<PAGE> 1
As filed with the Securities and Exchange Commission on April 15, 1999
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.
Post-Effective Amendment No. 1 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 2 /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: (877) 463-6464
Louis S. Citron
ING Mutual Funds Management Co. LLC
18 Campus Boulevard, Suite 200
Newtown Square, Pennsylvania 19073
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (b)
/ / On (date) pursuant to paragraph (a)(1)
/X/ On July 1, 1999 pursuant to 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.
<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
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<TABLE>
<CAPTION>
Part A Prospectus Caption
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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
</TABLE>
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2
<TABLE>
<CAPTION>
Part B .................................... Statement of Additional
- ------ Information Caption
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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)
</TABLE>
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3
<TABLE>
<S> <C> <C>
Item 21. Underwriters........................ Management
Item 22. Calculation of Performance
Data.............................. Other Information: Yields and
Performance Information
Item 23. Financial Statements................ No Annual Report is available
since the Funds have not
commenced operations. Initial
Balance Sheet is provided as an
attachment.
</TABLE>
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
ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes thirteen funds (each, a "Fund" and, collectively,
the "Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-advisers described herein (each a "Sub-Adviser", and collectively, the
"Sub-Advisers"). The Manager and its Sub-Advisers are wholly-owned indirect
subsidiaries of ING Groep, 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 & Income Fund, ING Balanced Fund and 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.
Each Fund offers five different classes of shares -- Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group. The Class A, Class B, Class C and Class X shares are
offered under separate prospectuses. Shares of the Funds are sold to the public
by ING Funds Distributor, Inc. (the "Distributor").
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT 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.
THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL BE
ACHIEVED.
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 __________, 1999, 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. The SEC
maintains a Web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference, and other information regarding the Funds. The SAI is
also 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.
____________, 1999
<PAGE> 7
TABLE OF CONTENTS
PAGE
HIGHLIGHTS.................................................. 1
FUND EXPENSES............................................... 5
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 13
MANAGEMENT OF THE FUNDS..................................... 16
FUND SHARE VALUATION........................................ 22
PURCHASE OF FUND SHARES..................................... 22
REDEMPTION OF FUND SHARES................................... 24
EXCHANGE OF FUND SHARES..................................... 25
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 26
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 27
RISKS OF INVESTING IN THE FUNDS............................. 35
OTHER INFORMATION........................................... 38
2
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HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes thirteen funds managed by ING Mutual Funds
Management Co. LLC (the "Manager") and sub-advised by the applicable
Sub-Adviser. Each Fund has a distinct investment objective and policies. There
can be no assurance that any Fund will achieve its investment objective.
ING Large Cap Growth Fund. The ING Large 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 & Income Fund. The ING Growth & Income Fund seeks to provide
investors with high 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 equity securities of
smaller companies (i.e., companies with market capitalizations falling within
the Russell 2500 Growth 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 equity securities of companies located in at least three
different countries including the United States, which, in the Sub-Adviser's
opinion, have well recognized franchises, a global 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 market
conditions, 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 equity
securities of emerging market issuers. Under normal market 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
3
<PAGE> 9
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-Advisers 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 equity securities of
European issuers. For these purposes, the Fund 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 high total return on an after-tax basis. In
attempting to achieve its investment objective, the Fund under normal market
conditions will invest at least 80% of its total assets in a 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. 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 to
provide investors with long-term capital appreciation. Under normal market
conditions, the Fund will invest in a non-diversified portfolio of 20 to 40
equity securities. The Sub-Adviser seeks to invest the Fund in companies that
possess the potential for reliable, above average earnings growth and that are
reasonably valued relative to their growth potential. To find such companies,
the Sub-Adviser identifies companies or industries that are likely to benefit
from significant fundamental change. Such significant fundamental change could
be the result of, among other factors, (i) the development of innovative
products or services that could create new markets, (ii) the development of more
efficient methods of manufacturing or distribution, (iii) positive regulatory
change, (iv) greater access to capital, or (v) change in industry concentration
or company ownership. The Sub-Adviser also seeks companies that have exhibited
consistent growth in the past. The Sub-Adviser assesses management's ability and
analyzes industry conditions and competition to determine the sustainability of
a company's growth and profitability.
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 equity securities of information technology companies located in
at least three different countries including the United States. 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, 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 equity securities of issuers located in at least three different
countries including the United States 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 a Fund's investment 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."
INVESTMENT RISKS
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.
4
<PAGE> 10
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.
Risks of Techniques Involving Leverage. Utilization of leverage involves
special risks and may involve speculative investment techniques. Certain Funds
may borrow for other than temporary or emergency purposes, lend their
securities, enter into 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
the 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,
as amended, (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 the 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."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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. The Manager 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 based on the average daily net assets of each Fund. See "Fund
Expenses -- Fee Table" and "Management of the Funds -- The Manager." All
5
<PAGE> 11
of the Sub-Advisers are indirect subsidiaries of ING Group and are affiliates of
each other and the Manager and ING Funds Distributor, Inc. ("Distributor").
Baring Asset Management, Inc. ("BAM") serves as sub-adviser to the ING Large
Cap Growth Fund and ING Small Cap Growth Fund and as co-sub-adviser, with Baring
International Investment Limited ("BIIL") and Baring International Investment
(Far East) Limited ("BIFL"), to the 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 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. ING Investment
Management LLC ("IIM") serves as sub-adviser to the ING Growth & Income Fund.
Delta Asset Management ("DELTA"), a division of FSCM, serves as sub-adviser to
the ING Tax Efficient Equity Fund. BAM, BIIL, BIFL, FSCM, IIMA, IIM and DELTA
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 from the
Manager based on their respective Fund's average daily net assets. See
"Management of the Funds -- The Sub-Advisers."
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.
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. 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, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. ("DST") to act as the Funds'
transfer agent and First Data Investor Services Group ("First Data") to act as
the Funds' 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted below, (iii) whether you qualify for any reduction or waiver of any
applicable sales charge, (iv) the various exchange privileges among the
different classes of shares and (v) the fact that Class B and X shares
automatically convert to Class A shares after eight years. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group.
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, but is not limited to,
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 I Shares. Class I shares are sold without an initial sales charge.
Class I shares also are not subject to any Rule 12b-1 fees, shareholder
servicing fees or account servicing fees. See "Purchase of Fund Shares."
Class A, Class B, Class C and Class X Shares. Each Fund offers Class A,
Class B, Class C and Class X shares under separate prospectuses. These Classes
of shares have different sales charges and other expenses, which may affect
performance. If you are interested in further information concerning the Class
A, Class B, Class C or Class X shares, please call the Funds and request a
prospectus at 1-877-INFO-ING or contact your authorized broker or investment
adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such shares. See "Management of the Funds --
Shareholder Servicing Plan" and "Management of the Funds -- Fund Accountant,
Transfer Agent and Account Services."
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FUND EXPENSES
The purpose of the following tables is to assist investors 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 I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................. NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................. NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value
at the time of redemption or at the time of purchase)... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS) 0.19% 0.19%
Management Fees (after waivers)*.......................
12b-1 Fees............................................. 0.00% 0.00%
Shareholder Servicing Fees............................. 0.00% 0.00%
Other Expenses**....................................... 0.55% 0.55%
-------- ------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***....... 0.74% 0.74%
======== ======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) would be 0.75% annually of the average daily net assets
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.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) for each Fund would be 1.30%
for Class I shares.
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<PAGE> 13
FEE TABLE
<TABLE>
<CAPTION>
ING MID CAP GROWTH FUND ING SMALL CAP GROWTH FUND
----------------------- -------------------------
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)..... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)*......................... 0.25% 0.25%
12b-1 Fees............................................... 0.00% 0.00%
Shareholder Servicing Fees............................... 0.00% 0.00%
Other Expenses **........................................ 0.55% 0.55%
-------- -------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***......... 0.80% 0.80%
======== =======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) would be 1.00% annually of the average daily net assets
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.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) for each Fund would be 1.55%
for Class I shares.
8
<PAGE> 14
FEE TABLE
<TABLE>
<CAPTION>
ING GLOBAL BRAND NAMES
ING BALANCED FUND FUND
----------------- ----
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)..... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)*......................... 0.20% 0.25%
12b-1 Fees............................................... 0.00% 0.00%
Shareholder Servicing Fees............................... 0.00% 0.00%
Other Expenses **........................................ 0.54% 0.73%
-------- --------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***......... 0.74% 0.98%
======== ========
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) for ING Balanced Fund and ING Global Brand Names Fund
would be 0.80% and 1.00% annually of the average daily net assets for each
Fund, respectively. The fee waivers reflected in the table are voluntary
and may be modified or terminated at any time without the Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.34% for Class I
shares of the ING Balanced Fund and 1.73% for Class I shares of the ING
Global Brand Names Fund.
9
<PAGE> 15
FEE TABLE
<TABLE>
<CAPTION>
ING INTERNATIONAL EQUITY ING EMERGING MARKETS
FUND EQUITY FUND
---- -----------
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)..... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)*......................... 0.31% 0.31%
12b-1 Fees............................................... 0.00% 0.00%
Shareholder Servicing Fees............................... 0.00% 0.00%
Other Expenses **........................................ 0.73% 0.84%
------- --------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***......... 1.04% 1.15%
======= ========
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) would be 1.25% annually of the average daily net assets
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.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.98% for Class I
shares of the ING International Equity Fund and 2.09% for Class I shares of
the ING Emerging Markets Equity Fund.
10
<PAGE> 16
FEE TABLE
<TABLE>
<CAPTION>
ING TAX EFFICIENT EQUITY
ING EUROPEAN EQUITY FUND FUND
------------------------ ----
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)..... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)*......................... 0.29% 0.20%
12b-1 Fees............................................... 0.00% 0.00%
Shareholder Servicing Fees............................... 0.00% 0.00%
Other Expenses **........................................ 0.78% 0.55%
-------- -------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***......... 1.07% 0.75%
======== =======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) for the ING European Equity Fund and the ING Tax Efficient
Equity Fund would be 1.15% and 0.80% annually of the average daily net
assets for each Fund, respectively. The fee waivers reflected in the table
are voluntary and may be modified or terminated at any time without the
Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.93% for Class I
shares of the ING European Equity Fund and 1.35% for Class I shares of the
ING Tax Efficient Equity Fund.
11
<PAGE> 17
FEE TABLE
<TABLE>
<CAPTION>
ING GLOBAL INFORMATION
ING FOCUS FUND TECHNOLOGY FUND
-------------- ---------------
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)..................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)..................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)...... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)*.......................... 0.25% 0.31%
12b-1 Fees................................................ 0.00% 0.00%
Shareholder Servicing Fees................................ 0.00% 0.00%
Other Expenses **......................................... 0.55% 0.73%
------- --------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***.......... 0.80% 1.04%
======= ========
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) for the ING Focus Fund and ING Global Information
Technology Fund would be 1.00% and 1.25% annually of the average daily net
assets for each Fund, respectively. The fee waivers reflected in the table
are voluntary and may be modified or terminated at any time without the
Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.55% for Class I
shares of the ING Focus Fund and 1.98% for Class I shares of the ING Global
Information Technology Fund.
12
<PAGE> 18
FEE TABLE
<TABLE>
<CAPTION>
ING GLOBAL REAL ESTATE FUND
---------------------------
CLASS I
-------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering NONE
price)..............................................................
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage
of offering price)................................................... NONE
Maximum Contingent Deferred Sales Charge (as a percentage of the
lesser of the net asset value at the time of redemption or
at the time of purchase)............................................ NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS)
Management Fees (after waivers)*...................................... 0.25%
12b-1 Fees............................................................ 0.00%
Shareholder Servicing Fees............................................ 0.00%
Other Expenses **..................................................... 0.73%
--------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***...................... 0.98%
========
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) would be 1.00% annually of the average daily net assets.
The fee waivers reflected in the table are voluntary and may be modified or
terminated at any time without the Fund's consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in the Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.73% for Class I
shares.
13
<PAGE> 19
EXPENSE EXAMPLES:
The following table is 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). These figures shown would be the same whether you sold your shares
at the end of a period or continued to hold them.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ING LARGE CAP GROWTH FUND
Class I Shares................ $ 8 $ 24
ING GROWTH & INCOME FUND
Class I Shares................ $ 8 $ 24
ING MID CAP GROWTH FUND
Class I Shares................ $ 8 $ 26
ING SMALL CAP GROWTH FUND
Class I Shares................ $ 8 $ 26
ING BALANCED FUND
Class I Shares................ $ 8 $ 24
ING GLOBAL BRAND NAMES FUND
Class I Shares................ $ 10 $ 31
ING INTERNATIONAL EQUITY FUND
Class I Shares................ $ 11 $ 33
ING EMERGING MARKETS EQUITY FUND
Class I Shares................ $ 12 $ 37
ING EUROPEAN EQUITY FUND
Class I Shares................ $ 11 $ 34
ING TAX EFFICIENT EQUITY FUND
Class I Shares................ $ 8 $ 24
ING FOCUS FUND
Class I Shares................ $ 8 $ 26
ING GLOBAL INFORMATION TECHNOLOGY
FUND
Class I Shares................ $ 11 $ 33
ING GLOBAL REAL ESTATE FUND
Class I Shares................ $ 10 $ 31
</TABLE>
- ------------
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%.
14
<PAGE> 20
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding shares, as defined under
the 1940 Act, 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. There can be no assurance that any Fund will achieve its
investment objective.
ING Large Cap Growth Fund. The ING Large 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 & Income Fund. The ING Growth & Income Fund seeks to provide
investors with high 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
issuers with market capitalizations falling within the Russell Mid Cap Growth
Index at the time of acquisition which, in the Sub-Adviser's opinion, possess
growth potential. 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 equity securities of
smaller companies (i.e., companies with market capitalizations falling within
the Russell 2500 Growth at the time of acquisition) which, in the Sub-Adviser's
opinion, possess growth potential.
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.
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 market conditions, the Fund will invest at least 65%
of its total assets in equity securities of companies located in at least three
different countries including the United States, which in the Sub-Adviser's
opinion, have a well recognized franchise, a global 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 market
conditions, 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 -- Open-End and Closed-End Investment
Companies."
15
<PAGE> 21
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 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-Advisers to have
emerging economies or developing markets. The Fund's Sub-Advisers 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 -- Open-End and 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 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 market
conditions will invest at least 80% of its total 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. An emphasis will be placed on 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 ING Focus Fund is a non-diversified fund that seeks
long-term capital appreciation. Under normal market conditions, the Fund will
invest in a non-diversified portfolio of 20 to 40 equity securities. The
Sub-Adviser seeks to invest the Fund in companies that possess the potential for
reliable, above average earnings growth and that are reasonably valued relative
to their growth potential. To find such companies, the Sub-Adviser identifies
companies or industries that are likely to benefit from significant fundamental
change. Such significant fundamental change could be the result of, among other
factors, (i) the development of innovative products or services that could
create new markets, (ii) the development of more efficient methods of
manufacturing or distribution, (iii) positive regulatory change, (iv) greater
access to capital, or (v) change in industry concentration or company ownership.
The Sub-Adviser also seeks companies that have exhibited consistent growth in
the past. The Sub-Adviser assesses management's ability and analyzes industry
conditions and competition to determine the sustainability of a company's growth
and profitability.
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 equity securities of information technology companies located in at
least three different countries including the United States. 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, or related consulting and services industries.
The Sub-Adviser believes that because of rapid advances in information
technology, investment in companies with business operations in this area 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.
16
<PAGE> 22
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 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 a 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 primary
or secondary market.
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 equity securities of issuers located in at least three different
countries including the United States 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. While each Fund will invest primarily in investments that are
consistent with its name, each Fund 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 Funds, 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 Nationally Recognized Statistical Ratings
Organization ("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
conservative than the types of securities that the Fund typically invests in. To
the extent a Fund is engaged in temporary defensive investments, it 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 changes 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 has the ability 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.
17
<PAGE> 23
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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 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
Manager also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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 & 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 Information Technology
Fund................................ 1.25%
ING Global Real Estate Fund......... 1.00%
</TABLE>
THE SUB-ADVISERS
18
<PAGE> 24
The Manager has entered into Sub-Advisory Agreements with the Sub-Advisers.
Under the Sub-Advisory 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. Each Sub-Advisory Agreement may be terminated without penalty by
the Manager, the Board of Trustees or the shareholders of the respective 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. Each of the Sub-Advisers is a wholly owned
indirect subsidiary of ING Group and is an affiliate of the Manager. The Manager
may make changes to the sub-advisory arrangements provided that it will not make
any changes that would constitute an assignment (as defined under the 1940 Act)
of an advisory agreement unless such actions are permissible under the 1940 Act,
the rules thereunder or pursuant to relief granted by the SEC.
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 ING Small Cap Growth Fund. BAM is
registered under the Investment Advisers Act of 1940, as amended, (the "Advisers
Act") 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").
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 September 30, 1998, the BAM Group
managed approximately $40.6 billion of assets.
The ING Large Cap Growth Fund is managed by Mr. William Thomas, a co-head of
a team of 11 investment professionals. The team has an average of 19 years
investment experience. Mr. Thomas has been an investment professional with BAM
since 1987 and has 25 years of investment experience.
The ING Small Cap Growth Fund is managed by Mr. Paul Berlinquet and Ms. Anne
Underhill, members of a team of 11 investment professionals. Mr. Berlinquet has
been affiliated with BAM since 1989 and has 12 years investment experience. Ms.
Underhill has been affiliated with BAM since 1997 and has 23 years 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 following 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. 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's
Class I shares during their initial fiscal period as set forth in the Fee Table
in this Prospectus. The amounts shown assume redemption of Fund shares at the
end of each period indicated. 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's performance,
as it is newly organized and has no performance record of its own. Included for
comparison purposes are performance figures of the S&P 500 Index, an unmanaged
market index. The performance shown is calculated in accordance with established
Securities and Exchange Commission rules and guidelines.
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 Large 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. The actual performance may
be higher or lower than that shown.
ANNUALIZED RATES OF RETURN FOR
19
<PAGE> 25
PERIODS ENDING SEPTEMBER 30, 1998
LARGE CAP GROWTH COMPOSITE
<TABLE>
<CAPTION>
S&P 500
CLASS I INDEX
------- -----
<S> <C> <C> <C>
1 Year 10.80% 9.04%
3 Years 24.85% 22.73%
5 Years 18.89% 19.99%
10 Years 18.27% 17.29%
</TABLE>
The Manager has also retained BAM and its affiliates, Baring International
Investment Limited and Baring International Investment (Far East) Limited, to
act as co-sub-adviser to the ING International Equity Fund and ING Emerging
Markets Equity Fund. BIIL is located at 155 Bishopsgate, London, England EC2M
3XY. BIFL is located at 19/F Edinburgh Tower, The Landmark, 15 Queens Road,
Central, Hong Kong. BAM, BIIL and BIFL may be referred to herein as
"Co-Sub-Advisers". BIIL and BIFL are registered under the Advisers Act, 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 with primary management responsibilities led by Messrs. James
Williams and Hayes Miller. The average experience of the team is 23 years. The
team utilizes the resources of the regional equity teams of the Co-Sub-Adviser.
Mr. Williams has been an investment professional with BIIL and its affiliates
since 1975 and has 25 years of investment experience. Mr. Miller has been an
investment professional with BIIL since 1994 and has 18 years of investment
experience.
The ING Emerging Markets Equity Fund is managed by a team of 29 investment
professionals led by Mr. Rory Landman in conjunction with the regional equity
teams of the other named Co-Sub-Advisers. Mr. Landman has been an investment
professional with BIIL since 1994 and has 11 years of investment experience.
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
ING International Equity Fund and ING Emerging Markets Equity Fund at the annual
rate of 0.625%, respectively.
The figures following 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 I shares
during their initial fiscal period as set forth in the Fee Table in this
Prospectus. The amounts shown assume redemption of Fund shares at the end of
each period indicated. 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 established Securities and Exchange Commission
rules and guidelines.
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
20
<PAGE> 26
<TABLE>
<CAPTION>
MSCI
EAFE
CLASS I INDEX
------- -----
<S> <C> <C> <C>
1 Year (8.66)% (8.08)%
3 Years 5.58% 4.05%
5 Years 7.56% 5.65%
10 Years 8.22% 5.41%
</TABLE>
ING Investment Management Advisors B.V. The Manager has retained IIMA
located at Schenkkade 65, 2595 AS The Hague, The Netherlands to act as
sub-adviser to the ING Global Brand Names Fund, ING European Equity Fund, ING
Global Information Technology Fund and ING Global Real Estate Fund. IIMA is
registered under the Advisers Act. IIMA is a company organized to manage
investments and provide investment advice on a world-wide basis to entities
affiliated and unaffiliated with ING Group. IIMA operates under the collective
management of ING Investment Management which has investments under management
of $120 billion at September 30, 1998. The following investment advisory
professionals work within ING Investment Management and are officers of IIMA.
Mr. 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 and its affiliates, 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 Mr. Adrian van Tiggelen. The average experience of the team
is 8 years. Mr. van Tiggelen has been employed by IIMA and its affiliates since
1988 and has ten years of investment experience.
Mr. 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 four years of investment experience.
The ING Global Real Estate Fund is managed by a team of investment
professionals led by Mr. Michael Lipsch. Mr. Lipsch has been with IIMA since
1997 and has nine years of investment experience. Prior to joining IIMA, Mr.
Lipsch was a portfolio manager for the Shell pension fund in The Hague, The
Netherlands.
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:
<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
Technology Fund............ 0.625%
ING Global Real Estate Fund 0.500%
</TABLE>
The figures following show past performance of IIMA in managing 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 Funds' 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 I shares during their initial fiscal period as set forth in the Fee
Table in this Prospectus. The amounts shown assume redemption of Fund shares at
the end of each period indicated. Included for comparison purposes are
performance figures of the FT Europe Index and Goldman Sachs Technology Industry
Composite ("GSTC") Index, respectively, each an unmanaged market index. The
performance shown below is calculated in accordance with established Securities
and Exchange Commission rules and guidelines.
21
<PAGE> 27
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>
FT
EUROPE
CLASS I INDEX
------- -----
<S> <C> <C>
1 Year 6.06% 7.84%
3 Years 18.85% 19.28%
Since Inception* 16.81% 18.41%
</TABLE>
* Inception date is July 12, 1994.
GLOBAL INFORMATION TECHNOLOGY POOLED ACCOUNT
<TABLE>
<CAPTION>
GSTC
CLASS I INDEX
------- -----
<S> <C> <C>
1 Year 10.13% 7.23%
Since Inception* 37.06% 31.56%
</TABLE>
* Inception date is March 27, 1997.
ING Investment Management LLC. The Manager has retained IIM to act as
sub-adviser to the ING Growth & Income Fund. IIM is located at 5780 Powers Ferry
Road, N.W., Suite 300, Atlanta, GA 30327. IIM is a Delaware limited liability
company which is engaged in the business of providing investment advice to
portfolios which as of September 30, 1998, were valued at approximately $26.7
billion. IIM is registered with the SEC as an investment adviser. IIM also
advises other registered investment companies.
The ING Growth & Income Fund is managed by a team of six investment
professionals led by Messrs. Martin Jansen and David Kushner. Messrs. Jansen and
Kushner have been employed by IIMA and IIM, respectively, as investment
professionals since 1997 and they each have 19 years of investment experience.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust) pays to
the Sub-Adviser a monthly fee based on the average daily net assets of the Fund
at the annual rate of 0.375%.
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 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 September
30, 1998 were valued at approximately $4.15 billion. FSCM is registered with the
SEC as an investment adviser.
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 24 years. Messrs. Price and Campbell have been
investment professionals with FSCM since 1990 and each has over 18 years of
experience.
The ING Balanced Fund and the ING Focus Fund are 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 ING Balanced Fund. Messrs. Adrian Jones and Michael Kass are
responsible for the equity portion of the ING Balanced Fund and the ING Focus
Fund. Mr. Jones has been an investment professional with FSCM since 1996 and has
11 years of experience. Mr. Kass has been an investment professional with FSCM
since 1996 and has 12 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
22
<PAGE> 28
professional with FSCM since 1985 and has 32 years of experience. Mr. Segars has
been an investment professional with FSCM since 1993 and has 30 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 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 following 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 Balanced Fund and the ING Focus
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 FSCM. The past performance
does not represent 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 the
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 Balanced and ING Focus Funds' Class I shares during their initial
fiscal period as set forth in the Fee Table in this Prospectus.(+) The amounts
shown assume redemption of Fund shares at the end of each period indicated.
Included for comparison purposes are performance figures of the Balanced Index
(++) for the ING Balanced Fund and the S&P 500 Index for the ING Focus Fund,
each an unmanaged market index. The performance shown below is calculated in
accordance with established Securities and Exchange Commission rules and
guidelines.
The composites are made up of unregistered accounts that are not subject to
diversification and other requirements that apply to mutual funds indicated
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 Focus
Fund may vary in some respects. The information should not be considered a
prediction of the future performance of these Funds. The actual performance may
be higher or lower than that shown.
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING SEPTEMBER 30, 1998
BALANCED WRAP ACCOUNTS
<TABLE>
<CAPTION>
CLASS I INDEX*
------- ------
<S> <C> <C>
1 Year 4.13% 10.23%
3 Years 15.26% 15.33%
5 Years 11.50% 13.26%
10 Years 11.57% 13.02%
</TABLE>
* The index consists of 50% S&P Index with income and 50% Lehman Intermediate
Government/Corporate Bond.
FOCUS WRAP ACCOUNTS
<TABLE>
<CAPTION>
S&P 500
CLASS I INDEX
------- -----
<S> <C> <C>
1 Year (1.20)% 9.04%
Since Inception* 22.20% 22.50%
</TABLE>
* Inception date is June 30, 1996.
- --------
+ The wrap account performance was adjusted for estimated transaction costs
such as brokerage and custody cost to obtain estimated gross wrap account
performance.
++ 50% S&P Index with income and 50% Lehman Intermediate Government/Corporate
Bond.
23
<PAGE> 29
Delta Asset Management. The Manager has retained DELTA, located at 333 South
Grand Avenue, Los Angeles, CA 90071 to act as sub-adviser to the ING Tax
Efficient Equity Fund. DELTA is a division of FSCM.
Messrs. Robert Sandroni and Carl Goldsmith and Ms. Marla K. Ryan 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 Ms. Ryan has been an investment professional with DELTA since
1998. Each has over 20 years of investment experience, except Ms. Ryan who has
over 10 years of investment 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
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses and $17
per account for transfer agency services plus out-of-pocket expenses. ING Fund
Services has retained DST to act as the Funds' transfer agent and First Data to
act as the Funds' fund accounting agent. DST is located at 333 W. 11th Street,
Kansas City, MO 64105, and First Data is located at 4400 Computer Drive,
Westborough, MA 01581-5120.
DISTRIBUTION EXPENSES
The Funds have not adopted a Plan of Distribution with respect to the Class
I shares. Accordingly, there are no distribution expenses attributable to the
Class I shares.
SHAREHOLDER SERVICING PLAN
The Funds have not adopted a Shareholder Servicing Plan with respect to the
Class I shares. Accordingly there are no shareholder servicing expenses
attributable to the Class I shares.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing 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 a 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 Agreements, 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
24
<PAGE> 30
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"), 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, 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, ING Fund Services 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. 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 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.
PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received. The minimum initial
investment in a Fund is $1,000. Any subsequent investments must be at least $50.
All initial investments should be accompanied by a completed Account
Application. An Account Application accompanies this Prospectus. All funds
received are invested in full and fractional shares of the appropriate Fund.
Certificates for shares are not issued. Contributions to qualified retirement
plans are subject to prevailing limits set by the Internal Revenue Service. An
annual maintenance fee is imposed per a taxpayer identification number per a
plan type. The Funds reserve the right to reject any purchase order. All
investments may be made using any of the following methods:
25
<PAGE> 31
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the purchase of shares (including, but not
limited to, how to purchase shares and minimum necessary initial and subsequent
investment amounts) and the completion of documentation related to the purchase
of Fund shares. Please consult with your retirement plan administrator to
determine if any such separate policies and procedures apply to you.
DESCRIPTION OF CLASS I SHARES
Class I shares are currently offered only to retirement plans affiliated
with ING Group. The public offering price of Class I shares is the net asset
value of the applicable Fund's shares.
MINIMUM ACCOUNT BALANCE
If (i) 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 (ii) 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.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge at the net asset value
next determined after a redemption request in good order has been received by
the applicable Fund. In the instance where a shareholder owns more than one
class of shares and the shares being redeemed are not subject to a contingent
deferred sales charge, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, which may take
up to 15 calendar days. 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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. 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
26
<PAGE> 32
giving written notice to shareholders. Redemption by mail will always be
available to shareholders. Under certain circumstances described below, a
signature guarantee may be required. You may redeem your shares using any of the
following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the redemption of shares (including, but not
limited to, how to redeem shares) and the completion of documentation related to
the redemption of Fund shares. Please consult with your retirement plan
administrator to determine if any such separate policies and procedures apply to
you.
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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 15 days; (iv) requests to transfer the registration of shares to
another owner; and (v) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
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
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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 in which 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.
EXCHANGE OF FUND SHARES
HOW TO EXCHANGE 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. All exchanges will be
made based on the net asset value next determined following receipt of the
request by a Fund in good order.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
Shareholders will receive written confirmation of the exchange following
completion of the transaction. You may exchange your shares using any of the
following methods:
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.
Auto-Exchange Privilege. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Funds at
1-877-INFO-ING.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the exchange of shares and the completion of
documentation related to the exchange of Fund shares. Please consult with your
retirement plan administrator to determine if any such separate policies and
procedures apply to you.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value. Dividends declared in, and attributable to, the
preceding period will be paid within five business days after the end of the
period. 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.
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TAX MATTERS
All Funds. 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 pay those dividends annually, except for the ING Growth & 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.
So long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class of
shares as compared with another, except in accordance with the former's dividend
rights as a class. The Funds believe that a multiple-class structure having all
of the features of the multiple-class structure of each of the Funds would not
result in dividends being treated as "preferential." The Funds' belief is not
binding on the Internal Revenue Service (the "IRS"), no ruling has been obtained
by the Funds from the IRS on the matter and there can be no guarantee that the
IRS will agree with the Funds on this matter. The Funds' belief is based on the
application of current federal income tax law and relevant authorities, and
subsequent changes in federal tax law or judicial or administrative decisions or
pronouncements may supercede or affect the Funds' conclusions. The Funds do not
believe that a multiple-class structure having all of the features of the
multiple-class structure of each of the Funds has been considered by the IRS in
other rulings. If dividends declared and paid by a Fund on any class of shares
were to be treated as "preferential," dividends paid by the Fund to shareholders
on all classes, of shares during the taxable year would become non-deductible.
In this event, the Fund would not be treated as a regulated investment company
and the Fund would be taxed on its net income, without any deductions for
dividends paid to its shareholders. The resulting federal and state income tax
liability, and any related interest and penalties, would be payable from and to
the extent of such Fund's then available assets and ultimately would be borne by
all current shareholders. The treatment of dividends declared and paid during
the taxable year on any class of shares as preferential, and the resulting
failure of a Fund to be treated as a regulated investment company, could have
additional personal income tax consequences for shareholders of the Fund,
including the taxation of distributions as ordinary income that otherwise would
have been classified as net capital gains.
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.
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.
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 IRS that the shareholder is subject to backup withholding. Most
corporate shareholders and certain other shareholders specified in the Code are
exempt from backup withholding.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as qualified retirement plans.
THE FOREGOING DISCUSSION IS INCLUDED FOR SHAREHOLDERS THAT ARE EXEMPT FROM
FEDERAL INCOME TAXES. 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.
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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 in the obligation 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.
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.
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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 (All Funds). 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.
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 (ING Balanced Fund, ING Emerging Markets
Equity Fund and ING Global Real Estate Fund). The ING Global Real Estate Fund
will invest in, among other securities, 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.
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.
The Funds may 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
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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 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). 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.
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 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.
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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.
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. See the SAI
for further details on variable rate demand obligations and variable rate master
demand obligations.
Open-End and Closed-End Investment Companies (All Funds). Each Fund may
invest in shares of other open-end and closed-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. The purchase of securities of other investment companies
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.
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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 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 liquid assets 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 & 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 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.
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Swap Agreements (ING Growth & 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 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 intend 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 International Equity Fund and ING Emerging Markets Equity
Fund). 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, a 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 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 weighting 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
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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 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, ING Emerging
Markets Equity Fund, ING European Equity Fund, ING Global Brand Names Fund, ING
Global Information Technology Fund and ING Global Real Estate 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 or against
another foreign currency. 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
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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 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 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 marked-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. A Fund 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). Each Fund may borrow up to 33 1/3% 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 a 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 a Fund's shares. The Funds 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.
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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. A 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 & 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
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 ING Global Brand
Names Fund, ING Focus 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.
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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.
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 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.
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
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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 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
40
<PAGE> 46
invested in these assets at all times. 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.
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 Funds are dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (i) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (ii) 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.
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 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except for the ING National
Tax-Exempt Bond Fund and ING National Tax-Exempt Money Market Fund, which are
not offering Class X or Class I 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.
41
<PAGE> 47
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 Declaration of Trust 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: (i) 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 (ii) 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 are 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 since inception, 1, 3, 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, 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.
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 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 sub-custodians which are approved by
the Trustees or a foreign custody manager appointed
42
<PAGE> 48
by the Trustees in accordance with these rules. The Board of Trustees 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 the 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.
CODE OF ETHICS
The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
43
<PAGE> 49
ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes four funds (each, a "Fund" and, collectively, the
"Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-advisers described herein (each a "Sub-Adviser", and collectively, the
"Sub-Advisers"). The Manager and its Sub-Advisers are wholly-owned indirect
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 a high level of
current income and total return.
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.
Each Fund offers five different classes of shares -- Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group. The Class A, Class B, Class C and Class X shares are
offered under separate prospectuses. Shares of the Funds are sold to the public
by ING Funds Distributor, Inc. (the "Distributor").
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT 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.
THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL BE
ACHIEVED.
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 ________, 1999, 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. The SEC maintains
a Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding the Funds. The SAI is also 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.
_____________, 1999
<PAGE> 50
TABLE OF CONTENTS
Page
----
HIGHLIGHTS.................................................. 1
FUND EXPENSES............................................... 4
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 7
MANAGEMENT OF THE FUNDS..................................... 9
FUND SHARE VALUATION........................................ 12
PURCHASE OF FUND SHARES..................................... 13
REDEMPTION OF FUND SHARES................................... 14
EXCHANGE OF FUND SHARES..................................... 15
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 16
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 17
RISKS OF INVESTING IN THE FUNDS............................. 26
OTHER INFORMATION........................................... 29
2
<PAGE> 51
HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes four funds managed by ING Mutual Funds Management
Co. LLC (the "Manager") and sub-advised by the applicable Sub-Adviser. Each Fund
has a distinct investment objective and policies. There can be no assurance that
any Fund will achieve its investment objective.
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 rated, at the time of
purchase, BBB or better by a Nationally Recognized Statistical Rating
Organization ("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." 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. The dollar-weighted average maturity of the ING 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 a high level of current income and total return. Under normal
market conditions, the Fund intends to invest at least 65% 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 and rated, at the time of
purchase, 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.
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.
All Funds. 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 investment 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".
INVESTMENT RISKS
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.
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<PAGE> 52
Foreign Securities. Investments in securities of issuers in any foreign
country involves special risk considerations not typically associated with
investing in U.S. companies. These risks are often heightened for investments in
developing or emerging markets.
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 Bond Fund is
classified as a non-diversified investment company under the Investment Company
Act of 1940, as amended, (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
Fund's share price to fluctuate more than that of a diversified investment
company.
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 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.
For additional information concerning the risks of investing in the Funds,
see "Risks of Investing in the Funds."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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. The Manager 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 based on the average daily net assets of each Fund. See "Fund
Expenses -- Fee Table" and "Management of the Funds -- The Manager." All of the
Sub-Advisers are indirect subsidiaries of ING Group and are affiliates of each
other and the Manager and ING Funds Distributor, Inc. ("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 ING International 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 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 from the
Manager based on their respective Fund's average daily net assets. See
"Management of the Funds -- the Sub-Advisers."
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.
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. 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, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. ("DST") to act as the Funds'
transfer agent and First Data Investor Services Group ("First Data") to act as
the Funds' fund accounting agent.
4
<PAGE> 53
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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted below, (iii) whether you qualify for any reduction or waiver of any
applicable sales charge, (iv) the various exchange privileges among the
different classes of shares and (v) the fact that Class B and X shares
automatically convert to Class A shares after eight years. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group.
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, but is not limited to,
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 I Shares. Class I shares are sold without an initial sales charge.
Class I shares also are not subject to any Rule 12b-1 fees, shareholder
servicing fees or account servicing fees. See "Purchase of Fund Shares."
Class A, Class B, Class C and Class X Shares. Each Fund offers Class A,
Class B, Class C and Class X shares under separate prospectuses. These Classes
of shares have different sales charges and other expenses, which may affect
performance. If you are interested in further information concerning the Class
A, Class B, Class C or Class X shares, please call the Funds and request a
prospectus at 1-877-INFO-ING or contact your authorized broker or investment
adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such shares. See "Management of the Funds --
Shareholder Servicing Plan" and "Management of the Funds -- Fund Accountant,
Transfer Agent and Account Services."
