its agent receives an automated
transmission from a Client for the initiation of payment (credit) or
collection (debit) transactions through the ACH network. The transactions
contained on each transmission or tape must be authenticated by the Client.
The transmission is sent from the Client's or its agent's system to IFTC's or
its agent's system with encryption.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT
ALTERNATE CONTACT
- -------------------------------------- -----------------------------------
Name Name
- -------------------------------------- -----------------------------------
Address Address
- -------------------------------------- -----------------------------------
City/State/Zip Code City/State/Zip Code
- -------------------------------------- -----------------------------------
Telephone Number Telephone Number
<PAGE> 25
- --------------------------------------
Facsimile Number
- --------------------------------------
SWIFT Number
(FUND NAME)
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE> 26
<TABLE>
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain The British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
People's The Hongkong and Shanghai Banking Corporation --
Republic of Limited Shanghai and Shenzhen branches
China
Colombia Cititrust Colombia S.A.Sociedad Fiduciaria --
Croatia Privredana banka Zagreb d.d --
Cyprus Barclays Bank Plc. Cyprus Offshore Banking Unit --
Czech Ceskoslovenska Obchodni Banka A.S. --
Republic
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C>
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A
Bank of Greece, System for Monitoring Transactions
in Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt- --
Iceland Icebank Ltd.
India Deutsche Bank AG;The Hongkong and Shanghai --
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques en Cote d'Ivoire --
Jamaica Scotiabank Trust and Merchant Bank, Ltd. --
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C>
Japan The Daiwa Bank, Limited; The Fuji Bank Limited
Japan Securities Depository
Jordan The British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking --
Korea Corporation Limited
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank Malaysia Berhad --
Mauritius The Hongkong and Shanghai Banking Corporation Limited --
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group (New Zealand) Limited --
Norway Christiania Bank og Kreditkasse --
Oman The British Bank of the Middle East
(as delegate of the Hongkong and Shanghai Banking Corporation
Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
Philippines Standard Chartered Bank --
Poland Citibank Poland S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, AO, Moscow --
(as delegate of Credit Suisse First Boston, Zurich)
Singapore The Development Bank of Singapore Ltd. --
Slovak Ceskoslovenska Obchodna Banka A.S. --
Republic
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai Banking Corporation Limited --
Swaziland Barclays Bank of Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AS --
Taiwan - Central Trust of China --
R.O.C.
Thailand Standard Chartered Bank --
Trinidad Republic Bank Ltd. --
& Tobago
Tunisia Banque Internationale Arabe de Tunisie --
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
Turkey Citibank, N.A.; Ottoman Bank --
Ukraine ING Bank, Ukraine --
United State Street Bank and Trust Company, --
Kingdom London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
<PAGE> 31
<TABLE>
<S> <C>
Argentina -Caja de Valores S.A.
Australia -Austraclear Limited;
-Reserve Bank Information and Transfer System
Austria -Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et de Virements de Titres S.A.;
-Banque Nationale de Belgique
Brazil -Companhia Brasileira de Liquidac, ao e
-Custodia (CBLC)
-Bolsa de Valores de Rio de Janeiro
-All SSB clients presently use CBLC
-Central de Custodia e de Liquidacao Financeira de Titulos
-Banco Central do Brasil, Sistema Especial de Liquidacao e Custodia
Bulgaria -Central Depository AD
-Bulgarian National Bank
Canada -The Canadian Depository for Securities Limited
People's Republic -Shanghai Securities Central Clearing and Registration Corporation;
of China -Shenzhen Securities Central Clearing Co., Ltd.
Croatia Ministry of Finance; - National Bank of Croatia
Czech Republic -Stredisko cennych papiru(degree);
-Czech National Bank
Denmark -Vaerdipapircentralen (The Danish Securities Center)
Egypt -Misr Company for Clearing, Settlement, and Central Depository
Estonia -Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities Depository
France -Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres
(SICOVAM)
Germany -The Deutscher Borse Clearing AG
</TABLE>
<PAGE> 32
<TABLE>
<S> <C>
Greece -The Central Securities Depository (Apothetirion Titlon AE)
Hong Kong -The Central Clearing and Settlement System;
-Central Money Markets Unit
Hungary -The Central Depository and Clearing House
(Budapest) Ltd.(KELER) [Mandatory for Gov't
Bonds only; SSB does not use for other
securities]
India -The National Securities Depository Limited
Indonesia -Bank of Indonesia
Ireland -The Central Bank of Ireland, Securities Settlement Office
Israel -The Tel Aviv Stock Exchange Clearing House Ltd.;
-Bank of Israel
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Japan -Bank of Japan Net System
Jamaica -The Jamaican Central Securities Depository
Kenya -Central Bank of Kenya
Republic of Korea -Korea Securities Depository Corporation
Latvia -The Latvian Central Depository
Lebanon -The Custodian and Clearing Center of Financial Instruments for Lebanon and the
Middle East
(MIDCLEAR) S.A.L.; -The Central Bank of Lebanon
Lithuania -The Central Securities Depository of Lithuania
Malaysia -Malaysian Central Depository Sdn. Bhd.;
-Bank Negara Malaysia, Scripless Securities Trading and Safekeeping Systems
Mauritius -The Central Depository & Settlement Co. Ltd.
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
Mexico -S.D. INDEVAL, S.A. de C.V.(Instituto para el Deposito de Valores);
Morocco -Maroclear (Pending publication of enabling legislation in the Moroccan
government Gazette)
The Netherlands -Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (ANECIGEF@)
-De Nederlandsche Bank N.V.
New Zealand -New Zealand Central Securities Depository Limited
Norway -Verdipapirsentralen (the Norwegian Registry of Securities)
Oman -Muscat Securities Market
Pakistan -Central Depository company of Pakistan Limited
Peru -Caja de Valores y Liquidaciones S.A. (CAVALI)
Philippines -The Philippines Central Depository Inc.
-The Registry of Scripless Securities (ROSS) of the Bureau of the Treasury
Poland -The National Depository of Securities (Krajowy Depozyt Papierow
Wartosciowych);
-Central Treasury Bills Registrar
Portugal -Central de Valores Mobiliarios (Central)
Romania -National Securities Clearing, Settlement and Depository Co.;
-Bucharest Stock Exchange Registry Division;
Singapore -The Central Depository (Pte)Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko Cennych Papierov;
-National Bank of Slovakia
Slovenia -Klirinsko Depotna Druzba d.d.
South Africa -The Central Depository Limited
Spain -Servicio de Compensacion y Liquidacion de Valores, S.A.;
-Banco de Espana; Central de Anotaciones en Cuenta
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
Sri Lanka -Central Depository System (Pvt) Limited
Sweden -Vardepapperscentralen AB (the Swedish Central Securities Depository)
Switzerland -Schweizerische Effekten - Giro AG;
-INTERSETTLE
Taiwan - R.O.C- -The Taiwan Securities Central Depository Company, Ltd.
Thailand -Thailand Securities Depository Company Limited
Tunisia -Societe Tunisienne Interprofessionelle de Compensation et de Depot de
Valeurs Mobilieres
-Central Bank of Tunisia;
-Tunisian Treasury
Turkey -Takas ve Saklama Bankasi A.S. (TAKASBANK)
-Central Bank of Turkey
Ukraine -The National Bank of Ukraine
United Kingdom -The Bank of England, The Central Gilts Office; The Central Moneymarkets
Office
Uruguay -Central Bank of Uruguay
Venezuela -Central Bank of Venezuela
Zambia -Lusaka Central Depository Limited
-Bank of Zambia
</TABLE>
<PAGE> 1
Exhibit 9(a)
ING FUNDS TRUST
Shares of Beneficial Interest
SUB-TRANSFER AGENCY AGREEMENT
__________, 199_
Ladies and Gentlemen:
We, the ING Funds Trust (the "Trust"), on behalf of each series of the Trust set
forth on Schedule 1 hereto, as such Schedule may be revised from time to time
(each, a "Fund"), wish to enter into this Sub-Transfer Agency Agreement (the
"Agreement") with you. For purposes of this Agreement, the term "Shares" shall
mean the authorized shares of the relevant Fund. The terms and conditions of
this Agreement are as follows:
1. Appointment. You hereby agree to perform certain sub-transfer agency
services as hereinafter set forth. Your appointment hereunder is non-exclusive,
and you understand and accept that (a) we are seeking to enter into this
Agreement in counterparts with you and certain other persons, (b) except as we
may otherwise agree with you, we may enter into agreements (which may or may not
be the same as this Agreement) with other persons, and (c) we may, upon notice,
cancel or change the terms of this Agreement.
2. Services to be Performed. Pursuant to this Agreement, you shall be
responsible for performing sub-transfer agency services to the extent
permissible under applicable statutes, rules and regulations. Such services may
include: (i) maintaining shareholder accounts which shall include name, address,
taxpayer identification number, and number of shares; (ii) preparation of
shareholder statements; (iii) preparation of confirmations; (iv) preparation of
shareholder lists when reasonably requested by us; (v) mailing shareholder
communications, including, but not limited to, shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements (collectively, "Shareholder
Communications"); (vi) tabulating proxies; (vii) disbursement of dividends and
other distributions; (viii) withholding taxes on U.S. resident and non-resident
accounts where applicable; (ix) preparation and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required by applicable statutes, rules
and regulations resulting from your role hereunder; and (x) providing such other
similar services directly to clients as we may reasonably request to the extent
you are permitted to do so under applicable statutes, rules and regulations. You
also will provide such office space and equipment, telephone facilities and
personnel (which may be any part of the space, equipment and facilities
currently
<PAGE> 2
used in your business, or any personnel employed by you) as may be reasonably
necessary or beneficial in order to provide the aforementioned services.
Compensation. In consideration of the services and facilities provided by
you hereunder, the Trust will pay to you, as provided under the Trust's
Sub-Transfer Agency Plan, and you will accept as full payment therefor, a fee
under the terms and at the rates as set forth in Schedule 2. This fee is not
intended to be compensation for the sale or distribution of Shares or a
"services fee" within the meaning of the NASD Rules.
4. Representations, Warranties and Undertakings. You represent and warrant
and undertake that:
(a) You have the requisite authority and have taken all necessary
corporate action to enter into this Agreement and to perform the services
contemplated herein.
(b) With respect to your services hereunder, you will comply with all
applicable provisions of the Securities Act, the Exchange Act and the Investment
Company Act.
(c) You will assume full responsibility for (i) monitoring shareholder
accounts, which includes verifying new account information and documentation,
(ii) to the extent we have provided sufficient Trust materials to you or your
agent in a timely manner, the timely delivery to shareholders of all Shareholder
Communications, and (iii) all other services described in this Agreement, and
agreed to from time-to-time by each party to this Agreement.
(d) The compensation payable to will be disclosed by you to your clients,
will be authorized by your clients and will not be excessive.
(e) The services provided by you under this Agreement will in no event be
primarily intended to result in the sale of Shares.
(f) For all purposes of this Agreement, you will be deemed to be an
independent contractor, and you will have no authority to act as agent for us in
any matter or in any respect.
5. Indemnification. Neither of us shall be liable to the other except for
(i) acts or failures to act which constitute a lack of good faith or gross
negligence, and (ii) obligations expressly assumed under this Agreement. In
addition, you agree to indemnify us and hold us harmless from any claims or
assertions relating to the lawfulness of your participation in this Agreement
and the services contemplated hereby or relating to any activities of any
persons or entities affiliated with your organization which are performed in
connection with the discharge of your
<PAGE> 3
responsibilities under this Agreement for which you may found liable to us. If
such claims are asserted, we shall have the right to manage our own defense,
including the selection and engagement of legal counsel, and all costs of such
defense will be borne by you.
6. Term. This Agreement shall become effective upon execution and delivery
hereof. This Agreement may be terminated, without the payment of any penalty, by
either party to this Agreement upon at least sixty days' written notice to the
other party, unless both parties waive such notice.
7. Recordkeeping. You will maintain all records required by law to be kept
by you relating to the services under this Agreement and, upon request by the
Trust, promptly make such of these records available to the Trust as the Trust
may reasonably request in connection with its operations.
8. Notices. Notices hereunder shall be deemed to have been duly given if
delivered by hand or facsimile (a) if to you, at your address or facsimile
number set forth below and (b) if to us, to ING Funds Trust, 18 Campus Blvd.,
Suite 200, Newtown Square, PA 19073, Attention: James MacCune or, in each case,
such other address as may be notified to the other party.
9. Amendments. We may modify this Agreement at any time by written notice
to you. The first services provided by you subsequent to the giving of such
notice shall be deemed acceptance by you of the modification described in such
notice.
10. Severability. Every provision of this Agreement shall be severable. If
a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement.
11. Limitation of Liability. A copy of the Certificate of Trust of the
Trust is on file with the Secretary of State of Delaware, and notice is hereby
given that this instrument is executed on behalf of the trustees of the Trust as
trustees and not individually and that the obligations of this instrument are
not binding upon any of the trustees or shareholders individually but are
binding only upon the assets and property of the Fund.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE> 4
Please confirm your agreement by signing and returning to us the two
enclosed duplicate copies of this Agreement. Upon our acceptance hereof, the
Agreement shall constitute a valid and binding contract between us. After our
acceptance, we will deliver to you one fully executed copy of this Agreement.
Very truly yours,
ING FUNDS TRUST, on behalf of each of
the Funds listed on Schedule 1
By:_____________________________________
Name:
Title:
Agreed to:
(Name of Authorized Dealer)
By:_____________________________________
Name:
Title:
________________________________________
Street Address
________________________________________
City State Zip
________________________________________
Fax No.