5
<PAGE> 54
FUND EXPENSES
The purpose of the following tables is to assist investors 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 ING HIGH YIELD BOND FUND
CLASS I CLASS I
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)............. NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............. NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset
value at the time of redemption or at the time of
purchase)....................................... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)*.................. 0.13% 0.16%
12b-1 Fees........................................ 0.00% 0.00%
Shareholder Servicing Fees........................ 0.00% 0.00%
Other Expenses**.................................. 0.49% 0.49%
------- ------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***.. 0.62% 0.65%
======= ======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and
administrative fees (before waivers) for the ING Intermediate Bond
Fund and the ING High Yield Bond Fund would be 0.50% and 0.65%
annually of the average daily net assets for each Fund,
respectively. The fee waivers reflected in the table are voluntary
and may be modified or terminated at any time without the Funds'
consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund
Services annually up to $40,000 for fund accounting services plus
out-of-pocket expenses and $17 per an account for transfer agency
services plus out-of-pocket expenses. ING Fund Services may engage
third parties to perform some or all of these services. (See
"Management of the Funds -- Fund Accountant, Transfer Agent and
Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 0.99% for
Class I shares of the ING Intermediate Bond Fund and 1.14% for
Class I shares of the ING High Yield Bond Fund.
6
<PAGE> 55
FEE TABLE
<TABLE>
<CAPTION>
ING INTERNATIONAL BOND ING MORTGAGE INCOME FUND
FUND
CLASS I CLASS I
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)............. NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............. NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset
value at the time of redemption or at the time of
purchase)....................................... NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)*.................. 0.25% 0.13%
12b-1 Fees........................................ 0.00% 0.00%
Shareholder Servicing Fees........................ 0.00% 0.00%
Other Expenses **................................. 0.78% 0.48%
------- ------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***.. 1.03% 0.61%
======= ======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and
administrative fees (before waivers) for the ING International
Bond Fund and ING Mortgage Income Fund would be 1.00% and 0.50%
annually of the average daily net assets for each Fund,
respectively. The fee waivers reflected in the table are voluntary
and may be modified or terminated at any time without the Funds'
consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund
Services annually up to $40,000 for fund accounting services plus
out-of-pocket expenses and $17 per an account for transfer agency
services plus out-of-pocket expenses. ING Fund Services may engage
third parties to perform some or all of these services. (See
"Management of the Funds -- Fund Accountant, Transfer Agent and
Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 1.78% for
Class I shares of the ING International Bond Fund and 0.98% for
Class I shares of the ING Mortgage Income Fund.
7
<PAGE> 56
EXPENSE EXAMPLES:
The following table is 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). These figures shown would be the same whether you sold your shares
at the end of a period or continued to hold them.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ING INTERMEDIATE BOND FUND
Class I Shares......... $6 $20
ING HIGH YIELD BOND FUND
Class I Shares......... $7 $21
ING INTERNATIONAL BOND FUND
Class I Shares......... $11 $33
ING MORTGAGE INCOME FUND
Class I Shares......... $6 $20
</TABLE>
- ------------
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%.
8
<PAGE> 57
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding shares, as defined under
the 1940 Act, 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. There can be no assurance that any Fund will achieve its
investment objective.
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 rated at the
time of purchase, 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." 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. A description of security ratings is contained in
an Appendix to the SAI. 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 a high level of current income and total return. Under normal
market conditions, the Fund intends to invest at least 65% of its total assets
in high yield (high risk) bonds. 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; 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 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.
The Fund will invest in common stocks purchased 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.
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
Sub-Adviser's assessment of interest rate trends and other economic and market
factors.
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 and rated, at the time of
purchase, 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. The Fund
strives to take maximum advantage of financial and economic developments and
currency fluctuations.
Fixed income securities, for purposes of this Fund, 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
9
<PAGE> 58
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
Sub-Adviser'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 debentures, asset-backed securities and money market
instruments that the Fund's Sub-Adviser believes are appropriate in light of the
Fund's objective. The Fund's investments will be rated, at the time of purchase,
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, at the time of purchase, of
comparable quality. A description of security ratings is contained in an
Appendix to the SAI.
There are no restrictions on the average maturity of the Fund or on the
maturity of any single instrument. Accordingly, 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.
Where securities are issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities, such guarantee does 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.
All Funds. 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 changes the percentage of a Fund's total assets that must be invested in
investments that are consistent
10
<PAGE> 59
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.
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 or defensive investments, a Fund
will not be pursuing its investment objective.
As a matter of fundamental policy, notwithstanding any limitation otherwise,
each Fund has the ability 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.
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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
Manager also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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:
11
<PAGE> 60
<TABLE>
<CAPTION>
FUND MANAGEMENT FEE
---- ---------------
<S> <C>
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%
</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. Each
Sub-Advisory Agreement may be terminated without penalty by the Manager, the
Board of Trustees or the shareholders of the respective 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. Each of the Sub-Advisers is a wholly owned indirect subsidiary
of ING Group and is an affiliate of the Manager. The Manager may make changes to
the sub-advisory arrangements provided that it will not make any changes that
would constitute an assignment (as defined under the 1940 Act) of an advisory
agreement unless such actions are permissible under the 1940 Act, the rules
thereunder or pursuant to relief granted by the SEC.
Baring International Investment Limited. The Manager has retained BIIL
located at 155 Bishopsgate, London, along with its affiliates, BAM and BIFL, to
act as co-sub-advisers to the ING International Bond Fund. BAM is located at 125
High Street, Boston, MA 02110 and BIFL is located at 19/F Edinburgh Tower, The
Landmark, 15 Queens Road, Central, Hong Kong. BIIL, BAM and BIFL may be referred
to herein as "Co-Sub-Advisers". BIIL, BAM and BIFL are registered with the SEC
and provide investment management services to clients located around the world.
BIIL, BAM and BIFL 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").
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 September
30, 1998, Baring Asset Management managed approximately $40.1 billion of assets.
The ING International Bond Fund is managed by Mr. Paul Thursby, a member of
a team of eight 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-Advisers a monthly fee based on the average daily net assets of the
Fund at an annual rate of 0.50%.
The figures following 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
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-Advisers. 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 fixed income 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 Bond Fund's Class I
shares during its initial fiscal period as set forth in the Fee Table in this
Prospectus. The amounts shown assume redemption of Fund shares at the end of
each period indicated. Included for comparison purposes are performance figures
of the Salomon Brothers World Government Bond Non-U.S. Dollar Index ("SWGB
ex-U.S. $ Index"), an unmanaged market index. The performance shown below is
calculated in accordance with established Securities and Exchange Commission
rules and guidelines.
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
12
<PAGE> 61
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.
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING SEPTEMBER 30, 1998
INTERNATIONAL BOND COMPOSITE
<TABLE>
<CAPTION>
SWGB
EX-U.S.$
CLASS I INDEX
------- -----
<S> <C> <C>
1 Year 12.84% 10.35%
3 Years 10.73% 4.41%
5 Years 9.99% 7.20%
10 Years 11.28% 9.13%
</TABLE>
ING Investment Management LLC. The Manager has retained IIM, located at 5780
Powers Ferry Road, N.W., Suite 300, Atlanta, GA 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 company which is engaged in the
business of providing investment advice to portfolios which, as of September 30,
1998, were valued at $26.7 billion. 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. Mr. James
Kauffmann, with more than 11 years of investment experience, leads a team of
three investment professionals managing the ING Intermediate Bond Fund. Mr.
Kauffmann received his undergraduate degree from Purdue University and his MBA
from Harvard University. Mr. Robert Bowman, who has more than 20 years of
investment experience, leads a team of five investment professionals in managing
the ING High Yield Bond Fund. Mr. Bowman is a Senior Vice President and Managing
Director at IIM. Mr. Jeffrey Seel, with more than 20 years of investment
management experience, leads a team of investment professionals in managing the
ING Mortgage Income Fund. Mr. Seel received both his undergraduate degree and
his MBA from Syracuse University.
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 each Fund at the
following annual rates:
<TABLE>
<CAPTION>
FUND INVESTMENT SUB-ADVISORY FEE
---- ----------------------------
<S> <C>
ING Intermediate Bond Fund.... 0.250%
ING High Yield Bond Fund...... 0.325%
ING Mortgage Income Fund...... 0.250%
</TABLE>
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT
SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses and $17
per an account for transfer agency services plus out-of-pocket expenses. ING
Fund Services has retained DST to act as the Funds' transfer agent and First
Data to act as the Funds' fund accounting agent. DST is located at 333 W. 11th
Street, Kansas City, MO 64105, and First Data is located at 4400 Computer Drive,
Westborough, MA 01581-5120.
DISTRIBUTION EXPENSES
13
<PAGE> 62
The Funds have not adopted a Plan of Distribution with respect to the Class
I shares. Accordingly, there are no distribution expenses attributable to the
Class I shares.
SHAREHOLDER SERVICING PLAN
The Funds have not adopted a Shareholder Servicing Plan with respect to the
Class I shares. Accordingly there are no shareholder servicing expenses
attributable to the Class I shares.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing fees
and expenses (as paid through ING Fund Services to third party agents); 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 a 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 Agreements, 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 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"), 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, 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, ING Fund Services 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. 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
14
<PAGE> 63
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 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.
PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received. The minimum initial
investment in a Fund is $1,000. Any subsequent investments must be at least $50.
All initial investments should be accompanied by a completed Account
Application. An Account Application accompanies this Prospectus. All funds
received are invested in full and fractional shares of the appropriate Fund.
Certificates for shares are not issued. Contributions to qualified retirement
plans are subject to prevailing limits set by the Internal Revenue Service. An
annual maintenance fee is imposed per a taxpayer identification number per a
plan type. The Funds reserve the right to reject any purchase order. All
investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the purchase of shares (including, but not
limited to, how to purchase shares and minimum necessary initial and subsequent
investment amounts) and the completion of documentation related to the purchase
of Fund shares. Please consult with your retirement plan administrator to
determine if any such separate policies and procedures apply to you.
DESCRIPTION OF CLASS I SHARES
Class I shares are currently offered only to retirement plans affiliated
with ING Group. The public offering price of Class I shares is the net asset
value of the applicable Fund's shares.
MINIMUM ACCOUNT BALANCE
If (i) 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 (ii) 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.
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REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge at the net asset value
next determined after a redemption request in good order has been received by
the applicable Fund. In the instance where a shareholder owns more than one
class of shares and the shares being redeemed are not subject to a contingent
deferred sales charge, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, which may take
up to 15 calendar days. 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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. 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. Under certain circumstances described
below, a signature guarantee may be required. You may redeem your shares using
any of the following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the redemption of shares (including, but not
limited to, how to redeem shares) and the completion of documentation related to
the redemption of Fund shares. Please consult with your retirement plan
administrator to determine if any such separate policies and procedures apply to
you.
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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 15 days; (iv) requests to transfer the registration of shares to
another owner; and (v) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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.
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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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
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 in which 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.
EXCHANGE OF FUND SHARES
HOW TO EXCHANGE 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. All exchanges will be
made based on the net asset value next determined following receipt of the
request by a Fund in good order.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
Shareholders will receive written confirmation of the exchange following
completion of the transaction. You may exchange your shares using any of the
following methods:
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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.
Auto-Exchange Privilege. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Funds at
1-877-INFO-ING.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the exchange of shares and the completion of
documentation related to the exchange of Fund shares. Please consult with your
retirement plan administrator to determine if any such separate policies and
procedures apply to you.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value. Dividends declared in, and attributable to, the
preceding period will be paid within five business days after the end of the
period. 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.
TAX MATTERS
All Funds. 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.
So long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to its shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class of
shares as compared with another, except in accordance with the former's dividend
rights as a class. The Funds believe that a multiple-class structure having all
of the features of the multiple-class structure of each of the Funds would not
result in dividends being treated as "preferential." The Funds' belief is not
binding on the Internal Revenue Service (the "IRS"), no ruling has been obtained
by the Funds from the IRS on the matter and there can be no guarantee that the
IRS will agree with the Funds on this matter. The Funds' belief is based on the
application of current federal income tax law and relevant authorities, and
subsequent changes in federal tax law or judicial or administrative decisions or
pronouncements may supersede or affect the Funds' conclusions.
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The Funds do not believe that a multiple-class structure having all of the
features of the multiple-class structure of each of the Funds has been
considered by the IRS in other rulings. If dividends declared and paid by a Fund
on any class of shares were to be treated as "preferential," dividends paid by
the Fund to shareholders on all classes, of shares during the taxable year would
become non-deductible. In this event, the Fund would not be treated as a
regulated investment company and the Fund would be taxed on its net income,
without any deductions for dividends paid to its shareholders. The resulting
federal and state income tax liability, and any related interest and penalties,
would be payable from and to the extent of such Fund's then available assets and
ultimately would be borne by all current shareholders. The treatment of
dividends declared and paid during the taxable year on any class of shares as
preferential, and the resulting failure of a Fund to be treated as a regulated
investment company, could have additional personal income tax consequences for
shareholders of the Fund, including the taxation of distributions as ordinary
income that otherwise would have been classified as net 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.
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.
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.
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 IRS that the shareholders is subject to backup withholding. Most
corporate shareholders and certain other shareholders specified in the Code are
exempt from backup withholding.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as qualified retirement plans.
THE FOREGOING DISCUSSION IS INCLUDED FOR SHAREHOLDERS THAT ARE EXEMPT FROM
FEDERAL INCOME TAXES. 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 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 in the
obligation must look to the agency issuing or guaranteeing the obligation for
ultimate repayment.
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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.
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-Related 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 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,
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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-Related Securities --
Collateralized Mortgage Obligations" in the SAI.
Stripped Mortgage-Backed Securities (All Funds). 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-Related
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). 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.
Adjustable Rate Securities (ING High Yield Bond Fund, ING Intermediate 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 Funds 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 Funds 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). The 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
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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.
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). 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.
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. and non-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). 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.
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 a Fund.
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 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. 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.
Municipal Commercial Paper (ING Intermediate 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.
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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 to the SAI for a more complete description of securities ratings.
Municipal Notes (ING Intermediate 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). 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 or, if not rated,
determined to be of comparable quality by the Fund's Sub-Adviser at the time of
purchase.
Floating Rate Instruments (ING Intermediate Bond Fund). Certain municipal
obligations which the Fund 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 Fund's 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. The 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. See the SAI
for further details on variable rate demand obligations and variable rate master
demand obligations.
Other Open-End and Closed-End Investment Companies (All Funds). Each Fund
may invest in shares of other open-end and closed-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. The purchase of securities of other investment companies
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.
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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, 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 liquid assets 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 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
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"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 Indices (All Funds). Each 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 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 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.
An index assigns relative weighting to the securities in the index, and the
index generally fluctuates with changes in the market values of these
securities. An 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 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 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 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 the 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 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 an 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 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 indices only to close out existing positions.
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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 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 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 a
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 a 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 Funds' obligations under
such contracts would obligate the Funds to deliver an amount of foreign currency
in excess of the value of the Funds' 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 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 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.
Warrants (All Funds). The Funds may purchase warrants. A warrant gives the
purchaser the right to purchase securities from the issuer at a specific price
(the strike price) for a limited period of time. The strike price of a warrant
typically is much lower than the current market price of the underlying
securities and therefore are subject to greater price fluctuations. As a result,
warrants may be more volatile investments than the underlying securities and may
offer greater potential for capital appreciation as well as capital loss.
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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 marked-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. Each Fund 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). Each Fund may borrow up to 33 1/3% 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 a 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 a Fund's shares. The Funds 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). 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%; and ING Mortgage Income Fund 200%. 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
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 ING International Bond
Fund) is managed within certain limitations that restrict the amount of the
Fund's investment in any single issuer.
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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 SEC 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.
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 and ING Intermediate Bond
Fund). The ING High Yield Bond Fund normally invests at least 65% of its total
assets in high yield, high risk bonds. The ING Intermediate Bond Fund also may
invest more than 5% 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 a Fund reduces the
Sub-Adviser's ability to maintain positions in high-yielding securities.
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 a 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
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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 a 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.
A Fund may buy high yield, fixed income securities during an initial
underwriting. These securities involve special risks because they are new
issues. The Sub-Advisers will carefully review their credit and other
characteristics. The Funds have no arrangement with its underwriter or any other
person concerning the acquisition of these securities.
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 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 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 the underlying
securities in an advantageous manner and the market declines, the Funds might
create a loss on the futures contract. 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
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.
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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 occurs 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 ING 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 Fund's 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 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 (i) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (ii) 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
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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.
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 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except for the ING National
Tax-Exempt Bond Fund and ING National Tax-Exempt Money Market Fund, which are
not offering Class X or Class I 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: (i) 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 (ii) more than 50% of the outstanding shares of a Fund
(or the Funds).
PERFORMANCE INFORMATION
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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 are mandated by the
SEC.
Quotations of "yield" for a Fund will be based on the investment income per
share during a particular 30 day period (including dividends and interest), less
expenses accrued per share 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, the yield is then annualized.
When a yield assumes that income earned is reinvested, it is called an effective
yield. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
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 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 since inception, 1, 3, 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, 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 ING 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 of Trustees 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
the 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.
CODE OF ETHICS
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The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
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ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes two funds (each, a "Fund" and, collectively, the
"Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-adviser described herein (the "Sub-Adviser"). The Manager and its
Sub-Adviser are wholly-owned indirect 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 per share. The
Fund seeks to achieve its objective by investing in U.S. Treasury securities and
repurchase agreements collateralized fully by U.S. Treasury securities.
The ING Money Market Fund seeks to provide investors with a high level of
current income as is consistent with the 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, short-term obligations.
Each Fund offers five different classes of shares -- Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group. The Class A, Class B, Class C and Class X shares are
offered under separate prospectuses. Shares of the Funds are sold to the public
by ING Funds Distributor, Inc. (the "Distributor").
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 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. THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL
BE ACHIEVED.
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 _________, 1999, 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. The SEC maintains a Web site (http://www.sec.gov) that contains
the SAI, material incorporated by reference, and other information regarding
the Funds. The SAI is also 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.
_____________, 1999
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TABLE OF CONTENTS
Page
----
HIGHLIGHTS.................................................. 1
FUND EXPENSES............................................... 3
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 5
MANAGEMENT OF THE FUNDS..................................... 6
FUND SHARE VALUATION........................................ 9
PURCHASE OF FUND SHARES..................................... 9
REDEMPTION OF FUND SHARES................................... 11
EXCHANGE OF FUND SHARES..................................... 12
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 13
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 14
RISKS OF INVESTING IN THE FUNDS............................. 17
OTHER INFORMATION........................................... 18
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HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two money market funds managed by ING Mutual Funds
Management Co. LLC (the "Manager") and sub-advised by the Sub-Adviser. Each Fund
has a distinct investment objective and policies. There can be no assurance that
either Fund will achieve its investment objective.
ING U.S. Treasury Money Market Fund. The investment objective of the ING
U.S. Treasury Money Market Fund is 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 per share. The Fund seeks to
achieve its objective by investing in U.S. Treasury securities and repurchase
agreements collateralized fully by 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 as is consistent
with the 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, (i) obligations of the U.S. Government or its
agencies or instrumentalities; (ii) commercial paper, mortgage-backed and
asset-backed securities, guaranteed investment contracts, loan participation
interests, medium-term notes, and other promissory notes, including floating or
variable rate obligations; and (iii) the following domestic, Yankeedollar and
Eurodollar obligations: certificates of deposit, time deposits, bankers'
acceptances, commercial paper, 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 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. The Fund may enter into repurchase agreements.
Both Funds. Both 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 investment objective. In addition, both Funds may borrow
up to 33 1/3% of its net assets for temporary purposes. 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."
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.
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INVESTMENT RISKS
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.
For additional information concerning the risks of investing in the Funds,
see "Risks of Investing in the Funds."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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 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
based on the average daily net assets of each Fund. See "Fund Expenses -- Fee
Table" and "Management of the Funds -- The Manager." The Sub-Adviser is an
indirect subsidiary of ING Group and is an affiliate of the Manager and ING
Funds Distributor, Inc. ("Distributor").
ING Investment Management LLC ("IIM") serves as sub-adviser to each Fund.
For its services, the Sub-Adviser receives a fee from the Manager based on the
respective Fund's average daily net assets. See "Management of the Funds -- The
Sub-Adviser."
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.
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. 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, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. ("DST") to act as the Funds'
transfer agent and First Data Investor Services Group ("First Data") to act as
the Funds' 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
imposed at the time of redemption and Rule 12b-1 fees, as noted below, (iii)
whether you qualify for any reduction or waiver of any applicable sales charge,
(iv) the various exchange privileges among the different classes of shares and
(v) the fact that Class B and X shares automatically convert to Class A shares
after eight years. The Class I shares are offered in this Prospectus and may be
purchased only by retirement plans affiliated with ING Group.
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, but is not limited to,
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 I Shares. Class I shares are sold without an initial sales charge.
Class I shares also are not subject to any Rule 12b-1 fees, shareholder
servicing fees or account servicing fees. See "Purchase of Fund Shares."
Class A, Class B, Class C and Class X Shares. Each Fund offers Class A,
Class B, Class C and Class X shares under separate prospectuses. The classes of
shares have different sales charges and other expenses, which may affect
performance. If you are interested
4
<PAGE> 87
in further information concerning the Class A, Class B, Class C or Class X
shares, please call the Funds and request a prospectus at 1-877-INFO-ING or
contact your authorized broker or investment adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such shares. See "Management of the Funds --
Shareholder Servicing Plan" and "Management of the Funds -- Fund Accountant,
Transfer Agent and Account Services."
5
<PAGE> 88
FUND EXPENSES
The purpose of the following tables is to assist investors 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 MARKETFUND
----------- --------------------
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the net asset value at the time of
redemption)............................................ NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)*......................... 0.06% 0.06%
12b-1 Fees............................................... 0.00% 0.00%
Shareholder Servicing Fees............................... 0.00% 0.00%
Other Expenses**......................................... 0.25% 0.25%
----- -----
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***......... 0.31% 0.31%
===== =====
</TABLE>
- ------------
* Management Fees consisting of investment advisory and
administrative fees (before waivers) would be 0.25% annually of
the average daily net assets 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.
** Under the Fund Services Agreement, each Fund may pay ING Fund
Services annually up to $40,000 for fund accounting services plus
out-of-pocket expenses and $17 per an account for transfer agency
services plus out-of-pocket expenses. ING Fund Services may
engage third parties to perform some or all of these services.
(See "Management of the Funds -- Fund Accountant, Transfer Agent
and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) for each Fund
would be 0.50% for Class I shares.
6
<PAGE> 89
EXPENSE EXAMPLES:
The following table is 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). These figures shown would be the same whether you sold your shares
at the end of a period or continued to hold them.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
ING U.S. TREASURY MONEY MARKET
FUND
Class I Shares.............. $3 $10
ING MONEY MARKET FUND
Class I Shares.............. $3 $10
</TABLE>
- ------------
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%.
7
<PAGE> 90
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding shares, as defined under
the 1940 Act, 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. There can be no assurance that either Fund will achieve
its investment objective.
ING U.S. Treasury Money Market Fund. 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 per share. The Fund seeks to achieve its objective by
investing in U.S. Treasury securities and repurchase agreements collateralized
fully by U.S. Treasury securities.
In selecting debt securities for the Fund, the Sub-Adviser seeks to select
those instruments that appear to have the potential 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, and repurchase agreements
collateralized fully by U.S. Treasury securities. 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 ING Money Market Fund seeks to provide investors
with a high level of current income consistent with the 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 risk.
In selecting debt securities for the Fund, the Sub-Adviser seeks to select
those instruments that appear to have the potential 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, (i) obligations of the U.S. Government or its agencies or
instrumentalities; (ii) commercial paper, mortgage-backed and asset-backed
securities, guaranteed investment contracts, loan participation interests,
medium-term notes, and other promissory notes, including floating or variable
rate obligations; and (iii) the following domestic, Yankeedollar and Eurodollar
obligations: certificates of deposit, time deposits, bankers' acceptances,
commercial paper, 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 (i) 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"); (ii) are single
rated and have received the highest short-term rating by a NRSRO; or (iii) 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 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. The Fund may enter into repurchase agreements.
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.
8
<PAGE> 91
Both Funds. As a matter of fundamental policy, notwithstanding any
limitation otherwise, each Fund has the ability 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' diversification tests are measured at the time of a securities'
purchase and are calculated in accordance with Rule 2a-7 of the 1940 Act which
may allow a Fund to exceed limits specified in this Prospectus for certain
securities subject to guarantees or demand features. The Funds will be deemed to
satisfy the maturity requirements described in this Prospectus to the extent the
Funds satisfy Rule 2a-7 maturity requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
Both Funds may borrow up to 33 1/3% of their respective net assets for
temporary purposes. 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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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-Adviser on a periodic basis, and will consider its performance record
with respect to the investment objectives and policies of each Fund. The Manager
also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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 U.S. Treasury Money Market Fund 0.25%
ING Money Market Fund 0.25%
</TABLE>
9
<PAGE> 92
THE SUB-ADVISER
The Manager has entered into Sub-Advisory Agreements with the Sub-Adviser.
Under the Sub-Advisory Agreements, 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. Each Sub-Advisory Agreement may be terminated without penalty by
the Manager, the Board of Trustees or the shareholders of the respective 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 a wholly owned indirect
subsidiary of ING Group and is an affiliate of the Manager. The Manager may make
changes to the sub-advisory arrangements provided that it will not make any
changes that would constitute an assignment (as defined under the 1940 Act) of
an advisory agreement unless such actions are permissible under the 1940 Act,
the rules thereunder or pursuant to relief granted by the SEC.
ING Investment Management LLC. The Manager has retained IIM to act as
sub-adviser to the Funds. IIM is located at 5780 Powers Ferry Road, N.W., Suite
300, Atlanta, GA 30327. IIM is a Delaware limited liability company which is
engaged in the business of providing investment advice to portfolios which as of
September 30, 1998, were valued at approximately $26.7 billion. IIM is
registered with the SEC as an investment adviser. IIM also advises other
registered investment companies.
The Funds are managed by a team of three investment professionals led by Ms.
Jennifer J. Thompson, CFA. Ms. Thompson has been employed by IIM as an
investment professional since 1998 and has seven years of investment experience.
Pursuant to the Sub-Advisory Agreements, the Manager (not the Trust) pays to
the Sub-Adviser a monthly fee based on the average daily net assets of each Fund
at the following annual rates:
<TABLE>
<CAPTION>
FUND INVESTMENT SUB-ADVISORY FEE
<S> <C>
ING U.S. Treasury Money
Market Fund........... 0.125%
ING Money Market Fund... 0.125%
</TABLE>
The figures following 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. 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 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 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 I shares during its initial fiscal period as set forth
in the Fee Table in this Prospectus. The amounts shown assume redemption of Fund
shares at the end of each period indicated. Included for comparison purposes are
performance figures of the IBC's Money Fund Report First Tier Average, a weekly
report tracking the performance of over 1300 taxable and tax-free money funds.
The performance shown is calculated in accordance with established Securities
and Exchange Commission rules and guidelines.
The composite is made up of accounts that are not subject to diversification
and other requirements that apply to mutual funds indicated 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
information should not be considered a prediction of the future performance of
the Fund. The actual performance may be higher or lower than that shown.
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING SEPTEMBER 30, 1998
MONEY MARKET COMPOSITE ACCOUNT
<TABLE>
<CAPTION>
IBC
FIRST TIER
CLASS I AVERAGE
------- -------
<S> <C> <C>
1 Year [1.38%] 5.06%
Since Inception* [3.45%] 4.99%
* Inception date is August 1, 1996.
</TABLE>
10
<PAGE> 93
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses and $17
per account for transfer agency services plus out-of-pocket expenses. ING Fund
Services has retained DST to act as the Funds' transfer agent and First Data to
act as the Funds' fund accounting agent. DST is located at 333 W. 11th Street,
Kansas City, MO 64105, and First Data is located at 4400 Computer Drive,
Westborough, MA 01581-5120.
DISTRIBUTION EXPENSES
The Funds have not adopted a Plan of Distribution with respect to the Class
I shares. Accordingly, there are no distribution expenses attributable to the
Class I shares.
SHAREHOLDER SERVICING PLAN
The Funds have not adopted a Shareholder Servicing Plan with respect to the
Class I shares. Accordingly there are no shareholder servicing expenses
attributable to the Class I shares.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing 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 a 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 Agreements, 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 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 Sub-Adviser may
cause a Fund to pay a broker-dealer which provides "brokerage and research
services" (as defined in the 1940 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.
11
<PAGE> 94
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
and the Federal Reserve Bank of New York 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, ING Fund Services 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. 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 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 and Fund
share valuation.
PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received. The minimum initial
investment in a Fund is $1,000. Any subsequent investments must be at least $50.
All initial investments should be accompanied by a completed Account
Application. An Account Application accompanies this Prospectus. All funds
received are invested in full and fractional shares of the appropriate Fund.
Certificates for shares are not issued. Contributions to qualified retirement
plans are subject to prevailing limits set by the Internal Revenue Service. An
annual maintenance fee is imposed per a taxpayer identification number per a
plan type. The Funds reserve the right to reject any purchase order. All
investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the purchase of shares (including, but not
limited to, how to purchase shares and minimum necessary initial and subsequent
investment amounts) and the completion of documentation related to the purchase
of Fund shares. Please consult with your retirement plan administrator to
determine if any such separate policies and procedures apply to you.
DESCRIPTION OF CLASS I SHARES
Class I shares are currently offered only to retirement plans affiliated
with ING Group. The public offering price of Class I shares is the net asset
value of the applicable Fund's shares.
MINIMUM ACCOUNT BALANCE
12
<PAGE> 95
If (i) 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 (ii) 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.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge at the net asset value
next determined after a redemption request in good order has been received by
the applicable Fund. In the instance where a shareholder owns more than one
class of shares and the shares being redeemed are not subject to a contingent
deferred sales charge, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, which may take
up to 15 calendar days. 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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. 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. Under certain circumstances described
below, a signature guarantee may be required. You may redeem your shares using
any of the following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the redemption of shares (including, but not
limited to, how to redeem shares) and the completion of documentation related to
the redemption of Fund shares. Please consult with your retirement plan
administrator to determine if any such separate policies and procedures apply to
you.
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. Signature
guarantees are required for: (i) redemptions by
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mail in excess of $50,000; (ii) redemptions by mail if the proceeds are to be
paid to someone other than the name(s) in which the account is registered; (iii)
redemptions requesting proceeds to be sent to a new address or an address that
has been changed within the past 15 days; (iv) requests to transfer the
registration of shares to another owner; and (v) written redemptions or
exchanges of shares previously reported as lost/abandoned property, 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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
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 in which 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.
EXCHANGE OF FUND SHARES
HOW TO EXCHANGE 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. All exchanges will be
made based on the net asset value next determined following receipt of the
request by a Fund in good order. .
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
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Shareholders will receive written confirmation of the exchange following
completion of the transaction. You may exchange your shares using any of the
following methods:
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.
Auto-Exchange Privilege. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Funds at
1-877-INFO-ING.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the exchange of shares and the completion of
documentation related to the exchange of Fund shares. Please consult with your
retirement plan administrator to determine if any such separate policies and
procedures apply to you.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value. Dividends declared in, and attributable to, the
preceding period will be paid within five business days after the end of the
period. 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.
TAX MATTERS
All Funds. 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.
As long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class of
shares as compared with another, except in accordance with the former's dividend
rights as a class. The Funds believe that a
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multiple-class structure having all of the features of the multiple-class
structure of each of the Funds would not result in dividends being treated as
"preferential." The Funds' belief is not binding on the Internal Revenue Service
(the "IRS"), no ruling has been obtained by the Funds from the IRS on the matter
and there can be no guarantee that the IRS will agree with the Funds on this
matter. The Funds' belief is based on the application of current federal income
tax law and relevant authorities, and subsequent changes in federal tax law or
judicial or administrative decisions or pronouncements may supercede or affect
the Funds' conclusions. The Funds do not believe that a multiple-class structure
having all of the features of the multiple-class structure of each of the Funds
has been considered by the IRS in other rulings. If dividends declared and paid
by a Fund on any class of shares were to be treated as "preferential," dividends
paid by the Fund to shareholders on all classes, of shares during the taxable
year would become non-deductible. In this event, the Fund would not be treated
as a regulated investment company and the Fund would be taxed on its net income,
without any deductions for dividends paid to its shareholders. The resulting
federal and state income tax liability, and any related interest and penalties,
would be payable from and to the extent of such Fund's then available assets and
ultimately would be borne by all current shareholders. The treatment of
dividends declared and paid during the taxable year on any class of shares as
preferential, and the resulting failure of a Fund to be treated as a regulated
investment company, could have additional personal income tax consequences for
shareholders of the Fund, including the taxation of distributions as ordinary
income that otherwise would have been classified as net capital gains.
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.
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 IRS that the shareholder is subject to backup withholding. Most
corporate shareholders and certain other shareholders specified in the Code are
exempt from backup withholding.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as qualified retirement plans.
THE FOREGOING DISCUSSION IS INCLUDED FOR SHAREHOLDERS THAT ARE EXEMPT FROM
FEDERAL INCOME TAXES. 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 (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 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. In accordance with Rule
2a-7, the Fund's investments in these securities are limited to those having a
remaining maturity not exceeding 13 months (397 days).
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 in the
obligation must look to the agency issuing or guaranteeing the obligation for
ultimate repayment. In accordance with Rule 2a-7, the Fund's investments in
these securities are limited to those having a remaining maturity not exceeding
13 months (397 days).
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
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and financial institutions and United States Government agencies and
instrumentalities. All commercial paper purchased by the Fund is, at the time of
investment (i) given the highest short-term rating by at least two NRSROs, such
as "A-1" by S&P and "Prime-1" by Moody's; (ii) single rated and given the
highest short-term rating by a NRSRO; or (iii) unrated, but determined to be of
comparable quality by the Sub-Adviser 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 in Rule 2a-7. The Fund may invest in both United States
dollar denominated rated commercial paper and 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, 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. In accordance with
Rule 2a-7, the Fund's investments in these securities are limited to those
having a remaining maturity not exceeding 13 months (397 days).
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.
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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 the opinion of the Sub-Adviser, 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 domestic banks.
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.
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 these securities are limited to those with maturity components
not exceeding 13 months (397 days).
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 (ING Money Market Fund Only). Variable rate
demand obligations generally have a maturity of longer than 397 days, 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. To the extent
this period is exceeded, the obligation in question would be considered
illiquid.
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. 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.
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 Sub-Adviser, 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
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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.
The Fund may only purchase mortgage-backed securities to the extent they
meet the maturity and quality requirements of Rule 2a-7.
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. The
Fund may only purchase mortgage-backed securities to the extent they meet the
maturity and quality requirements of Rule 2a-7.
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 of Rule 2a-7. 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 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
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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 (Both 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, 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 ("GIC") issued
by U.S. insurance companies. The Fund will purchase a GIC only when the
Sub-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 NRSROs.
"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 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 contribute 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 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 marked-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 (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. For
more information about repurchase agreements, see "Investment Policies" in the
SAI.
Borrowing (Both Funds). Each Fund may borrow up to 33 1/3% 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.
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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RISKS OF INVESTING IN THE FUNDS
General. 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
diversified Funds, each 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 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 Funds are dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (i) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (ii) 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.
OTHER INFORMATION
CAPITALIZATION
ING Funds Trust was organized as a Delaware business trust on July 30, 1998
and currently consists of 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except for the ING National
Tax-Exempt Bond Fund and ING National Tax-Exempt Money Market Fund, which are
not offering Class X or Class I 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
21
<PAGE> 104
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: (i) 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 (ii) 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 are mandated by the
SEC.
Quotations of "yield" for a Fund will be based on the investment income per
share (including dividends and interest) during a particular seven day period or
thirty day period, less expenses accrued per share 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, the
yield is then annualized. When a yield assumes that income earned is reinvested,
it is called an effective yield. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
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 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 since inception, 1, 3, 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, IBC Financial Data, Inc., 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.
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<PAGE> 105
CODE OF ETHICS
The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
23
<PAGE> 106
ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes two funds (each, a "Fund" and, collectively, the
"Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-adviser described herein (the "Sub-Adviser"). The Manager and its
Sub-Adviser are wholly-owned indirect subsidiaries of ING Groep, N.V. ("ING
Group"). The Funds and their investment objectives are:
ING Internet Fund and ING Quality of Life Fund each seeks to provide
investors with long-term capital appreciation.
Each Fund offers five different classes of shares--Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class A, Class B
and Class C shares are offered in this Prospectus. The Class X and Class I
shares are offered under separate prospectuses. The Class X shares may be
purchased only by certain qualified investors (including, but not limited to,
IRAs, Roth IRAs, Education IRAs, SEP IRAs, Simple IRAs and 403(b)(7) plans). The
Class I shares may be purchased only by retirement plans affiliated with ING
Group. Shares of the Funds are sold to the public by ING Funds Distributor, Inc.
(the "Distributor").
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT 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.
THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL BE
ACHIEVED.
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 _________, 1999, 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. The SEC maintains
a Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding the Funds. The SAI is also 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.
_____________, 1999
<PAGE> 107
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS.................................................. 3
FUND EXPENSES............................................... 6
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 8
MANAGEMENT OF THE FUNDS..................................... 10
FUND SHARE VALUATION........................................ 13
PURCHASE OF FUND SHARES..................................... 14
PURCHASE PLANS.............................................. 19
REDEMPTION OF FUND SHARES................................... 19
REDEMPTION PLANS............................................ 21
EXCHANGE OF FUND SHARES..................................... 22
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 23
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 25
RISKS OF INVESTING IN THE FUNDS............................. 32
OTHER INFORMATION........................................... 35
</TABLE>
2
<PAGE> 108
ING FUNDS TRUST
- --------------------------------------------------------------------------------
HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two funds managed by ING Mutual Funds Management
Co. LLC (the "Manager") and sub-advised by the Sub-Adviser. Each Fund has a
distinct investment objective and policies. There can be no assurance that any
Fund will achieve its investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S. and non-U.S. quality of life companies. For these
purposes, the Fund defines quality of life companies as those companies offering
products and services helping persons live longer, healthier and happier lives.
Such companies may include, but will not be limited to, (i) companies engaged in
the research, development, production or distribution of products or service
related to health care, medicine, or the life sciences, (ii) companies engaged
in providing entertainment services or equipment related to leisure time
activities, and (iii) companies providing other services or products desired by
the aging baby boomer population.
Both Funds. Both 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 investment 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."
INVESTMENT RISKS
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.
3
<PAGE> 109
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.
Risks of Techniques Involving Leverage. Utilization of leverage involves
special risks and may involve speculative investment techniques. Certain Funds
may borrow for other than temporary or emergency purposes, lend their
securities, enter into 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
the 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.
Non-diversified Investment Companies. The Funds are classified as
non-diversified investment companies under the Investment Company Act of 1940,
as amended, (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 the Fund's share price to
fluctuate more than that of a diversified investment company.
Concentration. The ING Internet Fund and ING Quality of Life Fund each
"concentrates" (for purposes of the 1940 Act) its 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.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
For additional information concerning the risks of investing in the Funds,
see "Risks of Investing in the Funds."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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. The Manager 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 based on the average daily net assets of each Fund. See "Fund
Expenses -- Fee Table" and "Management of the Funds -- The Manager." The
Sub-Adviser is an indirect subsidiary of ING Group and is an affiliate of the
other sub-advisers of the ING Family of Funds and the Manager and ING Funds
Distributor, Inc. ("Distributor").
ING Investment Management Advisors B.V. ("IIMA") serves as sub-adviser to
the Funds. IIMA may be referred to herein as a "Sub-Adviser." For its services,
the Sub-Adviser receives a fee from the Manager based on the respective Fund's
average daily net assets. See "Management of the Funds -- The Sub-Adviser." 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 objective, policies, and
restrictions for such Fund.
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Funds
pursuant to which ING Fund
4
<PAGE> 110
Services will perform or engage third parties to perform transfer agency, fund
accounting, account servicing, and other services. ING Fund Services has hired
DST Systems, Inc. ("DST") to act as the Funds' transfer agent and First Data
Investor Services Group ("First Data") to act as the Funds' 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted below, (iii) 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), (iv) the various exchange privileges among the
different classes of shares and (v) the fact that Class B and X shares
automatically convert to Class A shares after eight years. The Class A, Class B
and Class C shares are offered in this Prospectus.
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, but is not limited to,
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. An investor who purchases Class A shares pays a maximum
sales charge of 5.75% 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 ("CDSC") at the time of redemption). 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 may have lower expenses and may pay higher
dividends. See "Purchase of Fund Shares."
Class B Shares. Class B shares are sold without an initial sales charge, but
are subject to a 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 may 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 C Shares. Class C shares are sold without an initial sales charge, but
are subject to a CDSC of 1.00% if redeemed within one year of purchase. Class C
shares also 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 may
pay lower dividends than Class A shares due to the higher Rule 12b-1 fee and any
other class specific expenses. While Class C shares do not convert to Class A
shares, they do not have to be held for as long a time (one year) as Class B
shares to avoid paying a CDSC. See "Purchase of Fund Shares."
Class X Shares and Class I Shares. Each Fund offers Class X shares and Class
I shares under separate prospectuses. The Class X shares and Class I shares have
different sales charges and other expenses, which may affect performance. The
Class X shares may be purchased only by certain qualified investors (including,
but not limited to, IRAs, Roth IRAs, SEP IRAs, Simple IRAs and 403(b)(7) plans).
The Class I shares may be purchased only by retirement plans affiliated with ING
Group. If you are interested in further information concerning the Class X
shares or Class I shares, please call the Funds and request a prospectus at
1-877-INFO-ING or contact your authorized broker or investment adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such
5
<PAGE> 111
shares. See "Management of the Funds -- Shareholder Servicing Plan" and
"Management of the Funds -- Fund Accountant, Transfer Agent and Account
Services."
FUND EXPENSES
The purpose of the following tables is to assist investors 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:
6
<PAGE> 112
FEE TABLE
<TABLE>
<CAPTION>
ING INTERNET FUND ING QUALITY OF LIFE FUND
------------------------------ -------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)(1)......... 5.75% NONE NONE 5.75% NONE NONE
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............ NONE NONE NONE NONE NONE NONE
Maximum Contingent Deferred Sales Load
(as a percentage of the lesser of the net asset
value at the time of redemption or at the time of
purchase)(2)..................................... NONE 5.00% 1.00% NONE 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)*................. 0.31% 0.31% 0.31% 0.25% 0.25% 0.25%
12b-1 Fees (after waivers)*...................... 0.10% 0.75% 0.75% 0.10% 0.75% 0.75%
Shareholder Servicing Fees....................... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after waivers) **................ 0.93% 0.93% 0.93% 0.93% 0.93% 0.93%
------ ------ ------ ------ ------ ------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***. 1.59% 2.24% 2.24% 1.53% 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 CDSC 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 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
shares before the end of the sixth year after which you purchased such
shares. The CDSC for redemptions occurring in years one through six,
respectively, 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 at the time of
purchase. The CDSC is not imposed on the amount of any increase in your
account value over the amount invested. No CDSC is charged after the
sixth year. 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 and C CDSC, see this Prospectus under
"Purchase of Fund Shares."
* Management Fees consisting of investment advisory and administrative
fees (before waivers) for ING Internet Fund and ING Quality of Life Fund
would be 1.25% and 1.00% annually of the average daily net assets for
each Fund, respectively. Rule 12b-1 Fees (before waivers) would be 0.50%
annually of the average daily net assets for each Fund's Class A shares.
The fee waivers reflected in the table are voluntary and may be modified
or terminated at any time without the Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses, $17 per an account for transfer agency services plus
out-of-pocket expenses and up to 0.25% of the Fund's average daily net
assets annually for account servicing activities. Each Fund currently
waives 0.05% of such fees. ING Fund Services may engage third parties to
perform some or all of these services. The fee waivers are voluntary and
may be modified or terminated at any time without the Funds' consent.
(See "Management of the Fund-- Fund Accountant, Transfer Agent and
Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 2.98% for Class
A shares and 3.23% for Class B and C shares of the ING Internet Fund and
2.73% for Class A shares and 2.98% for Class B and C shares of the ING
Quality of Life Fund.
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<PAGE> 113
EXPENSE EXAMPLES:
The following table is 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).
<TABLE>
<CAPTION>
FULL REDEMPTION* NO REDEMPTION**
------------------- -------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
ING QUALITY OF LIFE FUND
Class A Shares................ $ 72 $ 103 $ 72 $ 103
Class B Shares................ $ 72 $ 109 $ 22 $ 69
Class C Shares................ $ 32 $ 69 $ 22 $ 69
ING INTERNET FUND
Class A Shares................ $ 73 $ 105 $ 73 $ 105
Class B Shares................ $ 73 $ 111 $ 23 $ 71
Class C Shares................ $ 33 $ 71 $ 23 $ 71
</TABLE>
* Full Redemption. You would have paid the above 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 above 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.
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%.
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding voting securities, as
defined under the 1940 Act, 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. There can be no assurance that any Fund will achieve its
investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
The Sub-Adviser believes that the internet is in the early stages of a
period of promising growth. The internet has enabled companies to tap into new
markets, use new distribution channels and do business with end users of their
products all over the world without having to go through wholesalers and
distributors. The Sub-Adviser believes that investment in companies related to
the internet should 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 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 a 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 primary
or secondary market.
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S.
8
<PAGE> 114
and non-U.S. quality of life companies. For these purposes, the Fund defines
quality of life companies as those companies offering products and services
helping persons live longer, healthier and happier lives. Such companies may
include, but will not be limited to, (i) companies engaged in the research,
development, production or distribution of products or service related to health
care, medicine, or the life sciences, (ii) companies engaged in providing
entertainment services or equipment related to leisure time activities, and
(iii) companies providing other services or products desired by the aging baby
boomer population.
The Sub-Adviser believes that these companies will benefit from the aging
baby boomer generation. The global consumption pattern is steadily changing as a
result of an increase in wealth and a resulting increase in life expectancy.
Especially in the developed world, the population is rapidly aging. In the
opinion of the Sub-Adviser this development will lead to a structural increase
in healthcare spending. At the same time the growing group of aging people will
have an increasing need for various services and more and new possibilities of
leisure activities. People will be increasingly willing to invest in their
quality of life aiming at longer, healthier and happier lives.
Both Funds. While each Fund will invest primarily in investments that are
consistent with its name, each Fund 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 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 Nationally Recognized Statistical Ratings Organization
("NRSRO"), or if unrated, are determined to be of comparable quality by the
Sub-Adviser. 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.
Both 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
conservative than the types of securities that the Fund typically invests in. To
the extent a Fund is engaged in temporary defensive investments, it 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 (e.g., the ING Internet Fund
must invest at least 65% of its total assets in equity securities of internet
technology companies). To the extent the SEC changes 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 has the ability 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.
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
The types of securities and investment practices used by the Funds are
described in greater detail at "Description of Securities and Investment
Practices."
9
<PAGE> 115
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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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 Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Adviser on a periodic basis, and will consider their performance records
with respect to the investment objectives and policies of each Fund. The Manager
also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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 Quality of Life Fund........ 1.00%
ING Internet
Fund.......................... 1.25%
</TABLE>
THE SUB-ADVISER
The Manager has entered into Sub-Advisory Agreements with the Sub-Adviser.
Under the Sub-Advisory Agreements, the Sub-Adviser has 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. Each Sub-Advisory Agreement may be terminated without penalty by
the Manager, the Board of Trustees or the shareholders of the respective 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 a wholly owned indirect
subsidiary of ING Group and is an affiliate of the Manager. The Manager may make
changes to the sub-advisory arrangements provided that it will not make any
changes that would constitute an assignment (as defined under the 1940 Act) of
an advisory agreement unless such actions are permissible under the 1940 Act,
the rules thereunder or pursuant to relief granted by the SEC.
ING Investment Management Advisors B.V. The Manager has retained IIMA
located at Schenkkade 65, 2595 AS The Hague, The Netherlands to act as
sub-adviser to the ING Internet Fund and ING Quality of Life Fund. IIMA is
registered under the Advisers Act.
10
<PAGE> 116
IIMA is a company organized to manage investments and provide investment advice
on a world-wide basis to entities affiliated and unaffiliated with ING Group.
IIMA operates under the collective management of ING Investment Management which
has investments under management of $130 billion at March 31, 1999. The
following investment advisory professionals work within ING Investment
Management and are officers of IIMA.
The ING Quality of Life Fund is managed by a team of two investment
professionals, led by Mr. Herman Kleeven, which is supported by the global
equity team of IIMA and its affiliates. Mr. Kleeven has been employed by IIMA
and its affiliates since 1997 and has investment experience of seven years.
Before joining IIMA and its affiliates, Mr. Kleeven was a portfolio manager for
Robeco Group, Rotterdam, The Netherlands.
The ING Internet Fund is managed by a team of three investment professionals
led Mr. Guy Uding. Mr. Uding has been employed by IIMA and its affiliates since
1995 and has four years of investment experience.
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:
<TABLE>
<CAPTION>
FUND INVESTMENT SUB-ADVISORY FEE
- ------------------------- ---------------------------
<S> <C>
ING Quality of Life Fund. 0.500%
ING Internet Fund........ 0.625%
</TABLE>
The figures following show past performance of IIMA in managing pooled
accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING Quality of Life
Fund and ING Internet 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 Quality of Life Fund or ING Internet
Funds' 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 quality of life mandate and one with an internet mandate managed by IIMA
for various periods ended March 31, 1999, as adjusted for the projected annual
expenses for the ING Quality of Life Fund and ING Internet Funds' Class A, Class
B and Class C shares during their initial fiscal period as set forth in the Fee
Table in this Prospectus. The amounts shown assume redemption of Fund shares at
the end of each period indicated. Included for comparison purposes are
performance figures of the MSCI Health and Personal Care Index ("MSCI H&PC") and
Interactive Week Internet Index ("IIX"), respectively, each an unmanaged market
index. The performance shown below is calculated in accordance with established
Securities and Exchange Commission rules and guidelines.
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 Quality of Life Fund and
ING Internet Fund may vary in some respects. The information should not be
considered a prediction of the future performance of the ING Quality of Life
Fund and the ING Internet Fund. The actual performance may be higher or lower
than that shown.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDING MARCH 31, 1999
QUALITY OF LIFE POOLED ACCOUNT
<TABLE>
<CAPTION>
CLASS A* CLASS B CLASS C MSCI H&PC
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
1 Year % % % %
3 Years % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to or in excess of
$1,000,000 will not be subject to an initial sales charge. The annualized
rate of return, without adjustment for an initial sales charge, would be
___%, ___%, and ___% for the 1, 3 year and since inception
11
<PAGE> 117
Periods, respectively.
** Inception date is ______, 1998.
INTERNET POOLED ACCOUNT
<TABLE>
<CAPTION>
IIX
CLASS A* CLASS B CLASS C INDEX
-------- ------- ------- -----
<S> <C> <C> <C> <C>
1 Year % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to or in excess of
$1,000,000 will not be subject to an initial sales charge. The annualized
rate of return, without adjustment for an initial sales charge, would be
____% and ____% for the 1 year and since inception periods, Respectively.
** Inception date is ______, 1998.
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses, $17 per
account for transfer agency services plus out-of-pocket expenses and up to 0.25%
of each Fund's average daily net assets annually for account servicing
activities. ING Fund Services may engage third parties to perform some or all of
these services. Account servicing may include, but is not limited to, (i)
maintaining shareholder accounts; (ii) preparing shareholders statements,
confirmations and shareholder lists; (iii) mailing shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements; (iv) tabulating proxies; (v)
disbursement of dividends and other distributions; (vi) withholding taxes on
U.S. resident and non-resident accounts where applicable; (vii) preparation and
filing of U.S. Treasury Department Forms 1099 and other appropriate forms by
applicable statutes, rules and regulations; and (viii) providing such other
similar services directly to shareholder accounts. ING Fund Services has
retained DST to act as the Funds' transfer agent and First Data to act as the
Funds' fund accounting agent. DST is located at 333 W. 11th Street, Kansas City,
MO 64105, and First Data is located at 4400 Computer Drive, Westborough, MA
01581-5120.
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 up to 0.50%
of average daily net assets attributable to that Fund's Class A shares, 0.75% of
average daily net assets attributable to that Fund's Class B and C shares.
The higher distribution fee attributable to Class B 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: (i) 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, (ii) to pay an affiliated party of the Distributor for interest
and other borrowing costs incurred by the Distributor; and (iii) 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
12
<PAGE> 118
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 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"). Under the Shareholder Servicing Plan, fees may be used to
compensate Service Organizations 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, but is not limited to, (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.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing 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 a 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 Agreements, 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"), 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, 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
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<PAGE> 119
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, ING Fund
Services 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. 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 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.
PURCHASE OF FUND SHARES
HOW TO PURCHASE 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. The minimum initial
investment in a Fund is $2,000 ($1,000 for an IRA investment or any qualified
plan). Any subsequent investments must be at least $50, including an IRA or
qualified plan investment. All initial investments should be accompanied by a
completed Account Application. An Account Application accompanies this
Prospectus. A separate application is required for an IRA or qualified plan
investor. All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. When you purchase
shares of a Fund, please specify the class of shares that you wish to purchase.
If you do not choose a class of shares, then your investment will be made in
Class A shares. The Funds reserve the right to reject any purchase order. All
investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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 the Funds at 1-877-INFO-ING to
obtain a fund account number and reference number for the wire.
The following wire instructions should be used:
Investors Fiduciary Trust Company
ABA 101003621
A/C# 756-095-8
14
<PAGE> 120
Credit to [insert the ING Fund Name]
For Account of [insert your ING Fund Account Number]
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 the Funds at 1-877-INFO-ING. Once the form is
completed, returned, and updated to your account, you can initiate a purchase by
calling the Funds at 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.
DESCRIPTION OF CLASS A SHARES -- INITIAL SALES CHARGE ALTERNATIVE
General Information. The public offering price of Class A shares is the net
asset value per share of the applicable Fund's shares plus any initial sales
charge. 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 BROKER-DEALER
AMOUNT OF SALE OFFERING PRICE NET AMOUNT 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 CDSC in connection with certain purchases of Class A
shares of $1,000,000 or more, as described below.
** The Distributor normally pays the broker-dealer concession of 1.00% of the
purchase price of Class A shares to the dealer from its own resources at the
time of the sale, provided the investor would not otherwise qualify for a
waiver, described below, from the initial sales charge (i.e., employees of
the Manager, etc.).
Rights of Accumulation. The initial sales charge for your investment in Fund
shares may 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. In order for the sales charge reductions to be effective under
the Rights of Accumulation, the Transfer Agent must be notified of the reduction
request when the purchase order is placed. The Transfer Agent may require
evidence of your qualification for such reductions. Additional information
concerning the Rights of Accumulation can be obtained from the Funds by calling
1-877-INFO-ING.
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. In
order for the sales charge reductions to be effective under the LOI, the
Transfer Agent must be notified of the reduction request when the purchase order
is placed. The Transfer Agent may require evidence of your qualification for
such reductions. Additional information concerning the LOI can be obtained from
the Funds by calling 1-877-INFO-ING.
Waiver of All Class A Shares Initial Sales Charges. No initial sales charge
is imposed on sales of Class A shares for the following investors: (i) the
Manager, ING Group, any affiliate or direct or indirect subsidiary of ING Group;
(ii) present officers, directors, trustees and employees (and their parents,
spouses and dependent children) of the Fund, the Manager and its affiliates
(including, ING Group, any affiliate or direct or indirect subsidiary of ING
Group), and any retirement plans established by such entities for their
employees; (iii) accounts with respect to which any person described in (ii)
above acts as a custodian on behalf of a minor (including Uniform Gift to Minors
Act and Uniform Transfer to Minors Act accounts); (iv) dealers that have a sales
agreement with the Distributor, if they purchase shares for their own accounts
or for retirement plans for their employees; (v) 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
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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); (vi) 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); and (vii) employees (and their parents,
spouses and dependent children) of firms providing the Funds, the Trust or their
affiliates with regular legal, actuarial, underwriting, claims, administrative,
computer support, marketing, office or other services.
Additionally, no sales charge is imposed on the following transactions: (i)
shares issued in plans of reorganization, such as mergers, asset acquisitions
and exchange offers, to which a Fund is a party; (ii) shares purchased by the
reinvestment of distributions received from a Fund; (iii) 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); (iv) purchases by
a defined contribution plan under section 401(a) of the Code (including 401(k)
plans) with at least 25 eligible employees; (v) purchases by a 403(b)(7) or 457
plan subject to the Employee Retirement Income Security Act of 1974, as amended;
(vi) shares purchased by the reinvestment of loan repayments by a participant in
a retirement plan; (vii) purchases by former participants in a qualified
retirement plan, where a portion of the plan was invested in the Fund; (viii)
purchases by non-qualified deferred compensation plans; and (ix) 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 waivers to be effective, the Transfer
Agent must be notified of the waiver request when the purchase order is placed.
The Transfer Agent may require evidence of your qualification for such waivers.
Additional information about the above sales charge waivers can be obtained from
the Funds by calling 1-877-INFO-ING.
Contingent Deferred Sales Charge. The redemption proceeds of Class A shares
that were not at the time of purchase assessed an initial sales charge because
the investor purchased $1,000,000 or more of such shares (including shares
acquired under Right of Accumulation and LOI), will be assessed a CDSC equal to
1.00% if such shares are redeemed within twelve months after their purchase date
(the "CDSC Period"). The Class A CDSC will be assessed on the lesser of the net
asset value of the shares at the time of redemption or at the time of purchase.
The Class A CDSC will not be imposed on the amount of any increase in your
account value over the initial amount invested. To determine whether the Class A
CDSC applies to a redemption, the Fund redeems shares in the following order:
(i) shares acquired by reinvestment of dividends and capital gains
distributions; (ii) shares held for over one year; and (iii) shares in the order
they were purchased (such that shares held the longest are redeemed first).
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 prior to the redemption: (i) redemption of shares
by an investor who would otherwise qualify for an exemption, described above,
from the initial sales charge (i.e., employees of the Manager, etc.); (ii)
redemption of shares when a Fund exercises its right to liquidate accounts which
are less than the minimum account size; (iii) redemption to pay for optional
insurance coverage described in the Prospectus under "Redemption Plans --
Optional Benefit"; (iv) the death or post-purchase disability, as defined in
Section 72(m)(7) of the Code (if satisfactory evidence is provided to the Fund);
(v) 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; (vi) reinvested dividends and capital gains and
(vii) a Systematic Withdrawal Plan of 10% per year where the minimum
distribution is $500 per month.
In order for the CDSC waivers to be effective, the Transfer Agent must be
notified of the waiver request when the redemption order is placed. The Transfer
Agent may require evidence of your qualification for such waivers. Additional
information about the above CDSC waivers can be obtained from the Funds by
calling 1-877-INFO-ING.
Rule 12b-1 Fees. 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 up to 0.50% of average daily net assets attributable to that Fund's Class
A shares. This fee may be lower than the amount paid in connection with the
Class B, Class C and Class X shares of each Fund.
DESCRIPTION OF CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
General Information. 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
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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 at the time of
purchase. The Class B CDSC will not be 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, ING Fund Services and their agents may assign their right to
receive any Class B CDSC, certain distribution, shareholder servicing and
account servicing fees to an entity affiliated with the Manager 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: (i) shares acquired by reinvestment of
dividends and capital gains distributions; (ii) shares held for over six years;
and (iii) 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>
1st 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 business day of the month in which the purchase was made.
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: (i) redemption
of shares when a Fund exercises its right to liquidate accounts which are less
than the minimum account size; (ii) redemption to pay for optional insurance
coverage described in the Prospectus under "Redemption Plans --Optional
Benefit"; (iii) the death or post-purchase disability, as defined in Section
72(m)(7) of the Code (if satisfactory evidence is provided to the Fund); (iv)
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; (v) reinvested dividends and capital gains and
(vi) 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.
Conversion to Class A Shares. Eight years after you purchase Class B shares
of a Fund, those shares will automatically convert to Class A shares of that
Fund. This conversion feature relieves Class B 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 shares 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 non-Dividend Shares to
your total Class B non-Dividend Shares. Under Section 1036 of the Code, the
automatic conversion of Class B shares will not result in a gain or loss to the
Fund or to affected shareholders.
Rule 12b-1 Fees. 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 up to 0.75% of average daily net assets attributable to that Fund's Class
B shares. This fee is higher than the amount paid in connection with the Class A
shares, but the same as the amount paid in connection with the Class C and Class
X shares of each Fund.
DESCRIPTION OF CLASS C SHARES -- LEVEL SALES CHARGE ALTERNATIVE
General Information. 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 CDSC (1.00%) and do not have to be held for as long a time
(one year) as Class B shares to avoid paying a CDSC. The Class C CDSC will be
assessed on the lesser of the net asset value of the shares at the
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<PAGE> 123
time of redemption or at the time of purchase. The Class C CDSC will not be
imposed on the amount of any increase in your account value over the initial
amount invested. To determine whether the Class C CDSC applies to a redemption,
the Fund redeems shares in the following order: (i) shares acquired by
reinvestment of dividends and capital gains distributions; (ii) shares held for
over one year; and (iii) shares in the order they were purchased (such that
shares held the longest are redeemed first). 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.
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: (i) redemption
of shares when a Fund exercises its right to liquidate accounts which are less
than the minimum account size; (ii) redemption to pay for optional insurance
coverage described in the Prospectus under "Redemption Plans --Optional
Benefit"; (iii) the death or post-purchase disability, as defined in Section
72(m)(7) of the Code (if satisfactory evidence is provided to the Fund); (iv)
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; (v) reinvested dividends and capital gains and
(vi) 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. 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 up to 0.75% of average daily net assets attributable to that Fund's Class
C shares. This fee is higher than the amount paid in connection with the Class A
shares, but the same as the amount paid in connection with the Class B and Class
X shares of each Fund.
IRAS AND QUALIFIED RETIREMENT PLANS
The Funds may be used as a funding medium for IRAs and Qualified Retirement
Plans. Contributions are subject to prevailing limits set by the Internal
Revenue Service. An annual maintenance fee is imposed per taxpayer
identification number per plan type. Establishment of these accounts requires a
special application. For more information, please call the Funds at
1-877-INFO-ING.
MINIMUM ACCOUNT BALANCE
If (i) 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 (ii) 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.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY)
Within 90 days of a redemption, a shareholder may invest all or part of the
redemption proceeds of Class A shares 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. 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
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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 CDSC 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 CDSC 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 or C
shares.
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 the Funds at
1-877-INFO-ING for the appropriate authorization form. These purchase plans are
currently not available for investors that invest through IRAs or any qualified
plans.
ING Auto-Asset Accumulation Plan. This plan permits you to purchase Fund
shares (minimum of $50 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 from the
Funds 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416, and the
notification will be effective three business days following receipt. The Fund
may 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 $50 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 from the Funds 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 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 Funds, P.O. Box 419416, Kansas
City, MO 64141-6416. You may obtain the necessary authorization form from the
Funds 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. Minimum investment amounts will be determined on a
case-by-case basis. The Fund may modify or terminate this program at any time or
charge a service fee. No such fee currently is contemplated.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge (except any applicable
CDSC) at the net asset value next determined after a redemption request in good
order has been received by the applicable Fund. The CDSC applicable to the Class
A, B and C shares is described under "Purchase of Fund Shares." In the
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<PAGE> 125
instance where a shareholder owns more than one class of shares and the shares
being redeemed are not subject to the CDSC, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, 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.
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. Under certain circumstances described below, a signature guarantee
may be required. You may redeem your shares using any of the following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. 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 Account 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 15 days
following a telephone address change.
By Wire. 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. Your bank may charge you a fee for receiving a wire payment on your
behalf.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
Certain of the above-mentioned redemption services may not be available for
clients of authorized brokers or investment advisers or for IRAs. These clients
should contact their representative.
SIGNATURE GUARANTEES
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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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) written redemptions requesting
proceeds to be sent by wire to other than the bank of record for the account;
(iv) redemptions requesting proceeds to be sent to a new address or an address
that has been changed within the past 15 days; (v) requests to transfer the
registration of shares to another owner; (vi) telephone exchange and telephone
redemption authorization forms; (vii) changes in previously designated wiring
instructions; and (viii) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
REDEMPTION PLANS
The Trust offers various redemption plans that make redeeming 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 the Funds at 1-877-INFO-ING for
the appropriate authorization form. These redemption plans are currently not
available for investors that invested through IRAs or any qualified plans.
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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Optional Benefit. ING Group, an affiliate of ING Group, or an unrelated
third party (the "Insurer") 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 CDSCs, but will have the same tax
consequences as any other Fund redemptions.
This 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 the Insurer 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 the Insurer 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 1-877-INFO-ING for more information and application
forms for this program.
EXCHANGE OF FUND SHARES
General Information. The Funds offer several convenient ways to exchange
shares in one Fund for shares in the same class of another Fund in the Trust.
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 with regard to
Class A shares, any applicable sales charge. See "Purchase of Fund Shares
- --Reinstatement Privilege (Class A shares only)". If a shareholder exchanges
shares subject to a CDSC (being either Class B or Class C shares) for the same
shares of a different ING Fund, the transaction will not be subject to a CDSC.
However, when shares acquired through the exchange are redeemed out of the ING
Family of Funds, then the shareholder will be treated as if no exchange took
place for the purpose of determining the CDSC period and applying the CDSC.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
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. You may exchange your shares using any
of the following methods:
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 Account 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. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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
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shareholder. The amount you designate, which can be expressed either in terms of
a specific dollar or share amount ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Funds at 1-877-INFO-ING.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value, unless you elect to receive such dividends and
distributions in cash five full business days prior to the record date.
Dividends declared in, and attributable to, the preceding period will be paid
within five business days after the end of the period. 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.
If you elect to receive distributions in cash, and if your checks are
returned and marked as "undeliverable", or remain uncashed for six months, then
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.
You also may elect to automatically invest dividend and capital gains
distributions, if any, paid by the Funds 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.
You also may elect to transfer electronically dividend and/or capital gains
distributions, if any, from the Funds 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.
The above described elections may be made either on the Account Application
or by calling the Funds at 1-877-INFO-ING.
TAX MATTERS
Both Funds. 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 pay those dividends annually. 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.
So long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class
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of shares as compared with another, except in accordance with the former's
dividend rights as a class. The Funds believe that a multiple-class structure
having all of the features of the multiple-class structure of each of the Funds
would not result in dividends being treated as "preferential." The Funds' belief
is not binding on the Internal Revenue Service (the "IRS"), no ruling has been
obtained by the Funds from the IRS on the matter and there can be no guarantee
that the IRS will agree with the Funds on this matter. The Funds' belief is
based on the application of current federal income tax law and relevant
authorities, and subsequent changes in federal tax law or judicial or
administrative decisions or pronouncements may supercede or affect the Funds'
conclusions. The Funds do not believe that a multiple-class structure having all
of the features of the multiple-class structure of each of the Funds has been
considered by the IRS in other rulings. If dividends declared and paid by a Fund
on any class of shares were to be treated as "preferential," dividends paid by
the Fund to shareholders on all classes, of shares during the taxable year would
become non-deductible. In this event, the Fund would not be treated as a
regulated investment company and the Fund would be taxed on its net income,
without any deductions for dividends paid to its shareholders. The resulting
federal and state income tax liability, and any related interest and penalties,
would be payable from and to the extent of such Fund's then available assets and
ultimately would be borne by all current shareholders. The treatment of
dividends declared and paid during the taxable year on any class of shares as
preferential, and the resulting failure of a Fund to be treated as a regulated
investment company, could have additional personal income tax consequences for
shareholders of the Fund, including the taxation of distributions as ordinary
income that otherwise would have been classified as net capital gains.
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. 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.
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.
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Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of a Fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the Fund would not be able to pay ordinary income dividends.
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.
A redemption is a taxable transaction on which gain or loss may be
recognized. 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 IRS 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
The following is a description of investment practices of the Funds and the
securities in which they may invest:
U.S. Treasury Obligations. 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. 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 in the obligation must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
Commercial Paper. 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.
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Corporate Debt Securities. 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.
Mortgage-Related Securities. 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. 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.
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
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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. 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. 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.
Depositary Receipts. 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.
The Funds may 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 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. 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.
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Convertible and Exchangeable Securities. 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.
Domestic and Foreign Bank Obligations. 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.
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. 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.
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.
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Variable rate demand obligations. 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. See the SAI for further details on
variable rate demand obligations and variable rate master demand obligations.
Open-End and Closed-End Investment Companies. Each Fund may invest in shares
of other open-end and closed-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. The
purchase of securities of other investment companies 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.
Options on Securities. 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 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 liquid assets 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
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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.
Futures, Related Options and Options on Stock Indices. 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 weighting 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 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. 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. 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
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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. 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 or against
another foreign currency. 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 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. 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 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. 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 marked-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. 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
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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. A Fund 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. Each Fund may borrow up to 33 1/3% 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 a 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 a Fund's shares. The Funds 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. 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. A 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 Quality of Life Fund 100% and ING Internet Fund 250%. 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
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.
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.
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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 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.
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
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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 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 Funds 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 Internet Fund and ING Quality of Life 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.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
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,
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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
Funds are dependent may result in errors and account maintenance failures. The
Funds have no reason to believe that (i) the Year 2000 plans of the Manager and
the Funds' other service providers will not be completed by December, 1999, and
(ii) 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.
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 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except the ING National Tax-Exempt
Bond Fund and the ING National Tax-Exempt Money Market Fund which are divided
into Class A, B and C shares only . 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 Declaration of Trust 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
35
<PAGE> 141
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: (i) 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 (ii) 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 are 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 since inception, 1, 3, 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, 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.
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 Funds' portfolios 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 of Trustees
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 the 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.
CODE OF ETHICS
The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
36
<PAGE> 142
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
37
<PAGE> 143
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
38
<PAGE> 144
MANAGER
ING Mutual Funds Management Co. LLC
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
SUB-ADVISER
ING Investment Management Advisors B.V.
Schenkkade 65, 2595 AS
The Hague, The Netherlands
DISTRIBUTOR
ING Funds Distributor, Inc.
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
CUSTODIAN
Investors Fiduciary Trust Co.
801 Pennsylvania Street
Kansas City, MO 64105
TRANSFER AGENT
DST Systems, Inc.
333 W. 11th Street
Kansas City, MO 64105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventy Avenue
New York, NY 10019
LEGAL COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
39
<PAGE> 145
ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes two funds (each, a "Fund" and, collectively, the
"Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-adviser described herein (the "Sub-Adviser"). The Manager and its
Sub-Adviser are wholly-owned indirect subsidiaries of ING Groep, N.V. ("ING
Group"). The Funds and their investment objectives are:
ING Internet Fund and ING Quality of Life Fund each seeks to provide
investors with long-term capital appreciation.
Each Fund offers five different classes of shares--Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class X shares
are offered in this Prospectus and may be purchased only by certain qualified
investors (including, but not limited to, IRAs, Roth IRAs, Education IRAs, SEP
IRAs, Simple IRAs and 403(b)(7) plans). The Class A, Class B, Class C and Class
I shares are offered under separate prospectuses. The Class I shares may be
purchased only by retirement plans affiliated with ING Group. Shares of the
Funds are sold to the public by ING Funds Distributor, Inc. (the "Distributor").
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT 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.
THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL BE
ACHIEVED.
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 _________, 1999, 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. The SEC maintains
a Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding the Funds. The SAI is also 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.
_____________, 1999
<PAGE> 146
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
HIGHLIGHTS.................................................. 3
FUND EXPENSES............................................... 5
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 7
MANAGEMENT OF THE FUNDS..................................... 9
FUND SHARE VALUATION........................................ 12
PURCHASE OF FUND SHARES..................................... 13
REDEMPTION OF FUND SHARES................................... 15
EXCHANGE OF FUND SHARES..................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 17
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 18
RISKS OF INVESTING IN THE FUNDS............................. 25
OTHER INFORMATION........................................... 28
</TABLE>
2
<PAGE> 147
ING FUNDS TRUST
- --------------------------------------------------------------------------------
HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two funds managed by ING Mutual Funds Management
Co. LLC (the "Manager") and sub-advised by the Sub-Adviser. Each Fund has a
distinct investment objective and policies. There can be no assurance that any
Fund will achieve its investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S. and non-U.S. quality of life companies. For these
purposes, the Fund defines quality of life companies as those companies offering
products and services helping persons live longer, healthier and happier lives.
Such companies may include, but will not be limited to, (i) companies engaged in
the research, development, production or distribution of products or service
related to health care, medicine, or the life sciences, (ii) companies engaged
in providing entertainment services or equipment related to leisure time
activities, and (iii) companies providing other services or products desired by
the aging baby boomer population.
Both Funds. Both 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 investment 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."
INVESTMENT RISKS
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.
3
<PAGE> 148
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.
Risks of Techniques Involving Leverage. Utilization of leverage involves
special risks and may involve speculative investment techniques. Certain Funds
may borrow for other than temporary or emergency purposes, lend their
securities, enter into 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
the 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.
Non-diversified Investment Companies. The Funds are classified as
non-diversified investment companies under the Investment Company Act of 1940,
as amended, (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 the Fund's share price to
fluctuate more than that of a diversified investment company.
Concentration. The ING Internet Fund and ING Quality of Life Fund each
"concentrates" (for purposes of the 1940 Act) its 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.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
For additional information concerning the risks of investing in the Funds,
see "Risks of Investing in the Funds."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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. The Manager 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 based on the average daily net assets of each Fund. See "Fund
Expenses -- Fee Table" and "Management of the Funds -- The Manager." ThE
Sub-Adviser is an indirect subsidiary of ING Group and is an affiliate of the
other sub-advisers of the ING Family of Funds and the Manager and ING Funds
Distributor, Inc. ("Distributor").
ING Investment Management Advisors B.V. ("IIMA") serves as sub-adviser to
the Funds. IIMA may be referred to herein as a "Sub-Adviser." For its services,
the Sub-Adviser receives a fee from the Manager based on the respective Fund's
average daily net assets. See "Management of the Funds -- The Sub-Adviser." 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 objective, policies, and
restrictions for such Fund.
OTHER SERVICE PROVIDERS
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Funds
pursuant to which ING Fund
4
<PAGE> 149
Services will perform or engage third parties to perform transfer agency, fund
accounting, account servicing, and other services. ING Fund Services has hired
DST Systems, Inc. ("DST") to act as the Funds' transfer agent and First Data
Investor Services Group ("First Data") to act as the Funds' 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted below, (iii) whether you qualify for any reduction or waiver of any
applicable sales charge, (iv) the various exchange privileges among the
different classes of shares and (v) the fact that Class B and X shares
automatically convert to Class A shares after eight years. The Class X shares
are offered in this Prospectus and may be purchased only by certain qualified
investors (including, but not limited to, IRAs, Roth IRAs, SEP IRAs, Simple IRAs
and 403(b)(7) plans).