________________________________________
Telephone No.
________________________________________
Telex No.
________________________________________
Firm Taxpayer Identification No.
<PAGE> 5
SCHEDULE 1
Name of Fund
ING Money Market Fund
ING U.S. Treasury Money Market Fund
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Fixed Income Fund
ING Mortgage Income Fund
ING National Tax-Exempt Bond Fund
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
<PAGE> 6
SCHEDULE 2
Compensation Payable
Name of Fund Class of Shares Fee Rate
The compensation payable under this agreement is the applicable fee rate
of the average daily net asset value of the shares for which you are providing
sub-transfer agency services hereunder (the "Clients' Shares"), which fee will
be computed daily (on the basis of 360 day year) and payable monthly. For
purposes of determining the fees payable under this section, the average daily
net asset value of the Clients' Shares will be computed in the manner specified
in our Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. By your written acceptance of this Agreement, you
agree to and do waive such portion of any fee payable to you hereunder to the
extent necessary to assure that such fee and other expenses required to be
accrued by us on any day with respect to the Clients' Share in any Fund that
declares its net investment income as a dividend to shareholders on a daily
basis does not exceed the income to be accrued by us to such Shares on that day.
The fee rate stated above may be prospectively increased or decreased by us, in
our sole discretion, at any time upon notice to you.
<PAGE> 1
Exhibit 9(b)
FUND SERVICES AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING FUND
TRUST, a Delaware business trust (the "Trust"), on behalf of each of its series
as listed in Schedule A (each, a "Fund", and collectively, the "Funds"), and ING
FUND SERVICES CO., LLC, a Delaware limited liability company ("ING Fund
Services").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the rules and regulations promulgated thereunder; and
WHEREAS, the Trust is authorized to issue shares of beneficial
interest in the Trust (the "Shares") in separate series, with each such series
representing interests in a separate portfolio of securities or other assets;
WHEREAS, the Trust initially intends to offer Shares in those
Funds identified in the attached Schedule A, each such Fund, together with all
other Funds subsequently established by the Fund, shall be subject to this
Agreement in accordance with Article 11;
WHEREAS, the Trust on behalf of the Funds, desires to appoint
ING Fund Services as its fund accounting agent, transfer agent, dividend
disbursing agent and agent in connection with certain other activities and ING
Fund Services desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
Article 1. Definitions
1.1 Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
(a) "Authorized Person" shall be deemed
to include (i) any authorized officer of the Trust, or (ii) any person, whether
or not such person is an officer or employee of the Trust, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Trust as
indicated in writing to ING Fund Services from time to time.
(b) "Board of Trustees" shall mean the
Board of Trustees of the Trust.
<PAGE> 2
(c) "Commission" shall mean the Securities
and Exchange Commission.
(d) "Custodian" refers to any custodian or
subcustodian of securities and other property which the Trust may from time to
time deposit, or cause to be deposited or held under the name or account of such
a custodian pursuant to a Custodian Agreement.
(e) "1934 Act" shall mean the Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder, all
as amended from time to time.
(f) "Oral Instructions" shall mean
instructions, other than written instructions, actually received by ING Fund
Services from a person reasonably believed by ING Fund Services to be an
Authorized Person.
(g) "Prospectus" shall mean the most
recently dated Fund Prospectus and Statement of Additional Information,
including any supplements thereto, if any, which has become effective under the
Securities Act of 1933 and the Investment Company Act of 1940, as amended.
(h) "Shareholder" shall mean a record owner
of Shares of each respective Portfolio of the Fund.
(i) "Written Instructions" shall mean a
written communication signed by a person reasonably believed by ING Fund
Services to be an Authorized Person and actually received by ING Fund Services.
Written Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
Article 2. Appointment. The Trust, on behalf of the Funds,
hereby appoints and constitutes ING Fund Services as its sole and exclusive
transfer agent and dividend disbursing agent for Shares of each respective Fund
of the Trust and as fund accounting agent and shareholder servicing agent for
the Trust and ING Fund Services hereby accepts such appointments and agrees to
perform the duties hereinafter set forth.
<PAGE> 3
Article 3. Duties of ING Fund Services
3.1 ING Fund Services shall be responsible for:
(a) Administering and/or performing the
customary services of a transfer agent acting as service agent in connection
with dividend and distribution functions; and for performing shareholder account
and administrative agent functions in connection with the issuance, transfer and
redemption or repurchase (including coordination with the Custodian) of Shares
of each Fund, as more fully described in the written schedule of Duties of ING
Fund Services annexed hereto as Schedule B and incorporated herein, and in
accordance with the terms of the Prospectus of the Trust on behalf of the
applicable Fund, applicable law and the procedures established from time to time
between ING Fund Services and the Trust.
(b) Recording the issuance of Shares and
maintaining pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the total
number of Shares of each Fund which are authorized, based upon data provided to
it by the Trust, and issued and outstanding. ING Fund Services shall provide the
Trust on a regular basis with the total number of Shares of each Fund which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Trust.
(c) ING Fund Services shall be responsible
for the following: performing the customary services of a fund accounting agent
for the Trust, as more fully described in the written schedule of Duties of ING
Fund Services annexed hereto as Schedule B and incorporated herein, and subject
to the supervision and direction of the Board of Trustees of the Trust.
(d) Notwithstanding any of the foregoing
provisions of this Agreement, ING Fund Services shall be under no duty or
obligation to inquire into, and shall not be liable for (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be received
therefor; (ii) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor; (iii) the legality of the declaration of any
dividend by the Board of Trustees, or the legality of the issuance of any Shares
in payment of any dividend or (iv) the legality of any recapitalization or
readjustment of the Shares.
3.2 In addition, the Trust shall (i) identify to
ING Fund Services in writing those transactions and assets to be treated as
exempt from blue sky reporting for each State and (ii) verify the establishment
of transactions for each State on the system prior to activation and thereafter
monitor the daily activity for each State. The responsibility of ING Fund
Services for the Trust's blue sky State registration status is
<PAGE> 4
solely limited to the initial establishment of transactions subject to blue sky
compliance by the Trust and the reporting of such transactions to the Trust as
provided above.
3.3 In performing its duties under this Agreement,
ING Fund Services: (a) will act in accordance with the Trust Instrument,
By-Laws, Prospectuses and with the Oral Instructions and Written Instructions of
the Trust and will conform to and comply with the requirements of the Investment
Company Act and all other applicable federal or state laws and regulations and
(b) will consult with legal counsel to the Trust, as necessary and appropriate.
Furthermore, ING Fund Services shall not have or be required to have any
authority to supervise the investment or reinvestment of the securities or other
properties which comprise the assets of the Trust or any of its Funds and shall
not provide any investment advisory services to the Trust or any of its Funds.
3.4 In addition to the duties set forth herein, ING
Fund Services shall perform such other duties and functions, and shall be paid
such amounts therefor, as may from time to time be agreed upon in writing
between the Trust and ING Fund Services.
Article 4. Recordkeeping and Other Information
4.1 ING Fund Services shall create and maintain all
records required of it pursuant to its duties hereunder and as set forth in
Schedule B in accordance with all applicable laws, rules and regulations,
including records required by Section 31(a) of the Investment Company Act. Where
applicable, such records shall be maintained by ING Fund Services for the
periods and in the places required by Rule 31a-2 under the Investment Company
Act.
4.2 To the extent required by Section 31 of the
Investment Company Act, ING Fund Services agrees that all such records prepared
or maintained by ING Fund Services relating to the services to be performed by
ING Fund Services hereunder are the property of the Trust and will be preserved,
maintained and made available in accordance with such section, and be
surrendered promptly to the Trust on and in accordance with the Trust's request.
4.3 In case of any requests or demands for the
inspection of Shareholder records of the Trust, ING Fund Services will endeavor
to notify the Trust of such request and secure Written Instructions as to the
handling of such request. ING Fund Services reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to comply with such request.
Article 5. Trust Instructions
<PAGE> 5
5.1 ING Fund Services will have no liability when
acting upon Written or Oral Instructions believed to have been executed or
orally communicated by an authorized person and will not be held to have any
notice of any change of authority of any person until receipt of a Written
Instruction thereof from the Trust. ING Fund Services will also have no
liability when processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the officers of the Trust and
the proper countersignature of ING Fund Services.
5.2 At any time, ING Fund Services may request
Written Instructions from the Trust and may seek advice from legal counsel for
the Trust, or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Trust or for
ING Fund Services. Written instructions requested by ING Fund Services will be
provided by the Trust within a reasonable period of time.
5.3 ING Fund Services, its officers, agents or
employees, shall accept Oral Instructions or Written Instructions given to them
by any person representing or acting on behalf of the Trust only if said
representative is an authorized person. The Trust agrees that all Oral
Instructions shall be followed within one business day by confirming Written
Instructions, and that the Trust's failure to so confirm shall not impair in any
respect ING Fund Services' right to rely on Oral Instructions.
Article 6. Compensation
6.1 The Trust on behalf of each of the Funds will
compensate ING Fund Services for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section
6.1 above, the Trust on behalf of each of the Funds agrees to pay, and will be
billed separately for, out-of-pocket expenses incurred by ING Fund Services in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be modified by written agreement between the
parties. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by ING Fund Services in the
performance of its obligations hereunder.
<PAGE> 6
6.3 The Trust on behalf of the Funds agrees to pay
all fees and out-of-pocket expenses to ING Fund Services by federal funds wire
within fifteen (15) business days following the receipt of the respective
invoice.
6.4 Any compensation agreed to hereunder may be
adjusted from time to time by attaching to Schedule C, a revised Fee Schedule
executed and dated by the parties hereto.
6.5 ING Fund Services will from time to time employ
or associate with itself such person or persons as ING Fund Services may believe
to be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are employed
by both ING Fund Services and the Trust. The compensation of such person or
persons shall be paid by ING Fund Services and no obligation shall be incurred
on behalf of the Fund in such respect.
6.6 ING Fund Services shall not be required to pay
any of the following expenses incurred by the Trust: membership dues in the
Investment Company Institute or any similar organization; investment advisory
expenses; costs of printing and mailing stock certificates, prospectuses,
reports and notices; interest on borrowed money; brokerage commissions; stock
exchange listing fees; taxes and fees payable to Federal, state and other
governmental agencies; fees of the Trust's Board of Trustees who are not
affiliated with ING Fund Services; outside auditing expenses; outside legal
expenses; Blue Sky registration or filing fees; or other expenses not specified
in this Section 6.6 which may be properly payable by the Fund.
Article 7. ING Fund Services System
7.1 ING Fund Services shall retain title to and
ownership of any and all databases, computer programs, screen formats, report
formats, interactive design techniques, derivative works, inventions,
discoveries, patentable or copyrightable matters, concepts, expertise, patents,
copyrights, trade secrets, and other related legal rights utilized by ING Fund
Services in connection with the services provided by ING Fund Services to the
Trust herein (the "ING Fund Services System").
7.2 ING Fund Services hereby grants to the Trust a
limited license to the ING Fund Services System for the sole and limited purpose
of having ING Fund Services provide the services contemplated hereunder and
nothing contained in this Agreement shall be construed or interpreted otherwise
and such license shall immediately terminate with the termination of this
Agreement.
7.3 In the event that the Trust, including any
affiliate or agent of the Trust or any third party acting on behalf of the Trust
is provided with direct access to the ING Fund Services System for either
account inquiry or to transmit transaction
<PAGE> 7
information, including but not limited to maintenance, exchanges, purchases and
redemptions, such direct access capability shall be limited to direct entry to
the ING Fund Services System by means of on-line mainframe terminal entry or PC
emulation of such mainframe terminal entry and any other nonconforming method of
transmission of information to the ING Fund Services System is strictly
prohibited without the prior written consent of ING Fund Services.
Article 8. Representations and Warranties
8.1 ING Fund Services represents and warrants to the
Trust that:
(a) it is a limited liability company duly
organized, existing and in good standing under the laws of Delaware;
(b) it is empowered under applicable laws
and by its Articles of Incorporation and By-Laws to enter into and perform this
Agreement;
(c) all requisite corporate proceedings have
been taken to authorize it to enter into this Agreement; and
(d) it has and will continue to have access
to the necessary facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
8.2 The Fund represents and warrants to ING Fund
Services that:
(a) it is duly organized, existing and in
good standing under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws
and by its Trust Instrument and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by
said Trust Instrument, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the
Securities Act of 1933, as amended, and the Investment Company Act on behalf of
each of the Funds is currently effective and will remain effective, and all
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
<PAGE> 8
(e) all outstanding Shares are validly
issued, fully paid and nonassessable and when Shares are hereafter issued in
accordance with the terms of the Trust's Trust Instrument and its Prospectus
with respect to each Fund, such Shares shall be validly issued, fully paid and
nonassessable; and
(f) as of the date hereof, each Fund is duly
registered and lawfully eligible for sale in each jurisdiction indicated for
such Fund and the Trust will notify ING Fund Services immediately of any
changes.
Article 9. Indemnification
9.1 ING Fund Services shall not be responsible
for and the Trust on behalf of each Fund shall indemnify and hold ING Fund
Services harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against ING Fund Services
or for which ING Fund Services may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of ING Fund Services
required to be taken pursuant to this Agreement unless such Claim resulted from
a negligent act or omission to act or bad faith by ING Fund Services in the
performance of its duties hereunder;
(b) ING Fund Services' reasonable reliance
on, or reasonable use of information, data, records and documents (including but
not limited to magnetic tapes, computer printouts, hard copies and microfilm
copies) received by ING Fund Services from the Trust, or any authorized third
party acting on behalf of the Trust, in the performance of ING Fund Services'
duties and obligations hereunder;
(c) the reliance on, or the implementation
of, any Written or Oral Instructions or any other instructions or requests of
the Trust on behalf of the applicable Fund;
(d) the offer or sales of shares in
violation of any requirement under the securities laws or regulations of any
state that such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the offer or
sale of such shares in such state; and
(e) the Trust's refusal or failure to comply
with the terms of this Agreement, or any Claim which arises out of the Trust's
negligence or misconduct or the breach of any representation or warranty of the
Trust made herein.
9.2 ING Fund Services shall indemnify and hold
the Trust harmless from and against any and all claims, costs, expenses
(including reasonable
<PAGE> 9
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against the Trust or for which the Trust may be
held to be liable in connection with this Agreement (a "Claim"), provided that
such Claim resulted from a negligent act or omission to act, bad faith, willful
misfeasance or reckless disregard by ING Fund Services in the performance of its
duties hereunder.
9.3 In any case in which one party (the "Indemnifying
Party") may be asked to indemnify or hold the other party (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying Party
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Indemnified Party
although the failure to do so shall not prevent recovery by the Indemnified
Party and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have the
option to defend the Indemnified Party against any Claim which may be the
subject of this indemnification, and, in the event that the Indemnifying Party
so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 9 shall survive the termination of this
Agreement.
9.4 Any claim for indemnification under this
Agreement must be made prior to the earlier of:
(a) one year after the Indemnifying Party
becomes aware of the event for which indemnification is claimed; or
(b) one year after the earlier of the
termination of this Agreement or the expiration of the term of this Agreement.
9.5 Except for remedies that cannot be waived as
a matter of law (and injunctive or provisional relief), the provisions of this
Article 9 shall be the Indemnified Party's sole and exclusive remedy for claims
or other actions or proceedings to which the Indemnifying Party's
indemnification obligations pursuant to this Article 9 may apply.
Article 10. Standard of Care
10.1 ING Fund Services shall at all times act in
good faith and agrees to use its best efforts within commercially reasonable
limits to ensure the accuracy
<PAGE> 10
of all services performed under this Agreement, but assumes no responsibility
for loss or damage to the Trust unless said errors are caused by ING Fund
Services' own negligence, bad faith or wilful misconduct or that of its
employees.
10.2 Each party shall have the duty to mitigate
damages for which the other party may become responsible.
Article 11. Additional Funds
11.1 In the event that the Trust establishes one or
more Funds in addition to those identified in Schedule A, with respect to which
the Trust desires to have ING Fund Services render services as transfer agent
under the terms hereof, the Fund shall so notify ING Fund Services in writing,
and if ING Fund Services agrees in writing to provide such services, Schedule A
shall be amended to include such additional Portfolios.
Article 12. Confidentiality
12.1 The parties agree that the Proprietary
Information (defined below) and the contents of this Agreement (collectively
"Confidential Information") are confidential information of the parties and
their respective licensors. The Trust and ING Fund Services shall exercise at
least the same degree of care, but not less than reasonable care, to safeguard
the confidentiality of the Confidential Information of the other as it would
exercise to protect its own confidential information of a similar nature. The
Trust and ING Fund Services shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the prior
written permission of the other party. The Trust and ING Fund Services may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Trust and ING Fund Services may also disclose the
Confidential Information to independent contractors, auditors, and professional
advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 12.1.
Notwithstanding the previous sentence, in no event shall either the Trust or ING
Fund Services disclose the Confidential Information to any competitor of the
other without specific, prior written consent.
12.2 Proprietary Information means:
(a) any data or information that is
competitively sensitive material, and not generally known to the public,
including, but not limited to, information about product plans, marketing
strategies, finance, operations, customer relationships, customer profiles,
sales estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Trust or ING Fund
Services, their
<PAGE> 11
respective subsidiaries and affiliated companies and the customers, clients and
suppliers of any of them;
(b) any scientific or technical information,
design, process, procedure, formula, or improvement that is commercially
valuable and secret in the sense that its confidentiality affords the Trust or
ING Fund Services a competitive advantage over its competitors; and
(c) all confidential or proprietary
concepts, documentation, reports, data, specifications, computer software,
source code, object code, flow charts, databases, inventions, know-how, show-how
and trade secrets, whether or not patentable or copyrightable.
12.3 Confidential Information includes, without
limitation, all documents, inventions, substances, engineering and laboratory
notebooks, drawings, diagrams, specifications, bills of material, equipment,
prototypes and models, and any other tangible manifestation of the foregoing of
either party which now exist or come into the control or possession of the
other.
12.4 The obligations of confidentiality and
restriction on use herein shall not apply to any Confidential Information that a
party proves:
(a) Was in the public domain prior to the
date of this Agreement or subsequently came into the public domain through no
fault of such party; or
(b) Was lawfully received by the party from
a third party free of any obligation of confidence to such third party; or
(c) Was already in the possession of the
party prior to receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a
judicial or administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted including, but
not limited to, giving the other party as much advance notice of the possibility
of such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently
developed by employees, consultants or agents of the party without reference to
the Confidential Information disclosed under this Agreement.
<PAGE> 12
Article 13. Term and Termination. This Agreement shall become
effective as it pertains to a Fund at the close of business on the date opposite
the Fund's name on Schedule A and shall remain in force and effect for [ ] years
and thereafter from year to year, unless the Trust or ING Fund Services provides
written notice of its intent not to renew. Such notice must be received not less
than ninety (90) days and not more than one hundred eighty (180) days prior to
the expiration of the then current term. In the event a termination notice is
given by the Trust, all expenses associated with movement of records and
materials and conversion thereof to a successor transfer agent will be borne by
the Trust.
Article 14. Limit of Liability. The terms "The ING Funds
Trust" and "Trustees" (of the Trust) refer, respectively to the trust created
and the Trustees, as trustees but not individually or personally, acting from
time to time under the Trust's organizational documentation, to which reference
is hereby made. The obligations of "The ING Funds Trust" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities and are not binding upon any of
the Trustees, shareholders or representatives of the Trust personally, but bind
only the assets of the Funds, and all persons dealing with the Funds or other
series of the Trust must look solely to the assets of the Funds for the
enforcement of any claims against the Trust.
Article 15. Non-Exclusivity. The services of ING Fund Services
to the Trust are not to be deemed to be exclusive, and ING Fund Services shall
be free to render such services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
members of ING Fund Services may serve as officers or trustees of the Trust, and
that officers or trustees of the Trust may serve as officers or members of ING
Fund Services to the extent permitted by law; and that the officers and members
of ING Fund Services are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers or partners of any other firm or corporation, including other
investment companies.
Article 16. Assignment and Subcontracting. This Agreement, its
benefits and obligations shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned or otherwise transferred by either party hereto,
without the prior written consent of the other party. ING Fund Services may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by ING Fund Services.
Article 17. Force Majeure. No party shall be liable for any
default or delay in the performance of its obligations under this Agreement if
and to the extent such default or delay is caused, directly or indirectly, by
(i) fire, flood, elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders
<PAGE> 13
in any country; (iii) any act or omission of the other party or any government
authority; (iv) any labor disputes (whether or not the employees' demands are
reasonable or within the party's power to satisfy); or (v) nonperformance by a
third party or any similar cause beyond the reasonable control of such party,
including, without limitation, failures or fluctuations in telecommunications or
other equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so affected only
for as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.
Article 18. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
Article 19. Notices. Any notices under this Agreement shall be
in writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Trust and that of ING Fund Services shall be 18 Campus Blvd., Suite 200, Newtown
Square, PA 19073.
Article 20. Relationship of Parties. The parties agree that
they are independent contractors and are not partners or co-venturers and
nothing contained herein shall be interpreted or construed otherwise.
Article 21. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Investment Company Act
shall be resolved by reference to such term or provision of the Investment
Company Act and to interpretations thereof, if any, by the United States Courts
or in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is released by rules, regulation or
order of the Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
Article 22. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both of which,
collectively, shall constitute one agreement.
Article 23. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
<PAGE> 14
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
ING FUNDS TRUST ING FUND SERVICES CO., LLC
on behalf each of its series listed
on Schedule A
By: _________________________ By: ________________________
Title: _________________________ Title: ________________________
Attest By:_______________________ Attest By:_______________________
Title: __________________________ Title:__________________
<PAGE> 15
SCHEDULE A
LIST OF PORTFOLIOS
<PAGE> 16
SCHEDULE B
DUTIES OF ING FUND SERVICES
I. TRANSFER AGENCY SERVICES.
(a) Shareholder Information. ING Fund Services shall maintain
a record of the number of Shares held by each Shareholder of record
which shall include name, address, taxpayer identification and which
shall indicate whether such Shares are held in certificates or
uncertificated form.
(b) Shareholder Services. ING Fund Services shall respond as
appropriate to all inquiries and communications from Shareholders
relating to Shareholder accounts with respect to its duties hereunder
and as may be from time to time mutually agreed upon between ING Fund
Services and the Trust.
(c) Share Certificates.
- At the expense of the Trust, the Trust shall
supply ING Fund Services with an adequate supply
of blank share certificates to meet ING Fund
Services requirements therefor. Such Share
certificates shall be properly signed by
facsimile. The Trust agrees that,
notwithstanding the death, resignation, or
removal of any officer of the Trust whose
signature appears on such certificates, ING Fund
Services or its agent may continue to
countersign certificates which bear such
signatures until otherwise directed by Written
Instructions.
- ING Fund Services shall issue replacement Share
certificates in lieu of certificates which have
been lost, stolen or destroyed, upon receipt by
ING Fund Services of properly executed
affidavits and lost certificate bonds, in form
satisfactory to ING Trust Services, with the
Trust and ING Fund Services as obligees under
the bond.
- ING Fund Services shall also maintain a record
of each certificate issued, the number of Shares
represented thereby and the Shareholder of
record. With respect to Shares held in open
accounts or uncertificated form (i.e., no
certificate being issued with respect thereto)
ING Fund Services shall maintain comparable
records of the Shareholders thereof, including
their names, addresses and taxpayer
identification. ING Fund Services
<PAGE> 17
shall further maintain a stop transfer
record on lost and/or replaced certificates.
(d) Mailing Communications to Shareholders; Proxy Materials.
ING Fund Services will address and mail, to Shareholders of the Trust,
all reports to Shareholders, dividend and distribution notices and
proxy material for the Trust's meetings of Shareholders. In connection
with meetings of Shareholders, ING Fund Services will prepare
Shareholder lists, mail and certify as to the mailing of proxy
materials, process and tabulate returned proxy cards, report on proxies
voted prior to meetings, act as inspector of election at meetings and
certify Shares voted at meetings.
(e) Sales of Shares.
- ING Fund Services shall not be required to issue
any Shares of the Trust where it has received a
Written Instruction from the Trust or official
notice from any appropriate authority that the
sale of the Shares of the Trust has been
suspended or discontinued. The existence of such
Written Instructions or such official notice
shall be conclusive evidence of the right of ING
Fund Services to rely on such Written
Instructions or official notice.
- In the event that any check or other order for
the payment of money is returned unpaid for any
reason, ING Fund Services will endeavor to: (i)
give prompt notice of such return to the Trust
or its designee; (ii) place a stop transfer
order against all Shares issued as a result of
such check or order; and (iii) take such actions
as ING Fund Services may from time to time deem
appropriate.
(f) Transfer and Repurchase.
- ING Fund Services shall process all requests to
transfer or redeem Shares in accordance with the
transfer or repurchase procedures set forth in
the Trust's Prospectus.
- ING Fund Services will transfer or repurchase
Shares upon receipt of Oral or Written
Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any,
properly endorsed for transfer or redemption,
accompanied by such documents as ING Fund
Services reasonably may deem necessary.
<PAGE> 18
- ING Fund Services reserves the right to refuse
to transfer or repurchase Shares until it is
satisfied that the endorsement on the
instructions is valid and genuine. ING Fund
Services also reserves the right to refuse to
transfer or repurchase Shares until it is
satisfied that the requested transfer or
repurchase is legally authorized, and it shall
incur no liability for the refusal, in good
faith, to make transfers or repurchases which in
its good judgment, deems improper or
unauthorized, or until it is reasonably
satisfied that there is no basis to any claims
adverse to such transfer or repurchase.
- When Shares are redeemed, ING Fund Services
shall upon receipt of the instructions and
documents in proper form, deliver to the
Custodian and the Trust or its designee a
notification setting forth the number of Shares
to be repurchased. Such repurchased shares shall
be reflected on appropriate accounts maintained
by ING Fund Services reflecting outstanding
Shares of the Trust and Shares attributed to
individual accounts.
<PAGE> 19
SCHEDULE C
FEE SCHEDULE
<PAGE> 1
Exhibit 9(c)
ING FUNDS TRUST
SHAREHOLDER SERVICING PLAN
This Shareholder Servicing Plan (the "Plan") is adopted by ING
Funds Trust, a business trust organized under the laws of Delaware (the
"Trust"), on behalf of each series of the Trust (each, a "Fund"), subject to the
following terms and conditions:
SECTION 1. ANNUAL FEES.
Shareholder Services Fee. The Fund may pay to financial
institutions, including the ING Mutual Funds Management Co. LLC. (the "Manager")
and its affiliates, or other persons that provide certain services to the Fund
(each, a "Service Provider"), a "services fee," within the meaning of NASD
Rules, under the Plan at the annual rate not to exceed 0.25% of the average
daily net assets of the Fund for which the Service Provider provides services
(the "Services Fee").