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, but is not limited to,
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 X Shares. Class X 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. In addition, investors purchasing Class X shares
will receive, as a bonus, additional shares having a value equal to 2.00% 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 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 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 may 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 A, Class B, Class C and Class I Shares. Each Fund offers Class A,
Class B, Class C and Class I shares under separate prospectuses. These Classes
of shares have different sales charges and other expenses, which may affect
performance. The Class I shares may be purchased only by retirement plans
affiliated with ING Group. If you are interested in further information
concerning the Class A, Class B, Class C or Class I shares, please call the
Funds and request a prospectus at 1-877-INFO-ING or contact your authorized
broker or investment adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such shares. See "Management of the Funds --
Shareholder Servicing Plan" and "Management of the Funds -- Fund Accountant,
Transfer Agent and Account Services."
FUND EXPENSES
The purpose of the following tables is to assist investors 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:
5
<PAGE> 150
FEE TABLE
<TABLE>
<CAPTION>
ING INTERNET FUND ING QUALITY OF LIFE FUND
CLASS X CLASS X
----------------- ------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ..................... NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) ..................... NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value at
the time of redemption or at the time of purchase)(1) .. 5.00% 5.00%
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fees (after waivers)* .......................... 0.31% 0.25%
12b-1 Fees ................................................ 0.75% 0.75%
Shareholder Servicing Fees ................................ 0.25% 0.25%
Other Expenses (after waivers)** .......................... 0.93% 0.93%
---- ----
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)*** .......... 2.24% 2.18%
==== ====
</TABLE>
(1) If you purchase Class 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 X shares
before the end of the sixth year after which you purchased such shares. The
CDSC for redemptions occurring in years one through six, respectively, 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 at the time of purchase. The CDSC is
not imposed on the amount of any increase in your account value over the
amount invested. No CDSC is charged after the sixth year. For a discussion
of the Class X CDSC, see this Prospectus under "Purchase of Fund Shares."
* Management Fees consisting of investment advisory and administrative fees
(before waivers) for the ING Internet Fund and the ING Quality of Life Fund
would be 1.25% and 1.00% annually of the average daily net assets for each
Fund, respectively. The fee waivers reflected in the table are voluntary
and may be modified or terminated at any time without the Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses, $17 per an account for transfer agency services plus
out-of-pocket expenses and up to 0.25% of the Fund's average daily net
assets annually for account servicing activities. Each Fund currently
waives 0.05% of such fees. ING Fund Services may engage third parties to
perform some or all of these services. The fee waivers are voluntary and
may be modified or terminated at any time without the Funds' consent. (See
"Management of the Funds -- Fund Accountant, Transfer Agent and Account
Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) would be 3.23% for Class X
shares of the ING Internet Fund and 2.98% for Class X shares of the ING
Quality of Life Fund.
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<PAGE> 151
EXPENSE EXAMPLES:
The following table is 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).
<TABLE>
<CAPTION>
FULL REDEMPTION* NO REDEMPTION**
------------------- -------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
ING QUALITY OF LIFE FUND
Class X Shares................ $ 73 $ 110 $ 23 $ 70
ING INTERNET FUND
Class X Shares................ $ 73 $ 112 $ 23 $ 72
</TABLE>
* Full Redemption. You would have paid the above 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 above 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.
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%.
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding voting securities, as
defined under the 1940 Act, 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. There can be no assurance that any Fund will achieve its
investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
The Sub-Adviser believes that the internet is in the early stages of a
period of promising growth. The internet has enabled companies to tap into new
markets, use new distribution channels and do business with end users of their
products all over the world without having to go through wholesalers and
distributors. The Sub-Adviser believes that investment in companies related to
the internet should 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 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 a 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 primary
or secondary market.
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S.
7
<PAGE> 152
and non-U.S. quality of life companies. For these purposes, the Fund defines
quality of life companies as those companies offering products and services
helping persons live longer, healthier and happier lives. Such companies may
include, but will not be limited to, (i) companies engaged in the research,
development, production or distribution of products or service related to health
care, medicine, or the life sciences, (ii) companies engaged in providing
entertainment services or equipment related to leisure time activities, and
(iii) companies providing other services or products desired by the aging baby
boomer population.
The Sub-Adviser believes that these companies will benefit from the aging
baby boomer generation. The global consumption pattern is steadily changing as a
result of an increase in wealth and a resulting increase in life expectancy.
Especially in the developed world, the population is rapidly aging. In the
opinion of the Sub-Adviser this development will lead to a structural increase
in healthcare spending. At the same time the growing group of aging people will
have an increasing need for various services and more and new possibilities of
leisure activities. People will be increasingly willing to invest in their
quality of life aiming at longer, healthier and happier lives.
Both Funds. While each Fund will invest primarily in investments that are
consistent with its name, each Fund 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 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 Nationally Recognized Statistical Ratings Organization
("NRSRO"), or if unrated, are determined to be of comparable quality by the
Sub-Adviser. 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.
Both 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
conservative than the types of securities that the Fund typically invests in. To
the extent a Fund is engaged in temporary defensive investments, it 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 (e.g.., the ING Internet Fund
must invest at least 65% of its total assets in equity securities of internet
technology companies). To the extent the SEC changes 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 has the ability 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.
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
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> 153
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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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 Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Adviser on a periodic basis, and will consider their performance records
with respect to the investment objectives and policies of each Fund. The Manager
also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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 Quality of Life Fund........ 1.00%
ING Internet
Fund.......................... 1.25%
</TABLE>
THE SUB-ADVISER
The Manager has entered into Sub-Advisory Agreements with the Sub-Adviser.
Under the Sub-Advisory Agreements, the Sub-Adviser has 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. Each Sub-Advisory Agreement may be terminated without penalty by
the Manager, the Board of Trustees or the shareholders of the respective 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 a wholly owned indirect
subsidiary of ING Group and is an affiliate of the Manager. The Manager may make
changes to the sub-advisory arrangements provided that it will not make any
changes that would constitute an assignment (as defined under the 1940 Act) of
an advisory agreement unless such actions are permissible under the 1940 Act,
the rules thereunder or pursuant to relief granted by the SEC.
ING Investment Management Advisors B.V. The Manager has retained IIMA
located at Schenkkade 65, 2595 AS The Hague, The Netherlands to act as
sub-adviser to the ING Internet Fund and ING Quality of Life Fund. IIMA is
registered under the Advisers Act.
9
<PAGE> 154
IIMA is a company organized to manage investments and provide investment advice
on a world-wide basis to entities affiliated and unaffiliated with ING Group.
IIMA operates under the collective management of ING Investment Management which
has investments under management of $130 billion at March 31, 1999. The
following investment advisory professionals work within ING Investment
Management and are officers of IIMA.
The ING Quality of Life Fund is managed by a team of two investment
professionals, led by Mr. Herman Kleeven, which is supported by the global
equity team of IIMA and its affiliates. Mr. Kleeven has been employed by IIMA
and its affiliates since 1997 and has investment experience of seven years.
Before joining IIMA and its affiliates, Mr. Kleeven was a portfolio manager for
Robeco Group, Rotterdam, The Netherlands.
The ING Internet Fund is managed by a team of three investment professionals
led Mr. Guy Uding. Mr. Uding has been employed by IIMA and its affiliates since
1995 and has four years of investment experience.
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:
<TABLE>
<CAPTION>
FUND INVESTMENT SUB-ADVISORY FEE
- ------------------------- ---------------------------
<S> <C>
ING Quality of Life Fund. 0.500%
ING Internet Fund........ 0.625%
</TABLE>
The figures following show past performance of IIMA in managing pooled
accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING Quality of Life
Fund and ING Internet 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 Quality of Life Fund or ING Internet
Funds' 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 quality of life mandate and one with an internet mandate managed by IIMA
for various periods ended March 31, 1999, as adjusted for the projected annual
expenses for the ING Quality of Life Fund and ING Internet Funds' Class X shares
during their initial fiscal period as set forth in the Fee Table in this
Prospectus. The amounts shown assume redemption of Fund shares at the end of
each period indicated. Included for comparison purposes are performance figures
of the MSCI Health and Personal Care Index ("MSCI H&PC") and Interactive Week
Internet Index ("IIX"), respectively, each an unmanaged market index. The
performance shown below is calculated in accordance with established Securities
and Exchange Commission rules and guidelines.
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 Quality of Life Fund and
ING Internet Fund may vary in some respects. The information should not be
considered a prediction of the future performance of the ING Quality of Life
Fund and the ING Internet Fund. The actual performance may be higher or lower
than that shown.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDING MARCH 31, 1999
QUALITY OF LIFE POOLED ACCOUNT
<TABLE>
<CAPTION>
CLASS A* CLASS B CLASS C MSCI H&PC
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
1 Year % % % %
3 Years % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to or in excess of
$1,000,000 will not be subject to an initial sales charge. The annualized
rate of return, without adjustment for an initial sales charge, would be
___%, ___%, and ___% for the 1, 3 year and since inception
10
<PAGE> 155
Periods, respectively.
** Inception date is ______, 1998.
INTERNET POOLED ACCOUNT
<TABLE>
<CAPTION>
CLASS A* CLASS B CLASS C IIX
-------- ------- ------- ---
<S> <C> <C> <C> <C>
1 Year % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to or in excess of
$1,000,000 will not be subject to an initial sales charge. The annualized
rate of return, without adjustment for an initial sales charge, would be
____% and ____% for the 1 year and since inception periods, Respectively.
** Inception date is ______, 1998.
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses, $17 per
account for transfer agency services plus out-of-pocket expenses and up to 0.25%
of each Fund's average daily net assets annually for account servicing
activities. ING Fund Services may engage third parties to perform some or all of
these services. Account servicing may include, but is not limited to, (i)
maintaining shareholder accounts; (ii) preparing shareholders statements,
confirmations and shareholder lists; (iii) mailing shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements; (iv) tabulating proxies; (v)
disbursement of dividends and other distributions; (vi) withholding taxes on
U.S. resident and non-resident accounts where applicable; (vii) preparation and
filing of U.S. Treasury Department Forms 1099 and other appropriate forms by
applicable statutes, rules and regulations; and (viii) providing such other
similar services directly to shareholder accounts. ING Fund Services has
retained DST to act as the Funds' transfer agent and First Data to act as the
Funds' fund accounting agent. DST is located at 333 W. 11th Street, Kansas City,
MO 64105, and First Data is located at 4400 Computer Drive, Westborough, MA
01581-5120.
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 up to 0.75%
of average daily net assets attributable to that Fund's Class X shares.
The higher distribution fee attributable to Class X 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: (i) 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, (ii) to pay an affiliated party of the Distributor for interest
and other borrowing costs incurred by the Distributor; and (iii) 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,
11
<PAGE> 156
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 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"). Under the Shareholder Servicing Plan, fees may be used to
compensate Service Organizations 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, but is not limited to, (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.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing 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 a 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 Agreements, 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"), 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, 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
12
<PAGE> 157
Manager, ING Fund Services 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. 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 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.
PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received. The minimum initial
investment in a Fund is $1,000. Any subsequent investments must be at least $50.
All initial investments should be accompanied by a completed Account
Application. An Account Application accompanies this Prospectus. All funds
received are invested in full and fractional shares of the appropriate Fund.
Certificates for shares are not issued. Contributions to IRAs and qualified
retirement plans are subject to prevailing limits set by the Internal Revenue
Service. An annual maintenance fee is imposed per a taxpayer identification
number per a plan type. The Funds reserve the right to reject any purchase
order. All investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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.
DESCRIPTION OF CLASS X SHARES
General Information. Class X shares are currently offered to certain
"Qualified" purchases (including, but not limited to, IRAs, Education IRAs, SEP
IRAs, Simple IRAs and 403(b)(7) plans). Any request for "Non-Qualified"
purchases of Class X shares up to, but not including, $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 for $1,000,000 or more 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 such amounts.
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 2.00% 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 Plan discussed below. Shares purchased by the reinvestment
of dividends or capital gains distributions are not eligible for Bonus Shares.
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<PAGE> 158
Although Class X shares are sold without an initial sales charge, a CDSC
will be imposed if shares are redeemed within six years of purchase. 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 at the
time of purchase. The Class X CDSC will not be imposed on the amount of any
increase in your account value over the 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 2.50% of the purchase price of
Class X shares to the dealer from its own resources at the time of the sale. The
Distributor, ING Fund Services and their agents may assign their right to
receive any Class X CDSC, certain distribution, shareholder servicing and
account servicing fees to an entity affiliated with the Manager 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: (i) shares acquired by reinvestment of
dividends and capital gains distributions; (ii) shares (including Bonus Shares)
held for over six years; and (iii) shares (not including Bonus Shares) in the
order they were purchased (such that shares held the longest are redeemed
first); and (iv) 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>
1st 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 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: (i) redemption
of shares when a Fund exercises its right to liquidate accounts which are less
than the minimum account size; (ii) the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code (if satisfactory evidence is provided to
the Fund); (iii) 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; and (iv) reinvested dividends
and capital gains.
Conversion to Class A Shares. Eight years after you purchase Class X shares
of a Fund, those shares will automatically convert to Class A shares of that
Fund. This conversion feature relieves Class 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 X shares 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 X non-Dividend Shares to
your total Class 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.
Rule 12b-1 Fees. 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 up to 0.75% of average daily net assets attributable to that Fund's Class
X shares. This fee is higher than the amount paid in connection with the Class A
shares, but the same as the amount paid in connection with the Class B and Class
C shares of each Fund.
MINIMUM ACCOUNT BALANCE
If (i) 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 (ii) 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
14
<PAGE> 159
$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.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge (except any applicable
CDSC) at the net asset value next determined after a redemption request in good
order has been received by the applicable Fund. The CDSC applicable to the Class
X shares is described under "Purchase of Fund Shares." In the instance where a
shareholder owns more than one class of shares and the shares being redeemed are
not subject to the CDSC, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, which may take
up to 15 calendar days. 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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. 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. Under certain circumstances described
below, a signature guarantee may be required. You may redeem your shares using
any of the following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 15 days; (iv) requests to transfer the registration of shares to
another owner; and (v) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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
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dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
EXCHANGE OF FUND SHARES
HOW TO EXCHANGE 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. All exchanges will be
made based on the net asset value next determined following receipt of the
request by a Fund in good order. If a shareholder exchanges shares subject to a
CDSC (such as the Class X shares) for the same shares of a different ING Fund,
the transaction will not be subject to a CDSC. However, when shares acquired
through the exchange are redeemed out of the ING Family of Funds, then the
shareholder will be treated as if no exchange took place for the purpose of
determining the CDSC period and applying the CDSC.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
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. You may exchange your shares using any
of the following methods:
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.
Auto-Exchange Privilege. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. The
Fund may charge a service fee for the use of this privilege. No such fee
currently is contemplated. For more
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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 the Funds at 1-877-INFO-ING.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value, unless you elect to receive such dividends and
distributions in cash five full business days prior to the record date.
Dividends declared in, and attributable to, the preceding period will be paid
within five business days after the end of the period. 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.
If you elect to receive distributions in cash, and if your checks are
returned and marked as "undeliverable", or remain uncashed for six months, then
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.
The above described elections may be made either on the Account Application
or by calling the Funds at 1-877-INFO-ING.
TAX MATTERS
Both Funds. 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 pay those dividends annually, except for the ING Growth & 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.
So long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class of
shares as compared with another, except in accordance with the former's dividend
rights as a class. The Funds believe that a multiple-class structure having all
of the features of the multiple-class structure of each of the Funds would not
result in dividends being treated as "preferential." The Funds' belief is not
binding on the Internal Revenue Service (the "IRS"), no ruling has been obtained
by the Funds from the IRS on the matter and there can be no guarantee that the
IRS will agree with the Funds on this matter. The Funds' belief is based on the
application of current federal income tax law and relevant authorities, and
subsequent changes in federal tax law or judicial or administrative decisions or
pronouncements may supercede or affect the Funds' conclusions. The Funds do not
believe that a multiple-class structure having all of the features of the
multiple-class structure of each of the Funds has been considered by the IRS in
other rulings. If dividends declared and paid by a Fund on any class of shares
were to be treated as "preferential," dividends paid by the Fund to shareholders
on all classes, of shares during the taxable year would become non-deductible.
In this event, the Fund would not be treated as a regulated investment company
and the Fund would be taxed on its net income, without any deductions for
dividends paid to its shareholders. The resulting federal and state income tax
liability, and any related interest and penalties, would be payable from and to
the extent of such Fund's then available assets and ultimately would be
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borne by all current shareholders. The treatment of dividends declared and paid
during the taxable year on any class of shares as preferential, and the
resulting failure of a Fund to be treated as a regulated investment company,
could have additional personal income tax consequences for shareholders of the
Fund, including the taxation of distributions as ordinary income that otherwise
would have been classified as net capital gains.
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.
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.
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 IRS that the shareholder is subject to backup withholding. Most
corporate shareholders and certain other shareholders specified in the Code are
exempt from backup withholding.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. THE FOREGOING
DISCUSSION IS INCLUDED FOR SHAREHOLDERS THAT ARE EXEMPT FROM FEDERAL INCOME
TAXES. 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. 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. 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 in the obligation must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
Commercial Paper. 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. 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
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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.
Mortgage-Related Securities. 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. 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.
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. 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.
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Preferred Stocks. 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.
Depositary Receipts. 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.
The Funds may 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 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. 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.
Convertible and Exchangeable Securities. 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
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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.
Domestic and Foreign Bank Obligations. 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.
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. 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.
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. 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
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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. See the SAI for further details on variable rate demand
obligations and variable rate master demand obligations.
Open-End and Closed-End Investment Companies. Each Fund may invest in shares
of other open-end and closed-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. The
purchase of securities of other investment companies 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.
Options on Securities. 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 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 liquid assets 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.
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Futures, Related Options and Options on Stock Indices. 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 weighting 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 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. 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. 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. 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
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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 or against
another foreign currency. 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 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. 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 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. 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 marked-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. 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. A Fund 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.
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Borrowing. Each Fund may borrow up to 33 1/3% 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 a 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 a Fund's shares. The Funds 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. 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. A 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 Quality of Life Fund 100% and ING Internet Fund 250%. 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
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.
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.
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
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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 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.
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
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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 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 Funds 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 Internet Fund and ING Quality of Life 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 to greater market fluctuation than a fund which has securities
representing a broader range of investment alternatives.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
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 Funds are dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (i) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (ii) 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.
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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.
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 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except the ING National Tax-Exempt
Bond Fund and the ING National Tax-Exempt Money Market Fund which are divided
into Class A, B and C shares only . 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 Declaration of Trust 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: (i) 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 (ii) more than 50% of the outstanding shares of a Fund
(or the Funds).
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<PAGE> 173
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 are 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 since inception, 1, 3, 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, 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.
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 Funds' portfolios 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 of Trustees
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 the 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.
CODE OF ETHICS
The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
29
<PAGE> 174
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
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<PAGE> 175
MANAGER
ING Mutual Funds Management Co. LLC
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
SUB-ADVISER
ING Investment Management Advisors B.V.
Schenkkade 65, 2595 AS
The Hague, The Netherlands
DISTRIBUTOR
ING Funds Distributor, Inc.
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
CUSTODIAN
Investors Fiduciary Trust Co.
801 Pennsylvania Street
Kansas City, MO 64105
TRANSFER AGENT
DST Systems, Inc.
333 W. 11th Street
Kansas City, MO 64105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventy Avenue
New York, NY 10019
LEGAL COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
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<PAGE> 176
ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes two funds (each, a "Fund" and, collectively, the
"Funds") of the ING Funds Trust (the "Trust"), managed by ING Mutual Funds
Management Co. LLC, a Delaware limited liability company (the "Manager"). The
Manager has delegated certain of its investment advisory activities to the
sub-adviser described herein (the "Sub-Adviser"). The Manager and its
Sub-Adviser are wholly-owned indirect subsidiaries of ING Group, N.V. ("ING
Group"). The Funds and their investment objectives are:
ING Internet Fund and ING Quality of Life Fund each seeks to provide
investors with long-term capital appreciation.
Each Fund offers five different classes of shares -- Class A shares, Class B
shares, Class C shares, Class X shares and Class I shares. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group. The Class A, Class B, Class C and Class X shares are
offered under separate prospectuses. Shares of the Funds are sold to the public
by ING Funds Distributor, Inc. (the "Distributor").
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ING GROUP OR ITS AFFILIATES, AND ARE NOT 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.
THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT OBJECTIVES WILL BE
ACHIEVED.
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 _________, 1999, 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. The SEC maintains
a Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding the Funds. The SAI is also 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.
_____________, 1999
<PAGE> 177
TABLE OF CONTENTS
PAGE
HIGHLIGHTS.................................................. 3
FUND EXPENSES............................................... 5
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 7
MANAGEMENT OF THE FUNDS..................................... 10
FUND SHARE VALUATION........................................ 13
PURCHASE OF FUND SHARES..................................... 13
REDEMPTION OF FUND SHARES................................... 14
EXCHANGE OF FUND SHARES..................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 16
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES.......... 18
RISKS OF INVESTING IN THE FUNDS............................. 26
OTHER INFORMATION........................................... 29
2
<PAGE> 178
ING FUNDS TRUST
HIGHLIGHTS
THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of the ING Funds Trust (the "Trust"), 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two funds managed by ING Mutual Funds Management
Co. LLC (the "Manager") and sub-advised by the Sub-Adviser. Each Fund has a
distinct investment objective and policies. There can be no assurance that any
Fund will achieve its investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S. and non-U.S. quality of life companies. For these
purposes, the Fund defines quality of life companies as those companies offering
products and services helping persons live longer, healthier and happier lives.
Such companies may include, but will not be limited to, (i) companies engaged in
the research, development, production or distribution of products or service
related to health care, medicine, or the life sciences, (ii) companies engaged
in providing entertainment services or equipment related to leisure time
activities, and (iii) companies providing other services or products desired by
the aging baby boomer population.
Both Funds. Both 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 investment 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."
INVESTMENT RISKS
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.
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<PAGE> 179
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.
Risks of Techniques Involving Leverage. Utilization of leverage involves
special risks and may involve speculative investment techniques. Certain Funds
may borrow for other than temporary or emergency purposes, lend their
securities, enter into 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
the 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.
Non-diversified Investment Companies. The Funds are classified as
non-diversified investment companies under the Investment Company Act of 1940,
as amended, (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 the Fund's share price to
fluctuate more than that of a diversified investment company.
Concentration. The ING Internet Fund and ING Quality of Life Fund each
"concentrates" (for purposes of the 1940 Act) its 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.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
For additional information concerning the risks of investing in the Funds,
see "Risks of Investing in the Funds."
MANAGEMENT OF THE FUNDS
As manager of the Funds, the Manager 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. The Manager 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 based on the average daily net assets of each Fund. See "Fund
Expenses -- Fee Table" and "Management of the Funds -- The Manager." The
Sub-Adviser is an indirect subsidiary of ING Group and is an affiliate of the
other sub-advisers of the ING Family of Funds and the Manager and ING Funds
Distributor, Inc. ("Distributor").
ING Investment Management Advisors B.V. ("IIMA") serves as sub-adviser to
the Funds. IIMA may be referred to herein as a "Sub-Adviser." For its services,
the Sub-Adviser receives a fee from the Manager based on the respective Fund's
average daily net assets. See "Management of the Funds -- The Sub-Adviser." 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 objective, policies, and
restrictions for such Fund.
OTHER SERVICE PROVIDERS
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<PAGE> 180
The Distributor distributes the Funds' shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. 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, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. ("DST") to act as the Funds'
transfer agent and First Data Investor Services Group ("First Data") to act as
the Funds' 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
(whether imposed at the time of purchase or redemption) and Rule 12b-1 fees, as
noted below, (iii) whether you qualify for any reduction or waiver of any
applicable sales charge, (iv) the various exchange privileges among the
different classes of shares and (v) the fact that Class B and X shares
automatically convert to Class A shares after eight years. The Class I shares
are offered in this Prospectus and may be purchased only by retirement plans
affiliated with ING Group.
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, but is not limited to,
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 I Shares. Class I shares are sold without an initial sales charge.
Class I shares also are not subject to any Rule 12b-1 fees, shareholder
servicing fees or account servicing fees. See "Purchase of Fund Shares."
Class A, Class B, Class C and Class X Shares. Each Fund offers Class A,
Class B, Class C and Class X shares under separate prospectuses. These Classes
of shares have different sales charges and other expenses, which may affect
performance. If you are interested in further information concerning the Class
A, Class B, Class C or Class X shares, please call the Funds and request a
prospectus at 1-877-INFO-ING or contact your authorized broker or investment
adviser.
All Classes. Each Class of shares, except the Class I shares, is also
subject to shareholder servicing fees of up to 0.25% of average daily net assets
attributable to such shares and account servicing fees of up to 0.25% of average
daily net assets attributable to such shares. See "Management of the Funds --
Shareholder Servicing Plan" and "Management of the Funds -- Fund Accountant,
Transfer Agent and Account Services."
FUND EXPENSES
The purpose of the following tables is to assist investors 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:
<TABLE>
<CAPTION>
ING INTERNET FUND ING QUALITY OF LIFE FUND
----------------- ------------------------
CLASS I CLASS I
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................. NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................. NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the lesser of the net asset value
at the time of redemption or at the time of purchase).. NONE NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)*....................... 0.31% 0.25%
12b-1 Fees............................................. 0.00% 0.00%
</TABLE>
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<PAGE> 181
<TABLE>
<S> <C> <C>
Shareholder Servicing Fees............................. 0.00% 0.00%
Other Expenses**....................................... 0.73% 0.73%
-------- ------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)***....... 1.04% 0.98%
======== ======
</TABLE>
- ------------
* Management Fees consisting of investment advisory and administrative fees
(before waivers) for the ING Internet Fund and ING Quality of Life Fund
would be 1.25% and 1.00% annually of the average daily net assets for each
Fund, respectively. The fee waivers reflected in the table are voluntary
and may be modified or terminated at any time without the Funds' consent.
** Under the Fund Services Agreement, each Fund may pay ING Fund Services
annually up to $40,000 for fund accounting services plus out-of-pocket
expenses and $17 per an account for transfer agency services plus
out-of-pocket expenses. ING Fund Services may engage third parties to
perform some or all of these services. (See "Management of the Funds --
Fund Accountant, Transfer Agent and Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) for the ING Internet Fund
and ING Quality of Life Fund would be 1.93% and 1.68% for Class I shares of
each Fund, respectively.
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<PAGE> 182
FEE TABLE
EXPENSE EXAMPLES:
The following table is 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). These figures shown would be the same whether you sold your shares
at the end of a period or continued to hold them.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ING QUALITY OF LIFE FUND
Class I Shares................ $10 $31
ING INTERNET FUND
Class I Shares................ $11 $33
</TABLE>
- -----------------
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%.
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. Each Fund's investment objective and
certain Investment Restrictions are fundamental policies which may not be
changed without a vote of a majority of the outstanding voting securities, as
defined under the 1940 Act, 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. There can be no assurance that any Fund will achieve its
investment objective.
ING Internet Fund. The ING Internet Fund is a non-diversified fund that
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 U.S. and non-U.S. internet technology companies. For these
purposes, the Fund defines internet technology companies as those companies with
internet/virtual businesses or internet related consulting businesses, or with
primary business operations in internet related hardware, software or
infrastructure industries.
The Sub-Adviser believes that the internet is in the early stages of a
period of promising growth. The internet has enabled companies to tap into new
markets, use new distribution channels and do business with end users of their
products all over the world without having to go through wholesalers and
distributors. The Sub-Adviser believes that investment in companies related to
the internet should 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 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 a 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 primary
or secondary market.
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<PAGE> 183
ING Quality of Life Fund. The ING Quality of Life Fund is a non-diversified
fund that 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 U.S. and non-U.S. quality of life companies. For these
purposes, the Fund defines quality of life companies as those companies offering
products and services helping persons live longer, healthier and happier lives.
Such companies may include, but will not be limited to, (i) companies engaged in
the research, development, production or distribution of products or service
related to health care, medicine, or the life sciences, (ii) companies engaged
in providing entertainment services or equipment related to leisure time
activities, and (iii) companies providing other services or products desired by
the aging baby boomer population.
The Sub-Adviser believes that these companies will benefit from the aging
baby boomer generation. The global consumption pattern is steadily changing as a
result of an increase in wealth and a resulting increase in life expectancy.
Especially in the developed world, the population is rapidly aging. In the
opinion of the Sub-Adviser this development will lead to a structural increase
in healthcare spending. At the same time the growing group of aging people will
have an increasing need for various services and more and new possibilities of
leisure activities. People will be increasingly willing to invest in their
quality of life aiming at longer, healthier and happier lives.
Both Funds. While each Fund will invest primarily in investments that are
consistent with its name, each Fund 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 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 Nationally Recognized Statistical Ratings Organization
("NRSRO"), or if unrated, are determined to be of comparable quality by the
Sub-Adviser. 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.
Both 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
conservative than the types of securities that the Fund typically invests in. To
the extent a Fund is engaged in temporary defensive investments, it 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 (e.g., the ING Internet Fund
must invest at least 65% of its total assets in equity securities of internet
technology companies). To the extent the SEC changes 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 has the ability 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.
It is the intention of the Funds, unless otherwise indicated, that with
respect to their respective policies that are the result of the application of
law, the Funds will use to their maximum advantage the flexibility that may
exist as a result of rules or interpretations of the SEC of such laws currently
in existence or amended or promulgated in the future.
8
<PAGE> 184
The types of securities and investment practices used by the Funds are
described in greater detail at "Description of Securities and Investment
Practices."
9
<PAGE> 185
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, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Funds pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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 Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Adviser on a periodic basis, and will consider their performance records
with respect to the investment objectives and policies of each Fund. The Manager
also provides certain administrative services necessary for the Funds'
operations including: (i) coordination of the services performed by the Funds'
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (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 any party to the Agreement 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 Quality of Life Fund........ 1.00%
ING Internet
Fund.......................... 1.25%
</TABLE>
THE SUB-ADVISER
The Manager has entered into Sub-Advisory Agreements with the Sub-Adviser.
Under the Sub-Advisory Agreements, the Sub-Adviser has 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. Each Sub-Advisory Agreement may be terminated without penalty by
the Manager, the Board of Trustees or the shareholders of the respective 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 a wholly owned indirect
subsidiary of ING Group and is an affiliate of the Manager. The Manager may make
changes to the sub-advisory arrangements provided that it will not make any
changes that would constitute an assignment (as defined under the 1940 Act) of
an advisory agreement unless such actions are permissible under the 1940 Act,
the rules thereunder or pursuant to relief granted by the SEC.
ING Investment Management Advisors B.V. The Manager has retained IIMA
located at Schenkkade 65, 2595 AS The Hague, The Netherlands to act as
sub-adviser to the ING Internet Fund and ING Quality of Life Fund. IIMA is
registered under the Advisers Act.
10
<PAGE> 186
IIMA is a company organized to manage investments and provide investment advice
on a world-wide basis to entities affiliated and unaffiliated with ING Group.
IIMA operates under the collective management of ING Investment Management which
has investments under management of $130 billion at March 31, 1999. The
following investment advisory professionals work within ING Investment
Management and are officers of IIMA.
The ING Quality of Life Fund is managed by a team of two investment
professionals, led by Mr. Herman Kleeven, which is supported by the global
equity team of IIMA and its affiliates. Mr. Kleeven has been employed by IIMA
and its affiliates since 1997 and has investment experience of seven years.
Before joining IIMA and its affiliates, Mr. Kleeven was a portfolio manager for
Robeco Group, Rotterdam, The Netherlands.
The ING Internet Fund is managed by a team of three investment professionals
led Mr. Guy Uding. Mr. Uding has been employed by IIMA and its affiliates since
1995 and has four years of investment experience.
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:
<TABLE>
<CAPTION>
FUND INVESTMENT SUB-ADVISORY FEE
---- ---------------------------
<S> <C>
ING Quality of Life Fund. 0.500%
ING Internet Fund........ 0.625%
</TABLE>
The figures following show past performance of IIMA in managing pooled
accounts with investment objectives, policies, styles and techniques
substantially similar though not identical to those of the ING Quality of Life
Fund and ING Internet 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 Quality of Life Fund or ING Internet
Funds' 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 quality of life mandate and one with an internet mandate managed by IIMA
for various periods ended March 31, 1999, as adjusted for the projected annual
expenses for the ING Quality of Life Fund and ING Internet Funds' Class I shares
during their initial fiscal period as set forth in the Fee Table in this
Prospectus. The amounts shown assume redemption of Fund shares at the end of
each period indicated. Included for comparison purposes are performance figures
of the MSCI Health and Personal Care Index ("MSCI H&PC") and Interactive Week
Internet Index ("IIX"), respectively, each an unmanaged market index. The
performance shown below is calculated in accordance with established Securities
and Exchange Commission rules and guidelines.
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 Quality of Life Fund and
ING Internet Fund may vary in some respects. The information should not be
considered a prediction of the future performance of the ING Quality of Life
Fund and the ING Internet Fund. The actual performance may be higher or lower
than that shown.
ANNUALIZED RATES OF RETURN FOR PERIODS ENDING MARCH 31, 1999
QUALITY OF LIFE POOLED ACCOUNT
<TABLE>
<CAPTION> MSCI
CLASS A* CLASS B CLASS C H&PC
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
1 Year % % % %
3 Years % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to
or in excess of $1,000,000 will not be subject to an initial
sales charge. The annualized rate of return, without
adjustment for an initial sales charge, would be ___%, ___%,
and ___% for the 1, 3 year and since inception
11
<PAGE> 187
Periods, respectively.
** Inception date is ______, 1998.
INTERNET POOLED ACCOUNT
<TABLE>
<CAPTION>
IIX
CLASS A* CLASS B CLASS C INDEX
-------- ------- ------- -----
<S> <C> <C> <C> <C>
1 Year % % % %
Since Inception** % % % %
</TABLE>
* As described herein, investments in Class A shares equal to
or in excess of $1,000,000 will not be subject to an initial
sales charge. The annualized rate of return, without
adjustment for an initial sales charge, would be ____% and
____% for the 1 year and since inception periods,
Respectively.
** Inception date is ______, 1998.
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of each Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
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, account services and other services.
Under the Fund Services Agreement, each Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses and $17
per account for transfer agency services plus out-of-pocket expenses. ING Fund
Services has retained DST to act as the Funds' transfer agent and First Data to
act as the Funds' fund accounting agent. DST is located at 333 W. 11th Street,
Kansas City, MO 64105, and First Data is located at 4400 Computer Drive,
Westborough, MA 01581-5120.
DISTRIBUTION EXPENSES
The Funds have not adopted a Plan of Distribution with respect to the Class
I shares. Accordingly, there are no distribution expenses attributable to the
Class I shares.
SHAREHOLDER SERVICING PLAN
The Funds have not adopted a Shareholder Servicing Plan with respect to the
Class I shares. Accordingly, there are no shareholder servicing expenses
attributable to Class I shares.
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, but are not
limited to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing 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 a 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
12
<PAGE> 188
Pursuant to the Sub-Advisory Agreements, 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"), 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, 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, ING Fund Services 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. 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 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.
PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received. The minimum initial
investment in a Fund is $1,000. Any subsequent investments must be at least $50.
All initial investments should be accompanied by a completed Account
Application. An Account Application accompanies this Prospectus. All funds
received are invested in full and fractional shares of the appropriate Fund.
Certificates for shares are not issued. Contributions to
13
<PAGE> 189
qualified retirement plans are subject to prevailing limits set by the Internal
Revenue Service. An annual maintenance fee is imposed per a taxpayer
identification number per a plan type. The Funds reserve the right to reject any
purchase order. All investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the purchase of shares (including, but not
limited to, how to purchase shares and minimum necessary initial and subsequent
investment amounts) and the completion of documentation related to the purchase
of Fund shares. Please consult with your retirement plan administrator to
determine if any such separate policies and procedures apply to you.
DESCRIPTION OF CLASS I SHARES
Class I shares are currently offered only to retirement plans affiliated
with ING Group. The public offering price of Class I shares is the net asset
value of the applicable Fund's shares.
MINIMUM ACCOUNT BALANCE
If (i) 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 (ii) 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.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Shareholders may redeem their shares, in whole or in part, on each day a
Fund is valued. Shares will be redeemed without charge at the net asset value
next determined after a redemption request in good order has been received by
the applicable Fund. In the instance where a shareholder owns more than one
class of shares and the shares being redeemed are not subject to a contingent
deferred sales charge, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, which may take
up to 15 calendar days. 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
14
<PAGE> 190
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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. 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. Under certain circumstances described
below, a signature guarantee may be required. You may redeem your shares using
any of the following methods:
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the redemption of shares (including, but not
limited to, how to redeem shares) and the completion of documentation related to
the redemption of Fund shares. Please consult with your retirement plan
administrator to determine if any such separate policies and procedures apply to
you.
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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 15 days; (iv) requests to transfer the registration of shares to
another owner; and (v) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) 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 call the Funds at 1-877-INFO-ING.
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 in which 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.
15
<PAGE> 191
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 in which 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.
EXCHANGE OF FUND SHARES
HOW TO EXCHANGE 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. All exchanges will be
made based on the net asset value next determined following receipt of the
request by a Fund in good order. .
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 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.
Shareholders will receive written confirmation of the exchange following
completion of the transaction. You may exchange your shares using any of the
following methods:
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.
Auto-Exchange Privilege. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Funds at
1-877-INFO-ING.
Alternatively, your retirement plan administrator may establish separate
policies and procedures concerning the exchange of shares and the completion of
documentation related to the exchange of Fund shares. Please consult with your
retirement plan administrator to determine if any such separate policies and
procedures apply to you.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
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<PAGE> 192
Dividends and distributions will be reinvested in the respective shares of
the Funds at net asset value. Dividends declared in, and attributable to, the
preceding period will be paid within five business days after the end of the
period. 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.