Adjustment to Fees. The Fund may pay a Services Fee to the
Service Provider at a lesser rate than the fees specified in Section 1 hereof.
Payment of Fees. The Services Fees will be computed daily (on
the basis of a 360-day year) and payable monthly by the Fund at the annual rates
indicated above.
Section 2. EXPENSES COVERED BY THE PLAN.
Services. Fees may be used to compensate Service Providers who
provide administrative and support services to their customers who may from time
to time beneficially own shares of beneficial interest in the Fund, which may
include: (i) answering routine customer inquiries regarding the Fund; (ii)
assisting customers in changing dividend options, account designations and
addresses, and in enrolling into any of several investment plans offered by the
Fund; (iii) assisting in processing purchase and redemption transactions,
including arranging wire transfers, transmitting and receiving funds, and
verifying customer signatures; and (iv) providing such other similar services
directly to their customers to the extent permitted under applicable statutes,
rules and regulations.
SECTION 3. APPROVAL OF TRUSTEES.
Neither the Plan nor any related agreements will take effect
until approved by a majority of the Board of Trustees of the Trust.
<PAGE> 2
Page 2
SECTION 4. TERMINATION.
The Plan may be terminated at any time by vote of a majority
of the Board of Trustees of the Trust or vote of a majority of the outstanding
voting securities of the Trust.
SECTION 5. AMENDMENTS.
No material amendment to the Plan may be made unless approved
by the Trust's Board of Trustees in the manner described in Section 3 above.
SECTION 6. MEANINGS OF CERTAIN TERMS.
As used in the Plan, the term "majority of the outstanding
voting securities" will be deemed to have the same meaning that term has under
the Investment Company Act of 1940, as amended.
Approved: October 30, 1998
<PAGE> 1
Exhibit 9(d)
ING FUNDS TRUST
SUB-TRANSFER AGENCY PLAN
This Sub-Transfer Agency Plan (the "Plan") is adopted by ING
Funds Trust, a business trust organized under the laws of Delaware (the
"Trust"), on behalf of each series of the Trust (each, a "Fund"), subject to the
following terms and conditions:
SECTION 1. ANNUAL FEES.
Sub-Transfer Agency Fee. The Fund may pay to financial
institutions, including the ING Mutual Funds Management Co. LLC. (the "Manager")
and its affiliates, or other persons that provide sub-transfer agency services
to the Fund (each, a "Service Provider"), a sub-transfer agency fee under the
Plan at the annual rate not to exceed 0.25% of the average daily net assets of
the Fund for which the Service Provider provides sub-transfer agency services
(the "Sub-Transfer Agency Fee").
Adjustment to Fees. The Fund may pay a Sub-Transfer Agency Fee
to the Service Provider at a lesser rate than the fees specified in Section 1
hereof.
Payment of Fees. The Sub-Transfer Agency Fees will be computed
daily (on the basis of a 360-day year) and payable monthly by the Fund at the
annual rates indicated above.
Section 2. EXPENSES COVERED BY THE PLAN.
Sub-Transfer Agency Services. Fees may be used to compensate
Service Providers who provide sub-transfer agency services to their customers
who may from time to time beneficially own shares of beneficial interest in the
Fund, which may include: (i) maintaining shareholder accounts which shall
include name, address, taxpayer identification number, and number of shares;
(ii) preparation of shareholder statements; (iii) preparation of confirmations;
(iv) preparation of shareholder lists; (v) mailing shareholder communications,
including, but not limited to, shareholder statements, confirmations,
prospectuses, statements of additional information, annual and semi-annual
reports and proxy statements (collectively "Shareholder Communications"); (vi)
tabulating proxies; (vii) disbursement of dividends and other distributions;
(viii) withholding taxes on U.S. resident and non-resident accounts where
applicable; (ix) preparation and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required by applicable statutes, rules and regulations
resulting from the Services Provider's role hereunder; and (x) providing such
other similar services directly to customers to the extent permitted under
applicable statutes, rules and regulations.
<PAGE> 2
Page 2
SECTION 3. APPROVAL OF TRUSTEES.
Neither the Plan nor any related agreements will take effect
until approved by a majority of the Board of Trustees of the Trust.
SECTION 4. TERMINATION.
The Plan may be terminated at any time by vote of a majority
of the Trustees of the Trust or vote of a majority of the outstanding voting
securities of the Trust.
SECTION 5. AMENDMENTS.
No material amendment to the Plan may be made unless approved
by the Trust's Board of Trustees in the manner described in Section 3 above.
SECTION 6. MEANINGS OF CERTAIN TERMS.
As used in the Plan, the term "majority of the outstanding
voting securities" will be deemed to have the same meaning that term has under
the Investment Company Act of 1940, as amended.
Approved: October 30, 1998
<PAGE> 1
DELEGATION AGREEMENT
BETWEEN
ING FUNDS TRUST
AND
INVESTORS FIDUCIARY TRUST COMPANY
<PAGE> 2
DELEGATION AGREEMENT
AGREEMENT, dated as of October 30, 1998 by and between
INVESTORS FIDUCIARY TRUST COMPANY, a corporation chartered under the laws of
Missouri (the "Delegate"), and ING FUNDS TRUST, an investment management company
organized under the laws of Delaware (the "Fund"), on behalf of its various
Portfolios, individually and not severally (collectively, the "Portfolios").
WHEREAS, the Delegate is the investment adviser of each the
Portfolios under an investment advisory agreement (the "Advisory Agreement").
WHEREAS, pursuant to the provisions of Rule 17f-5(b) under the
Investment Company Act of 1940, and subject to the terms and conditions set
forth herein, the Board of Trustees of the Fund desires to delegate to the
Delegate, and the Delegate hereby agrees to accept and assume, certain
responsibilities described herein concerning Assets held outside of the United
States.
NOW THEREFORE, in consideration of the premises and of the
mutual agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS
Capitalized terms in this Agreement have the following
meanings:
a. Assets
Assets means any of the Fund's investments (including
foreign currencies) for which the primary market is outside the United States,
and such cash and cash equivalents as are reasonably necessary to effect the
Fund's transactions in such investments.
b. Authorized Representative
Authorized Representative means any one of the
persons who are empowered, on behalf of the parties to this Agreement, to
receive notices from the other party, to send notices to the other party, to add
or delete jurisdictions pursuant to Article 4, and to otherwise bind the
respective parties with respect to the subject matter of this Agreement.
c. Board
Board means the Board of Trustees (or the body
authorized to exercise authority similar to that of the board of directors of a
corporation) of the Fund.
<PAGE> 3
d. Compulsory Securities Depository
Compulsory Securities Depository means a Securities
Depository the use of which is mandatory (i) by law or regulation; (ii) because
securities cannot be withdrawn from the depository; or (iii) because maintaining
securities outside the Securities Depository is not consistent with prevailing
custodial practices.
e. Country Risk
Country Risk means all factors reasonably related to
the systemic risk of holding assets in a particular country including, but not
limited to, such country's financial infrastructure (including any Securities
Depositories operating in such country); prevailing custody and settlement
practices; and laws applicable to the safekeeping and recovery of Assets held in
custody.
f. Eligible Foreign Custodian
Eligible Foreign Custodian has the meaning set forth
in Rule 17f-5(a)(1) and shall include branches of a U.S. Bank (as the term U.S.
Bank is defined in Rule 17f-5).
g. Foreign Custody Manager
Foreign Custody Manager has the meaning set forth in
Rule 17f-5(a)(2).
h. Monitor
Monitor means to re-assess or re-evaluate, at
reasonable intervals, a decision or determination previously made.
i. Securities Depository
Securities Depository has the meaning set forth in
Rule 17f-5(a)(6).
2. REPRESENTATIONS
a. Delegate's Representations
The Delegate represents that it is a corporation
chartered under the laws of the State of Missouri.
b. Fund's Representations
The Fund represents that the Board has determined that it is
reasonable to rely on the Delegate to perform the responsibilities delegated by
this Agreement.
<PAGE> 4
3. JURISDICTIONS COVERED
a. Initial Jurisdictions
The authority delegated by this Agreement applies
only with respect to Assets held in the jurisdictions listed in Appendix B.
b. Added Jurisdictions
Jurisdictions may be added to Appendix B by written
agreement in the form of Appendix C. The Delegate's responsibility and authority
with respect to any jurisdiction so added will commence at the later of (i) the
time that the Delegate's Authorized Representative and the Board's Authorized
Representative have both executed a copy of Appendix C listing such
jurisdiction, or (ii) the time that the Delegate's Authorized Representative
receives a copy of such fully executed Appendix C.
c. Withdrawn Jurisdictions
The Board may withdraw its delegation with respect to
any jurisdiction upon written notice to the Delegate. The Delegate may withdraw
its acceptance of delegated authority with respect to any jurisdiction upon
written notice to the Board. Ten days (or such longer period as to which the
parties agree) after receipt of any such notice by the Authorized Representative
of the party other than the party giving notice, the Delegate shall have no
further responsibility or authority under this Agreement with respect to the
jurisdiction or jurisdictions as to which authority is withdrawn.
4. DELEGATION OF AUTHORITY TO ACT AS FOREIGN CUSTODY MANAGER
a. Selection of Eligible Foreign Custodians
Subject to the provisions of this Agreement and the
requirements of Rule 17f-5 (and any other applicable law), the Delegate is
authorized and directed to place and maintain Assets in the care of any Eligible
Foreign Custodian or Custodians selected by the Delegate in each jurisdiction to
which this Agreement applies.
b. Contracts With Eligible Foreign Custodians
Subject to the provisions of this Agreement and the
requirements of Rule 17f-5 (and any other applicable law), the Delegate is
authorized to enter into, on behalf of the Fund and the Portfolios, such written
contracts governing the Fund's foreign custody arrangements with such Eligible
Foreign Custodians as the Delegate deems appropriate.
5. MONITORING OF ELIGIBLE FOREIGN CUSTODIANS AND CONTRACTS
In each case in which the Delegate has exercised the authority
delegated under this Agreement to place Assets with an Eligible Foreign
Custodian, the Delegate is authorized to, and shall, on behalf of the Fund,
establish a system to Monitor the appropriateness of maintaining Assets with
such Eligible Foreign Custodian. In each case in which the Delegate has
<PAGE> 5
exercised the authority delegated under this Agreement to enter into a written
contract governing the Fund's foreign custody arrangements, the Delegate is
authorized to, and shall, on behalf of the Fund, establish a system to Monitor
the appropriateness of such contract.
6. GUIDELINES AND PROCEDURES FOR THE EXERCISE OF DELEGATED
AUTHORITY
a. Board's Conclusive Determination Regarding Country
Risk
In exercising its delegated authority under this
Agreement, the Delegate may assume, for all purposes, that the Board (or a
Portfolio's investment adviser, pursuant to authority delegated by the Board)
has considered, and pursuant to its fiduciary duties to the Fund and the
Portfolios' shareholders, determined to accept, such Country Risk as is incurred
by placing and maintaining Assets in the jurisdictions to which this Agreement
applies. In exercising its delegated authority under this Agreement, the
Delegate may also assume that the Board (or the Fund's investment adviser,
pursuant to authority delegated by the Board) has, and will continue to, Monitor
such Country Risk to the extent the Board deems necessary or appropriate.
Nothing in this Agreement shall require the Delegate
to make any selection or to engage in any Monitoring on behalf of the Fund that
would entail consideration of Country Risk.
b. Selection of Eligible Foreign Custodians
In exercising the authority delegated under this
Agreement to place Assets with an Eligible Foreign Custodian, the Delegate shall
determine that Assets will be subject to reasonable care, based on the standards
applicable to custodians in the market in which the Assets will be held, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation:
i. The Eligible Foreign Custodian's practices,
procedures and internal controls, including,
but not limited to, the physical protections
available for certificated securities (if
applicable), the method of keeping custodial
records, and the security and data
protection practices;
ii. Whether the Eligible Foreign Custodian has
the financial strength to provide reasonable
care for Fund Assets;
iii. The Eligible Foreign Custodian's general
reputation and standing and, in the case of
a Securities Depository, the Securities
Depository's operating history and number of
participants;
iv. Whether the Fund will have jurisdiction over
and be able to enforce judgments against the
Eligible Foreign Custodian, such as by
virtue of the existence of any offices of
the Eligible Foreign Custodian in the United
States or the Eligible Foreign Custodian's
consent to service of process in the United
States;
<PAGE> 6
v. In the case of an Eligible Foreign Custodian
that is a banking institution or trust
company, any additional factors and criteria
set forth in Appendix D to this Agreement;
and
vi. In the case of an Eligible Foreign Custodian
that is a Securities Depository, any
additional factors and criteria set forth in
Appendix E to this Agreement.
c. Evaluation of Written Contracts
In exercising the authority delegated under this
Agreement to enter into written contracts governing the Fund's foreign custody
arrangements with an Eligible Foreign Custodian, the Delegate shall determine
that such contracts (or, in the case of a Securities Depository, such contract,
the rules or established practices or procedures of the depository, or any
combination of the foregoing) provide reasonable care for Assets based on the
standards applicable to Eligible Foreign Custodians in the relevant market. In
making this determination, the Delegate ensures that the terms of such contracts
comply with the provisions of Rule 17f-5(c)(2).
d. Monitoring
In exercising the authority delegated under this
Agreement to establish a system to Monitor the appropriateness of maintaining
Assets with an Eligible Foreign Custodian or the appropriateness of a written
contract governing the Fund's foreign custody arrangements, the Delegate shall
consider any factors and criteria set forth in Appendix F to this Agreement. If,
as a result of its Monitoring of Eligible Foreign Custodian relationships
hereunder or otherwise, the Delegate determines in its sole discretion that it
is in the best interest of the safekeeping of the Assets to move such Assets to
a different Eligible Foreign Custodian, the Fund shall bear any expense related
to such relocation of Assets.
7. STANDARD OF CARE
In exercising the authority delegated under this Agreement,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having responsibility for the safekeeping of assets of an investment
company registered under the Investment Company Act of 1940 would exercise.
8. REPORTING REQUIREMENTS
The Delegate agrees to provide written reports notifying the
Board of the placement of Assets with a particular Eligible Foreign Custodian or
Permissible Foreign Custodian and of any material change in the Fund's foreign
custody arrangements. Such reports shall be provided to the Board quarterly for
consideration at the next regularly scheduled meeting of the Board or earlier if
deemed necessary or advisable by the Delegate in its sole discretion.
<PAGE> 7
9. PROVISION OF INFORMATION REGARDING COUNTRY RISK
With respect to the jurisdictions listed in Appendix B, or
added thereto pursuant to Article 4, the Delegate agrees to provide annually to
the Board such information relating to Country Risk, if available, as is
specified in Appendix G to this Agreement.
10. LIMITATION OF LIABILITY
a. Notwithstanding anything in this Agreement to the contrary,
in no event shall the Delegate or any of its officers, directors, employees or
agents (collectively, the "Indemnified Parties") be liable to the Fund or any
third party, and each Portfolio (individually, and not jointly) shall indemnify
and hold the Delegate and the Indemnified Parties harmless from and against any
and all loss, damage, liability, actions, suits, claims, costs and expenses,
including legal fees, (a "Claim") arising as a result of any act or omission of
the Delegate or any Indemnified Party under this Agreement, except for any Claim
resulting solely from the negligence, willful misfeasance or bad faith of the
Delegate or any Indemnified Party with respect to such Portfolio. Without
limiting the foregoing, neither the Delegate nor the Indemnified Parties shall
be liable for, and the Delegate and the Indemnified Parties shall be indemnified
against, any Claim arising as a result of:
i. Any act or omission by the Delegate or any
Indemnified party in reasonable good faith
reliance upon the terms of this Agreement,
any resolution of the Board, telegram,
telecopy, notice, request, certificate or
other instrument reasonably believed by the
Delegate to be genuine;
ii. Any information which the Delegate provides
or does not provide under Section 10 hereof;
iii. Any acts of God, earthquakes, fires, floods,
storms or other disturbances of nature,
epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts
of war, civil war of terrorism,
insurrection, nuclear fusion, fission or
radiation, the interruption, loss or
malfunction of utilities, transportation or
computers (hardware of software) and
computer facilities, the unavailability of
energy sources and other similar happenings
or events.
b. Notwithstanding anything to the contrary in this Agreement,
in no event shall the Delegate or the Indemnified Parties be liable to the Fund
or any third party for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind whatsoever in
connection with this Agreement or any activities hereunder.
c. The Delegate shall indemnify the Fund and hold harmless the
Fund, its officers, trustees, employees and agents, against any claim resulting
solely from the negligence, willful misfeasance or bad faith of the Delegate.
<PAGE> 8
11. ARBITRATION OF DISPUTES
To the extent permitted by law, all disputes or claims arising
under this Agreement shall be resolved through arbitration. Arbitration under
this Article shall be conducted according to the laws of the State of Delaware.
This Article shall be enforced and interpreted exclusively in accordance with
applicable federal law, including the Federal Arbitration Act.
12. EFFECTIVENESS AND TERMINATION OF AGREEMENT
This Agreement shall be effective as of the later of the date
of execution on behalf of the Board or the Delegate and shall remain in effect
until terminated as provided herein. This Agreement may be terminated at any
time, without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective 30 days after receipt
by the non-terminating party of such notice.
13. AUTHORIZED REPRESENTATIVES AND NOTICES
The respective Authorized Representatives of Fund and Board,
and the addresses to which notices and other documents under this Agreement are
to be sent to each, are as set forth in Appendix H. Any Authorized
Representative of a party may add or delete persons from that party's list of
Authorized Representatives by written notice to an Authorized Representative of
the other party.
14. GOVERNING LAW
This Agreement shall be constructed in accordance with the
laws of State of Delaware without regard to principals of choice of law.
15. LIMITATION OF LIABILITY
The Delegate understands that the obligations of the Fund
under this Agreement are not binding upon any Trustee or shareholder of the Fund
personally but bind only the Fund and the Fund's Property.
The Delegate represents that it has notice of the provision of
the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
[Remainder of Page Intentionally Left Blank]
<PAGE> 9
IN WITNESS WHEREOF, Authorized Representatives of the Board and of the
Delegate have affixed their signatures as of the date first written above.
INVESTORS FIDUCIARY TRUST COMPANY
By: _____________________________
Name:
Title:
ING FUNDS TRUST, on behalf
of the Portfolios set forth in Appendix A,
individually and not jointly
By: _____________________________
Name:
Title:
<PAGE> 10
LIST OF APPENDICES
A -- List of Portfolios
B -- Jurisdictions Covered
C -- Additional Jurisdictions Covered
D -- Additional Factors and Criteria To Be Applied in the Selection
of Eligible Foreign Custodians That Are Banking Institutions
or Trust Companies
E -- Additional Factors and Criteria To Be Applied in the Selection
of Eligible Foreign Custodians That Are Securities Depositories
F -- Factors and Criteria To Be Applied in Establishing Systems For
The Monitoring of Foreign Custody Arrangements and Contracts
G -- Information Regarding Country Risk
H -- Authorized Representatives
<PAGE> 11
APPENDIX A
LIST OF PORTFOLIOS
ING Money Market Fund
ING U.S. Treasury Money Market Fund
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Fixed Income Fund
ING Mortgage Income Fund
ING National Tax-Exempt Bond Fund
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Fund
ING Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
A-1
<PAGE> 12
APPENDIX B
JURISDICTIONS COVERED
[DELETE those countries which are NOT delegated]
Argentina Lithuania
Austria Luxembourg
Australia Malaysia
Bangladesh Mauritius
Belgium Mexico
Bahrain Morocco
Botswana Namibia
Brazil Netherlands
Canada New Zealand
Chile Norway
China Oman
Colombia Pakistan
Croatia Peru
Cyprus Philippines
Czech Republic Poland
Denmark Portugal
Ecuador Romania
Egypt Russia
Estonia Singapore
Euroclear Slovak Republic
Finland Slovenia
France South Africa
Germany Spain
Ghana Sri Lanka
Greece Swaziland
Hong Kong Sweden
Hungary Switzerland
India Taiwan
Indonesia Thailand
Ireland Turkey
Israel United Kingdom
Italy United States
Japan Uruguay
Jordan Venezuela
Kenya Zambia
Korea Zimbabwe
Latvia
Lebanon
B-1
<PAGE> 13
APPENDIX C
ADDITIONAL JURISDICTIONS COVERED
Pursuant to Article 4 of this Agreement, the Delegate and the Board
agree that the following jurisdictions shall be added to Appendix A:
[insert additional countries, if any]
INVESTORS FIDUCIARY TRUST COMPANY
By: ___________________________________
Name:
Title:
ING FUNDS TRUST, on behalf of
the Portfolios set forth in Appendix A,
individually and not jointly
By: ___________________________________
Name:
Title:
DATE: ______________________________
C-1
<PAGE> 14
APPENDIX D
ADDITIONAL FACTORS AND CRITERIA TO BE APPLIED
IN THE SELECTION OF ELIGIBLE FOREIGN CUSTODIANS
THAT ARE BANKING INSTITUTIONS OR TRUST COMPANIES
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are banking institutions or trust companies,
the Delegate shall consider the following factors, if such information is
available (check all that apply):
__________ None
__________ Other (list below)
D-1
<PAGE> 15
APPENDIX E
ADDITIONAL FACTORS AND CRITERIA TO BE
APPLIED IN THE SELECTION OF ELIGIBLE FOREIGN
CUSTODIANS THAT ARE SECURITIES DEPOSITORIES
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are Securities Depositories, the Delegate shall
consider the following factors, if such information is available (check all that
apply):
1. Whether use is voluntary or compulsory
2. Ownership
3. Operating history
4. Established rules, practices and procedures
5. Membership
6. Financial strength
7. Governing regulatory body
E-1
<PAGE> 16
APPENDIX F
FACTORS AND CRITERIA TO BE APPLIED
IN ESTABLISHING SYSTEMS FOR THE MONITORING OF
FOREIGN CUSTODY ARRANGEMENTS AND CONTRACTS
In establishing systems for the Monitoring of foreign custody
arrangements and contracts with Eligible Foreign Custodians, the Delegate shall
consider the following factors, if such information is available (check all that
apply).
1. Operating performance
2. Established practices and procedures
3. Relationship with market regulators
4. Contingency planning
F-1
<PAGE> 17
APPENDIX G
INFORMATION REGARDING COUNTRY RISK
To aid the Board in its determinations regarding Country Risk, the
Delegate will furnish the Board annually with respect to the jurisdictions
specified in Article 3, the following information:
1. Copy of Addenda or Side Letters to Subcustodian Agreements
2. Legal Opinion, if available, with regard to:
a) Access to books and records by the Fund's accountants
b) Ability to recover assets in the event of bankruptcy of a
custodian
c) Ability to recover assets in the event of a loss
d) Likelihood of expropriation or nationalization, if available
e) Ability to repatriate or convert cash or cash equivalents
3. Audit Report
4. Copy of Balance Sheet from Annual Report
5. Summary of Central Depository Information
6. Country Profile Matrix containing market practice for:
a) Delivery versus payment
b) Settlement method
c) Currency restrictions
d) Buy-in practice
e) Foreign ownership limits
f) Unique market arrangements
G-1
<PAGE> 18
APPENDIX H
AUTHORIZED REPRESENTATIVES
Notices under this Agreement shall be sent to any one of the following --
1. BOARD
a. _____________________________________________ (name)
_____________________________________________ (title)
_____________________________________________ (address)
b. _____________________________________________ (name)
_____________________________________________ (title)
_____________________________________________ (address)
c. _____________________________________________ (name)
_____________________________________________ (title)
_____________________________________________ (address)
2. DELEGATE
a.
b.
H-1
<PAGE> 1
Exhibit 10
October 27, 1998
ING Funds Trust
18 Campus Blvd., Suite 200
Newtown Square, PA 19073
ING Funds Trust
Dear Sirs:
We understand that ING Funds Trust, a Delaware business trust
(the "Trust"), has filed with the Securities and Exchange Commission a
Registration Statement on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940.
In connection with the registration of shares under its
Registration Statement, we have examined the Trust's Agreement and Declaration
of Trust, its By-Laws, and the Registration Statement, as amended, or as
proposed to be amended, including all exhibits thereto, as well as such other
records and documents as we have deemed necessary. Based
<PAGE> 2
upon such examination, we are of the opinion that:
1. The Trust has been duly organized and is validly existing
in good standing as a business trust under the laws of the state of Delaware;
and
2. The shares of beneficial interest in the Trust to be
offered to the public have been duly authorized for issuance and will be legally
issued, fully paid and nonassessable when said shares have been issued and sold
in accordance with the terms and in the manner set forth in the Trust's
Registration Statement, as amended.
We hereby consent to the filing of this opinion as an exhibit
to the Trust's Registration Statement and to the reference to our name in the
documents comprising said Registration Statement.
Very truly yours,
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated October 27, 1998 in this
Registration Statement (Form N1-A No. 333-59745) of ING Funds Trust.
/s/ Ernst & Young LLP
-------------------------------
ERNST & YOUNG LLP
New York, New York
October 27, 1998
<PAGE> 1
Exhibit 13
PURCHASE AGREEMENT
ING Funds Trust, a Delaware business trust (the "Trust"), and ING
America Insurance Holdings, Inc. hereby agree as follows:
1. The Trust hereby offers and ING America Insurance Holdings, Inc.
hereby purchases shares (the "Original Shares"), par value $.001 per share, of
each portfolio ("Fund") of the Trust as indicated on Exhibit A, attached hereto.
ING America Insurance Holdings, Inc. hereby acknowledges receipt of a purchase
confirmation reflecting the purchase of the Shares, and the Trust hereby
acknowledges receipt from ING America Insurance Holdings, Inc.in the amount of
$100,000 in full payment for the Original Shares.
2. ING America Insurance Holdings, Inc. represents and warrants to the
Trust that the Original Shares are being acquired for investment purposes and
not with a view to the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
this ____ day of October, 1998.
ING FUNDS TRUST
Attest:
_____________________________ By:___________________________
Name:
Title:
ING AMERICA INSURANCE
HOLDINGS, INC.