TAX MATTERS
Both Funds. 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 pay those dividends annually. 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.
So long as the Funds qualify as regulated investment companies for federal
income tax purposes, each Fund, in computing its income subject to federal
income tax, is entitled to deduct all dividends other than "preferential"
dividends paid by it to shareholders during the taxable year. "Preferential"
dividends are dividends other than dividends which have been distributed to
shareholders pro rata without preference to any share of the Fund as compared
with other shares of the same class and without preference to one class of
shares as compared with another, except in accordance with the former's dividend
rights as a class. The Funds believe that a multiple-class structure having all
of the features of the multiple-class structure of each of the Funds would not
result in dividends being treated as "preferential." The Funds' belief is not
binding on the Internal Revenue Service (the "IRS"), no ruling has been obtained
by the Funds from the IRS on the matter and there can be no guarantee that the
IRS will agree with the Funds on this matter. The Funds' belief is based on the
application of current federal income tax law and relevant authorities, and
subsequent changes in federal tax law or judicial or administrative decisions or
pronouncements may supercede or affect the Funds' conclusions. The Funds do not
believe that a multiple-class structure having all of the features of the
multiple-class structure of each of the Funds has been considered by the IRS in
other rulings. If dividends declared and paid by a Fund on any class of shares
were to be treated as "preferential," dividends paid by the Fund to shareholders
on all classes, of shares during the taxable year would become non-deductible.
In this event, the Fund would not be treated as a regulated investment company
and the Fund would be taxed on its net income, without any deductions for
dividends paid to its shareholders. The resulting federal and state income tax
liability, and any related interest and penalties, would be payable from and to
the extent of such Fund's then available assets and ultimately would be borne by
all current shareholders. The treatment of dividends declared and paid during
the taxable year on any class of shares as preferential, and the resulting
failure of a Fund to be treated as a regulated investment company, could have
additional personal income tax consequences for shareholders of the Fund,
including the taxation of distributions as ordinary income that otherwise would
have been classified as net capital gains.
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. 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.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of a Fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the Fund would not be able to pay ordinary income dividends.
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.
A redemption is a taxable transaction on which gain or loss may be
recognized. 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 IRS 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 qualified retirement plans. 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
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The following is a description of investment practices of the Funds and the
securities in which they may invest:
U.S. Treasury Obligations. 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. 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 in the obligation must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
Commercial Paper. 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. 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.
Mortgage-Related Securities. 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-
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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. 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.
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. 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. 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.
Depositary Receipts. 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.
The Funds may 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.
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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. 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.
Convertible and Exchangeable Securities. 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.
Domestic and Foreign Bank Obligations. 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.
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
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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. 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.
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. 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. See the SAI for further details on
variable rate demand obligations and variable rate master demand obligations.
Open-End and Closed-End Investment Companies. Each Fund may invest in shares
of other open-end and closed-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. The
purchase of securities of other investment companies 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.
Options on Securities. 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 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
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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 liquid assets 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.
Futures, Related Options and Options on Stock Indices. 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 weighting 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
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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, 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. 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. 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. 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 or against
another foreign currency. 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 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
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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. 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 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. 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 marked-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. 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. A Fund 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. Each Fund may borrow up to 33 1/3% 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 a 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 a Fund's shares. The Funds 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. 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. A 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 Quality of Life Fund 100% and ING Internet Fund 250%. 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
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.
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.
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 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
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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 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
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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 Funds 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 Internet Fund and ING Quality of Life 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.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence cause by progressive scientific and technological
advances.
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 Funds are dependent may result in errors and account maintenance
failures. The Funds have no reason to believe that (i) the Year 2000 plans of
the Manager and the Funds' other service providers will not be completed by
December, 1999, and (ii) 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.
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.
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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 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except the ING National Tax-Exempt
Bond Fund and the ING National Tax-Exempt Money Market Fund which are divided
into Class A, B and C shares only. 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 Declaration of Trust 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: (i) 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 (ii) 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 are 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 since inception, 1, 3, 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, 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.
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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 Funds' portfolios 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 of Trustees
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 the 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.
CODE OF ETHICS
The Code of Ethics of the Manager and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
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SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Funds at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Funds at 1-877-INFO-ING.
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MANAGER
ING Mutual Funds Management Co. LLC
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
SUB-ADVISER
ING Investment Management Advisors B.V.
Schenkkade 65, 2595 AS
The Hague, The Netherlands
DISTRIBUTOR
ING Funds Distributor, Inc.
18 Campus Boulevard, Suite 200
Newtown Square, PA 19073
CUSTODIAN
Investors Fiduciary Trust Co.
801 Pennsylvania Street
Kansas City, MO 64105
TRANSFER AGENT
DST Systems, Inc.
333 W. 11th Street
Kansas City, MO 64105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventy Avenue
New York, NY 10019
LEGAL COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
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ING FUNDS TRUST PROSPECTUS
P.O. BOX 1239
MALVERN, PA 19355-9836
GENERAL & ACCOUNT INFORMATION: 1-877-INFO-ING OR 1-877-463-6464
This Prospectus describes one fund (the "Fund") of the ING Funds Trust (the
"Trust"), managed by ING Mutual Funds Management Co. LLC, a Delaware limited
liability company (the "Manager"). The Manager has delegated certain of its
investment advisory activities to the sub-adviser described herein (the
"Sub-Adviser"). The Manager and its Sub-Adviser are wholly-owned indirect
subsidiaries of ING Groep, N.V. ("ING Group"). The ING National Tax-Exempt Money
Market Fund seeks to provide investors with a high level of current income that
is exempt from Federal income tax as is consistent with the 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 at least 80% of the
value of its net assets in high quality, short-term municipal obligations.
The Fund offers three different classes of shares -- Class A shares, Class B
shares and Class C shares. The Class A, Class B and Class C shares are offered
in this Prospectus. Shares of the Fund are sold to the public by ING Funds
Distributor, Inc. (the "Distributor").
AN INVESTMENT IN SHARES OF THE TRUST IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND 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 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. THERE CAN BE NO ASSURANCE THAT THE FUND'S INVESTMENT OBJECTIVE WILL
BE ACHIEVED.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A statement of additional information (the "SAI"),
dated _______, 1999, containing additional and more detailed information about
the Fund, has been filed with the Securities and Exchange Commission ("SEC") and
is hereby incorporated by reference into this Prospectus. The SEC maintains a
Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding the Fund. The SAI is also available
without charge and can be obtained by writing or calling the Fund 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.
____________, 1999
<PAGE> 209
TABLE OF CONTENTS
PAGE
HIGHLIGHTS............................................. 3
FUND EXPENSES.......................................... 6
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND...... 8
MANAGEMENT OF THE FUND................................. 9
FUND SHARE VALUATION................................... 12
PURCHASE OF FUND SHARES................................ 13
PURCHASE PLANS......................................... 15
REDEMPTION OF FUND SHARES.............................. 16
REDEMPTION PLANS....................................... 18
EXCHANGE OF FUND SHARES................................ 19
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS............... 19
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES..... 22
RISKS OF INVESTING IN THE FUND......................... 26
OTHER INFORMATION...................................... 28
2
<PAGE> 210
HIGHLIGHTS
THE FUND
The Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Fund is a portfolio of the ING Funds Trust (the "Trust"), 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 Fund and elects the officers of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
This Prospectus describes one money market fund managed by ING Mutual Funds
Management Co. LLC (the "Manager") and sub-advised by the Sub-Adviser. The Fund
has a distinct investment objective and policies. There can be no assurance that
the Fund will achieve its investment objective.
The investment objective of the ING National Tax-Exempt Money Market Fund is
to provide investors with a high level of current income that is exempt from
Federal income tax as is consistent with the 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 at least 80% of the value of
its net assets in high quality, short-term municipal obligations which are
determined by the Sub-Adviser to present minimal credit risks. Municipal
obligations are debt obligations issued by states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multistate agencies or
authorities the interest from which is, in the opinion of bond counsel to the
issuer, exempt from Federal income tax. The Fund will not purchase private
activity bonds, the interest from which may be a preference item for purposes of
the alternative minimum tax, or a factor in determining the extent to which a
shareholder's Social Security benefits are taxable. See the "Investment Policies
and Practices of the Fund".
AMORTIZED COST METHOD OF VALUATION FOR THE FUND
Portfolio investments of the Fund are valued based on the amortized cost
valuation method pursuant to Rule 2a-7 under the Investment Company Act of 1940
(the "1940 Act"). Obligations in which the Fund invests generally have remaining
maturities of 397 days or less, although upon satisfying certain conditions of
Rule 2a-7, the Fund 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 the Fund will not exceed 90 days. See the SAI for an
explanation of the amortized cost valuation method.
INVESTMENT RISKS
The Fund attempts to maintain the net asset value of its shares at a
constant $1.00 per share, although there can be no assurance that the Fund will
always be able to do so. The Fund 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 Fund invests.
For additional information concerning the risks of investing in the Fund,
see "Risks of Investing in the Fund."
MANAGEMENT OF THE FUND
As manager of the Fund, the Manager 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 the Fund by the
Sub-Adviser. The Manager also provides certain administrative services necessary
for the Fund's operations. Pursuant to a Management Agreement, the Trust
currently pays the Manager for its services a monthly fee at an annual rate
based on the average daily net assets of the Fund. See "Fund Expenses -- Fee
Table" and "Management of the Fund -- The Manager." The Sub-Adviser is an
indirect subsidiary of ING Group and is an affiliate of the Manager and ING
Funds Distributor, Inc. ("Distributor").
3
<PAGE> 211
Furman Selz Capital Management LLC ("FSCM") serves as sub-adviser to the
Fund. For its services, the Sub-Adviser receives a fee from the Manager based on
the respective Fund's average daily net assets. See "Management of the Fund --
The Sub-Adviser."
The Sub-Adviser has full investment discretion and makes all determinations
with respect to the investment of the Fund's assets and the purchase and sale of
portfolio securities consistent with the investment objectives, policies, and
restrictions for such Fund.
OTHER SERVICE PROVIDERS
The Distributor distributes the Fund's shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Fund
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. ("DST") to act as the Fund's
transfer agent and First Data Investor Services Group ("First Data") to act as
the Fund's fund accounting agent.
CLASSES OF SHARES
The Fund offers 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, (i) the length of time you
expect to hold your investment, (ii) the amount of any applicable sales charge
imposed at the time of redemption and Rule 12b-1 fees, as noted below, (iii)
whether you qualify for any reduction or waiver of any applicable sales charge,
(iv) the various exchange privileges among the different classes of shares and
(v) the fact that Class B shares automatically convert to Class A shares after
eight years. The Class A, Class B and Class C shares are offered in this
Prospectus.
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 Fund or for
their own company-sponsored sales programs. Additional compensation or
assistance may be provided to dealers and includes, but is not limited to,
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 Fund or its shareholders.
Class A Shares. Class A shares are offered at net asset value without an
initial 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 may have lower expenses and may pay higher dividends. See "Purchase of
Fund 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
will have a higher expense ratio and may 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 C Shares. Class C shares are sold without an initial sales charge, but
are subject to a CDSC of 1.00% if redeemed within one year of purchase. Class C
shares also 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 will have a higher expense ratio and may pay
lower dividends than Class A shares due to the higher Rule 12b-1 fee and any
other class specific expenses. While Class C shares do not convert to Class A
shares, they do not have to be held for as long a time (one year) as Class B
shares to avoid paying a CDSC. See "Purchase of Fund Shares."
All Classes. Each Class of shares is also subject to shareholder servicing
fees of up to 0.25% of average daily net assets attributable to such shares and
account servicing fees of up to 0.25% of average daily net assets attributable
to such shares. See
4
<PAGE> 212
"Management of the Fund -- Shareholder Servicing Plan" and "Management of the
Fund -- Fund Accountant, Transfer Agent and Account Services."
5
<PAGE> 213
FUND EXPENSES
The purpose of the following tables is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear, either
directly or indirectly. The 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 NATIONAL TAX-EXEMPT
MONEY MARKET FUND
----------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) NONE NONE NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) NONE NONE NONE
Maximum Contingent Deferred Sales Charge
(as a percentage of the net asset value at the time of
redemption)(1) NONE 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE DAILY NET ASSETS)
Management Fees (after waivers)* 0.10% 0.10% 0.10%
12b-1 Fees (after waivers)* 0.00% 0.75% 0.75%
Shareholder Servicing Fees 0.25% 0.25% 0.25%
Other Expenses (after waivers)** 0.35% 0.35% 0.35%
---- ---- ----
TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)*** 0.70% 1.45% 1.45%
==== ==== ====
</TABLE>
- -----------------------------
(1) If you purchase Class B 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 shares before the end of the sixth year after which you
purchased such shares. The CDSC for redemptions occurring in years
one through six, respectively, is 5%, 4%, 4%, 3%, 2% and 1% of the
net asset value of the shares at the time of redemption. The CDSC
is not imposed on the amount of any increase in your account value
over the amount invested. No CDSC is charged after the sixth year.
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 and C CDSC, see "Purchase of Fund
Shares" in this Prospectus.
* Management Fees consisting of investment advisory and
administrative fees (before waivers) would be 0.40% annually of
the average daily net assets for the Fund. Rule 12b-1 Fees (before
waivers) would be 0.50% annually of the average daily net assets
for the Fund's Class A shares. The fee waivers reflected in the
table are voluntary and may be modified or terminated at any time
without the Fund's consent.
** Under the Fund Services Agreement, the Fund may pay ING Fund
Services annually up to $40,000 for fund accounting services plus
out-of-pocket expenses, $17 per an account for transfer agency
services plus out-of-pocket expenses and up to 0.25% of the Fund's
average daily net assets annually for account servicing
activities. The Fund currently waives 0.15% of such fees. ING Fund
Services may engage third parties to perform some or all of these
services. The fee waivers are voluntary and may be modified or
terminated at any time without the Fund's consent. (See
"Management of the Fund -- Fund Accountant, Transfer Agent and
Account Services" in this Prospectus.)
*** Total Fund Operating Expenses (before waivers) for the Fund would
be 1.65% for Class A shares and 1.90% for Class B and C shares.
6
<PAGE> 214
EXPENSE EXAMPLES:
The following table is provided to assist you in understanding the various
costs and expenses that you would bear directly or indirectly as an investor in
the Fund.
<TABLE>
<CAPTION>
FULL REDEMPTION* NO REDEMPTION**
----------------- ------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
ING NATIONAL TAX-EXEMPT
MONEY MARKET FUND
Class A Shares $ 7 $22 $ 7 $22
Class B Shares $65 $86 $15 $46
Class C Shares $25 $46 $15 $46
</TABLE>
- -----------------------------
* Full Redemption. You would have paid the above 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 above 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.
THE EXAMPLES PROVIDED SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE
FUND'S PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5% ANNUAL RETURN, THE
FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN THAT IS
GREATER OR LESS THAN 5%.
7
<PAGE> 215
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The 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 the Fund's investments. The Fund's investment objective and certain
Investment Restrictions are fundamental policies which may not be changed
without a vote of a majority of the outstanding shares, as defined under the
1940 Act, 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.
There can be no assurance that the Fund will achieve its investment objective.
ING National Tax-Exempt Money Market Fund. The ING National Tax-Exempt Money
Market Fund seeks to provide investors with a high level of current income that
is exempt from Federal income tax as is consistent with the 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 at least 80% of the
value of its net assets in high quality, short-term municipal obligations which
are determined by the Sub-Adviser to present minimal credit risk. Municipal
obligations are debt obligations issued by states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multistate agencies or
authorities the interest from which is, in the opinion of bond counsel to the
issuer, exempt from Federal income tax ("Municipal Obligations"). The Fund will
not purchase private activity bonds, the interest from which may be a preference
item for purposes of the alternative minimum tax, or a factor in determining the
extent to which a shareholder's Social Security benefits are taxable. From time
to time, on a temporary basis other than for temporary defensive purposes, the
Fund may invest up to 20% of the Fund's net assets in money market instruments
that are subject to Federal income tax ("Taxable Investments"). For temporary
defensive purposes the Fund may invest up to 100% of its net assets in Taxable
Investments.
In selecting debt securities for the Fund, the Sub-Adviser seeks to select
those instruments that appear to have the potential 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. The Fund will invest
only in issuers or instruments that at the time of purchase (i) 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"); (ii) are
single rated and have received the highest short-term rating by a NRSRO; or
(iii) 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 20% of its total assets in instruments issued by
domestic banks.
The Fund may purchase securities on a "when-issued" basis and purchase or
sell them on a "forward commitment" basis. The Fund may also invest in
obligations that have floating and variable rates of interest. The Fund may
enter into repurchase agreements.
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.
As a matter of fundamental policy, notwithstanding any limitation otherwise,
the Fund has the ability 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 Fund's diversification tests are measured at the time of a securities'
purchase and are calculated in accordance with Rule 2a-7 of the 1940 Act which
may allow the Fund to exceed limits specified in this Prospectus for certain
securities subject to guarantees or demand features. The Fund will be deemed to
satisfy the maturity requirements described in this Prospectus to the extent the
Fund satisfies Rule 2a-7 maturity requirements.
8
<PAGE> 216
It is the intention of the Fund, unless otherwise indicated, that with
respect to its respective policies that are the result of the application of
law, the Fund will use to its maximum advantage the flexibility that may exist
as a result of rules or interpretations of the SEC of such laws currently in
existence or amended or promulgated in the future.
The Fund may borrow up to 33 1/3% of its net assets for temporary purposes.
The types of securities and investment practices used by the Fund are described
in greater detail at "Description of Securities and Investment Practices."
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Fund's executive officers, may be found in the SAI under the heading "Management
- -- Trustees and Officers."
THE MANAGER
ING Mutual Funds Management Co. LLC, 18 Campus Boulevard, Suite 200, Newtown
Square, PA 19073, serves as the manager of the Fund pursuant to a Management
Agreement with the Trust. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser and
has no prior experience as an investment adviser to an investment company.
Under the Management Agreement, the Manager 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 the Fund by
the Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Adviser on a periodic basis, and will consider its performance record
with respect to the investment objectives and policies of the Fund. The Manager
also provides certain administrative services necessary for the Fund's
operations including: (i) coordination of the services performed by the Fund's
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (iii) preparation of proxy statements and shareholder
reports for the Fund; (iv) general supervision relative to the compilation of
data required for the preparation of periodic reports distributed to the Fund's
officers and Board of Trustees; and (v) furnishing office space and certain
facilities required for conducting the business of the Fund.
Pursuant to the Management Agreement, the Manager is authorized to exercise
full investment discretion and make all determinations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund in the event that at any time no Sub-Adviser is engaged
to manage the assets of the 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 any party to the
Agreement 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 the Fund at an
annual rate of 0.40%.
THE SUB-ADVISER
The Manager has entered into a Sub-Advisory Agreement with the Sub-Adviser.
Under the Sub-Advisory Agreement, the Sub-Adviser has full investment discretion
and makes all determinations with respect to the investment of the 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 the 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
9
<PAGE> 217
is a wholly owned indirect subsidiary of ING Group and is an affiliate of the
Manager. The Manager may make changes to the sub-advisory arrangement provided
that it will not make any changes that would constitute an assignment (as
defined under the 1940 Act) of an advisory agreement unless such actions are
permissible under the 1940 Act, the rules thereunder or pursuant to relief
granted by the SEC.
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 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
June 30, 1999 were valued at approximately __%. FSCM is registered with the SEC
as an investment adviser.
The Fund is managed by a team of three investment professionals led by
_________. _______ has been employed by ___ as an investment professional since
_______ and has _____ years of investment experience.
Pursuant to the Sub-Advisory Agreement, the Manager (not the Trust) pays to
the Sub-Adviser a monthly fee based on the average daily net assets of the Fund
at an annual rate of 0.20%
The figures following 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 Money
Market 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 FSCM. The past
performance does not represent the ING National Tax-Exempt 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
accounts managed by FSCM for various periods ended ____________, 1999, as
adjusted for the projected annual expenses for the ING National Tax-Exempt Money
Market Fund's Class A, Class B and Class C shares during its initial fiscal
period as set forth in the Fee Table in this Prospectus. The amounts shown
assume redemption of Fund shares at the end of each period indicated. Included
for comparison purposes are performance figures of the ____________. The
performance shown is calculated in accordance with established Securities and
Exchange Commission rules and guidelines.
The composite is made up of accounts that are not subject to diversification
and other requirements that apply to mutual funds indicated 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 Money Market Fund may vary in some
respects. The information should not be considered a prediction of the future
performance of the Fund. The actual performance may be higher or lower than that
shown.
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING ____________, 1999
NATIONAL TAX-EXEMPT MONEY MARKET COMPOSITE ACCOUNT
<TABLE>
<CAPTION>
IBC
FIRST TIER
CLASS A CLASS B CLASS C AVERAGE
------- ------- ------- ----------
<S> <C> <C> <C> <C>
1 Year % % % %
Since Inception* % % % %
</TABLE>
* Inception date is August 1, 1996.
10
<PAGE> 218
THE DISTRIBUTOR
ING Funds Distributor, Inc. acts as distributor and is located at 18 Campus
Boulevard, Suite 200, Newtown Square, PA 19073. As distributor, the Distributor
sells shares of the Fund on behalf of the Trust.
FUND ACCOUNTANT, TRANSFER AGENT AND ACCOUNT SERVICES
ING Fund Services has entered into a Fund Services Agreement with the Fund
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting, account services and other services.
Under the Fund Services Agreement, the Fund may pay ING Fund Services annually
up to $40,000 for fund accounting services plus out-of-pocket expenses, $17 per
account for transfer agency services plus out-of-pocket expenses and up to 0.25%
of the Fund's average daily net assets annually for account servicing
activities. ING Fund Services may engage third parties to perform some or all of
these services. Account servicing may include, but is not limited to, (i)
maintaining shareholder accounts; (ii) preparing shareholders statements,
confirmations and shareholder lists; (iii) mailing shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements; (iv) tabulating proxies; (v)
disbursement of dividends and other distributions; (vi) withholding taxes on
U.S. resident and non-resident accounts where applicable; (vii) preparation and
filing of U.S. Treasury Department Forms 1099 and other appropriate forms by
applicable statutes, rules and regulations; and (viii) providing such other
similar services directly to shareholder accounts. ING Fund Services has
retained DST to act as the Fund's transfer agent and First Data to act as the
Fund's fund accounting agent. DST is located at 333 W. 11th Street, Kansas City,
MO 64105, and First Data is located at 4400 Computer Drive, Westborough, MA
01581-5120.
DISTRIBUTION EXPENSES
Pursuant to a Plan of Distribution adopted by the Fund under Rule 12b-1
under the 1940 Act, the Fund pays the Distributor an annual fee of up to 0.50%
of average daily net assets attributable to the Fund's Class A shares, 0.75% of
average daily net assets attributable to the Fund's Class B and C 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 Fund. For example, such distribution fee may be used by
the Distributor: (i) 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, (ii) to pay an affiliated party of the
Distributor for interest and other borrowing costs incurred by the Distributor;
and (iii) 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 Fund, the Board of Trustees may allow the Fund to pay the
12b-1 fees to the Distributor for distributing shares before the Plan was
terminated.
SHAREHOLDER SERVICING PLAN
The Fund has adopted a Shareholder Servicing Plan pursuant to which it may
pay a service fee up to an annual rate of 0.25% of the 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"). Under the Shareholder Servicing Plan, fees may be used to
compensate Service Organizations 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, but is not limited to, (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.
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<PAGE> 219
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by the Manager. The costs borne by the Fund include, but are not limited
to, legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian; transfer agent, fund accounting and account servicing fees
and expenses; expenses incurred in acquiring or disposing of the Fund's
portfolio securities; expenses of registering and qualifying the Fund's shares
for sale with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. Expenses of the Fund directly
attributable to the Fund are charged to the Fund; other expenses are allocated
proportionately among all of the funds of the Trust in relation to the net
assets of each fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Sub-Advisory Agreements, the Sub-Adviser places orders for
the purchase and sale of portfolio investments for the Fund's account with
brokers or dealers selected by it in its discretion. In effecting purchases and
sales of securities for the account of the Fund, the Sub-Adviser will seek the
best execution of the Fund's orders. Purchases and sales of portfolio debt
securities for the Fund 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 Fund. 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 the Fund to pay a broker-dealer which provides "brokerage and research
services" (as defined in the 1940 Act) to the Sub-Adviser an amount of disclosed
commissions for executing a securities transaction for the Fund 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 Fund is calculated at 4:00 p.m.
(Eastern time), Monday through Friday, on each day the New York Stock Exchange
and the Federal Reserve Bank of New York 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, ING Fund Services and the
Distributor, are accrued daily and taken into account for the purpose of
determining the net asset value. Expenses directly attributable to the 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. 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 Fund uses the amortized cost method to value its 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 value of the security. There can be no
assurances that at all times the Fund's 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 the Fund. See
the SAI for a more complete description of the amortized cost method and Fund
share valuation.
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PURCHASE OF FUND SHARES
HOW TO PURCHASE SHARES
Purchase orders will be effected only on Business Days. A purchase order for
shares must generally be received by 12:00 noon (Eastern time) for the Fund (a
"Cut-Off Time") to be executed on the same day at the price per share next
determined after receipt of such order, provided that the Fund's custodian
receives federal funds or other immediately available funds by 4:00 p.m.
(Eastern time) that day. Purchase orders received after the Fund's Cut-Off Time
will be considered received prior to the Fund's Cut-Off Time on the following
Business Day and processed accordingly.
The minimum initial investment in the Fund is $2,000. Any subsequent
investments must be at least $50. All initial investments should be accompanied
by a completed Account Application. An Account Application accompanies this
Prospectus. All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. When you purchase
shares of the Fund, please specify the class of shares that you wish to
purchase. If you do not choose a class of shares, then your investment will be
made in Class A shares. The Fund reserves the right to reject any purchase
order. All investments may be made using any of the following methods:
By Mail. A completed Account Application together with a check payable to
ING Funds Trust should be forwarded to ING Funds, P.O. Box 419416, Kansas City,
MO 64141-6416. Third party and foreign checks will not be accepted. Please
include the Fund name and your account number on all checks. The remittance slip
from a confirmation statement should be used for this purpose.
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
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 the Fund at 1-877-INFO-ING to obtain a
fund account number and reference number for the wire.
The following wire instructions should be used:
Investors Fiduciary Trust Company
ABA 101003621
A/C# 756-095-8
Credit to [insert the ING Fund Name]
For Account of [insert your ING Fund Account Number]
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 the Fund at 1-877-INFO-ING. Once the form is
completed, returned, and updated to your account, you can initiate a purchase by
calling the Fund at 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.
DESCRIPTION OF CLASS A SHARES
General Information. Class A shares are offered at net asset value without
an initial sales charge.
Rule 12b-1 Fees. Pursuant to a Plan of Distribution adopted by the Fund
under Rule 12b-1 under the 1940 Act, the Fund pays the Distributor an annual fee
of up to 0.50% of average daily net assets attributable to the Fund's Class A
shares. This fee may be lower than the amount paid in connection with the Class
B and Class C shares of the Fund.
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DESCRIPTION OF CLASS B SHARES --
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
General Information. The public offering price of Class B shares is the net
asset value of the 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 net asset value of the shares at the time of redemption. The Class B CDSC
will not be 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, ING Fund Services
and their agents may assign their right to receive any Class B CDSC, certain
distribution, shareholder servicing and account servicing fees to an entity
affiliated with the Manager 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: (i) shares acquired by reinvestment of
dividends and capital gains distributions; (ii) shares held for over six years;
and (iii) 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>
1st 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 business day of the month in which the purchase was made.
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: (i) redemption
of shares when the Fund exercises its right to liquidate accounts which are less
than the minimum account size; (ii) redemption to pay for optional insurance
coverage described in the Prospectus under "Redemption Plans -- Optional
Benefit"; (iii) the death or post-purchase disability, as defined in Section
72(m)(7) of the Code (if satisfactory evidence is provided to the Fund); (iv)
reinvested dividends and capital gains and (v) 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.
Conversion to Class A Shares. Eight years after you purchase Class B shares
of the Fund, those shares will automatically convert to Class A shares of the
Fund. This conversion feature relieves Class B 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 shares 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 non-Dividend Shares to
your total Class B non-Dividend Shares. Under Section 1036 of the Code, the
automatic conversion of Class B shares will not result in a gain or loss to the
Fund or to affected shareholders.
Rule 12b-1 Fees. Pursuant to a Plan of Distribution adopted by the Fund
under Rule 12b-1 under the 1940 Act, the Fund pays the Distributor an annual fee
of up to 0.75% of average daily net assets attributable to the Fund's Class B
shares. This fee is higher than the amount paid in connection with the Class A
shares, but the same as the amount paid in connection with the Class C shares of
the Fund.
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DESCRIPTION OF CLASS C SHARES --
LEVEL SALES CHARGE ALTERNATIVE
General Information. 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 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 CDSC (1.00%) and do not have to be held for as long a time (one year) as
Class B shares to avoid paying a CDSC. The Class C CDSC will be assessed on the
net asset value of the shares at the time of redemption. The Class C CDSC will
not be imposed on the amount of any increase in your account value over the
initial amount invested. To determine whether the Class C CDSC applies to a
redemption, the Fund redeems shares in the following order: (i) shares acquired
by reinvestment of dividends and capital gains distributions; (ii) shares held
for over one year; and (iii) shares in the order they were purchased (such that
shares held the longest are redeemed first). 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 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.
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: (i) redemption
of shares when the Fund exercises its right to liquidate accounts which are less
than the minimum account size; (ii) redemption to pay for optional insurance
coverage described in the Prospectus under "Redemption Plans -- Optional
Benefit"; (iii) the death or post-purchase disability, as defined in Section
72(m)(7) of the Code (if satisfactory evidence is provided to the Fund); (iv)
reinvested dividends and capital gains and (v) 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. Pursuant to a Plan of Distribution adopted by the Fund
under Rule 12b-1 under the 1940 Act, the Fund pays the Distributor an annual fee
of up to 0.75% of average daily net assets attributable to the Fund's Class C
shares. This fee is higher than the amount paid in connection with the Class A
shares, but the same as the amount paid in connection with the Class B shares of
the Fund.
MINIMUM ACCOUNT BALANCE
If (i) an account opened in the 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 (ii) 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 the Fund determines that a shareholder has provided incorrect
information in opening an account with the 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.
PURCHASE PLANS
The Trust offers various purchase plans that make investing in additional
shares of the Fund more convenient than by mail or wire. The following are the
plans offered and the features of the plans. Please contact the Fund at
1-877-INFO-ING for the appropriate authorization form.
ING Auto-Asset Accumulation Plan. This plan permits you to purchase Fund
shares (minimum of $50 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 from the
Fund 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416, and
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<PAGE> 223
the notification will be effective three business days following receipt. The
Fund may 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 $50 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 from the Fund 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 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 Funds, P.O. Box 419416, Kansas
City, MO 64141-6416. You may obtain the necessary authorization form from the
Fund 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. Minimum investment amounts will be determined on a
case-by-case basis. The Fund may modify or terminate this program at any time or
charge a service fee. No such fee currently is contemplated.
REDEMPTION OF FUND SHARES
HOW TO REDEEM SHARES
Redemption orders will be effected only on Business Days. A redemption order
for shares of the Fund must generally be received by such Fund's Cut-Off Time to
be executed on the same day at the price per share next determined after receipt
of such order. Redemption orders received after the Fund's Cut-Off Time will be
considered received prior to the Fund's Cut-Off Time on the following Business
Day and processed accordingly. Shares will be redeemed without charge (except
any applicable CDSC). The CDSC applicable to the Class B and C shares is
described under "Purchase of Fund Shares." In the instance where a shareholder
owns more than one class of shares and the shares being redeemed are not subject
to the CDSC, 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.
Where purchases are made by check in any Fund, redemption proceeds will be
made available immediately upon clearance of the purchase check, 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, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund 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 Fund 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.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Fund has no present intention to do
so, the Fund reserves 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
Fund may modify or terminate its services and provisions at any time. If the
Fund terminates any particular service, it will do so only after giving written
notice to shareholders. Redemption by mail will always be available to
shareholders. Under certain circumstances described below, a signature guarantee
may be required. You may redeem your shares using any of the following methods:
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<PAGE> 224
By Mail. You may redeem your shares by sending a letter directly to ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 below. Corporations, partnerships, trusts
or other legal entities will be required to submit additional documentation.
By Telephone. You may redeem your shares by calling the Fund 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 Fund. Telephone redemptions are available unless the shareholder
specifically declines this option on the Account Application and may only be
sent to the address of record or preassigned wire instructions. The Fund employs
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Fund fails to employ such reasonable procedures, it 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 Fund requires 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 15 days
following a telephone address change.
By Wire. You may instruct the Fund 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. Your bank may charge you a fee for receiving a wire payment on your
behalf.
Through an Authorized Broker or Investment Adviser. You may redeem your
shares by contacting your authorized broker or investment adviser 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.
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 the Fund 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.
Certain of the above-mentioned redemption services may not be available for
clients of authorized brokers or investment advisers. These clients should
contact their representative.
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. Signature
guarantees are required for: (i) redemptions by mail in excess of $50,000; (ii)
redemptions by mail if the proceeds are to be paid to someone other than the
name(s) in which the account is registered; (iii) written redemptions requesting
proceeds to be sent by wire to other than the bank of record for the account;
(iv) redemptions requesting proceeds to be sent to a new address or an address
that has been changed within the past 15 days; (v) requests to transfer the
registration of shares to another owner; (vi) telephone exchange and telephone
redemption authorization forms; (vii) changes in previously designated wiring
instructions; and (viii) written redemptions or exchanges of shares previously
reported as lost/abandoned property, 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: (i) a signature guarantee with a medallion stamp of the STAMP
Program, or (ii) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program,
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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 call the Fund at
1-877-INFO-ING.
REDEMPTION IN KIND
All redemptions of shares of the Fund shall be made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each shareholder of the Fund during any 90-day period of up to the lesser of
$250,000 or 1% of the net assets of the 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 Fund 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 Fund 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 the Fund to the
detriment of the existing shareholders. In this event, the securities would be
valued in the same manner in which the securities of the 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.
REDEMPTION PLANS
The Trust offers various redemption plans that make redeeming shares of the
Fund more convenient than by mail or wire. The following are the plans offered
and the features of the plans. Please contact the Fund at 1-877-INFO-ING for the
appropriate authorization form.
Systematic Withdrawal Plan. An owner of $10,000 or more of the 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.
Optional Benefit. ING Group, an affiliate of ING Group, or an unrelated
third party (the "Insurer") may make certain life insurance coverage available
to certain persons on whose behalf shares of the Fund 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 CDSCs, but will have the same tax
consequences as any other Fund redemptions.
This 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 the Insurer 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 the Insurer 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
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themselves familiar with the impact on the life coverage of purchasing
additional shares, reinvestment of dividends and capital gains distributions and
redemptions. Please call 1-877-INFO-ING for more information and application
forms for this program.
EXCHANGE OF FUND SHARES
General Information. The Fund offers several convenient ways to exchange
shares in one Fund for shares in the same class of another fund in the Trust.
All exchanges will be made based on the net asset value next determined
following receipt of the request by the Fund in good order, plus with regard to
Class A shares, any applicable sales charge. If a shareholder exchanges shares
subject to a CDSC (being either Class B or Class C shares) for the same shares
of a different ING Fund, the transaction will not be subject to a CDSC. However,
when shares acquired through the exchange are redeemed out of the ING Family of
Funds, then the shareholder will be treated as if no exchange took place for the
purpose of determining the CDSC period and applying the CDSC.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. 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 calling the Fund 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.
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. You may exchange your shares using any
of the following methods:
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 Fund 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 Account 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. The Auto-Exchange Privilege enables you to invest
regularly (on a monthly, quarterly, semi-annual 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 ($50 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. 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 Funds, P.O. Box 419416, Kansas City, MO 64141-6416. 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 the Fund at
1-877-INFO-ING.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be reinvested in the respective shares of
the Fund at net asset value, unless you elect to receive such dividends and
distributions in cash five full business days prior to the record date.
Dividends declared in, and attributable to, the preceding period will be paid
within five business days after the end of the period. Investors who redeem all
or a portion of Fund
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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.
If you elect to receive distributions in cash, and if your checks are
returned and marked as "undeliverable", or remain uncashed for six months, then
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.
You also may elect to automatically invest dividend and capital gains
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.
You also may elect to transfer electronically dividend and/or capital gains
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.
The above described elections may be made either on the Account Application
or by calling the Fund at 1-877-INFO-ING.
TAX MATTERS
The 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, the 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.
The 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
Fund will declare distributions of such income daily and pay those dividends
monthly. The 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.