Attest:
_____________________________ By:___________________________
Name:
Title:
<PAGE> 2
Name of Fund Number of Shares Price Per Share
ING Money Market Fund
Class A
Class B
Class C
Class X
ING U.S. Treasury Money Market Fund
Class A
Class B
Class C
Class X
ING Intermediate Bond Fund
Class A
Class B
Class C
Class X
ING High Yield Bond Fund
Class A
Class B
Class C
Class X
ING International Bond Fund
Class A
Class B
Class C
Class X
ING Mortgage Income Fund
Class A
Class B
Class C
Class X
ING National Tax-Exempt Bond Fund
Class A
Class B
Class C
Class X
<PAGE> 3
Name of Fund Number of Shares Price Per Share
ING Large Cap Growth Fund
Class A
Class B
Class C
Class X
ING Growth and Income Fund
Class A
Class B
Class C
Class X
ING Mid Cap Growth Fund
Class A
Class B
Class C
Class X
ING Small Cap Growth Fund
Class A
Class B
Class C
Class X
ING Balanced Fund
Class A
Class B
Class C
Class X
ING Global Brand Names Fund
Class A
Class B
Class C
Class X
ING International Equity Fund
Class A
Class B
Class C
Class X
<PAGE> 4
Name of Fund Number of Shares Price Per Share
ING Emerging Markets Equity Fund
Class A
Class B
Class C
Class X
ING European Equity Fund
Class A
Class B
Class C
Class X
ING Tax Efficient Equity Fund
Class A
Class B
Class C
Class X
ING Focus Fund
Class A
Class B
Class C
Class X
ING Global Information Technology Fund
Class A
Class B
Class C
Class X
ING Global Real Estate Fund
Class A
Class B
Class C
Class X
<PAGE> 1
ING FUNDS TRUST
CLASS A
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the distribution Plan
for the Class A shares of the portfolio series (each a "Fund" and collectively
the "Funds") of ING Funds Trust, a Delaware business trust (the "Trust"),
adopted pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act") and the related agreement between the Trust and ING
Funds Distributor Inc. (the "Distributor"). During the effective term of this
Plan, the Fund may incur expenses primarily intended to result in the sale of
its Class A shares upon the terms and conditions hereinafter set forth:
SECTION 1. The Fund shall pay to the Distributor a monthly fee at the annual
rate of 0.50% of the average net asset value of the Class A shares of the Fund,
as determined at the close of each business day during the month (the "Monthly
Limitation"), to compensate the Distributor for services provided and expenses
incurred by it in connection with the offering of the Fund's Class A shares,
which may include, without limitation, (i) the payment by the Distributor to
investment dealers of commissions on the sale of Class A shares as set forth in
the then current Prospectus or Statement of Additional Information of the Fund;
(ii) paying compensation to and expenses of personnel of the Distributor who
support distribution of Class A shares; (iii) paying of or reimbursing the
Distributor for interest and other borrowing costs on its unreimbursed Carry
Forward Expenses (as hereinafter defined) at the rate paid by the Distributor
or, if such amounts are financed by the Distributor by its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which shall mean
the most preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of the Wall
Street Journal (or if such prime rate is no longer so reported, such other rate
as may be designated from time to time by the Distributor with the approval of
the Qualified Trustees, as defined below); and (iv) other direct distribution
costs of the type approved by the Board of Trustees, including without
limitation the costs of sales literature, advertising and prospectuses, (other
than those furnished to current shareholders) and state "blue sky" registration
expenses. Such fees shall be payable for each month within 15 days after the
close of such month. The Distributor's cost of providing the above mentioned
services are hereinafter collectively referred to as "Distribution Costs". Carry
Forward Expenses are Distribution Costs that are not paid in the fiscal month in
which they arise because they exceed the Monthly Limitation. A majority of the
Qualified Trustees, may, from time to time, reduce the amount of such payments,
or may suspend the operation of the Plan for such period or periods of time as
they may determine.
SECTION 2. This Plan shall not take effect until: (a) it has been approved by a
vote of a majority of the outstanding Class A shares of the Fund; (b) it has
been approved,
<PAGE> 2
together with any related agreements, by votes of the majority (or whatever
greater ercentage may, from time to time, be required by Section 12(b) of the
Act or the rules and regulations thereunder) of both (i) the Trustees of the
Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting
called for the purpose of voting on this Plan or such agreement; and (c) the
Fund has received the proceeds of the initial public offering of its Class A
shares.
SECTION 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
SECTION 4. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by vote of the majority of the outstanding Class A shares
of the Fund. In the event of such termination, the Board and its Qualified
Trustees shall determine whether the Distributor is entitled to payment from the
Fund of all Carry Forward Expenses and related costs properly incurred in
respect of Shares sold prior to the effective date of such termination, and
whether the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under Section 1 hereof, until such time as
the Distributor has been reimbursed for all such amounts by the Fund and by
retaining CDSC payments.
SECTION 6. All agreements with any person relating to implementation of this
Plan shall be in writing, and any agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Class A shares of the Fund, on not more than 60
days' written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 7. This Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding Class A shares of the Fund and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it, and (b) the term "majority of the outstanding
Class A shares of the Fund" means the affirmative vote, at a duly called and
held meeting of shareholders of the Fund, (i) of the holders of 67% or more of
the Class A shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the
<PAGE> 3
outstanding Class A shares of the Fund entitled to vote at such meeting are
present in person or by proxy, or (ii) of the holders of more than 50% of he
outstanding shares of the Class of shares of the Fund entitled to vote at such
meeting, whichever is less, and (c) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
SECTION 9. So long as the Plan is in effect, the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of such
Qualified Trustees. This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Funds, and the Distributor
as evidenced by their execution hereof.
Executed as of October 30, 1998
ING FUNDS TRUST. ING FUNDS DISTRIBUTOR, INC.
By: ------------------- By: -----------------------
<PAGE> 1
ING FUNDS TRUST
CLASS B
CLASS C
CLASS X
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the distribution Plan
for the Class B, C and X shares of the portfolio series (each a "Fund" and
collectively the "Funds") of ING Funds Trust, a Delaware business trust (the
"Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") and the related agreement between the Trust and
ING Funds Distributor Inc. (the "Distributor"). During the effective term of
this Plan, the Fund may incur expenses primarily intended to result in the sale
of its Class B, C and X shares upon the terms and conditions hereinafter set
forth:
SECTION 1. The Fund shall pay to the Distributor a monthly fee at the annual
rate of 0.75% of the average net asset value of the Class B, C and X shares of
the Fund, as determined at the close of each business day during the month (the
"Monthly Limitation"), to compensate the Distributor for services provided and
expenses incurred by it in connection with the offering of the Fund's Class B, C
and X shares, which may include, without limitation, (i) the payment by the
Distributor to investment dealers of commissions on the sale of Class B, C or X
shares as set forth in the then current Prospectus or Statement of Additional
Information of the Fund; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Class B, C or X shares; (iii)
paying of or reimbursing the Distributor for interest and other borrowing costs
on its unreimbursed Carry Forward Expenses (as hereinafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the Distributor by
its own resources or by an affiliate, at the rate of 1% per annum above the
prime rate (which shall mean the most preferential interest rate on corporate
loans at large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is no longer
so reported, such other rate as may be designated from time to time by the
Distributor with the approval of the Qualified Trustees, as defined below); and
(iv) other direct distribution costs of the type approved by the Board,
including, without limitation, the costs of sales literature, advertising and
prospectuses, (other than those furnished to current shareholders) and state
"blue sky" registration expenses. Such fees shall be payable for each month
within 15 days after the close of such month. The Distributor's cost of
providing the above mentioned services are hereinafter collectively referred to
as "Distribution Costs". Carry Forward Expenses are Distribution Costs that are
not paid in the fiscal month in which they arise because they exceed the Monthly
Limitation. A majority of the Qualified Trustees, may, from time to time, reduce
the amount of such payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until: (a) it has been approved by a
vote of a majority of the outstanding Class B, Class C and Class X shares of the
Fund; (b) it
<PAGE> 2
has been approved, together with any related agreements, by votes of the
majority (or whatever greater percentage may, from time to time, be required by
Section 12(b) of the Act or the rules and regulations thereunder) of both (i)
the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in
person at a meeting called for the purpose of voting on this Plan or such
agreement; and (c) the Fund has received the proceeds of the initial public
offering of its Class B, Class C and Class X shares.
SECTION 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
SECTION 4. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by vote of the majority of the outstanding Class B, Class
C or Class X shares of the Fund. In the event of such termination, the Board and
its Qualified Trustees shall determine whether the Distributor is entitled to
payment from the Fund of all Carry Forward Expenses and related costs properly
incurred in respect of Shares sold prior to the effective date of such
termination, and whether the Fund shall continue to make payment to the
Distributor in the amount the Distributor is entitled to retain under Section 1
hereof, until such time as the Distributor has been reimbursed for all such
amounts by the Fund and by retaining CDSC payments.
SECTION 6. All agreements with any person relating to implementation of this
Plan shall be in writing, and any agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Class B, Class C or Class X shares of the Fund, on
not more than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
SECTION 7. This Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding Class B, Class C or Class X shares of
the Fund and all material amendments to this Plan shall be approved in the
manner provided for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it, and (b) the term "majority of the outstanding
Class B and Class X shares of the Fund" means the affirmative vote, at a duly
called and held meeting of shareholders of the Fund, (i) of the holders of 67%
or more of the Class B or Class X shares of the Fund present (in person or by
proxy) and entitled to vote at such meeting, if the holders of
<PAGE> 3
more than 50% of the outstanding Class B, Class C or Class X shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (ii) of
the holders of more than 50% of the outstanding shares of the Class of shares of
the Fund entitled to vote at such meeting, whichever is less, and (c) the terms
"assignment" and "interested person" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange Commission.
SECTION 9. So long as the Plan is in effect, the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of such
Qualified Trustees. This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, on behalf of the Funds, and the Distributor
as evidenced by their execution hereof.
Executed as of October 30, 1998
ING FUNDS TRUST. ING FUNDS DISTRIBUTOR, INC.
By: ---------------- By: ------------------------
<PAGE> 1
Exhibit 15c
ING FUNDS TRUST
Shares of Beneficial Interest
DEALER AGREEMENT
__________, 199_
Ladies and Gentlemen:
ING Funds Distributor, Inc. has entered into a distribution agreement (the
"Distribution Agreement") dated October 30, 1998 with ING Funds Trust (the
"Trust"), pursuant to which we have agreed to act as distributor (the
"Distributor") of shares of each series of the Trust set forth on Schedule 1
hereto, as such Schedule may be revised from time to time (each, a "Fund"). This
Dealer Agreement shall herein be referred to as the "Agreement". For purposes of
this Agreement, the term "Shares" shall mean the authorized shares of the
relevant Fund. The terms and conditions of this Agreement are as follows:
1. Role of ING Funds Distributor, Inc. Pursuant to the Distribution
Agreement, we have agreed to use our best efforts to make arrangements for
securities dealers which can make the representations set forth in Section 7 of
this Agreement to solicit from the public orders to purchase Shares. You are
hereby invited to become one of such securities dealers (each such securities
dealer, an "Authorized Dealer"). This will confirm our mutual agreement as to
the terms and conditions applicable to your participation as an Authorized
Dealer, such agreement to be effective on your confirmation hereof. You
understand (a) that we may, at any time at our option, act as an Authorized
Dealer, (b) that we are seeking to enter into this Agreement in counterparts
with you and certain other securities dealers, which also may act as Authorized
Dealers, (c) that, except as we may otherwise agree with you, we may enter into
agreements (which may or may not be the same as this Agreement) with Authorized
Dealers, (d) that the Trust and we may modify, suspend, terminate or withdraw
entirely the offering of Shares at any time without giving notice to you and
without incurring any liability or obligation to you, and (e) that we may, upon
notice, change the net asset value, sales load, or dealer allowance or modify,
cancel or change the terms of this Agreement. All purchases of Shares from, and
redemptions of Shares by, the Trust shall be effected through us acting on
behalf of the Trust. You understand that we shall have no obligation to sell
Shares to you at such times as we are not acting as Distributor for the Shares.
2. Role of Authorized Dealers. (a) As an Authorized Dealer, you shall have
no obligation to purchase or sell or to solicit the purchase or sale of Shares.
When and if you determine to purchase, redeem or exchange Shares or you receive
a
<PAGE> 2
customer order for the purchase, redemption, or exchange of Shares and you
determine to accept such order, you agree to accept the order pursuant to and
comply with the terms and procedures relating to the handling of purchase,
redemption, and exchange orders that are detailed in the Prospectus, SAI, and
Addendum A, attached hereto, which may be amended and/or supplemented from
time-to-time.
(b) You agree to offer Shares to the public at the then applicable net
asset value plus any initial sales charge (the "Sales Load") (collectively, the
"Public Offering Price")[NOTE: This definition must be conformed in the
prospectus.] and subject to the minimum investment amount set forth in the
relevant Prospectus and SAI, subject to any waivers or reductions of the Sales
Load or dealer allowances (the "Dealer Allowances") as described in the
Prospectus as amended from time to time. Any amendment to a Prospectus which
affects the Sales Load, Dealer Allowances, waivers or discounts shall not affect
Sales Load, Dealer Allowances, discounts or waivers with respect to sales on
which orders have been accepted by us prior to the date of notice of such
amendment. Your placement of an order for Shares after the date of any notice of
such amendment shall conclusively evidence your agreement to be bound thereby.
The Trust and ING Funds Distributor, Inc. reserve the right to modify the
minimum investment requirement, the subsequent investment requirement, the
manner in which Shares are offered and the Sales Load rates applicable to future
purchases of Shares. We shall make a reasonable effort to notify you of any
redetermination or suspension of the Public Offering Price, but we shall be
under no liability for failure to do so. Reduced Sales Loads also may be
available as a result of a cumulative discount or pursuant to a right of
accumulation as set forth in the relevant Prospectus. You agree to advise us
promptly as to the amounts of any sales made by you to the public qualifying for
reduced Sales Loads.
(c) You agree to purchase Shares from us only to cover purchase orders
already received from your customers, or for your own bona fide investment. You
will not withhold placing with us orders received from your customers so as to
profit yourself as a result of such withholding. All orders for Shares are
subject to acceptance or rejection by us or the Trust in the sole discretion of
either.
(d) In purchasing Shares through us, you shall rely solely on the
representations contained in the relevant Prospectus, relevant SAI and the
registration statement, as most recently amended (the "Registration Statement"),
relating to the Shares. You will not furnish to any person any information
relating to the Shares, the Trust, any Fund or us that is inconsistent with
information contained in the relevant Prospectus, relevant SAI, the Registration
Statement or any printed information issued by the Trust or us as information
supplemental to such Prospectus or cause any advertisement to be published or
posted in any public place without our consent and the consent of the Trust.
<PAGE> 3
(e) In all sales of Shares to the public, you shall act as dealer for your
own account, whether as agent or principal. Except as provided in paragraph C of
Addendum A, nothing herein shall be deemed to constitute you or any other
Authorized Dealer as agent for the Trust, us, or any other Authorized Dealer.
You agree not to act as our agent and not to claim to act as our agent or as
agent of any of the foregoing. You shall be deemed an independent contractor and
you shall have no authority to act for or represent the Trust. You will not act
as an "underwriter" or "distributor" of Shares, as those terms are used in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder. You agree to buy Shares only through us and not from any
other sources and to sell Shares only to us, as the Trust's redemption agent,
and not to any other purchasers.
(f) You agree that we shall have full authority to act upon your express
instructions to purchase, redeem or exchange Shares through us on behalf of your
customers under the terms and conditions provided in the relevant Prospectus,
SAI and Addendum A. You agree to hold us harmless as a result of any action
taken with respect to authorized purchases, redemptions or exchanges upon your
express instructions.
3. Compensation. (a) You will be entitled to receive that portion of the
Sales Load allocated to Authorized Dealers as set forth in the relevant
Prospectus in connection with purchases of Shares effected to or through you.
For classes of shares of the Funds with a contingent deferred sales load, you
will receive from us, or a paying agent appointed by us, a commission in the
amount outlined in the relevant Prospectus. You acknowledge that the
Prospectuses will set forth a description of waivers or reduction of the Sales
Load in certain cases and you hereby waive such portion of the Sales Load
otherwise allocated to you. We will promptly remit or cause to be remitted to
you, by wire transfer of same day funds to an account you shall designate, that
portion of the Sales Load, if any, to which you are entitled, after deduction of
the portion allocated to us, which was received by us and not yet paid to you.
(b) If any Shares purchased by you as agent or as principal are
repurchased by a Fund or by us for the account of a Fund or are tendered for
redemption within seven business days after confirmation by us of the original
purchase order for such shares, (i) you agree forthwith to refund to us the full
concession allowed to you on the original sale and (ii) we shall forthwith pay
to such Fund that part of the discount retained by us on the original sale.
Notice will be given to you of any such repurchase or redemption within ten days
of the date on which the tender of Shares for redemption is delivered to us or
to the Fund.
4. Additional Services and Fees.
<PAGE> 4
(a) Shareholder Services. You agree to provide shareholder services to
your customers who may from time to time beneficially own Shares to the extent
permissible under applicable statutes, rules and regulations. Such services may
include: (i) answering routine customer inquiries regarding the Funds; (ii)
assisting customers in changing dividend options, account designations and
addresses, and in enrolling into any of several investment plans offered by the
Funds; (iii) assisting in processing purchase and redemption transactions,
including arranging wire transfers, transmitting and receiving funds, and
verifying customer signatures; and (iv) providing such other similar services
directly to clients as we may reasonably request to the extent you are permitted
to do so under applicable statutes, rules and regulations. We must clearly
delineate between shareholder services and sub-transfer agency activities. You
also will provide such office space and equipment, telephone facilities and
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services and assistance to customers.
In consideration of the services and facilities provided by you hereunder,
the Trust will pay to you, as provided under the Trust's Shareholder Servicing
Plan, and you will accept as full payment therefor, a "services fee", within the
meaning of the NASD Rules, at the annual rate of twenty-five one-hundredths of
one percent (.25%) of the average daily net asset value of the shares
beneficially owned by your customers for whom you have a servicing relationship
(the "Clients' Shares"), which fee will be computed daily (on the basis of
360day year) and payable monthly. For purposes of determining the fees payable
under this section, the average daily net asset value of the Clients' Shares
will be computed in the manner specified in the Registration Statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Shares for purposes of purchases and redemptions. By your
written acceptance of this Agreement, you agree to and do waive such portion of
any fee payable to you hereunder to the extent necessary to assure that such fee
and other expenses required to be accrued by us on any day with respect to the
Clients' Share in any Fund that declares its net investment income as a dividend
to shareholders on a daily basis does not exceed the income to be accrued by us
to such Shares on that day. The fee rate stated above may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you.
(b) Distribution Services. With regard to the shares of the Trust set
forth in Schedule 2, you agree to provide distribution services of the type
contemplated by the applicable plan adopted by the Trust under Rule 12b-1 of the
Investment Company Act (a "12b-1 Plan") as described in the Prospectuses. In
consideration for such services, you will be entitled to receive compensation
from us that we received under the applicable Rule 12b-1 Plan under the terms
and at the rates as set forth in
<PAGE> 5
Schedule 2. Compensation shall be payable to you only to the extent that funds
are received by us and in our possession.
(c) Fees from Customers. It is agreed to the extent legally permissible
that you may impose certain conditions on customers, in addition to or different
from those imposed by the Trust, such as requiring a minimum initial investment
or imposing limitations on the amounts of transactions. It is also understood
that to the extent legally permissible you may directly credit or charge fees to
customers in connection with an investment in the Funds. You shall credit or
bill customers directly for such credits or fees. In the event that you charge
customers such fees, you shall make appropriate prior written disclosure (such
disclosure to be in accordance with all applicable laws) to customers both of
any direct fees charged to the customer by you and of the fees received by you
or to be received by you from the Trust pursuant to this Agreement. It is
understood by you however, that in no event shall you have recourse or access as
agent or otherwise to the account of any shareholder of the Trust except to the
extent expressly authorized by law or by such shareholder, or to any assets of
the Trust, for payment of any direct fees referred to in this paragraph.
5. Orders and Payment for Shares. Upon receipt from you of any order to
purchase Shares and, if a new account, an Account Information Form, we shall
confirm such order to you in writing or by wire to be followed by a confirmation
in writing. Additional instructions may be forwarded to you from time to time.
Payment for Shares ordered from us shall be made in Federal Funds and must
be received by the Trust's agent, First Data Corp. - Investor Services Group,
within three business days of a receipt and acceptance by us of an order. If
payment in Federal Funds is not received by the third business day after the
subscription date, we reserve the right, without any notice, to cancel the sale
and to hold you responsible for any loss, including loss of profits, suffered by
us or by the Trust resulting from such failure.
6. Blue Sky and Other Qualifications. The Trust has registered an
indefinite number of Shares under the Securities Act. Upon application by you,
we shall inform you as to any advice received by us concerning the jurisdictions
in which the Shares have been qualified for offer or sale or are exempt under
the securities or blue sky laws of such jurisdictions, but we assume no
obligation or responsibility as to your right to offer or sell Shares in any
jurisdiction (other than under the federal laws of the United States). If you
propose to offer or sell Shares outside the United States, its territories or
its possessions, you will take, at your expense, such action, if any, as may be
necessary to comply with the laws of such foreign jurisdictions.
<PAGE> 6
7. Representations, Warranties and Undertakings. You represent and warrant
and undertake that:
(a) You have the requisite authority and have taken all necessary
corporate action to enter into this Agreement and to perform the services
contemplated herein.
(b) You are familiar with Rule 15c2-8 under the Securities Exchange Act of
1934 (the "Exchange Act"), Section 4(3) of Securities Act and Section 24(d) of
the Investment Company Act relating to the distribution and delivery of
preliminary and final prospectuses and agree that you will comply therewith. You
agree to deliver thereafter to any purchaser whose Shares you are holding as
record holder copies of the annual and interim reports and proxy solicitation
materials relating to the Shares. You further agree to make reasonable efforts
to endeavor to obtain proxies from such purchasers whose Shares you are holding
as record holder. Additional copies of the Trust's Prospectuses, SAI, annual or
interim reports, proxy solicitation materials and any other printed information
supplemental to such material will be supplied to you as you reasonably request.
(c) You are a member of good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or, if you are not such a member, you are
a foreign bank, dealer or institution not eligible for membership in the NASD
which agrees to make no sales within the United States, its territories or its
possessions or to persons who are citizens thereof or residents therein, and in
making other sales to comply, as though you were a member of NASD, with the
provisions of Sections 8, 24 and 36 of Article III of the Rules of Fair Practice
of the NASD and with Section 25 thereof as that Section applies to a non-NASD
member broker or dealer in a foreign country.
(d) You undertake to comply with respect to your offering of Shares to the
public pursuant to this Agreement with all applicable provisions of the
Securities Act, the Exchange Act and the Investment Company Act and the rules
and regulations thereunder and with the applicable rules of the NASD.
(e) You represent that any compensation payable to you hereunder (i) will
be disclosed to your customers; (ii) will be authorized by your customers; and
(iii) will not result in an excessive fee to you. In addition, if an issue
relating to a Fund's 12b-1 Plan (as defined below) is submitted for shareholder
approval, you will vote any Shares held for your own account in the same
proportion as the vote of the Shares held by your customers on such issue. You
further represent that in effecting the purchase or redemption of Shares in
accordance with the terms of this Agreement, you represent as follows: (i)
except as provided in paragraph C of Addendum A, you shall act solely as agent
for the account of your customer; (ii) purchases or redemptions of Shares shall
be initiated solely upon the instruction and order of your
<PAGE> 7
customer; (iii) the customer will have full beneficial ownership of any Shares
purchased upon its authorization and order; and (iv) all transactions shall be
for the account of the customer or for your own bona fide investment, and shall
be without recourse to you except in instances where the transaction is for your
own bona fide investment. Under no circumstances will you make any oral or
written representations to the contrary.
(f) You represent that with regard to the transmission of purchase,
redemption or exchange instructions for Shares through the National Securities
Clearing Corporation's Fund/SERV system, you have entered into a membership
agreement with the National Securities Clearing Corporation, and have met all
the requirements to participate in their Fund/SERV system.
8. Liability and Indemnification. Neither of us shall be liable to the
other except for (i) acts or failures to act which constitute a lack of good
faith or gross negligence, and (ii) obligations expressly assumed under this
Agreement. In addition, you agree to indemnify us and hold us harmless from any
claims or assertions relating to the lawfulness of your participation in this
Agreement and the transactions contemplated hereby or relating to any activities
of any persons or entities affiliated with your organization which are performed
in connection with the discharge of your responsibilities under this Agreement
for which you may found liable to us. If such claims are asserted, we shall have
the right to manage our own defense, including the selection and engagement of
legal counsel, and all costs of such defense will be borne by you.
9. NSCC Indemnity - Shareholder and House Accounts. In consideration of
our liquidating, exchanging and/or transferring unissued Shares for your
customers without the use of original or underlying documentation supporting
such instruction (e.g. a signed stock power or signature guarantees), you hereby
agree to indemnify us and the Trust against any losses, including reasonable
attorney's fees, that may arise from such liquidation, exchange and/or transfer
of unissued Shares upon your direction. This indemnification shall apply only to
the liquidation, exchange and/or transfer of unissued Shares in shareholder and
house accounts executed as wire orders transmitted via NSCC's Fund/SERV system.
You represent and warrant to the Trust and to us that all such transactions
shall be authorized by your customers.
This indemnification shall not apply to any losses (including attorneys
fees) caused by the us or the Trust to comply with any of your instructions
governing any of the above transactions, or any grossly negligent act or
omission by us or the Trust, or any of their directors, officers, employees or
agents. All transactions shall be settled upon your confirmation through NSCC
transmission to the Distributor.
<PAGE> 8
The Distributor or the Trust may revoke the indemnity contained in this
Section 9 upon written notice to each of the other parties hereto, and in the
case of such revocation, this indemnity agreement shall remain effective as to
trades made prior to such revocation.
10. Term. This Agreement shall become effective upon execution and
delivery hereof. This Agreement may be terminated at any time, without the
payment of any penalty, by either party to this Agreement, by vote of a majority
of the members of the board of trustees of the Trust who are not interested
persons of the Trust and have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or in this Agreement or by vote of a majority
of the outstanding voting securities of the Trust on not more than 60 days'
written notice to any other party to the Agreement. This Agreement shall
automatically terminate in the event of its assignment, as such term is defined
under the Investment Company Act.
11. Representations to Survive. The agreements, representations,
warranties and other statements set forth in or made pursuant to this Agreement
will remain in full force and effect, to the extent permitted by applicable law,
regardless of any investigation made by or on behalf of us or any Authorized
Dealer. The provisions of Sections 7, 8 and 9 of this Agreement shall survive
the offer and sale of the Shares, to the extent permitted by applicable law, and
the termination or cancellation of this Agreement.
12. No Association. Nothing herein contained constitutes an agreement to
become partners with you or with any other Authorized Dealer, but you shall be
liable for your proportionate share of any tax, liability or expense based on
any claim arising from the sale of Shares under this Agreement. We shall not be
under any liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under Section 11(f) of the Securities Act of
1933, as amended, and no obligations on our part shall be implied or inferred
herefrom.
13. Recordkeeping. You will maintain all records required by law to be
kept by you relating to transactions in the Shares and, upon request by the
Trust, promptly make such of these records available to the Trust as the Trust
may reasonably request in connection with its operations.