As long as the Fund qualifies as regulated investment companies for federal
income tax purposes, the Fund, in computing its income subject to federal income
tax, is entitled to deduct all dividends other than "preferential" dividends
paid by it to shareholders during the taxable year. "Preferential" dividends are
dividends other than dividends which have been distributed to shareholders pro
rata without preference to any share of the Fund as compared with other shares
of the same class and without preference to one class of shares as compared with
another, except in accordance with the former's dividend rights as a class. The
Fund believes that a multiple-class structure having all of the features of the
multiple-class structure of the Fund would not result in dividends being treated
as "preferential." The Fund's belief is not binding on the Internal Revenue
Service (the "IRS"), no ruling has been obtained by the Fund from the IRS on the
matter and there can be no guarantee that the IRS will agree with the Fund on
this matter. The Fund's belief is based on the application of current federal
income tax law and relevant authorities, and subsequent changes in federal tax
law or judicial or administrative decisions or pronouncements may supercede or
affect the Fund's conclusions. The Fund does not believe that a multiple-class
structure having all of the features of the multiple-class structure of the Fund
has been considered by the IRS in other rulings. If dividends declared and paid
by the Fund on any class of shares were to be treated as "preferential,"
dividends paid by the Fund to shareholders on all classes, of shares during the
taxable year would become non-deductible. In this event, the Fund would not be
treated as a regulated investment company and the Fund would be taxed on its net
income, without any deductions for dividends paid to its shareholders. The
resulting federal and state income tax liability, and any related interest and
penalties, would be payable from and to the extent of such Fund's then available
assets and ultimately would be borne by all current shareholders. The treatment
of dividends declared and paid during the taxable year on any class of shares as
preferential, and the resulting failure of the Fund to be treated as a regulated
investment company, could have additional personal income tax consequences for
shareholders of the Fund, including the taxation of distributions as ordinary
income that otherwise would have been classified as net capital gains.
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
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the Fund as capital gain distributions will be taxable as long-term capital
gains, regardless of how long a shareholder has held his Fund shares.
Distributions are taxable in the same manner whether received in additional
shares or in cash.
Provided that the 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 could be treated as an item of "tax preference" for purposes of the
alternative minimum tax. 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.
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.
Earnings of the Fund 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, the 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 the Fund during October, November, or December of that year
to shareholders of record in such a month and paid by the 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 redemption is a taxable transaction on which gain or loss may be
recognized. Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the 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 the 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 Fund 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 the Fund or shareholder has been
notified by the IRS 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 Fund as to the Federal tax
status of distributions made by the Fund 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. SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISERS AS TO THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF OWNERSHIP OF SHARES OF THE FUND IN THEIR PARTICULAR
CIRCUMSTANCES.
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DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
The following is a description of investment practices of the Fund and the
securities in which they may invest:
Municipal Obligations. Municipal Obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal Obligations are classified as general obligation bonds,
revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment or principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or in some cases from the proceeds of a special
excise or other specific revenue source, but not from the general taxing power.
Tax exempt industrial development bonds, in most cases, are revenue bonds that
generally do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are solid in anticipation of a bond sales,
collection of taxes or receipt of other revenues.
Risks of Municipal Obligations. The Fund may invest more than 25% of the
value of its total assets in Municipal Obligations which are related in such a
way that an economic, business or political development or change affecting one
such security also would affect the other securities (i.e., securities the
interest upon which is paid from revenues of similar types of projects). As a
result, the Fund may be subject to greater risk as compared to a fund that does
not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult.
Certain provisions of the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce available yield.
Tax Exempt Participation Interests. The Fund may purchase from financial
institutions participation interests in Municipal Obligations. A participation
interest gives the Fund an undivided interest in the Municipal Obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the Municipal Obligation. If the participation interest is unrated or
has been given a rating below that which otherwise is permissible for purchase
by the Fund, it will be backed by an irrevocable letter of credit or guarantee
of a bank that the Fund's Board has determined meets prescribed quality
standards for banks or the payment obligation otherwise will be collateralized
by U.S. Government securities. For certain participation interests, the Fund
will have the right to demand payment, on not more than seven days' notice, for
all or any part of the Fund's participation interest in the Municipal
Obligation, plus accrued interest.
Tender Option Bonds. The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. In certain
instances and for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations.
U.S. Treasury Obligations. The 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
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to 10 years, and bonds, which have original maturities of 10 to 30 years, are
direct obligations of the United States Government. In accordance with Rule
2a-7, the Fund's investments in these securities are limited to those having a
remaining maturity not exceeding 13 months (397 days).
U.S. Government Securities. 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 in the obligation must look to the agency issuing or
guaranteeing the obligation for ultimate repayment. In accordance with Rule
2a-7, the Fund's investments in these securities are limited to those having a
remaining maturity not exceeding 13 months (397 days).
Commercial Paper. 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 (i) given
the highest short-term rating by at least two NRSROs, such as "A-1" by S&P and
"Prime-1" by Moody's; (ii) single rated and given the highest short-term rating
by a NRSRO; or (iii) unrated, but determined to be of comparable quality by the
Sub-Adviser pursuant to guidelines approved by the Fund's Board of Trustees.
Corporate Debt Securities. The Fund may purchase corporate debt securities,
subject to the rating and quality requirements specified in Rule 2a-7. The Fund
may invest in both United States dollar denominated rated commercial paper and
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, 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. In accordance with Rule 2a-7, the Fund's
investments in these securities are limited to those having a remaining maturity
not exceeding 13 months (397 days).
Domestic and Foreign Bank Obligations. 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 the opinion of the Sub-Adviser, 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 domestic banks.
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
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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.
STRIPS and Zero Coupon Securities. The 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
these securities are limited to those with maturity components not exceeding 13
months (397 days).
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. Variable rate demand obligations generally
have a maturity of longer than 397 days, 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. To the extent this period is exceeded, the
obligation in question would be considered illiquid.
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. 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.
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 Sub-Adviser, 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. 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.
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The Fund may only purchase mortgage-backed securities to the extent they
meet the maturity and quality requirements of Rule 2a-7.
Risk Of Mortgage-Backed Securities. 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. The
Fund may only purchase mortgage-backed securities to the extent they meet the
maturity and quality requirements of Rule 2a-7.
Asset-Backed Securities. The Fund is permitted to invest in asset-backed
securities, subject to the rating and quality requirements of Rule 2a-7. 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 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. 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, 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. The Fund may also make limited investments
in guaranteed investment contracts ("GIC") issued by U.S. insurance companies.
The Fund will purchase a GIC only when the Sub-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 NRSROs.
"When-Issued" and "Forward Commitment" Transactions. The 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 the Fund with payment and
delivery taking place in the future in order to secure what is considered
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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 the Fund to
purchase or sell securities at a specified future date. When the 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 the Fund until it receives payment or
delivery from the other party to the transaction. A separate account containing
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 contribute to volatility of the Fund's net asset value. For further
information, see the SAI.
Loans of Portfolio Securities. To increase current income, the 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 marked-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 Fund and are subject to the same risks
as repurchase agreements. For further information, see the SAI.
Repurchase Agreements. The Fund 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 the 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, the 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 Fund may not invest more than 10% of its net assets in
repurchase agreements maturing in more than seven business days. For more
information about repurchase agreements, see "Investment Policies" in the SAI.
Borrowing. The Fund may borrow up to 33 1/3% 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.
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.
RISKS OF INVESTING IN THE FUND
General. The Fund attempts to maintain a constant net asset value of $1.00
per share, although there can be no assurance that it will always be able to do
so. The Fund 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
Fund invest.
There is, of course, no assurance that the 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 a
diversified Fund, the 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
Fund 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 Fund has been
informed that the Manager, and the Fund's 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
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<PAGE> 234
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 Fund has no reason to
believe that (i) the Year 2000 plans of the Manager and the Fund's other service
providers will not be completed by December, 1999, and (ii) the costs currently
associated with the implementation of their plans will have material adverse
impact on the business, operations or financial condition of the Fund or its
service providers.
In addition, the Year 2000 problem may adversely affect the companies in
which the Fund 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 Fund's service providers are unknown to the Fund at
this time, no assurance can be made that such costs or consequences will not
have a material adverse impact on the Fund or its service providers.
The Fund 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.
27
<PAGE> 235
OTHER INFORMATION
CAPITALIZATION
ING Funds Trust was organized as a Delaware business trust on July 30, 1998
and currently consists of 23 separately managed portfolios, each of which is
divided into Class A, B, C, X and I shares, except the ING National Tax-Exempt
Bond Fund and the ING National Tax-Exempt Money Market Fund which are divided
into Class A, B and C shares only. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Fund consists
solely of an unlimited number of shares of beneficial interest with a par value
of $0.001 each. When issued, shares of the Fund 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 Fund is 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 Fund 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 Fund 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 the Fund means the vote of the lesser of:
(i) 67% of the shares of the Fund present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy; or (ii)
more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The 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 Fund are mandated by the
SEC.
Quotations of "yield" for the Fund will be based on the investment income
per share (including dividends and interest) during a particular seven day
period or thirty day period, less expenses accrued per share 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, the yield is then annualized. When a yield assumes that income earned is
reinvested, it is called an effective yield. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Quotations of yield reflect only the Fund's performance during the
particular period on which the calculations are based. Yield for the Fund will
vary based on changes in market conditions, the level of interest rates and the
level of the 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 the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of since inception, 1, 3, 5 and 10 years (up
to the life of the 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 the Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, IBC Financial Data, Inc., 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 Fund 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 the Fund, see the SAI.
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<PAGE> 236
ACCOUNT SERVICES
All transactions in shares of the Fund 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 Fund has been advised that the statement may be transmitted to the customer
at the discretion of the Service Organization.
DST acts as the Fund's transfer agent pursuant to a Services Agreement with
ING Fund Services. ING Fund Services (not the Fund) compensates DST for
providing personnel and facilities to perform dividend disbursing and transfer
agency-related services for the Fund.
CUSTODIAN
Investors Fiduciary Trust Co. acts as the Fund's custodian. Pursuant to the
Custodian Agreement, the custodian is responsible for holding the Fund's cash
and portfolio securities. The custodian may enter into sub-custodian agreements
with certain qualified banks.
CODE OF ETHICS
The Code of Ethics of the Manager and the Fund prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of the Fund's planned portfolio transactions. Both
organizations maintain careful monitoring of compliance with the Code of Ethics.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the Trust and
from time to time provides advice to the Manager.
SHAREHOLDER INQUIRIES
All written shareholder inquiries should be directed to the Fund at ING
Funds, P.O. Box 419416, Kansas City, MO 64141-6416. Alternatively, you may call
the Fund at 1-877-INFO-ING.
29
<PAGE> 237
STATEMENT OF ADDITIONAL INFORMATION
ING Funds Trust
P.O. Box 1239
Malvern, PA 19355-9836
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
23 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 & 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 National Tax-Exempt
ING Balanced Fund ING National Tax-Exempt Bond Fund Money Market 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
ING Internet Fund
ING Quality of Life Fund
</TABLE>
<PAGE> 238
The SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by a current prospectus for shares of the Funds. 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.
__________, 1999
<PAGE> 239
iii
TABLE OF CONTENTS
Page
STATEMENT OF ADDITIONAL INFORMATION......................................... 1
INVESTMENT POLICIES......................................................... 1
U.S. TREASURY OBLIGATIONS.......................................... 1
U.S. GOVERNMENT SECURITIES......................................... 1
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES........................ 1
COMMERCIAL PAPER................................................... 2
CORPORATE DEBT SECURITIES.......................................... 2
MORTGAGE-RELATED SECURITIES........................................ 2
GNMA CERTIFICATES.................................................. 3
FNMA CERTIFICATES.................................................. 4
FHLMC SECURITIES................................................... 4
FHLMC CERTIFICATES................................................. 5
NON-AGENCY MORTGAGE-BACKED SECURITIES.............................. 5
ADJUSTABLE RATE MORTGAGE SECURITIES................................ 6
COLLATERALIZED MORTGAGE OBLIGATIONS................................ 6
REAL ESTATE SECURITIES............................................. 7
ASSET-BACKED SECURITIES............................................ 8
FOREIGN SECURITIES................................................. 9
CONVERTIBLE SECURITIES............................................. 9
VARIABLE RATE DEMAND OBLIGATIONS AND FLOATING RATE INSTRUMENTS..... 10
GUARANTEED INVESTMENT CONTRACTS.................................... 10
PRIVATE FUNDS...................................................... 11
OPTIONS ON SECURITIES.............................................. 11
OVER-THE-COUNTER OPTIONS........................................... 12
OPTIONS ON 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.................................... 16
SHORT SALES........................................................ 16
LOANS OF PORTFOLIO SECURITIES...................................... 17
REPURCHASE AGREEMENTS.............................................. 17
BORROWING.......................................................... 18
REVERSE REPURCHASE AGREEMENTS...................................... 18
<PAGE> 240
iv
LOWER-RATED SECURITIES............................................. 18
ILLIQUID SECURITIES................................................ 19
INVESTMENT RESTRICTIONS............................................ 21
MANAGEMENT......................................................... 22
Trustees and Officers..................................... 22
Trustees Biographies...................................... 23
Officers Biographies...................................... 23
Investment Manager........................................ 24
Sub-Advisers.............................................. 25
Distribution of Fund Shares............................... 26
Transfer Agent, Fund Accountant and Account Services...... 26
Rule 12b-1 Distribution Plan.............................. 26
Shareholder Servicing Plan................................ 27
DETERMINATION OF NET ASSET VALUE................................... 28
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................... 29
PORTFOLIO TRANSACTIONS............................................. 30
Portfolio Turnover........................................ 31
TAXATION........................................................... 32
OTHER INFORMATION.................................................. 38
Capitalization............................................ 38
Voting Rights............................................. 39
Custodian................................................. 39
Yield and Performance Information......................... 39
Independent Auditors...................................... 41
Registration Statement.................................... 41
APPENDIX.................................................................... 43
<PAGE> 241
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 considers 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> 242
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 purchased by the Funds include
conventional thirty-year fixed-rate mortgages, graduated
<PAGE> 243
3
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 on one- to-four-family housing
units.
<PAGE> 244
4
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.
<PAGE> 245
5
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-
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backed securities. Other than lacking the guarantee by the full faith and credit
of 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' investment
objective, policies and quality standards, the Funds may invest in these
mortgage-backed securities issued by non-agency private issuers.
ADJUSTABLE RATE MORTGAGE SECURITIES (All Funds except ING International
Bond Fund, ING National Tax Exempt Bond Fund and 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 adopted by the Securities and Exchange Commission ("SEC"),
and the Funds may invest in the securities of such issuers without the
limitations imposed by the Investment Company Act of
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1940, as amended (the "1940 Act"), on investments by the Funds in other
investment companies. In addition, in reliance on an earlier SEC 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 SEC'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 Fund, ING Emerging
Markets Equity Fund, ING Balanced Fund, ING Intermediate Bond Fund, ING High
Yield Bond Fund, ING International Bond Fund, ING Mortgage Income Fund, ING
National Tax-Exempt Bond Fund, and ING Quality of Life Fund). 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
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expected to rise. Conversely, when interest rates rise, the value of a REIT's
investment in 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, ING Growth and Income Fund, ING Balanced Fund, and ING U.S. Treasury Money
Market Fund). 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
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addition of credit enhancements such as a letter of credit from a bank, excess
collateral or a third-party guarantee.
FOREIGN SECURITIES (All Funds except the ING Money Market Fund, ING
U.S. Treasury Money Market Fund, and ING National Tax-Exempt Money Market Fund).
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 the 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
Fund, ING U.S. Treasury Money Market Fund, ING Money Market Fund and ING
National Tax-Exempt Money Market Fund). 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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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 Fund and ING National Tax-Exempt Bond Fund 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 (All Funds except ING U.S. Treasury
Money Market Fund). The Funds may invest in Guaranteed Investment Contracts
("GICs") issued by insurance companies. Pursuant to such contracts, the Fund
makes cash
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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. In
addition, because the Funds 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 invested in by a Fund
which are not readily marketable, will not exceed 15% (10% in the case of the
Money Market Fund) of a 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.
PRIVATE FUNDS (ING Large Cap Growth Fund, ING Growth & 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, ING
Internet Fund and ING Quality of Life Fund). 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
Fund, ING Money Market Fund, ING National Tax-Exempt Money Market Fund 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
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
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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 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 Fund, ING Money Market Fund, ING National Tax-Exempt Money Market Fund
and ING National Tax-Exempt Bond Fund). 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
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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 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.
OPTIONS ON INDICES (All Funds except ING U.S. Treasury Money Market
Fund, ING Money Market Fund, ING National Tax-Exempt Money Market Fund and ING
National Tax-Exempt Bond Fund). 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.
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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.
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 Fund, ING Money Market Fund, ING National Tax-Exempt Money Market Fund
and ING National Tax-Exempt Bond Fund). 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.
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DOLLAR ROLL TRANSACTIONS (ING Growth & Income Fund, ING Balanced Fund,
ING Emerging Markets Equity Fund, ING Intermediate Bond Fund, ING High Yield
Bond Fund, ING International Bond Fund and ING Mortgage Income Fund). 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 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 Fund, ING Money Market Fund, ING National Tax-Exempt Money
Market Fund 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 Fund, ING Intermediate Bond Fund, ING International
Equity Fund, ING Tax Efficient Equity Fund, ING Emerging Markets Equity Fund,
ING Global Brand Names Fund, ING Quality of Life Fund and ING European Equity
Fund 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 Sub-Adviser to be of comparable
quality to the other obligations in which the Fund may invest. Such securities
also include debt obligations of supranational
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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 Fund, ING U.S. Treasury Money Market Fund, ING National
Tax-Exempt Money Market Fund and ING Money Market Fund). 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 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
Fund, ING High Yield Bond Fund and ING International Equity Fund). 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
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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 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 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
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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.
BORROWING (All Funds). The Fund may borrow from banks up to 33 1/3% of
the current value of its net assets to purchase securities and for temporary or
emergency purposes and those borrowings may be secured by the pledge of not more
than 33 1/3% of the current value of that Fund's net assets.
REVERSE REPURCHASE AGREEMENTS (All Funds except ING U.S. Treasury Money
Market Fund, ING National Tax-Exempt Money Market Fund and ING Money Market
Fund). 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 Fund and ING High
Yield Bond Fund). 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.
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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 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 impede 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.
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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.
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 SEC 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.
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Rule 144A securities and Section 4(2) commercial paper 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
and Section 4(2) commercial paper could have the effect of increasing Fund
illiquidity.
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 7 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 reverse repurchase agreements, 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;
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(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 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, ING Internet Fund and the ING Global 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 Global Real Estate Fund, ING Internet Fund, ING Quality of Life
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.
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Trustees Biographies
John J. Pileggi,* Trustee, Chairman of the Board and President - Age
40. 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).
Joseph N. Hankin, Trustee - Age 59. President, Westchester Community
College since 1971; Adjunct Professor of Columbia University Teachers College
since 1976.
Jack D. Rehm, Trustee - Age 66. 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 63 Vice President, The Channel
Corporation (1996-present); Vice President of Performance Advantage, Inc.
(1992-1996); Vice President, Operations and Administration of Jim Henson
Productions (1979-1997).
Officers Biographies
John J. Pileggi, President and Chief Executive Officer - Age 40. See
above.
Louis S. Citron, Vice President - Age 34. 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).
Ralph G. Norton, III, Vice President - Age 39. Vice President and Chief
Investment Officer, ING Mutual Funds Management Co. LLC (1999-present); Managing
Editor, Standard & Poor's (1996-1999); Vice President, IBC Financial Data
(1992-1996).
Lisa M. Buono, Vice President - Age 34. Vice President - Financial
Operations, ING Mutual Funds Management Co. LLC (1999-present); Vice President,
Provident Advisers, Inc. (199_-1999).
Donald Brostrom, Treasurer - Age 40. Executive Vice President and Chief
Financial Officer, ING Mutual Funds Management Co. LLC (1998-present); Managing
Director, Furman Selz LLC (1984-1998).
Rachelle I. Rehner, Secretary - Age 37. Fund Legal Manager, ING Mutual
Funds Management Co. LLC (1998-present); Senior Legal Assistant, Kramer, Levin,
Naftalis & Frankel (1995-1998); Compliance Administrator, BISYS Funds Services
(1994-1995); Senior Legal Assistant, Battle Fowler (1989-1994).
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Charles Eng, Assistant Treasurer - Age 35, 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 (1992-1997).
Amy Lau, Assistant Treasurer - Age 33. 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).
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, 18 Campus Blvd., Suite 200,
Newtown Square, Pennsylvania 19073, serves as the Manager of the Funds. IMFC is
a wholly owned subsidiary of ING Groep 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. 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 any
party to the agreement, and will terminate automatically if assigned as that
term is described in the 1940 Act.
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
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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.
An affiliate of the Manager will make a significant investment in the
Funds. The affiliate may redeem its investment in the Funds at any time. Such
redemption may have an adverse effect on the Funds. In addition, certain
provisions of the 1940 Act may prohibit the Funds from investing in securities
issued by affiliates of the ING Group. Such restrictions may adversely effect
the Funds.
Sub-Advisers
ING Investment Management, LLC ("IIM") serves as Sub-Adviser to each of
the Money Market Funds, other than the ING National Tax-Exempt Money Market
Fund, and the ING Intermediate Bond Fund, ING High Yield Bond Fund, ING Mortgage
Income Fund, and the ING Growth & Income Fund. Located in Atlanta, Georgia, IIM
is a Delaware limited liability company which is engaged in the business of
providing investment advice to affiliated insurance companies.
Baring International Investment Limited ("BIIL") serves as
co-Sub-Adviser to the ING International Bond Fund, ING International Equity Fund
and ING Emerging Markets Equity Fund. Located in London, BIIL is a wholly-owned
subsidiary of Baring Asset Management Holdings Limited ("BAMHL"), the parent of
the worldwide group of investment management companies that operate under the
collective name, Baring Asset Management (the "BAM Group").
Furman Selz Capital Management LLC ("FSCM") serves as Sub-Adviser to
the ING National Tax-Exempt Bond Fund, ING National Tax-Exempt Money Market
Fund, ING Mid Cap Growth Fund, ING Balanced Fund, and the ING Focus Fund.
Located at 230 Park Avenue, New York, New York 10169, FSCM is a Delaware limited
liability company which is engaged in the business of providing investment
advice to institutional and individual clients.
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 Fund, ING International Equity Fund and ING
Emerging Markets Equity Fund. Located at 125 High Street, Boston, Massachusetts
02110, BAM is a wholly-owned subsidiary of BAMHL.
Baring International Investment (Far East) Limited ("BIFL") acts as
Co-Sub-Adviser to the ING International Bond Fund, ING International Equity Fund
and ING Emerging Markets Equity Fund. BIFL is located at 19/F Edinburgh Tower,
The Landmark, 15 Queens Road, Central, Hong Kong. BIFL is a wholly-owned
subsidiary of BAMHL.
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ING Investment Management Advisors, B.V. ("IIMA"), serves as
Sub-Adviser to the ING Global Brand Names Fund, ING European Equity Fund, ING
Global Information Technology Fund, ING Internet Fund, ING Quality of Life Fund
and ING Global Real Estate Fund. Located at Schenkkade 65, 2595 AS, The Hague,
The Netherlands, IIMA operates under the collective management of ING Investment
Management.
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.
Distribution of Fund Shares
ING Funds Distributor, Inc., 18 Campus Blvd., Suite 200, Newtown
Square, Pennsylvania 19073, serves as Distributor and Principal Underwriter of
the Funds. As distributor, IFD sells shares of each Fund on behalf of the Trust.
Transfer Agent, Fund Accountant and Account Services
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, account services and other
services. ING Fund Services has retained DST Systems, Inc. ("DST") to act as the
Funds' transfer agent and First Data Investors Services Group ("First Data") to
act as the Funds' fund accounting agent. DST is located at 333 W. 11th Street,
Kansas City, Missouri 64105. For their services as transfer agent and fund
accounting agent, DST and First Data, respectively, receive 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
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 C and X shares.
The higher distribution fee attributable to Class B, C, and X 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
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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 of the Class A, Class B, Class C and Class X shares 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.
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 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.
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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 Trustees to
be of minimal credit risks and which (1) have received the highest short-term
rating by at least two 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.
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 one 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
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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-Money 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 Funds 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 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 New York Stock Exchange is closed for other than customary weekend or
holiday closings, (b) when trading on New York Stock 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 SEC, by order, so permits; provided that applicable rules
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and regulations of the SEC shall govern as to whether the conditions prescribed
in (b) or (c) exist. The New York Stock 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, Martin
Luther King, Jr. 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
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 Distributor are prohibited from dealing with the Funds as a
principal in the purchase and
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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 Distributor 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.
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.
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.
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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 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
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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 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.
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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 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.
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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.
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
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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
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,
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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 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 advisers with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their tax
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 and ING National Tax-Exempt Money
Market Fund. These Funds intend to manage their respective portfolios so that
each will be eligible to pay "exempt-interest dividends" to shareholders. The
Funds will so qualify if, at the close of each quarter of its taxable year, at
least 50% of the value of their respective 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 a 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 Funds 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 Funds, 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 a 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.
<PAGE> 278
38
OTHER INFORMATION
Capitalization
The Trust is a Delaware business trust established under a Trust
Instrument dated July 30, 1998 and currently consists of twenty-three separately
managed portfolios, all of which are discussed in this SAI. Each portfolio,
except as noted, is comprised of five different classes of shares -- Class A
shares, Class B shares, Class C shares, Class X shares and Class I shares. The
ING National Tax-Exempt Bond Fund and the ING National Tax-Exempt Money Market
Fund do not offer Class X and Class I 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.
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 Trust Instrument
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.
<PAGE> 279
39
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
Investors Fiduciary Trust Company acts as custodian of the Trust's
assets. 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.
<PAGE> 280
40
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.
Quotations of the tax-equivalent yield for the ING National 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.
<PAGE> 281
41
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.
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 Auditors
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.
<PAGE> 282
42
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.
<PAGE> 283
43
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally know as
high grade bonds; A -- possess many favorable investment attributes and are to
be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. This group is the
lowest which qualifies for investment grade. Other Moody's bond descriptions
include: Ba -- judged to have speculative elements, their future cannot be
considered as well assured; B -- generally lack characteristics of the desirable
investment; Caa -- are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest; Ca
- -- speculative in a high degree, often in default; C -- lowest rated class of
bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; the modifier 2 indicates a mid-range ranking; and modifier
3 indicates a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are
listed as follows: AAA -- highest grade obligations, in which capacity to pay
interest and repay principal is extremely strong; AA -- also qualify as high
grade obligations, having a very strong capacity to pay interest and repay
principal, and differs from AAA issues only in a small degree; A -- regarded as
upper medium grade, having a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories; BBB -- regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories. This group is the lowest which
qualifies for investment grade. BB, B, CCC, CC -- predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
<PAGE> 284
44
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term promissory obligations.
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A: Debt rated "A" has strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
<PAGE> 285
45
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest
is being paid.
D: Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to
pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the
likelihood of timely repayment of debt having an original maturity of no more
than 365 days. The two rating categories for securities in which the Trust may
invest are as follows:
A-1: This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
<PAGE> 286
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> 287
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> 288
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> 289
4
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (1) Financial Statement included in Part A: None
(2) Financial Information included in Part B:
Statement of Assets, Liabilities and Capital
(b) Exhibits:
Exhibit
Number Description
1 -- Declaration of Trust. (1)
2 -- By-Laws of Registrant. (1)
3 -- None.
4 -- None.
5(a) -- Management Agreement between Registrant and ING
Mutual Funds Management Co. LLC. (2)
5(b)(i) -- Sub-Advisory Agreement between the Manager and
Baring Asset Management, Inc. (2)
5(b)(ii) -- Sub-Advisory Agreement between the Manager and
the Baring International Investment Limited. (2)
5(b)(iii) -- Sub-Advisory Agreement between the Manager and the
Baring International Investment (Far East)
Limited. (2)
5(b)(iv) -- Sub-Advisory Agreement between the Manager and the
ING Investment Management Advisors B.V. (2)
5(b)(v) -- Sub-Advisory Agreement between the Manager and the
ING Investment Management LLC. (2)
5(b)(vi) -- Sub-Advisory Agreement between the Manager and the
Furman Selz Capital Management LLC. (2)
5(b)(vii) -- Sub-Advisory Agreement between the Manager and the
Furman Selz Capital Management LLC on behalf of
Delta Asset Management. (2)
6 -- Distribution Agreement between Registrant and ING
Funds Distributor, Inc. (2)
8 -- Custodian Agreement between Registrant and
Investors Fiduciary Trust Company. (2)
9(a) -- Form of Account Services Agreement between
Registrant and Participants. (2)
<PAGE> 290
5
9(b) -- Fund Services Agreement between Registrant and
ING Fund Services Co. LLC. (2)
9(c) -- Services Agreement between ING Fund Services Co.
LLC and First Data Investor Services Group, Inc.
(2)
9(d) -- Shareholder Servicing Plan. (2)
10 -- Consent of Paul, Weiss, Rifkind, Wharton &
Garrison. (2)
11 -- Consent of Ernst & Young LLP, independent
auditors. (2)
l3 -- Purchase Agreement. (2)
l5(a) -- Rule l2b-l Distribution Plan and Agreement with
respect to Class A Shares. (2)
l5(b) -- Rule l2b-l Distribution Plan and Agreement with
respect to Class B, C and X Shares. (2)
15(c) -- Form of Dealer Agreement. (2)
16 -- Schedule for Computation of Performance
Quotations. (3)
17 -- Financial Data Schedules. (3)
18 -- Rule 18f-3 Plan. (2)
Other Exhibits
(A) -- Power of Attorney. (2)
- ----------
(1) Filed as an exhibit to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed electronically on October 28,
1998, accession number 0000950123-98-009276.
(2) Filed herewith.
(3) 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 February 28, 1998.
Fund No. of Shareholders
---- -------------------
ING Money Market Fund 391
ING Intermediate Bond Fund 257
ING High Yield Bond Fund 216
ING International Bond Fund 148
ING Large Cap Growth Fund 570
ING Growth and Income Fund 226
<PAGE> 291
6
ING Mid Cap Growth Fund 136
ING Small Cap Growth Fund 195
ING Global Brand Names Fund 431
ING International Equity Fund 62
ING European Equity Fund 192
ING Tax Efficient Equity Fund 701
ING Focus Fund 149
ING Global Information Technology Fund 447
ING Global Real Estate Fund 0
ING U.S. Treasury Money Market Fund 0
ING Mortgage Income Fund 0
ING National Tax-Exempt Bond Fund 0
ING Balanced Fund 0
ING Emerging Markets Equity Fund 0
ING Internet Fund 0
ING Quality of Life Fund 0
ING National Tax-Exempt Money Market Fund 0
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 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 Agreements and Section 1.11 of the
Distribution Agreement between the Registrant and Distributor limit the
liability of Manager, the Sub-Advisors 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 Agreement in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission
<PAGE> 292
7
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 Co. LLC 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, Chief Executive Officer and Director of the
Manager. Senior Managing Director and Member of the Board of Directors
of Furman Selz LLC May 1984 to September 1998.
Donald E. Brostrom, Executive Vice President and Chief Financial
Officer of the Manager. Manager of Furman Selz LLC, February 1986 to
September 1998.
Louis S. Citron, Senior Vice President and General Counsel of the
Manager. Attorney, Kramer, Levin, Naftalis & Frankel, September 1994 to
July 1998.
Alan G. Holden, Senior Vice President and Chief Marketing Officer of
the Manager. Marketing Director of Oppenheimer Funds, Inc., October
1992 to August 1998.
Jay Peters, Senior Vice President and Chief Technology Officer of the
Manager; Manager of Information Technology at Furman Selz LLC, prior to
1993 to September 1998.
James W. MacCune, Vice President of the Manager. Manager of Mutual Fund
Operations at Furman Selz LLC from May 1998 to September 1998, Manager
of Mutual Fund Relations at Lazard Freres & Co. LLS from October 1996
to May 1998.
David A. Freeman, Vice President of the Manager. Vice President of
Marketing of Linsco/Pivate Ledger Corp. prior to 1993 through July
1998.
Ralph G. Norton, III, Vice President of the Manager. Managing Editor,
Standard & Poor's from December 1996 to March 1999.
Cynthia M. Schaus, Vice President of Corporate Communication and
Strategy of the Manager. Assistant Vice President of ING FSI North
America, US Retail Financial Services October 1997 to March 1999;
Director of Corporate & Investor relations of Equitable of Iowa
Companies, January 1989 to October 1997.
Lisa M. Buono, Vice President of Financial Operations of the Manager.
Vice President of Provident Advisers, Inc. January 1997 to March 1999;
Director of Finance & Compliance of Provident Distributors, July 1993
to December 1996.
<PAGE> 293
8
Stuart H. Quillman, Vice President of Marketing of the Manager.
Manager, Corporate Communications at Pilgrim, Baxter & Associates,
October 1997 to October 1998; Product manager/Director of Marketing at
SEI Investments, September 1989 to June 1996.
Alexander H. Rinnnooy-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; Member of the Executive
Committee of ING FSI, February 1999 to present. General Manager ING
Financial Services, International September 1997 to January 1999.
President and CEO of Equitable of Iowa Company May 1987 to September
1997.
Item 29. Principal Underwriter
(a) Officers and Directors
<TABLE>
<CAPTION>
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Registrant Registrant
------- ---------- ----------
<S> <C> <C>
Edward J. Berkson None President & CEO
Karl Lindberg None Vice President &
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
</TABLE>
(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.
<PAGE> 294
9
Item 32. Undertakings
(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.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
<PAGE> 295
10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Newtown
Square, and Commonwealth of Pennsylvania, on April 15, 1999.
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
Post-Effective Amendment to this Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John J. Pileggi Trustee, President April 15, 1999
- -----------------------------------
John J. Pileggi and Chief Executive Officer
/s/ Donald E. Brostrom Treasurer April 15, 1999
- -----------------------------------
Donald E. Brostrom
/s/ Joseph N. Hankin* Trustee April 15, 1999
- -----------------------------------
Joseph N. Hankin
/s/ Jack D. Rehm* Trustee April 15, 1999
- -----------------------------------
Jack D. Rehm
/s/ Blaine E. Rieke* Trustee April 15, 1999
- -----------------------------------
Blaine E. Rieke
/s/ Richard A. Wedemeyer* Trustee April 15, 1999
- -----------------------------------
Richard A. Wedemeyer
*/s/ Louis S. Citron
- -----------------------------------
Louis S. Citron
Attorney-in-Fact
</TABLE>
- ------------
* Power of Attorney filed herewith as Exhibit A.
<PAGE> 296
11
EXHIBIT INDEX
Exhibit 5(a) Management Agreement between Registrant and ING Mutual
Funds Management Co. LLC
Exhibit 5(b)(i) Sub-Advisory Agreement between Manager and Baring Asset
Management, Inc.
Exhibit 5(b)(ii) Sub-Advisory Agreements between Manager and Baring
International Investment Limited
Exhibit 5(b)(iii) Sub-Advisory Agreements between Manager and Baring
International Investment (Far East) Limited
Exhibit 5(b)(iv) Sub-Advisory Agreement between Manager and ING
Investment Management Advisors B.V.
Exhibit 5(b)(v) Sub-Advisory Agreement between Manager and ING
Investment Management LLC
Exhibit 5(b)(vi) Sub-Advisory Agreement between Manager and Furman Selz
Capital Management LLC
Exhibit 5(b)(vii) Sub-Advisory Agreement between Manager and Furman Selz
Capital Management LLC on behalf of Delta Asset
Management.
Exhibit 6 Distribution Agreement between Registrant and ING Funds
Distributor, Inc.
Exhibit 8 Custody Agreement between Registrant and Investors
Fiduciary Trust Company.
Exhibit 9(a) Form of Account Services Agreement between Registrant
and Participants
Exhibit 9(b) Fund Services Agreement between Registrant and ING Fund
Services Co. LLC
Exhibit 9(c) Services Agreement between ING Fund Services Co. LLC
and First Data Investor Service Group, Inc.
Exhibit 9(d) Shareholder Servicing Plan
Exhibit 10 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE> 297
12
Exhibit 11 Consent of Ernst & Young LLP, independent auditors
Exhibit 13 Purchase Agreement
Exhibit 15(a) Rule 12b-1 Distribution Plan and Agreement with respect
to Class A Shares
Exhibit 15(b) 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 Rule 18f-3 Plan, as amended
Exhibit A Power of Attorney
<PAGE> 1
Exhibit 5a
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:
1. 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.
2. 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
<PAGE> 2
services, including telephone service, heat, utilities, stationery supplies and
similar items for the Funds' 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.
3. 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 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
2
<PAGE> 3
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.
4. 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.
5. 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.
6. Expenses. The expenses connected with the Funds shall be allocable
between the Funds and the Investment Manager as follows:
(a) 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;
(b) 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;
(c) 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 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
3
<PAGE> 4
personnel carrying out such functions and the Funds shall
reimburse the Investment Manager therefor upon proper accounting.
(d) 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.
7. Delegation of Responsibilities. The Investment Manager may delegate the
performance of certain investment advisory services, as described hereunder, to
a sub-adviser.
8. 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 1,
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.
9. 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 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.
4
<PAGE> 5
10. 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.
11. 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.
12. 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,
employees or agents in alleged violation of applicable federal, state or foreign
laws, rules or regulations.
13. 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.
5
<PAGE> 6
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.
16. 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.
17. 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 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.
6
<PAGE> 7
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: /s/ John J. Pileggi By: /s/ Donald E. Brostrom
------------------------------------ -------------------------------
Title: President Title: Executive Vice President
--------------------------------- ----------------------------
Attest By: /s/ Louis S. Citron Attest By: /s/ Alan George Hoden
----------------------------- ------------------------
Title: Vice President Title: Senior Vice President
--------------------------------- ----------------------------
7
<PAGE> 8
Schedule 1
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational 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 & Income Fund 0.75% October 30, 1998
ING U.S. Treasury Money 0.25% October 30, 1998
Market Fund
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.
8
<PAGE> 9
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING European Equity Fund 1.15% October 30, 1998
ING Global Information 1.25% October 30, 1998
Technology Fund
ING Global Real Estate Fund 1.00% October 30, 1998
ING Internet Fund 1.25% March 26, 1999
ING Quality of Life Fund 1.00% March 26, 1999
ING National Tax-Exempt Money
Market Fund 0.400% March 26, 1999
</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.
9
<PAGE> 1
Exhibit 5bi
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, the 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.
2. Asset Allocation. Baring International Investment Limited shall
allocate the assets of each of the Funds for which the Sub-Adviser, Baring
International Investment Limited and Baring International Investment (Far East)
Limited act as co-sub-advisers (collectively, the "Co-Sub-Advisers") among the
Co-Sub-Advisers.
3. 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 directly to it by the Investment Adviser or,
with regard to the Funds to be managed by the Co-Sub-Advisers as indicated on
Schedule A, the portions of the Funds allocated to it by Baring International
Investment Limited. The Sub-Adviser will place all orders for the purchase and
sale of securities
<PAGE> 2
for such portions of the Funds allocated to it. In the performance of its
duties, the Sub-Adviser will (a) comply with the provisions of the Trust's
written procedures adopted by its Board of Trustees, and the investment
objective, policies and restrictions of the Funds as provided in pre-effective
amendment no.1 to the Trust's registration statement on form N-1A dated October
28, 1998 and in subsequent post-effective amendments to its registration
statement and filings made under Rule 497 of the Securities Act of 1933, as
amended, that are delivered to the Sub-Adviser in writing, (b) use its best
efforts to safeguard and promote the welfare of the Funds, and (c) 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 in
writing to the Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) 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;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 6 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) 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.
4. 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)
2
<PAGE> 3
and Rule 17e-1 under the Investment Company Act of 1940, as amended (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 seek the best overall terms available and will take the
following into consideration: the best net price available; the reliability,
integrity, financial condition and execution capability of the broker-dealer;
the size of and difficulty in executing the order; and the value of the
brokerage and research services provided by the broker-dealer. Accordingly, the
price to a Fund in any transaction may be less favorable than that available
from another broker-dealer.
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 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 Trust. 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, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate exercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor.
5. 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 and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; (b)
the provisions of the Registration Statement of the Trust 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.
6. 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 copies of 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 the Sub-Adviser
on behalf of the Investment Adviser under Rule 3la-1(b)(5), (6), (7), (9) and
(10) under the Investment Company Act.
3
<PAGE> 4
7. 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.
8. 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. With regard to certain of the Funds
indicated on Schedule A for which the Co-Sub-Advisers provide co-sub-advisory
services, the Investment Adviser will pay the full fee to the Sub-Adviser who
will accept the fee on behalf of all the Co-Sub-Advisers and who will in turn
pay to the other Co-Sub-Advisers their compensation as agreed between the
Sub-Adviser and the other Co-Sub-Advisers. 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 8
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. The Sub-Adviser will be given at least 30
days' written notice of any proposed waiver, deferral or reduction of investment
advisory and sub-advisory fees. 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.
9. Exclusivity. The investment management services furnished by the
Sub-Adviser shall not be deemed exclusive, and the Sub-Adviser shall be free to
render investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
10. 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 that may be sustained in the purchase, holding or
sale of any security.
11. 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
4
<PAGE> 5
other series of the Trust must look solely to the assets of the Funds for the
enforcement of any claims against the Trust.
12. 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 A 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.
13. 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 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.
14. 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.
15. Notices. Any notices under this Agreement may be by facsimile,
electronic mail or by any other method, provided that such notice shall be
followed by written notice, addressed and delivered or mailed postage paid to
the other party at the address set forth below or such address as may
subsequently be designated for the receipt of such notice in accordance with the
provisions hereof. 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.
16. 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. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified 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.
17. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
18. 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
5
<PAGE> 6
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: /s/ James R. W. Sloane By: /s/ John J. Pileggi
--------------------------------- --------------------------------
Title: Chief Operating Officer Title: President
Attest By: /s/ Attest By: /s/ Louis S. Citron
-------------------------- -------------------------
Title: VP Human Resources Title: Senior Vice President
------------------------------ -----------------------------
6
<PAGE> 7
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
ING Large Cap Growth Fund 0.375% October 30, 1998
ING Small Cap Growth Fund 0.500% October 30, 1998
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
- ---------------
* 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.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
7
<PAGE> 1
Exhibit 5bii
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, is regulated in the conduct of its investment business by the
Investment Management Regulatory Organization of the United Kingdon ("IMRO") 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, the 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.
2. Asset Allocation. The Sub-Adviser shall allocate the assets of each of
the Funds for which the Sub-Adviser, Baring Asset Management, Inc. and Baring
International Investment (Far East) Limited act as co-sub-advisers
(collectively, the "Co-Sub-Advisers") among the Co-Sub-Advisers.
3. 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
<PAGE> 2
in respect of, and make investment decisions for, the portions of the Funds
allocated directly to it by the Investment Adviser or, with regard to the Funds
to be managed by the Co-Sub-Advisers as indicated on Schedule A, the portions of
the Funds allocated to it by itself. The Sub-Adviser will place all orders for
the purchase and sale of securities for such portions of the Funds allocated to
it. In the performance of its duties, the Sub-Adviser will (a) comply with the
provisions of the Trust's written procedures adopted by its Board of Trustees,
and the investment objective, policies and restrictions of the Funds as provided
in pre-effective amendment no.1 to the Trust's registration statement on form
N-1A dated October 28, 1998 and in subsequent post-effective amendments to its
registration statement and filings made under Rule 497 of the Securities Act of
1933, as amended, that are delivered to the Sub-Adviser in writing, (b) use its
best efforts to safeguard and promote the welfare of the Funds, and (c) 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 in
writing to the Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) 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;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 7 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) 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.
2
<PAGE> 3
4. Sub-Adviser Disclosures as Required by IMRO. In accordance with the
rules of IMRO, the Sub-Adviser is required to inform the Trust that:
(a) any formal complaints in respect of the services provided to the
Trust under this Agreement should be made to the Sub-Adviser's
Compliance Officer, who is required to deal with them in
accordance with the IMRO rules. The Trust also has a right of
complaint direct to the Investment Ombudsman of the United
Kingdom;
(b) investments may be made by the Sub-Adviser in various currencies
in accordance with the investment objective, policies and
restrictions of the Funds as described under Paragraph 3 and the
movement of exchange rates may have a separate effect,
unfavourable as well as favourable, on the gains or losses
otherwise experienced on the investments;
(c) the Sub-Adviser may effect transactions in warrants in accordance
with the investment objective, policies and restrictions of the
Funds as described under Paragraph 3, which often involve a high
degree of gearing so that a relatively small movement in the price
of the security to which the warrant relates may result in a
disproportionately large movement, unfavourable as well as
favourable, in the price of the warrant;
(d) the Sub-Adviser shall not commit any Fund to any transactions
which would require the Trust to supplement the funds in a Fund
unless permitted to do so in writing by the Trust. Investments in
a Fund may not be lent or deposited by way of collateral with a
third party unless permitted in accordance with the investment
objective, policies and restrictions of the Funds as described
under Paragraph 3. Money may not be borrowed by the Sub-Adviser on
the Trust's behalf except in accordance with the investment
objective, policies and restrictions of the Funds as described
under Paragraph 3; and
(e) in providing its services to the Trust, the Sub-Adviser will only
effect transactions suitable for the Funds and will secure best
execution of those transactions.
5. 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 of 1940, as
amended (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
3
<PAGE> 4
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 seek
the best overall terms available and will take the following into consideration:
the best net price available; the reliability, integrity, financial condition
and execution capability of the broker-dealer; the size of and difficulty in
executing the order; and the value of the brokerage and research services
provided by the broker-dealer. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another
broker-dealer.
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 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 Trust. 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, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate excercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor. In addition, the Sub-Adviser will report to the Trust annually on the
proportion of soft dollar commissions against the total commissions paid and the
value of services received. A list of those brokers with whom the Sub-Adviser
has soft dollar arrangements will be sent to the Trust at the same time. The
Trust will also be informed immediately of any material change in the
Sub-Adviser's policy relating to soft dollars.
6. 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 and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; (b)
the provisions of the Registration Statement of the Trust 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.
7. 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 copies of 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 the Sub-Adviser
on behalf of the
4
<PAGE> 5
Investment Adviser under Rule 3la-1(b)(5), (6), (7), (9) and (10) under the
Investment Company Act.
8. 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.
9. 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. With regard to certain of the Funds
indicated on Schedule A for which the Co-Sub-Advisers provide co-sub-advisory
services, the Investment Adviser will pay the full fee to Baring Asset
Management, Inc. who will accept the fee on behalf of all the Co-Sub-Advisers
and who will in turn pay to the other Co-Sub-Advisers their compensation as
agreed between Baring Asset Management, Inc. and the other Co-Sub-Advisers. 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 9 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. The Sub-Adviser
will be given at least 30 days' written notice of any proposed waiver, deferral
or reduction of investment advisory and sub-advisory fees. 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.
10. Exclusivity. The investment management services furnished by the
Sub-Adviser shall not be deemed exclusive, and the Sub-Adviser shall be free to
render investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
11. 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 that may be sustained in the purchase, holding or
sale of any security.
12. 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,
5
<PAGE> 6
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.
13. 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 A 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.
14. 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 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.
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.
16. Notices. Any notices under this Agreement may be by facsimile,
electronic mail or by any other method, provided that such notice shall be
followed by written notice, addressed and delivered or mailed postage paid to
the other party at the address set forth below or such address as may
subsequently be designated for the receipt of such notice in accordance with the
provisions hereof. 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 EC2M 3XY.
17. 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. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rules, regulation or order of the Securities and
6
<PAGE> 7
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.
BARING INTERNATIONAL INVESTMENT ING MUTUAL FUNDS MANAGEMENT CO. LLC
LIMITED
By: /s/ By: /s/ John J. Pileggi
------------------------------ --------------------------
Title: Director Title: President
--------------------------- ------------------------
Attest By: /s/ Attest By: /s/ Louis S. Citron
----------------------- --------------------
Title: VP, Human Resources Title: Senior Vice President
--------------------------- ------------------------
7
<PAGE> 8
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
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
- ---------------
* 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.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
8
<PAGE> 1
Exhibit 5biii
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 (Far East) 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, is registered with Securities and Futures Commission ("SFC") as an
Investment Adviser and as a Commodity Trading Adviser, 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, the 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.
2. Asset Allocation. Baring International Investment Limited shall
allocate the assets of each of the Funds for which the Sub-Adviser, Baring
International Investment Limited and Baring Asset Management, Inc. act as
co-sub-advisers (collectively, the "Co-Sub-Advisers") among the Co-Sub-Advisers.
3. 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
<PAGE> 2
in respect of, and make investment decisions for, the portions of the Funds
allocated directly to it by the Investment Adviser or, with regard to the Funds
to be managed by the Co-Sub-Advisers as indicated on Schedule A, the portions of
the Funds allocated to it by Baring International Investment Limited. The
Sub-Adviser will place all orders for the purchase and sale of securities for
such portions of the Funds allocated to it. In the performance of its duties,
the Sub-Adviser will (a) comply with the provisions of the Trust's written
procedures adopted by its Board of Trustees, and the investment objective,
policies and restrictions of the Funds as provided in pre-effective amendment
no.1 to the Trust's registration statement on form N-1A dated October 28, 1998
and in subsequent post-effective amendments to its registration statement and
filings made under Rule 497 of the Securities Act of 1933, as amended, that are
delivered to the Sub-Adviser in writing, (b) use its best efforts to safeguard
and promote the welfare of the Funds, and (c) 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 in writing to the
Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) 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;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 7 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) 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.
2
<PAGE> 3
4. Sub-Adviser Disclosures as Required by SFC. In accordance with the
rules of SFC, the Sub-Adviser is required to inform the Trust that:
(a) the price of securities can and do fluctuate, and any individual
security may experience upward or downward movements, and may even
become valueless. There is an inherent risk that losses may be
incurred rather than profit made as a result of buying and selling
securities;
(b) investments may be made by the Sub-Adviser in various currencies
in accordance with the investment objective, policies and
restrictions of the Funds as described under Paragraph 3 and the
movement of exchange rates may have a separate effect,
unfavourable as well as favourable, on the gains or losses
otherwise experienced on the investments;
(c) the Sub-Adviser may effect transactions in warrants in accordance
with the investment objective, policies and restrictions of the
Funds as described under Paragraph 3, which often involve a high
degree of gearing so that a relatively small movement in the price
of the security to which the warrant relates may result in a
disproportionately large movement, unfavourable as well as
favourable, in the price of the warrant;
(d) the risk of loss in trading futures contracts or options can be
substantial. In some circumstances, a client may sustain losses in
excess of its initial margin funds. Placing contingent orders,
such as "stop-loss" or "stop-limit" orders, will not necessarily
achieve the desired results. Market conditions may make it
impossible to execute such orders. A Fund may be called upon at
short notice to deposit additional margin funds. If the required
funds are not provided within the prescribed time, the Fund's
position may be liquidated. The Fund will remain liable for any
resulting deficit in its account. The Investment Adviser should
therefore study and understand futures contracts and options
before permitting the Sub-Adviser to trade and carefully consider
whether such trading is suitable in the light of the Funds'
investment objectives; and
(e) the Investment Adviser and the Sub-Adviser undertake to notify the
other in the event of any material change to the information
provided in this agreement.
5. 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)
3
<PAGE> 4
and Rule 17e-1 under the Investment Company Act of 1940, as amended (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 seek the best overall terms available and will take the
following into consideration: the best net price available; the reliability,
integrity, financial condition and execution capability of the broker-dealer;
the size of and difficulty in executing the order; and the value of the
brokerage and research services provided by the broker-dealer. Accordingly, the
price to a Fund in any transaction may be less favorable than that available
from another broker-dealer.
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 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 Trust. 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, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate excercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor. In addition, the Sub-Adviser will report to the Trust annually its
soft dollar practices and provide a description of research goods and services
received by the Sub-Adviser.
6. 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 and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; (b)
the provisions of the Registration Statement of the Trust 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.
7. 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
4
<PAGE> 5
Trust or to the Investment Adviser copies of 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 the Sub-Adviser on behalf of the Investment Adviser under Rule
3la-1(b)(5), (6), (7), (9) and (10) under the Investment Company Act.
8. 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.
9. 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. With regard to certain of the Funds
indicated on Schedule A for which the Co-Sub-Advisers provide co-sub-advisory
services, the Investment Adviser will pay the full fee to Baring Asset
Management, Inc. who will accept the fee on behalf of all the Co-Sub-Advisers
and who will in turn pay to the other Co-Sub-Advisers their compensation as
agreed between Baring Asset Management, Inc. and the other Co-Sub-Advisers. 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 9 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. The Sub-Adviser
will be given at least 30 days' written notice of any proposed waiver, deferral
or reduction of investment advisory and sub-advisory fees. 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.
10. Exclusivity. The investment management services furnished by the
Sub-Adviser shall not be deemed exclusive, and the Sub-Adviser shall be free to
render investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
11. 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
5
<PAGE> 6
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
12. 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.
13. 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 A 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.
14. 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 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.
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.
16. Notices. Any notices under this Agreement may be by facsimile,
electronic mail or by any other method, provided that such notice shall be
followed by written notice, addressed and delivered or mailed postage paid to
the other party at the address set forth below or such address as may
subsequently be designated for the receipt of such notice in accordance with the
provisions hereof. 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
19/F Edinburgh Tower, The Landmark, 15 Queens Road, Central Hong Kong.
6
<PAGE> 7
17. 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. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified 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.
BARING INTERNATIONAL INVESTMENT ING MUTUAL FUNDS MANAGEMENT CO. LLC
(FAR EAST) LIMITED
By: /s/ By: /s/ John J. Pileggi
------------------------------------ ----------------------------
Title: Chief Operating Officer Title: President
Attest By: /s/ Attest By: /s/ Louis S. Citron
------------------------------ ---------------------
Title: Director - Finance Title: Senior Vice President
---------------------------------- -------------------------
7
<PAGE> 8
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
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
- ---------------
* 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.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
8
<PAGE> 1
Exhibit 5biv
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, the 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.
2. 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 each of the Funds, as
amended, and will comply with other policies
<PAGE> 2
which the Trust's Board of Trustees or the Investment Adviser, as the case may
be, may from time to time reasonably determine and communicate to the
Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer;
(c) 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, such reports and reviews to
be scheduled at times mutually acceptable to the Sub-Adviser, the
Board of Trustees and the Investment Adviser;
(d) 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;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and
will not 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, except where such information is already in the
Sub-Adviser's possession as of the date of this Agreement, is
developed independently by the Sub-Adviser, becomes publically
available through no fault of the Sub-Adviser or is disclosed
pursuant to law, rule or legal process;
(f) 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
(g) 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
2
<PAGE> 3
provision of investment management services as the Investment
Adviser may reasonably request.
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.
4. 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 under the Securities Act of 1933, as
3
<PAGE> 4
amended, and the Investment Company Act (the "Registration Statement"); (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.
5. 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.
6. 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.
7. 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. 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.
8. 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 that may be sustained in the purchase, holding or
sale of any security.
9. 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
4
<PAGE> 5
other series of the Trust must look solely to the assets of the Funds for the
enforcement of any claims against the Trust.
10. 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 A 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.
11. 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.
12. 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 parties hereto.
13. 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.
14. 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. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
5
<PAGE> 6
16. 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: /s/ By: /s/ John J. Pileggi
---------------------------- -----------------------------
Title: Managing Director Title: President
------------------------- --------------------------
Attest By: /s/ Attest By: /s/ Louis S. Citron
--------------------- ----------------------
Title: Managing Director Title: Senior Vice President
------------------------- --------------------------
6
<PAGE> 7
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
ING Global Brand Names Fund 0.500% October 30, 1998
ING European Equity Fund 0.575% October 30, 1998
ING Global Information 0.625% October 30, 1998
Technology Fund
ING Global Real Estate Fund 0.500% October 30, 1998
ING Internet Fund 0.625% March 26, 1999
ING Quality of Life Fund 0.500% March 26, 1999
- ---------------
* 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.
7
<PAGE> 1
EXHIBIT 5bv
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, the 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.
2. 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 each of the Funds, as
amended, and will comply with
<PAGE> 2
other policies which the Trust's Board of Trustees or the Investment Adviser, as
the case may be, may from time to time reasonably determine and communicate to
the Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations
for the Funds either directly with the issuer or with any
broker or dealer;
(c) 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, such reports and reviews to be scheduled at
times mutually acceptable to the Sub-Adviser, the Board of
Trustees and the Investment Adviser;
(d) 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;
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust, and will not 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, except where such
information is already in the Sub-Adviser's possession as of
the date of this Agreement, is developed independently by the
Sub-Adviser, becomes publically available through no fault of
the Sub-Adviser or is disclosed pursuant to law, rule or legal
process;
(f) 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
2
<PAGE> 3
(g) 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.
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.
3
<PAGE> 4
4. 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 under the Securities Act of 1933, as
amended, and the Investment Company Act (the "Registration Statement"); (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.
5. 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.
6. 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.
7. 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. 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.
8. 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 that may be sustained in the purchase, holding or
sale of any security.
4
<PAGE> 5
9. 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.
10. 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 A 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.
11. 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.
12. 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 parties hereto.
13. 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.
14. 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.
5
<PAGE> 6
In addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is modified by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
15. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
16. 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: /s/ By: /s/ John J. Pileggi
Title: President Title: President
Attest By: /s/ Attest By: /s/ Louis S. Citron
Title: Assistant Secretary Title: Senior Vice President
6
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------- ----
<S> <C> <C>
ING Growth and Income Fund 0.375% October 30, 1998
ING U.S. Treasury Money 0.125% October 30, 1998
Market Fund
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.
7
<PAGE> 1
Exhibit 5bvi
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.
2. 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
<PAGE> 2
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.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer;
(c) 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;
(d) 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;
(e) 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;
(f) 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
(g) 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
2
<PAGE> 3
provision of investment management services as the Investment
Adviser may reasonably request.
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 of 1940, as
amended (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.
4. 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 and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; (b)
the provisions of the Registration Statement of the Trust under the Securities
Act of 1933, as
3
<PAGE> 4
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.
5. 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 copies of 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(b)(5), (6), (7), (9) and (10)
under the Investment Company Act.
6. 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.
7. 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.
8. 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 that may be sustained in the purchase, holding or
sale of any security.
9. 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
4
<PAGE> 5
other series of the Trust must look solely to the assets of the Funds for the
enforcement of any claims against the Trust.
10. 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 A 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.
11. 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.
12. 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.
13. 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, attn: Vincent J. Lepore.
14. 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. 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.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
5
<PAGE> 6
16. 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 ING MUTUAL MANAGEMENT FUNDS CO. LLC
LLC
By: /s/ By: /s/John J. Pileggi
----------------------------- ----------------------------
Title: Vice President Title: President
-------------------------- -------------------------
Attest By: /s/ Valerie D. King Attest By: /s/ Louis S. Citron
---------------------- ---------------------
Title: Managing Director Title: Vice President
-------------------------- -------------------------
6
<PAGE> 7
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
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
ING National Tax-Exempt Money
Market Fund 0.200% March 26, 1999
- ---------------
* 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.
7
<PAGE> 1
Exhibit 5bvii
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.
2. 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
<PAGE> 2
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.
The Sub-Adviser further agrees that it:
(a) 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;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer;
(c) 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;
(d) 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;
(e) 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;
(f) 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
(g) 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
2
<PAGE> 3
provision of investment management services as the Investment
Adviser may reasonably request.
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 of 1940, as
amended (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.
4. 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 and the Investment
Advisers Act and any rules and regulations adopted thereunder as amended; (b)
the provisions of the Registration Statement of the Trust
3
<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.
5. 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 copies of 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(b)(5), (6), (7), (9) and (10)
under the Investment Company Act.
6. 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.
7. 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.
8. 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 that may be sustained in the purchase, holding or
sale of any security.
9. 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
4
<PAGE> 5
other series of the Trust must look solely to the assets of the Funds for the
enforcement of any claims against the Trust.
10. 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 A 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.
11. 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.
12. 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.
13. 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, on behalf of
the Sub-Adviser, shall be 230 Park Avenue, New York, NY 10169, attn: Vincent J.
Lepore.
14. 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. 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.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
5
<PAGE> 6
16. 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 ING MUTUAL FUNDS MANAGEMENT
LLC, on behalf of Delta Asset Management CO. LLC
By: /s/ By: /s/ John J. Pileggi
-------------------------------------- ---------------------------
Title: Vice President Title: President
----------------------------------- ------------------------
Attest By: /s/ Melanie Crowe Attest By: /s/ Louis S. Citron
------------------------------- --------------------
Title: Assistant Title: Senior Vice President
----------------------------------- ------------------------
6
<PAGE> 7
Schedule A
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
ING Tax Efficient Fund 0.400% October 30, 1998
- ---------------
* 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.
7
<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, Class X and Class I 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 the above-referenced registration statements, together with
any amendments and supplements thereto.
<PAGE> 2
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.
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
2
<PAGE> 3
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, 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
3
<PAGE> 4
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
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
4
<PAGE> 5
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.
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.
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<PAGE> 6
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 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.
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<PAGE> 7
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 contemplated by
Section 2 of this Agreement) on the redemption of shares sold prior to the
effective date of such termination.
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<PAGE> 8
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: /s/ John J. Pileggi By: /s/ Edward J. Berkson
--------------------------------- ------------------------------
Title: President Title: President
------------------------------ ---------------------------
Date: October 30, 1998 Date: October 30, 1998
------------------------------- ----------------------------
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<PAGE> 9
SCHEDULE A
Name of Fund Date of Approval
- ------------ ----------------
ING Money Market Fund October 30, 1998
ING U.S. Treasury Money Market Fund October 30, 1998
ING Intermediate Bond Fund October 30, 1998
ING High Yield Bond Fund October 30, 1998
ING International Fixed Income Fund October 30, 1998
ING Mortgage Income Fund October 30, 1998
ING National Tax-Exempt Bond Fund October 30, 1998
ING Large Cap Growth Fund October 30, 1998
ING Growth & Income Fund October 30, 1998
ING Mid Cap Growth Fund October 30, 1998
ING Small Cap Growth Fund October 30, 1998
ING Balanced Fund October 30, 1998
ING Global Brand Names Fund October 30, 1998
ING International Equity Fund October 30, 1998
ING Emerging Markets Equity Fund October 30, 1998
ING European Equity Fund October 30, 1998
ING Tax Efficient Equity Fund October 30, 1998
ING Focus Fund October 30, 1998
ING Global Information Technology Fund October 30, 1998
ING Global Real Estate Fund October 30, 1998
ING Internet Fund March 26, 1999
ING Quality of Life Fund March 26, 1999
ING National Tax-Exempt Money Market Fund March 26, 1999
A-1
<PAGE> 1
Exhibit 8
CUSTODY AGREEMENT
THIS AGREEMENT is made effective the 30th day of October, 1998, 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 ING Funds Trust
("Fund"), a Delaware business trust, on behalf of each of its portfolios, 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
18 Campus Blvd., Newtown Square, PA 19073 ("Fund") (each a "Portfolio", and
collectively the "Portfolios").
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as custodian of the assets of the
Fund's 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:
1. 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").
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to IFTC:
1. That it is a trust duly organized and existing and in
good standing under the laws of its state of
organization, and that it is registered under the
Investment Company Act of 1940, as amended (the "1940
Act"); and
2. That it has the requisite power and authority under
applicable law and its trust instrument 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.
B. IFTC hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Missouri; and
<PAGE> 2
2. 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.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. 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 term hereof. IFTC has no responsibility
or liability whatsoever for or on account of assets not so
delivered.
B. 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 reasonably determined by IFTC to be
needed to perform its duties and responsibilities hereunder
fully and properly. IFTC may rely conclusively on the
completeness and correctness of such accounts and records.
C. 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.
D. 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
2
<PAGE> 3
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.
E. 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.
F. 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:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or
dealer through whom the purchase was made; and
9. 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
3
<PAGE> 4
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.
G. 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:
1. If applicable, the name of the Portfolio making such
sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and
accrued interest, if any;
4. The date on which the Assets sold were purchased or
other information identifying the Assets sold and to
be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
8. The total amount to be received by the Portfolio upon
such sale; and
9. 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, 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.
4
<PAGE> 5
H. 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:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
e. 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
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<PAGE> 6
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
I. 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:
1. 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.
2. 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.
J. 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.
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<PAGE> 7
K. 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 5L. 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.
L. Income and Other Payments. IFTC will:
1. 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;
2. 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
3. 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, 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.
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<PAGE> 8
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.
M. 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.
N. 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.
O. 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.
P. Appointment of Subcustodians. Notwithstanding any other
provisions hereof:
1. 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
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<PAGE> 9
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 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.
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<PAGE> 10
"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 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.
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<PAGE> 11
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
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<PAGE> 12
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
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 17f-5. 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
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<PAGE> 13
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, trust instrument,
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 dispose of such Portfolio's Assets
pursuant to applicable law to the extent necessary to 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.
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<PAGE> 14
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.
4. INSTRUCTIONS.
A. 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.
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<PAGE> 15
B. 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 date and the time of the beginning and ending
of such oral Instruction.
C. 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.
5. 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, with reasonable care and without
negligence; 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:
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<PAGE> 16
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;
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,
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<PAGE> 17
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.
6. 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.
7. 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 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.
17
<PAGE> 18
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.
8. 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.
9. 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 employees
and agents who have access to the Protected Information
18
<PAGE> 19
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.
10. 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.
11. 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.
19
<PAGE> 20
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.
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.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST ING FUNDS TRUST
COMPANY
By: /s/ Robert G. Novelland By: /s/ Donald E. Brostrom
-------------------------- -----------------------
Title: Senior Vice President Title: CFO
----------------------- --------------------
21
<PAGE> 22
SCHEDULE A
- ----------
LIST OF PORTFOLIOS
<TABLE>
<CAPTION>
TAX ID
------
<S> <C>
ING US Treasury Money Market Fund 23-2978932
ING Money Market Fund 23-2978935
ING Intermediate Bond Fund 52-2125227
ING High Yield Bond Fund 23-2978938
ING International Bond Fund 23-2978939
ING Mortgage Income Fund 23-2978940
ING National Tax-Exempt Bond Fund 23-2978941
ING Large Cap Growth Fund 23-2978942
ING Growth and Income Fund 23-2978943
ING Mid Cap Growth Fund 23-2978944
ING Small Cap Growth Fund 23-2978981
ING Balanced Fund 23-2978982
ING Global Brand Names Fund 23-2978984
ING International Equity Fund 23-2978985
ING Emerging Markets Equity Fund 23-2978986
ING European Equity Fund 23-2978987
ING Tax Efficient Equity Fund 23-2978988
ING Focus Fund 23-2978989
ING Global Information Technology Fund 23-2978990
ING Global Real Estate Fund 23-2978991
</TABLE>
22
<PAGE> 23
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
- ------------------------------------------------------------------------------------------------------------------------------------
Chile Actual Kenya Actual Switzerland Contractual
- ------------------------------------------------------------------------------------------------------------------------------------
China Actual Lebanon Actual Taiwan Actual
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia Actual Luxembourg Actual Thailand Actual
- ------------------------------------------------------------------------------------------------------------------------------------
Cyprus Actual Malaysia Actual * Trinidad & Tobago Actual
- ------------------------------------------------------------------------------------------------------------------------------------
Czech Republic Actual Mauritius Actual * Tunisia Actual
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark Contractual Mexico Actual Turkey Actual
- ------------------------------------------------------------------------------------------------------------------------------------
Ecuador Actual Morocco Actual United Kingdom 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
- ------------------------------------------------------------------------------------------------------------------------------------
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.
23
<PAGE> 24
UNITED STATES--
<TABLE>
<CAPTION>
====================================================================================================================================
INCOME TYPE DTC FED PTC PHYSICAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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:
o Involved in a trade whose settlement either failed, or is pending over
the record date, (excluding the United States);
o On loan under a self directed securities lending program other than
IFTC's own vendor lending program;
o Known to be in a condition of default, or suspected to present a risk
of default or payment delay;
o In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon Bonds.
o 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;
o 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.
24
<PAGE> 25
EXHIBIT B -- FUNDS TRANSFER OPERATING GUIDELINES
1. 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.
2. 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.
3. 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.
4. 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.
25
<PAGE> 26
5. 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.
6. 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 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.
7. 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.
8. 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.
9. 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.
10. 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.
26
<PAGE> 27
SECURITY PROCEDURES SELECTION FORM
Please select one or more of the funds transfer security procedures
indicated below.
[X] 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.
[X] 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.
[X] 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.
[X] 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.
[X] 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.
27
<PAGE> 28
[X] 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.
[X] 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
James MacCune John Armenia
- ---------------------------- --------------------------------
Name Name
18 Campus Blvd. 18 Campus Blvd.
- ---------------------------- --------------------------------
Address Address
Newtown Square, PA 19073 Newtown Square, PA 19073
- ---------------------------- --------------------------------
City/State/Zip Code City/State/Zip Code
302-576-3862 302-576-3861
- ---------------------------- --------------------------------
Telephone Number Telephone Number
302-576-3898
- ----------------------------
Facsimile Number
- ----------------------------
SWIFT Number
ING FUNDS TRUST
By: /s/ Donald E. Brostrom
----------------------------
Title: Treasurer
-------------------------
Date: 12/11/98
--------------------------
28
<PAGE> 29
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<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
Denmark Den Danske Bank --
</TABLE>
29
<PAGE> 30
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
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. --
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)
</TABLE>
30
<PAGE> 31
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
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. --
Philippines Standard Chartered Bank --
Poland Citibank Poland S.A. --
Bank Polska Kasa Opieki S.A.
</TABLE>
31
<PAGE> 32
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
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 --
Turkey Citibank, N.A.; Ottoman Bank --
Ukraine ING Bank, Ukraine --
United State Street Bank and Trust Company, --
Kingdom London Branch
</TABLE>
32
<PAGE> 33
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
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>
33
<PAGE> 34
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW OR
EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<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 Liquidacao 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
Peoples 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;
-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>
34
<PAGE> 35
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW OR
EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<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>
35
<PAGE> 36
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW OR
EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<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. ("NECIGEF")
-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.;
</TABLE>
36
<PAGE> 37
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW OR
EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<S> <C>
-Banco de Espana; Central de Anotaciones en Cuenta
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>
37
<PAGE> 38
INVESTORS FIDUCIARY TRUST COMPANY
PROPOSED FEE SCHEDULES FOR
ING FUNDS
I. DOMESTIC CUSTODY
<TABLE>
<CAPTION>
Portfolio Net Assets Annual Basis Points
-------------------- -------------------
<S> <C>
First $500 million .75 bp
Thereafter .5bp
</TABLE>
There is a $1,000 per month minimum fee per portfolio
<TABLE>
<CAPTION>
Transactions
--------------------
<S> <C>
Fed Wires $ 6.00
State Street Bank Repos 7.00
DTC, Fed Book Entry, PTC, Maturities 8.00
Paydowns 10.00
Futures transactions - no security movement 8.00
Option expiration or exercised charge, per issue, per broker 15.00
Each option written or closing contract, per issue, per broker 25.00
New York Physical Settlements 20.00
All Other Trades 10.00
<CAPTION>
Holdings Charge
--------------------
<S> <C>
For each issue maintained - Depository $ 3.00
Vault 8.00
</TABLE>
Overdraft Charge
--------------------
Overdrafts are calculated at the monthly average Prime Rate (as
published in the Wall Street Journal) and charged on the monthly
average overdraft balance.
Balance Credits
--------------------
We offset fees with balance credits calculated at 75% of the bank
credit rate* applied to average custody collected cash balances for the
month. Balance credits can be used to offset fees. Any credits in
excess of fees are carried forward from month to month through the end
of the calendar year. For calculation purposes, we use an actual/actual
basis.
*Note: The bank credit rate is the equivalent to
the lesser of:
(OR) The average 91-day Treasury Bill discount rate for the month
The average Federal Funds rate for the month less 50 basis points.
<PAGE> 39
I. GLOBAL CUSTODY
GLOBAL ASSET BASED FEES AND TRANSACTION CHARGES BY COUNTRY.
<TABLE>
<CAPTION>
COUNTRY * HOLDING TRANSACTION COUNTRY *HOLDING CHARGES TRANSACTION
CHARGES IN BASIS CHARGES IN BASIS POINTS CHARGES
POINTS (ANNUAL (PER TRADE) (ANNUAL FEE) (PER TRADE)
FEE)
<S> <C> <C> <C> <C> <C>
Argentina 17.0 $ 75 Lebanon 40.0 $100
Australia 5.0 $ 25 Lithuania 35.0 $ 50
Austria 15.0 $ 25 Luxembourg 6.0 $ 60
Bahrein 50.0 $150 Malaysia 15.0 $ 50
Bangladesh 45.0 $125 Mauritius 45.0 $125
Belgium 15.0 $ 50 Mexico 9.0 $ 40
Bermuda 30.0 $ 90 Morocco 35.0 $100
Bolivia 45.0 $125 Namibia 45.0 $125
Botswana 35.0 $100 Netherlands 4.0 $ 40
Brazil 30.0 $ 25 New Zealand 5.0 $ 25
Bulgaria 50.0 $100 Norway 15.0 $ 50
Canada 5.0 $ 25 Oman 65.0 $150
Chile 45.0 $125 Pakistan 45.0 $125
China 25.0 $ 60 Peru 45.0 $125
Colombia 45.0 $125 Philippines 15.0 $ 50
Croatia 50.0 $100 Poland 45.0 $125
Cyprus 45.0 $125 Portugal 15.0 $ 50
Czech Republic 17.0 $ 75 Romania 75.0 $100
Denmark 5.0 $ 25 Russia 41.0 $250
Ecuador 35.0 $100 Singapore 15.0 $ 50
Egypt 35.0 $100 Slovakia 45.0 $125
Estonia 50.0 $ 50 Slovak Republic 45.0 $ 75
Euroclear 5.0 $ 25 Slovania 75.0 $100
Finland 15.0 $ 50 South Africa 5.0 $ 25
France 5.0 $ 25 South Korea 13.0 $ 65
Germany 5.0 $ 25 Spain 15.0 $ 50
Ghana 35.0 $100 Sri Lanka 20.0 $ 70
Greece 45.0 $125 Swaziland 50.0 $200
Hong Kong 15.0 $ 50 Sweden 15.0 $ 50
Hungary 45.0 $125 Switzerland 5.0 $ 25
Iceland 35.0 $ 50 Taiwan 35.0 $100
India 45.0 $125 Thailand 15.0 $ 50
Indonesia 15.0 $ 50 Trinidad & Tobago 35.0 $100
Ireland 15.0 $ 50 Tunisia 45.0 $125
Israel 35.0 $ 55 Turkey 20.0 $ 75
Italy 5.0 $ 25 Ukraine 50.0 $275
Ivory Coast 75.0 $150 United Kingdom 5.0 $ 25
Jamaica 35.0 $ 50 Uruguay 45.0 $125
Japan 5.0 $ 25 Venezuela 45.0 $125
Jordan 45.0 $125 Zambia 35.0 $100
Kenya 35.0 $100 Zimbabwe 35.0 $100
Latvia 65.0 $ 50
</TABLE>
<PAGE> 40
III SPECIAL SERVICES
Activities of a non-recurring nature such as fund consolidations or
reorganizations, extraordinary security shipments and the preparation
of special reports are subject to negotiation. Fees for SEC yield
calculation, self-directed securities lending, SaFIRe financial
reporting, client information delivery product, master/feeder
accounting, and other special items are also negotiated separately.