14. Notices. Notices hereunder shall be deemed to have been duly given if
delivered by hand or facsimile (a) if to you, at your address or facsimile
number set forth below and (b) if to us, to ING Funds Distributor, Inc., 18
Campus Blvd., Suite 200, Newtown Square, PA 19073, Attention: James MacCune or,
in each case, such other address as may be notified to the other party.
<PAGE> 9
15. Amendments. We may modify this Agreement at any time by written notice
to you. The first order placed by you subsequent to the giving of such notice
shall be deemed acceptance by you of the modification described in such notice.
16. Severability. Every provision of this Agreement shall be severable. If
a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement.
17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Please confirm your agreement by signing and returning to us the two
enclosed duplicate copies of this Agreement. Upon our acceptance hereof, the
Agreement shall constitute a valid and binding contract between us. After our
acceptance, we will deliver to you one fully executed copy of this Agreement.
Very truly yours,
ING FUNDS DISTRIBUTOR, INC.
By:_____________________________________
Name:
Title:
Agreed to:
(Name of Authorized Dealer)
By:_____________________________________
Name:
Title:
________________________________________
Street Address
________________________________________
City State Zip
________________________________________
Fax No.
________________________________________
Telephone No.
________________________________________
Telex No.
________________________________________
Firm Taxpayer Identification No.
<PAGE> 10
SCHEDULE 1
Name of Fund
ING Money Market Fund
ING U.S. Treasury Money Market Fund
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Fixed Income Fund
ING Mortgage Income Fund
ING National Tax-Exempt Bond Fund
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Balanced Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Tax Efficient Equity Fund
ING Focus Fund
ING Global Information Technology Fund
ING Global Real Estate Fund
<PAGE> 11
SCHEDULE 2
Distribution Compensation Payable under Rule 12b-1 Plan
Name of Fund Class of Shares Fee Rate
The compensation payable under this agreement is the applicable fee rate
of the average daily net asset value of the shares held by your investors (the
"Clients' Shares"), which fee will be computed daily (on the basis of 360day
year) and payable monthly. For purposes of determining the fees payable under
this section, the average daily net asset value of the Clients' Shares will be
computed in the manner specified in our Registration Statement (as the same is
in effect from time to time) in connection with the computation of the net asset
value of Shares for purposes of purchases and redemptions. By your written
acceptance of this Agreement, you agree to and do waive such portion of any fee
payable to you hereunder to the extent necessary to assure that such fee and
other expenses required to be accrued by us on any day with respect to the
Clients' Share in any Fund that declares its net investment income as a dividend
to shareholders on a daily basis does not exceed the income to be accrued by us
to such Shares on that day. The fee rate stated above may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you.
ADDENDUM A
Terms of Purchase, Redemption and Exchange Instructions
A. You acknowledge that instructions placed by you and authorized by your
clients ("Clients") for the purchase, redemption or exchange of Shares
("Instructions") will be accepted only at the relevant Fund's net asset value
per Share next calculated after receipt of the order by the Trust or its
designated agent, as set forth in the applicable
<PAGE> 12
Prospectus and Statement of Additional Information (the "SAI"). You agree to
process all Instructions in accordance with the procedures and limitations set
forth in the Prospectus and SAI.
You agree to be solely responsible for the accuracy of each Instruction,
including an Instruction through Fund/SERV, and acknowledge that the issuance of
any Instruction will constitute your representation and warranty to us and the
Trust that the Instruction is accurate, complete and issued as duly authorized
by the Client whose Shares are the subject of the Instructions. With regard to
transactions through Fund/SERV, you understand that you will receive
confirmation of purchases, redemptions and exchanges, and notice of any
rejections, from the Trust, or the Trust's designated agents, as applicable, via
Fund/SERV. You acknowledge that exchanges are limited to exchanges among
identically registered accounts in the Trust.
C. You understand that Instructions shall be deemed to have been received
as of the day on which the Instructions were placed by you with the Trust or its
designated agent ("Trade Date"), if such Instructions are received by you from
Client, or from a person having discretion over the Client's account, prior to
4:00 p.m., Eastern Standard Time ("EST"), on a business day on which the New
York Stock Exchange is open ("Close of Trading") and transmitted to the Trust or
its designated agent no later than 8:30 a.m., EST, on the next business day
following such Trade Date ("Cutoff Time"). You understand that Instructions
received in proper form by the Trust or its designated agent after the Cutoff
Time on any business day shall be treated as if received on the next following
business day. You hereby warrant that all Instructions you transmit to the Trust
or its designated agent for processing as of a particular Trade Date will relate
only to Instructions received by you prior to the Close of Trading on the Trade
Date. Provided you are not in breach of the terms and conditions of this
Agreement, you understand that you shall be considered, for purposes of this
paragraph only, the Trust's agent for the limited purpose of receiving requests
for the purchase, redemption or exchange of Shares and communicating to the
Trust or its designated agent such requests.
D. You agree not to seek a net asset value per Share of a Fund as of a
time ("As of Trade") other than the next calculated net asset value per Share of
the Fund on the Trade Date, without the prior approval of the Trust. You
acknowledge that the Trust shall have complete and sole discretion as to whether
or not to accept an As of Trade. Unless an As of Trade is placed to correct our
error or a Trust-related error, you agree to promptly pay the Trust for any loss
incurred to the Trust as a result of the As of Trade. If an As of Trade is
authorized by the Trust to be processed as of a particular Trade Date, you
hereby warrant that the trade relates only to Instructions received by you by
the Close of Trading on such Trade Date.
<PAGE> 13
You agree not to seek to cancel or change a previously placed Instruction
without the prior approval of the Trust. You understand that the Trust shall
have complete and sole discretion as to whether or not to allow the cancellation
or change to be made. You agree to promptly pay the Trust the amount of any loss
incurred by the Trust as a result of transactions canceled or changed by or at
your instruction.
F. In the event of overpayment to you in connection with a redemption of
Shares where such overpayment is caused by our or the Trust's error, you agree
to use your best efforts to collect such overpayment. If, after such efforts,
you are not able to recover all of such overpayment, you will cooperate with our
or the Trust's attempt to recover any portion of the overpayment, including, to
the extent permitted by your agreements with Clients and applicable law,
providing us or the Trust with information reasonably available to you as to the
identity of the Client(s) from whom the remainder has not been recovered.
Alternatively, if available, at our or the Trust's option, we or the Trust shall
be entitled to reclaim such overpayment by debiting your account at NSCC. You
agree that overpayments caused by your error shall be your sole responsibility
and liability and we or the Trust may debit your account at NSCC to cover such
overpayment.
<PAGE> 1
Exhibit 18
ING FUNDS TRUST
Rule 18f-3 Plan
Rule 18f-3
Pursuant to Rule 18f-3 (" Rule 18f-3") of the Investment Company Act of
1940, as amended (the "Act"), ING Funds Trust (the "Trust"), a registered
open-end investment company whose shares are registered on Form N-1A, consisting
of the ING Money Market Fund, ING U.S. Treasury Money Market Fund, ING
Intermediate Bond Fund, ING High Yield Bond Fund, ING International Bond Fund,
ING Mortgage Income Fund, ING National Tax-Exempt Bond Fund, ING Large Cap
Growth Fund, ING Growth and Income Fund, ING Mid Cap Growth Fund, ING Small Cap
Growth Fund, ING Balanced Fund, ING Global Brand Names Fund, ING International
Equity Fund, ING Emerging Markets Equity Fund, ING European Equity Fund, ING Tax
Efficient Equity Fund, ING Focus Fund, ING Global Information Technology Fund
and ING Global Real Estate Fund, and any future fund or series created by the
Trust (collectively, the "Funds"), hereby adopts this plan setting forth the
separate arrangements and expense allocations of each class of shares. Any
material amendment to this plan is subject to prior approval of the Board of
Trustees, including a majority of the disinterested Trustees.
Authorized Classes
CLASS A SHARES
Class A shares of all funds except the Money Market and U.S. Treasury
Money Market Fund are sold subject to an initial sales charge as follows:
<TABLE>
<CAPTION>
EQUITY FUNDS
SALES-CHARGE-AS FIXED INCOME FUNDS
PERCENTAGE OF SALES CHARGE AS
THE OFFERING PERCENTAGE OF THE
AMOUNT OF SALE PRICE OFFERING PRICE
- ------------------------------------------------------- ------------------------ -------------------------------
<S> <C> <C>
Less than $50,000 .................................... 5.75% 4.75%
$50,000 to $99,999 ................................... 4.75% 4.25%
$100,000 to $249,999 ................................. 3.75% 3.50%
$250,000 to $499,999 ................................. 2.75% 2.50%
$500,000 to $999,999.................................. 2.00% 2.00%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
EQUITY FUNDS
SALES-CHARGE-AS FIXED INCOME FUNDS
PERCENTAGE OF SALES CHARGE AS
THE OFFERING PERCENTAGE OF THE
AMOUNT OF SALE PRICE OFFERING PRICE
- ------------------------------------------------------- ------------------------ -------------------------------
<S> <C> <C>
$1,000,000 or more* .................................. -0- -0-
</TABLE>
Class A shares are subject to a distribution fee under the Rule 12b-1 Plan
payable at a maximum annual rate of up to 0.50% of the average daily net assets
of that Class. Class A Shares are also subject to fees of up to 0.25% (subject
to NASD rules) pursuant to a Servicing Organization Agreement. Class A Shares
are also subject to fees of up to 0.25% pursuant to a Sub-Transfer Agency
Agreement.
CLASS B SHARES
Class B Shares are not subject to an initial sales charge but all Funds
subject to a contingent deferred sales charge which will be imposed on
redemptions as follows:
5% in year 1
4% in year 2
4% in year 3
3% in year 4
2% in year 5
1% in year 6
0% in year 7
0% in year 8
Class B Shares automatically convert to Class A shares on the first
business day of the month following the eighth anniversary of the issuance of
such Class B shares. Class B shares are also subject to a distribution fee
pursuant to Rule 12b-1 payable at the annual rate of up to 0.75% of the average
daily net assets of the class. Class B Shares are also subject to fees of up to
0.25% (subject to NASD rules) pursuant to a Servicing Organization Agreement.
Class B Shares are also subject to fees of up to 0.25% pursuant to a
Sub-Transfer Agency Agreement.
CLASS C SHARES
Class C Shares are not subject to an initial sales charge but all Funds
are subject to a contingent deferred sales charge which will be imposed on
redemptions. Class C Shares are subject to a lower contingent deferred sales
charge (1.00%) and do not have to be held as long as Class B or X Shares (one
year) to avoid paying a contingent deferred sales charge.
- 2 -
<PAGE> 3
Class C Shares will not automatically convert to Class A shares. Class
C Shares are also subject to a distribution fee pursuant to Rule 12b-1 payable
at the annual rate of up to 0.75% of the average daily net assets of the class.
Class C Shares are also subject to fees of up to 0.25% (subject to NASD rules)
pursuant to a Servicing Organization Agreement. Class C Shares are also subject
to fees of up to 0.25% pursuant to a Sub-Transfer Agency Agreement.
CLASS X SHARES
Class X Shares are sold without an initial sales charge. Investors will
receive, as a bonus, additional shares having a value equal to 2.50% of the
amount invested. The Distributor will pay for these Bonus Shares. Class X Shares
are subject to a contingent deferred sales charge which will be imposed on
redemptions as follows:
5% in year 1
4% in year 2
4% in year 3
3% in year 4
2% in year 5
1% in year 6
0% in year 7
Class X Shares automatically convert to Class A shares on the first
business day of the month following the eighth anniversary of the issuance of
such Class X shares. Class X shares are also subject to a distribution fee
pursuant to Rule 12b-1 payable at the annual rate of up to 0.75% of the average
daily net assets of the class. Class B Shares are also subject to fees of up to
0.25% (subject to NASD rules) pursuant to a Servicing Organization Agreement.
Class X Shares are also subject to fees of up to 0.25% pursuant to a
Sub-Transfer Agency Agreement. Class X Shares are offered to certain Qualified
purchasers (including but not limited to IRAs, Roth IRAs, Education IRAs, SEP
IRAs, SIMPLE IRAs and 403(b)(7) plans).
Class Voting Rights and Obligations and Class Expenses
The Classes of shares issued by any Fund will be identical in all
respects except for Class designation, allocation of certain expenses directly
related to the distribution or service arrangement, or both, for a Class, and
voting rights--each Class votes separately with respect to issues affecting only
that Class. Shares of all Classes will represent interests in the same
investment fund; therefore each Class is subject to the same investment
objectives, policies and limitations.
Each Class of shares shall bear expenses, not including advisory or
custodial fees or other expenses related to the management of the Fund's assets,
that are directly attributable to the kind or degree of services rendered to
that Class ("Class Expenses"). Class Expenses, including the management fee or
the fee of other service providers, may be waived or reimbursed by the
- 3 -
<PAGE> 4
Funds' investment adviser, underwriter or any other provider of services to the
Funds with respect to each Class of a Fund on a Class by Class basis.
Exchanges and Conversion Privileges
Shareholders who have held all or part of their shares in a Fund
for at least seven days may exchange shares of one Fund for shares of any of the
other portfolios of the Trust which are available for sale in their state. A
shareholder who has paid a sales load in connection with the purchase of shares
of any of the Funds will be subject only to that portion of the sales load of
the Fund into which the shareholder is exchanging which exceeds the sales load
originally paid by the shareholder. Class B and X Shares will convert
automatically to Class A shares on the first business day of the month following
the eighth anniversary of the issuance of such Class B or X Shares. Class B or X
Shares will be converted at the net asset value of Class A Shares, without the
imposition of any sales load, fee or charge.
- 4 -