IV REIMBURSABLE EXPENSES
A billing for the recovery of reimbursable expenses is made as of the
end of each month. Reimbursable expenses include, but are not limited
to mailing expenses, research services, legal fees, telephone,
sub-custodian charges such as stamp duties and proxy fees, audit
letter, and lease lines.
V PAYMENT AND TERMS
The above fees are charged against the portfolio's custodian checking
account five (5) days after the invoice is mailed to your offices. The
above fee schedule is applicable for selections made and communicated
within 90 days of the date of this proposal. The fees are guaranteed
for a one-year period commencing on the effective date of the service
agreement between IFTC and the client. All changes to the fee schedule
will be communicated in writing at least 60 days prior to their
effective date.
ING FUNDS INVESTORS FIDUCIARY TRUST COMPANY
By: /s/Donald E. Brostrom By: /s/Darcy L. Orr
Title: Treasurer Title: Vice President
Date: 2/22/99 Date: 2/22/99
<PAGE> 1
Exhibit 9a
ING FUNDS SERVICES CO. LLC
ACCOUNT SERVICES AGREEMENT
__________, 199_
Ladies and Gentlemen:
We, ING Funds Services Co. LLC, wish to enter into this Account Services
Agreement (the "Agreement") with you, pursuant to which you will provide the
services described herein to accounts holding beneficial interests in the ING
Funds Trust (the "Trust") and each series of the Trust set forth on Schedule 1
hereto, as such Schedule may be revised from time to time (each, a "Fund"). 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 account 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 account 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 of 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 accounts 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 used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services.
3. Compensation. In consideration of the services and facilities
provided by you
<PAGE> 2
hereunder, we will pay to you 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 of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
amended.
(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 you 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 responsibilities under this Agreement for
which you may be 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.
- 2 -
<PAGE> 3
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 Services Co. LLC, c/o 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 Trust Instrument 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 Trust.
12. 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 SERVICES CO. LLC
By:________________________
Name:
Title:
Agreed to:
(Name of Authorized Dealer)
- 3 -
<PAGE> 4
By:________________________
Name:
Title:
Address:
Fax No: ________
Telephone No: ___________
Telex No: ____________
Firm Taxpayer Identification No: ___________
- 4 -
<PAGE> 5
SCHEDULE I
Name of Fund
- ------------
- 5 -
<PAGE> 6
SCHEDULE 2
Compensation Payable
- --------------------
<TABLE>
<CAPTION>
Name of Fund Class of Shares Fee Rate
- ------------ --------------- --------
<S> <C> <C>
</TABLE>
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 account 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.
For purposes of the Class B, C and X shares, the calculation, accrual
and payment of this fee shall begin in the 13th month that Client Shares are
held by an investor.
- 6 -
<PAGE> 1
Exhibit 9b
FUND SERVICES AGREEMENT
THIS AGREEMENT is made this 30th day of October, 1998 by and between ING FUNDS
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, account servicing 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
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 a 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 account servicing agent for the
Trust and ING Fund Services hereby accepts such appointments and agrees to
perform the duties hereinafter set forth.
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 account servicing and
administrative agent functions in
<PAGE> 3
3
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 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
<PAGE> 4
4
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
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.
<PAGE> 5
5
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. In addition to those fees set forth in
Section 6.1, the Trust on behalf of each of the Funds agrees to pay, and will be
billed separately for, reasonable out-of-pocket expenses incurred by ING Fund
Services in the performance of its duties hereunder.
6.2 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.
6.3 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.
6.4 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.
6.5 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;
<PAGE> 6
6
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 6.5 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.
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 organizational documentation to enter into and perform this Agreement;
(c) all requisite company 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.
<PAGE> 7
7
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 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;
(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
<PAGE> 8
8
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 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.
<PAGE> 9
9
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 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. 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
12.2 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
<PAGE> 10
10
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.
12.3 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 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.
12.4 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.
12.5 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
<PAGE> 11
11
(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.
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 two 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
<PAGE> 12
12
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 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.
<PAGE> 13
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 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: /s/ Donald E. Brostrom By: /s/ Louis S. Citron
-------------------------------- ----------------------------
Title: Treasurer Title: Vice President
----------------------------- -------------------------
Attest By: /s/ Rachelle I. Rehner Attest By: /s/ Rachelle I. Rehner
------------------------- ------------------------
Title: Secretary Title: Secretary
----------------------------- ----------------------------
<PAGE> 14
SCHEDULE A
LIST OF PORTFOLIOS
Fund Name Date Approved
- --------- -------------
ING Money Market Fund October 30, 1998
ING U.S. Treasury Money Market Fund October 30, 1998
ING Intermediate Bond Fund October 30, 1998
ING High Yield Bond Fund October 30, 1998
ING International Fixed Income Fund October 30, 1998
ING Mortgage Income Fund October 30, 1998
ING National Tax-Exempt Bond Fund October 30, 1998
ING Large Cap Growth Fund October 30, 1998
ING Growth & Income Fund October 30, 1998
ING Mid Cap Growth Fund October 30, 1998
ING Small Cap Growth Fund October 30, 1998
ING Balanced Fund October 30, 1998
ING Global Brand Names Fund October 30, 1998
ING International Equity Fund October 30, 1998
ING Emerging Markets Equity Fund October 30, 1998
ING European Equity Fund October 30, 1998
ING Tax Efficient Fund October 30, 1998
ING Focus Fund October 30, 1998
ING Global Information Technology Fund October 30, 1998
ING Global Real Estate Fund October 30, 1998
ING Internet Fund March 26, 1999
ING Quality of Life Fund March 26, 1999
ING National Tax-Exempt Money Market Fund March 26, 1999
<PAGE> 15
SCHEDULE B
DUTIES OF ING FUND SERVICES
I. TRANSFER AGENCY SERVICES.
Perform transfer agency and dividend disbursing services as may be
required, including, but not limited to:
o Receive for acceptance, order for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to
the custodian of the Fund
o Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate shareholder account
o Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to
the custodian
o At the appropriate time as and when it receives monies paid to it
by the custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as
instructed by the Fund
o Effect transfers of Shares by the registered owners therof upon
receipt of appropriate instructions
o Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the Shares
o Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing
o Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares which
are authorized, based upon data provided to it by the Fund, and
issued and outstanding.
II. FUND ACCOUNTING
Perform fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of each Fund as may be
required by
<PAGE> 16
Section 31(a) of the Investment Company Act of 1940, as amended),
including, but not limited to:
o Daily, weekly, and monthly reporting
o Portfolio and general ledger accounting
o Daily valuation of all portfolio securities
o Daily valuation and NAV calculation
o Comparison of NAV to market movement
o Review research of price tolerance/fluctuation report to market
movements and events
o Research of items appearing on the price exception report
o Weekly cost monitoring along with mark-to-market valuations in
accordance with Rule 2a-7
o Security trade processing
o Daily cash and position reconciliation with the custodian bank
o Daily updating of price and distribution rate information to the
transfer agent/insurance agent
o Daily support and report delivery to portfolio management
o Daily calculation of portfolio adviser fees and waivers
o Daily calculation of distribution rates
o Daily investable cash call
o Monitor and research aged receivable
o Collect aged income items and perform reclaims
o Update NASDAQ reporting
o Daily maintenance of each portfolio's general ledger including
expense accruals
<PAGE> 17
o Daily NAV per share notification to other vendors as required
o Calculation of 30 day SEC yields and total returns
o Preparation of month-end reconciliation package
o Monthly reconciliation of portfolio expense records
o Application of monthly pay down gain/loss
o Preparation of all annual and semi-annual audit work papers
III. ACCOUNT SERVICING
Perform account servicing services as may be required, including, but
not limited to:
o Maintaining shareholder accounts which shall include name,
address, taxpayer identification number, and number of shares
o Preparation of shareholder statements
o Preparation of confirmations
o Preparation of shareholder lists
o Mailing shareholder communication, including, but not limited to,
shareholder statements, confirmations, prospectuses, statements
of additional information, annual and semi-annual reports and
proxy statements
o Tabulating proxies
o Withholding taxes on U.S. resident and non-resident accounts
where applicable
o Preparation and filing of U.S. Treasury Department Forms 1099 and
other appropriate forms required by applicable statutes, rules
and regulations
o Providing other services directly to accounts as may be required
<PAGE> 18
SCHEDULE C
FEE SCHEDULE
Each Fund may pay ING Fund Services on an annual basis the following amounts:
o $40,000 for fund accounting services plus out-of-pocket expenses
o $17 per account for transfer agency services plus out-of-pocket expenses
o 0.25% of average daily net assets of the Class A shares, Class B shares,
Class C shares and Class X shares for account servicing services
<PAGE> 1
EXHIBIT 9C
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 14th day of December, 1998 (the "Effective
Date") between ING FUND SERVICES CO., LLC (the "Company"), a Delaware limited
liability company having its principal place of business at 18 Campus Blvd.,
NewTown Square, Pennsylvania 19073 and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), a Massachusetts corporation with principal offices
at 4400 Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Company manages the operations of the ING Funds Trust (the
"Fund"); and
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets (a "Portfolio"); and
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14; and
WHEREAS, the Company is authorized by the Fund to engage service
providers for the performance of certain services for the Fund and the
Portfolios; and
WHEREAS, the Company desires to appoint Investor Services Group as the
Fund's fund accounting agent, and Investor Services Group desires to accept such
appointment.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Company and Investor Services Group 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) "Articles of Incorporation" shall mean the
Articles of Incorporation, Declaration of Trust, or other similar
organizational document as the case may be, of the Fund as the same may
be amended from time to time.
(b) "Authorized Person" shall be deemed to include
(i) any authorized officer of the Company; or (ii) any person, whether
or not such person is an officer or employee of the Company, duly
authorized to give Oral Instructions or Written Instructions on
-1-
<PAGE> 2
behalf of the Company as indicated in writing to Investor Services
Group from time to time.
(c) "Board Members" shall mean the Directors or
Trustees of the governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of
Directors or Board of Trustees of the Fund, as the case may be.
(e) "Commencement Date" shall mean the date on which
Investor Services Group commences providing services to the Company
pursuant to this Agreement.
(f) "Commission" shall mean the Securities and
Exchange Commission.
(g) "Custodian" refers to any custodian or
subcustodian of securities and other property which the Fund 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.
(h) "1934 Act" shall mean the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder, all as
amended from time to time.
(i) "1940 Act" shall mean the Investment Company Act
of 1940 and the rules and regulations promulgated thereunder, all as
amended from time to time.
(j) "Oral Instructions" shall mean instructions,
other than Written Instructions, actually received by Investor Services
Group from a person reasonably believed by Investor Services Group to
be an Authorized Person;
(k) "Portfolio" shall mean each separate series of
shares offered by the Fund representing interests in a separate
portfolio of securities and other assets;
(l) "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 1940 Act.
(m) "Shares" refers collectively to such shares of
capital stock or beneficial interest, as the case may be, or class
thereof, of each respective Portfolio of the Fund as may be issued from
time to time.
(n) "Shareholder" shall mean a record owner of Shares
of each respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by Investor
Services Group to be an Authorized Person and actually received by
Investor Services Group. Written Instructions shall include
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manually executed originals and electronic transmissions, including
telefacsimile of a manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Company, on behalf of the Portfolios, hereby appoints and
constitutes Investor Services Group as its fund accounting agent for the Fund
and Investor Services Group hereby accepts such appointments and agrees to
perform the duties hereinafter set forth. This Agreement shall be effective as
of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Investor Services Group shall be responsible for the
following: performing the customary services of a fund accounting agent
for the Fund, as more fully described in the written schedule of Duties
of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and subject to the supervision and direction of
the Board of Directors of the Fund.
(b) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group 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 Directors, 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 performing its duties under this Agreement, Investor Services Group: (a)
will act in accordance with the Articles of Incorporation, By-Laws, Prospectuses
and with the Oral Instructions and Written Instructions of the Company and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal or state laws and regulations; and (b) will consult with
legal counsel to the Fund, as necessary and appropriate. Furthermore, Investor
Services Group 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 Fund or any of its Portfolios and shall not provide
any investment advisory services to the Fund or any of its Portfolios.
3.3 Investor Services Group agrees to provide the services described
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement of
the parties.
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3.4 In addition to the duties set forth herein, Investor Services Group
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 Company
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group 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 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Company and will be preserved,
maintained and made available in accordance with such section, and will be
surrendered promptly to the Company on and in accordance with the Company's
request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Company of such request and secure Written Instructions as to the handling
of such request. Investor Services Group 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 Company Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions reasonably 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 Company. Investor Services Group 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 Company and the
proper countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Company and may seek advice from legal counsel for the
Fund, 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 Fund or for
Investor Services Group. Written Instructions requested by Investor Services
Group will be provided by the Company within a reasonable period of time.
5.3 Investor Services Group, 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 Company only if said representative is
an Authorized Person. The Company agrees that
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all Oral Instructions shall be followed within one business day by confirming
Written Instructions, and that the Company's failure to so confirm shall not
impair in any respect Investor Services Group's right to rely on Oral
Instructions.
Article 6 Compensation.
6.1 The Company on behalf of each of the Portfolios will compensate
Investor Services Group 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 the event that Investor Services Group has failed to meet a
specific Performance Standard, as set forth on Exhibit 1 of Schedule A, in two
of any rolling three month period, the Company may reduce the amount of fees due
to Investor Services Group under this Agreement for such service, excluding
out-of-pocket expenses, by an amount equal to five percent (5%) of the fees for
such service for the third month. For purposes of the foregoing fee reduction,
Investor Services Group's obligation to meet the Performance Standards shall be
measured in the aggregate with respect to all Portfolios. Notwithstanding the
foregoing, the Company's rights under this Section 6.2 shall not become
effective until ninety (90) days following the Commencement Date.
6.3 In addition to those fees set forth in Section 6.1 above, the
Company on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by Investor Services Group 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 limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder and previously approved by the Company.
6.4 The Company on behalf of each of the Portfolios agrees to pay all
fees and out-of-pocket expenses to Investor Services Group by Federal Funds Wire
within thirty (30) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts.
6.5 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.
6.6 The Company acknowledges that the fees that Investor Services Group
charges the Company under this Agreement reflect the allocation of risk between
the parties, including the exclusion of remedies in Article 12. Modifying the
allocation of risk from what is stated here would affect the fees that Investor
Services Group charges, and in consideration of those fees, the Company agrees
to the stated allocation of risk.
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6.7 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group 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
Investor Services Group and the Company. The compensation of such person or
persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Company in such respect.
6.8 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Company: 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 Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.8
which may be properly payable by the Company or the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the
Company shall, on or before the date this Agreement goes into effect, but in any
case within a reasonable period of time for Investor Services Group to prepare
to perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, 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 Investor Services
Group in connection with the services provided by Investor Services Group to the
Company herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Company a limited
license to the Investor Services Group System for the sole and limited purpose
of having Investor Services Group 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.
8.3 In the event that the Company, including any affiliate or agent of
the Company or any third party acting on behalf of the Company is provided with
direct access to the Investor Services Group System for either account inquiry
or to transmit transaction information, including but not limited to
maintenance, exchanges, purchases and redemptions, such direct access capability
shall be limited to direct entry to the Investor Services Group System by means
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of on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry or any other transmission method approved by Investor Services Group and
any other non-conforming method of transmission of information to the Investor
Services Group System is strictly prohibited without the prior written consent
of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Company
that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(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;
(d) all equipment and software provided or used by Investor
Services Group or any of its subsidiaries or divisions in connection
with rendering services to the Company under the terms of this
Agreement, include or shall include design and performance capabilities
so that prior to, during, and after December 31, 1999 (the "Millennium
Date Change") they will not malfunction, produce invalid or incorrect
results, cause an interruption in or diminish the quality of the
services provided to the Company, or abnormally cease to function due
to the Millennium Date Change. Such design and performance capabilities
shall include without limitation the ability to recognize and process
the year 2000 and thereafter and to manage and manipulate data
involving dates, including without limitation, (i) single century and
multi-century formulas and date values without resulting in the
generation of incorrect values involving such dates or causing an
abnormal ending, (ii) date data interfaces with functionalities and
data fields that indicate the century, and (iii) date-related functions
that indicate the century; and
(e) all equipment and software provided by Investor Services
Group in connection with the services rendered to the Company under the
terms of this Agreement, as amended include or shall include design and
performance capabilities so that prior to, during, and after the
calendar year 2000, they will not malfunction, produce invalid or
incorrect results, or abnormally cease to function due solely to the
year 2000 date change. Such design and performance capabilities shall
include without limitation the ability to recognize the century and to
manage and manipulate data involving dates, including single century
and multi-century formulas and date values, without resulting in the
generation of incorrect values involving such dates or causing an
abnormal ending; date data interfaces with functionality's and data
fields that indicate the century; and date-related functions that
indicate the century.
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(f) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Company represents and warrants to Investor Services Group
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 Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, 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 1940 Act on behalf of each of the Portfolios 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;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered
and lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the
Company on behalf of each Portfolio shall indemnify and hold Investor Services
Group 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 Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by Investor Services
Group in the performance of its duties hereunder;
(b) Investor Services Group's 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 Investor Services
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Group from the Company, or any authorized third party acting on behalf
of the Company, including but not limited to the prior transfer agent
for the Fund, in the performance of Investor Services Group's 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 Company
on behalf of the applicable Portfolio;
(d) the offer or sales of shares by the principal underwriter
of the Fund or any broker-dealer or service organization 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 Company's refusal or failure to comply with the terms
of this Agreement, or any Claim which arises out of the Company's
negligence or misconduct or the breach of any representation or
warranty of the Company made herein.
10.2 The Company agrees and acknowledges that Investor Services Group
has not prior to the date hereof assumed, and will not assume, any obligations
or liabilities arising out of the conduct by the Company prior to the date
hereof of those duties which Investor Services Group has agreed to perform
pursuant to this Agreement. The Company further agrees to indemnify Investor
Services Group against any losses, claims, damages or liabilities to which
Investor Services Group may become subject in connection with the conduct by the
Company or its agent of such duties prior to the date hereof.
10.3 Investor Services Group shall indemnify and hold the Company
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 the Company or for which the
Company 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 Investor Services Group in
the performance of its duties hereunder.
10.4 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
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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 10
shall survive the termination of this Agreement.
10.4 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.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 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 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Company unless said errors are caused
by Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY TO THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR LOST
PROFITS, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of two (2) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, the parties agree to
renegotiate in good faith the terms of this Agreement.
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13.3 In the event a termination notice is given by the Company, all
expenses associated with movement of records and materials and conversion
thereof to a successor service provider will be borne by the Company.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 (a) In the event that Investor Services Group has failed to meet a
specific performance standard category, as set forth in Exhibit 1 of Schedule A,
with respect to the Fund in four consecutive months of any rolling twelve month
period (a "Termination Event"), the Company may terminate this Agreement. The
Company will provide Investor Services Group with sixty (60) days notice in
writing if the Company intend to exercise its option under this Section 13.5;
provided that such notice must be given to Investor Services Group no later than
ninety (90) days following notification of the Termination Event.
Notwithstanding the foregoing, the Company's rights under this Section 13.5,
shall not become effective until ninety (90) days following the Commencement
Date.
(b) For purposes of the Company's option to terminate this
Agreement under Section 13.5(a) above, Investor Services Group's obligation to
meet the Performance Standards shall be measured in the aggregate with respect
to all of the Portfolios of the Fund.
13.6 (a) Notwithstanding anything contained in this Agreement to the
contrary and except as provided in Sections 13.4, 13.5, 13.6(b), and 13.7,
should the Company desire to move any of the services provided by Investor
Services Group hereunder, to a successor service provider prior to the
expiration of the Initial Term, or should the Company or any of its affiliates
take any action which would result in Investor Services Group ceasing to provide
fund accounting services to the Company prior to the expiration of the Initial
Term, the payment of fees to Investor Services Group as set forth herein shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the Initial Term and calculated at the asset and/or
Shareholder account levels, as the case may be, on the date notice of
termination was given to Investor Services Group.
(b) Notwithstanding anything contained in this Agreement to the
contrary, in the event that a merger, acquisition or change in control of the
Company, the Fund or an affiliate (as
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defined under the 1940 Act) of the foregoing results, either directly or
indirectly, in the termination of this Agreement, the Company shall pay to
Investor Services Group within 30 days of the notice of termination the fee set
forth in Schedule C (the "Merger/Termination Fee"). Such Merger/Termination Fee
shall not be payable if Investor Services Group will provide or continues to
provide fund accounting services to either the legal entity which holds the
portfolio assets of the Fund determined as of the date of the constructive
termination of this Agreement (the "Successor Fund") or the direct provider of
such fund accounting services to the Successor Fund to a successor in interest
of the Fund services substantially similar to those services provided to the
Fund hereunder.
13.7 This Agreement may be terminated by the Company without penalty
(a) in the event of its assignment by Investor Services Group to a third-party
not affiliated with Investor Services Group as of the Effective Date or (b) in
the event that the Company and Investor Services Group in good faith determine
that Investor Services Group is no longer able to provide fund accounting
services to the Fund in accordance with prevailing industry standards and for
commercially reasonable fees; provided that 45 days prior written notice of
termination must be given to Investor Services Group within 120 days following
such event of termination.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Company
desires to have Investor Services Group render services as fund accounting agent
under the terms hereof, the Company shall so notify Investor Services Group in
writing, and if Investor Services Group agrees in writing to provide such
services, Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 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
Company and Investor Services Group 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 Company and Investor Services
Group 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 Company and Investor Services Group 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 Company and Investor Services Group 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 15.1.
Notwithstanding the previous sentence, in no event shall either the Company or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
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15.2 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 Company or
Investor Services Group, their 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 Company or
Investor Services Group 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.
15.3 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.
15.4 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
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(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 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 in any country, (iii) any act or omission of the other party or
any governmental 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 17 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;
provided, however, that Investor Services Group may, in its sole discretion,
assign all its right, title and interest in this Agreement to an affiliate,
parent or subsidiary. Investor Services Group may, in its sole discretion,
engage subcontractors to perform any of the obligations contained in this
Agreement to be performed by Investor Services Group.
Article 18 Equipment Failures.
Notwithstanding any other provision in this Agreement, in the event of
equipment failures or the occurrence of events beyond Investor Services Group's
control which render its performance under this Agreement impossible, Investor
Services Group shall at no additional expense to the Company take reasonable
steps to minimize service interruptions. Investor Services Group represents that
the various procedures and systems which Investor Services Group has implemented
with regard to safekeeping from loss or damage attributable to fire, theft or
any other cause of the records, and other data of the Fund and Investor Services
Group's records, data, equipment, facilities and other property used in
performance of its obligations hereunder are reasonably adequate and are covered
by a reasonably adequate disaster recovery plan, and it will make such changes
therein from time to time as are reasonably required for the secure performance
of its obligations hereunder.
Article 19 Notice.
-14-
<PAGE> 15
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Company or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Company:
ING Fund Services Co., LLC
18 Campus Blvd., Suite 200
NewTown Square, Pennsylvania 19073
Attention: President
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the State of Delaware, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Company hereby submit themselves to the
exclusive jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement 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.
Article 23 Publicity.
Neither Investor Services Group nor the Company shall release or
publish news releases, public announcements, advertising or other publicity
relating to this Agreement or to the transactions contemplated by it without the
prior review and written approval of the other party; provided, however, that
either party may make such disclosures as are required by legal,
-15-
<PAGE> 16
accounting or regulatory requirements after making reasonable efforts in the
circumstances to consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Company shall not recruit, solicit, employ or engage, for the Company or
others, Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to 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. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
ING FUND SERVICES CO. LLC
By: /s/Donald E. Brostrom
Title: CFO - ING Mutual Funds Management Co. LLC
-16-
<PAGE> 17
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Jylanne Dunne
Title: Senior Vice President
-17-
<PAGE> 18
SCHEDULE A
LIST OF PORTFOLIOS
ING Large Cap Growth Fund
ING Growth and Income Fund
ING Tax Efficient Equity Fund
ING Mid Cap Growth Fund
ING Small Cap Growth Fund
ING Global Brand Names Fund
ING International Equity Fund
ING Balanced Fund
ING Global International Technology Fund
ING Focus Fund
ING Emerging Markets Equity Fund
ING European Equity Fund
ING Global Real Estate Fund
ING Intermediate Bond Fund
ING High Yield Bond Fund
ING International Bond Fund
ING Federal Tax-Exempt Bond Fund
ING Mortgage Income Fund
ING Money Market Fund
ING US Treasury Money Market Fund
-18-
<PAGE> 19
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
FUND ACCOUNTING SERVICES
Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
- - Daily, Weekly, and Monthly Reporting
- - Portfolio and General Ledger Accounting
- - Daily Valuation of all Portfolio Securities
- - Daily Valuation and NAV Calculation
- - Comparison of NAV to market movement
- - Review research of price tolerance/fluctuation report to market
movements and events
- - Research of items appearing on the price exception report
- - Weekly cost monitoring along with market-to-market valuations in
accordance with Rule 2a-7
- - Security trade processing
- - Daily cash and position reconciliation with the custodian bank
- - Daily updating of price and distribution rate information to the
Transfer Agent/Insurance Agent
- - Daily support and report delivery to Portfolio Management
- - Daily calculation of Portfolio adviser fees and waivers
- - Daily calculation of distribution rates
- - Daily investable cash call
- - Monitor and research aged receivables
-19-
<PAGE> 20
- - Collect aged income items and perform reclaims
- - Update NASDAQ reporting
- - Daily maintenance of each Portfolio's general ledger including expense
accruals
- - Daily NAV per share notification to other vendors as required
- - Calculation of 30-day SEC yields and total returns
- - Preparation of month-end reconciliation package
- - Monthly reconciliation of Portfolio expense records
- - Application of monthly pay down gain/loss
- - Preparation of all annual and semi-annual audit work papers
-20-
<PAGE> 21
Exhibit 1 to Schedule B
Performance Standards
Investor Services Group's obligation to meet the following Performance Standards
shall be measured in the aggregate with respect to all Portfolios of the Fund.
Investor Services Group will report to the Company on a monthly basis the
percent of items completed within standard as well as a quality rating. A
pass/fail determination for contractual penalties will however be based on the
categories listed below. For example, the accuracy of NAVs will be reported to
the Company on an individual basis and as a collective group. Investor Services
Group will receive a "fail" for the month if the collective score for all
categories falls below the contractual level.
Fund Accounting
A. NAVs calculated accurately, provided that all information received from
external vendors or Fund managers is correct
B. Information to nasdaq is reported accurately and within appropriate
time frames
C. Daily bulletin is released by 6:30 p.m. Eastern Time, provided that all
information received from external vendors or Fund managers is received
on a timely basis
D. Accurate Cash Availability will be provided by 9:30 a.m. Eastern Time
assuming supersheets are received by 8:30 a.m. Eastern Time.
The above standards will be adhered to at least 98% of the time measured on an
aggregate and monthly basis.
-21-
<PAGE> 22
SCHEDULE C
FEE SCHEDULE
1. Fund Accounting Fees:
$35,000 per Portfolio per annum plus $5,000 per class per
annum for each\additional class above four (4) classes
2. Other Fees and Expenses:
- Microfiche/microfilm production, including imaging
- Ad hoc reports, as agreed upon by the Company
3. Programming Costs
(a) Dedicated Team:
Programmer $100,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements to be used for any customized programming
requests (Non Dedicated Team):
Programmer $135.00 per hour
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the above fees once per calendar year, upon thirty
(30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
4. Termination Fees:
(a) Merger/Termination Fee: $100,000
-1-
<PAGE> 23
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Company shall reimburse Investor Services Group monthly for
applicable out-of-pocket expenses, including, but not limited to the following
items:
- - Magnetic media tapes and freight
- - Printing costs, including certificates, envelopes, checks and
stationery
- - Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Company
- - Due diligence mailings
- - Telephone and telecommunication costs, including all lease, maintenance
and line costs
- - Proxy solicitations, mailings and tabulations
- - Daily & Distribution advice mailings
- - Shipping, Certified and Overnight mail and insurance
- - Year-end form production and mailings
- - Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- - Duplicating services
- - Courier services
- - Incoming and outgoing wire charges
- - Federal Reserve charges for check clearance
- - Overtime, as approved by the Company
- - Temporary staff, as approved by the Company
- - Travel to and from Board meetings
- - Travel and entertainment, as approved by the Company
- - Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- - Third party audit reviews
- - Ad hoc SQL time
- - Insurance
- - Pricing services (or services used to determine Fund NAV)
- - Forms and supplies for the preparation of Board meetings and other
materials for the Company
- - Customized programming requests
- - SAS 70
- - Cold Storage
- - Document Retrieval
- - Vendor pricing comparison
- - Manual pricing
- - Such other miscellaneous expenses reasonably incurred by Investor
Services Group in performing its duties and responsibilities under this
Agreement.
-2-
<PAGE> 24
The Company agrees that postage and mailing expenses will be paid on
the day of or prior to mailing as agreed with Investor Services Group. In
addition, the Company will promptly reimburse Investor Services Group for any
other unscheduled expenses incurred by Investor Services Group whenever the
Company and Investor Services Group mutually agree that such expenses are not
otherwise properly borne by Investor Services Group as part of its duties and
obligations under the Agreement.
-3-
<PAGE> 25
SCHEDULE E
FUND DOCUMENTS
- - Certified copy of the Articles of Incorporation of the Fund, as amended
- - Certified copy of the By-laws of the Fund, as amended
- - Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
- - Copies of all agreements between the Fund and its service providers
- - A listing of all jurisdictions in which each Portfolio is registered
and lawfully available for sale as of the date of this Agreement and
all information relative to the monitoring of sales and registrations
of Fund shares in such jurisdictions
- - Each Fund's most recent post-effective amendment to its Registration
Statement
- - Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements thereto
-4-
<PAGE> 1
Exhibit 9d
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"), for the Class
A, Class B, Class C and Class X shares 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 Class A, Class B, Class C and Class X shares,
respectively, 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
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 10
[Letterhead of Paul, Weiss, Rifkind, Wharton & Garrison]
April 15, 1999
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
ING Funds Trust (File Nos. 333-59745 and 811-08895)
Dear Sir/Madam:
As counsel to ING Funds Trust (the "Trust"), we have
reviewed Post-Effective Amendment No. 1 to the Trust's Registration Statement on
Form N-1A (the "Amendment"). The Amendment is being filed pursuant to
paragraph(a) of Rule 485 of the 1933 Act and it is proposed that it will become
effective on July 1, 1999.
We hereby consent to the filing of this consent as an exhibit
to the Trust's Registration Statement and to the reference to our name in the
documents comprising said Registration Statement and the shares being registered
will, when sold, be legally used, fully paid, and nonassessable.
If you have any questions or comments concerning the enclosed,
please telephone Scott R. MacLeod at (212) 373-3515.
Very truly yours,
/s/Scott R. MacLeod
JMJ:52189
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the inclusion of our report dated October 27, 1998, on 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 in this
Registration Statement (Form N-1A No. 333-59745 and 811-08895) of ING Funds
Trust.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
April 14, 1999
<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 26th day of October, 1998.
ING FUNDS TRUST
Attest:
/s/ Charles Eng By: /s/ Donald E. Brostrom
- ------------------------ -------------------------
Name: Donald E. Brostrom
Title: CFO
ING AMERICA INSURANCE
HOLDINGS, INC.
Attest:
/s/ Fran E. Young By: /s/ David Pendergrass
- ------------------------ -------------------------
Name: David Pendergrass
Title: VP & Treasurer
<PAGE> 2
EXHIBIT A
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NAME OF FUND NUMBER OF SHARES PRICE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ING Money Market Fund
Class A 2,380.960 $1.00
Class B 2,380.950 $1.00
Class C 2,380.950 $1.00
- ------------------------------------------------------------------------------------------------------------------
ING Intermediate Bond Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING High Yield Bond Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING International Bond Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Large Cap Growth Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Growth and Income Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Mid Cap Growth Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Small Cap Growth Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Global Brand Names Fund
Class A 238.095 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING International Equity Fund
Class A 238.095 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING European Equity Fund
Class A 238.095 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NAME OF FUND NUMBER OF SHARES PRICE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ING Tax Efficient Equity Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Focus Fund
Class A 238.096 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
ING Global Information
Technology Fund
Class A 238.095 $10.00
Class B 238.095 $10.00
Class C 238.095 $10.00
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 15a
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
<PAGE> 2
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 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).
<PAGE> 3
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
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: /s/ John J. Pileggi By: /s/ Edward J. Berkson
---------------------------- ----------------------------
<PAGE> 1
Exhibit 15b
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;
<PAGE> 2
(b) it 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, Class C or 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, Class C or Class X shares of
the Fund present (in person or by proxy) and entitled to vote at such
<PAGE> 3
meeting, if the holders of 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: /s/ John J. Pileggi By: /s/ Edward J. Berkson
----------------------------- -----------------------------
<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 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
<PAGE> 2
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) 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.
(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.
- 2 -
<PAGE> 3
(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.
(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
- 3 -
<PAGE> 4
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 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 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 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, DST Systems, Inc., within three business
days of a receipt and
- --------
* For purpose of the Class B, C and X shares, the calculation, accrual and
payment of this fee shall begin in the 13th month that Client Shares are held by
an investor.
- 4 -
<PAGE> 5
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.
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
- 5 -
<PAGE> 6
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 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.
- 6 -
<PAGE> 7
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.
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.
- 7 -
<PAGE> 8
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:
Address:
Fax No: ___________
Telephone Number: ______________
Telex No: _____________________
Firm Taxpayer Indentification: __________________
- 8 -
<PAGE> 9
SCHEDULE 1
Name of Fund
- ------------
- 9 -
<PAGE> 10
SCHEDULE 2
Distribution Compensation Payable under Rule 12b-1 Plan
- -------------------------------------------------------
<TABLE>
<CAPTION>
Name of Fund Class of Shares Fee Rate
- ------------ --------------- --------
<S> <C> <C>
</TABLE>
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
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.
For purposes of the Class B, C and X shares, the calculation, accrual
and payment of this fee shall begin in the 13th month that Client Shares are
held by an investor.
- 10 -
<PAGE> 11
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 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.
B. 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 ("Cut-off Time"). You understand that Instructions
received in proper form by the Trust or its designated agent after the Cut-off
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.
- 11 -
<PAGE> 12
E. 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.
- 12 -
<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 & 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, ING Internet Fund, ING Quality of Life Fund, ING
National Tax-Exempt Money Market 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 ING Money Market, ING U.S.
Treasury Money Market Fund and ING National Tax-Exempt Money Market Fund are
sold subject to an initial sales charge as follows:
<TABLE>
<CAPTION>
AMOUNT OF SALE EQUITY FUNDS FIXED INCOME FUNDS
SALES CHARGE AS SALES CHARGE AS
PERCENTAGE OF THE PERCENTAGE OF THE
OFFERING 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%
$1,000,000 or more* ............................... -0- -0-
</TABLE>
<PAGE> 2
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 Fund Services 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 Fund
Services 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
<PAGE> 3
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.
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 Fund Services 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
0% in year 8
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 Fund
Services 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). The ING National Tax-Exempt Bond Fund and ING
National Tax-Exempt Money Market Fund do not offer Class X shares.
CLASS I SHARES
Class I shares are sold without an initial sales charge and are not
subject to a contigent deferred sales charge. In addition, Class I shares are
not subject to a distribution fee pursuant to Rule 12b-1, are not subject to a
shareholder servicing fee and are not subject to a fund services fee. Class I
shares are offered only to retirement plans affiliated with ING Group. The ING
National Tax-Exempt Bond Fund and ING National Tax-Exempt Money Market Fund do
not offer Class I shares.
<PAGE> 4
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 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.
<PAGE> 1
Exhibit A
POWER OF ATTORNEY
We, the undersigned Trustees of ING Funds Trust (the "Funds"), an
open-ended, diversified, management investment company, organized as a Delaware
business trust, do hereby constitute and appoint John J. Pileggi, Louis S.
Citron, and Steven R. Howard and each of them individually, our true and lawful
attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable the Funds to comply with:
(i) the Securities Act of 1933, as amended, and any rules,
regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the registration
under such Securities Act of 1933, as amended, of shares of beneficial
interest of the Funds to be offered by the Funds;
(ii) the Investment Company Act of 1940, as amended, and any
rules, regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the registration of
the Funds under the Investment Company Act of 1940, as amended; and
(iii) state securities laws and any rules, regulations, orders
or other requirements of state securities commissions, in connection
with the registration under state securities laws of the Funds and with
the registration under state securities laws of shares of beneficial
interest of the Funds to be offered by the Funds;
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Funds in its behalf and to affix its seal, and
to sign the name of such Trustee in his behalf as such Trustee to any amendment
or supplement (including post-effective amendments) to the registration
statement or statements filed with the Securities and Exchange Commission under
such Securities Act of 1933, as amended, and such Investment Company Act of
1940, as amended, and to execute any instruments or documents filed or to be
filed as part of or in connection with such registration statement or
statements, and to execute any instruments or documents filed or to be filed as
a part of or in connection with compliance with state securities laws,
including, but not limited to, all state filings for any purpose, state filings
in connection with corporate or trust organization or amending corporate or
trust documentation, filings for purposes of state tax laws and filings in
connection with blue sky
1
<PAGE> 2
regulations; and the undersigned hereby ratifies and confirms all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned place their hands as of this 29th
day of October, 1998.
/s/ John J. Pileggi
--------------------------
John J. Pileggi
/s/ Joseph N. Hankin
--------------------------
Joseph N. Hankin
/s/ Jack D. Rehm
--------------------------
Jack D. Rehm
/s/ Blaine E. Rieke
--------------------------
Blaine E. Rieke
/s/ Richard A. Wedemeyer
--------------------------
Richard A. Wedemeyer
2
