As filed with the Securities and Exchange Commission on December 22, 2000
Securities Act File No. 333-59745
Investment Company Act File No. 811-8895
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U.S. 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. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes)
ING FUNDS TRUST
(Exact Name of Registrant Specified in Charter)
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (800) 992-0180
James M. Hennessy, Esq.
ING Pilgrim Investments, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz, Esq.
Dechert
1775 Eye Street, N.W.
Washington, DC 20006
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on March 1, 2001 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designated a new effective date for a
previously filed post-effective amendment.
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<PAGE>
March 1, 2001
Classes A, B, C, M and T
INCOME FUNDS
ING Pilgrim Government Securities Income
ING Pilgrim GNMA Income
ING Pilgrim National Tax-Exempt Bond
ING Pilgrim Intermediate Bond
ING Pilgrim Strategic Income
ING Pilgrim High Yield
ING Pilgrim High Yield II
ING Pilgrim High Total Return
ING Pilgrim High Yield Bond
Pilgrim Money Market
ING Money Market
This prospectus contains important information about investing in the ING
Pilgrim Funds. You should read it carefully before you invest, and keep it for
future reference. Please note that your investment: is not a bank deposit, is
not insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
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These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy and risks.
[GRAPHIC]
OBJECTIVE
[GRAPHIC]
INVESTMENT STRATEGY
You'll also find:
[GRAPHIC]
RISKS
How the fund has performed. A chart that shows the Fund's financial performance
for the past ten years (or since inception, if shorter).
[GRAPHIC]
HOW THE FUND HAS PERFORMED
What you pay to invest. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
An Introduction to the ING Pilgrim Funds
Funds At A Glance
INCOME FUNDS
ING Pilgrim Government Securities Income
ING Pilgrim GNMA Income
ING Pilgrim National Tax-Exempt Bond
ING Pilgrim Intermediate Bond
ING Pilgrim Strategic Income
ING Pilgrim High Yield
ING Pilgrim High Yield II
ING Pilgrim High Total Return
ING Pilgrim High Yield Bond
ING Pilgrim High Total Return II
Pilgrim Money Market
ING Money Market
What You Pay to Invest
Shareholder Guide
Management of the Funds
Dividends, Distributions and Taxes
More Information About Risks
Financial Highlights
Where To Go For More Information Back cover
<PAGE>
INTRODUCTION TO THE
ING PILGRIM FUNDS
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Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.
[GRAPHIC]
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
INCOME FUNDS
ING Pilgrim offers both aggressive and conservative Income Funds.
They may suit you if you:
* want a regular stream of income.
Income Funds other than the Money Market Fund may suit you if you:
* want greater growth potential than a money market fund
* are willing to accept more risk than a money market fund.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
1
<PAGE>
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Funds
At A
Glance
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This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 4.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
---- --------------------
<S> <C> <C>
Income Government Securities Income Fund High current income, consistent with liquidity
Funds Adviser: ING Pilgrim Investments, Inc. and preservation of capital
GNMA Income Fund High current income, consistent with liquidity
Adviser: ING Pilgrim Investments, Inc. and safety of principal
National Tax-Exempt Bond Fund High current income that is exempt from federal
Adviser: ING Mutual Funds Management Co. LLC income taxes consistent with the preservation
Sub-Adviser: Furman Selz Capital Management LLC of capital
Intermediate Bond Fund High current income consistent with the
Adviser: ING Mutual Funds Management Co. LLC preservation of capital and liquidity
Sub-Adviser: ING Investment Management LLC
Strategic Income Fund Maximum total return
Adviser: ING Pilgrim Investments, Inc.
High Yield Fund High current income, with capital appreciation
Adviser: ING Pilgrim Investments, Inc. as a secondary objective
High Yield Fund II High level of current income and capital growth
Adviser: ING Pilgrim Investments, Inc.
High Total Return Fund High income and capital appreciation
Adviser: ING Pilgrim Investments, Inc.
High Yield Bond Fund A high level of current income and total return
Adviser: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management LLC
High Total Return Fund II High income and capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Pilgrim Money Market Fund High current income consistent with the preservation
Adviser: ING Pilgrim Investments, Inc. of capital and liquidity
ING Money Market Fund High current Income consistent with the preservation
Adviser: ING Mutual Funds Management Co. LLC of capital and liquidity
Sub-Adviser: ING Investment Management LLC
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MAIN INVESTMENTS MAIN RISKS
---------------- ----------
<S> <C>
Securities issued or guaranteed by the Credit, interest rate, prepayment and other risks that
U.S. Government and certain of its accompany an investment in government bonds and mortgage
agencies or instrumentalities. related investments. Generally has less credit risk than the
other income funds.
Mortgage-backed GNMA Certificates that Credit, interest rate, prepayment and other risks that
are guaranteed as to the timely payment accompany an investment in government bonds and mortgage
of principal and interest by the U.S. related investments. Generally has less credit risk than the
Government. other income funds.
Investment grade debt securities of Credit, interest rate, prepayment and other risks that
municipal issuers, the interest from accompany an investment in investment grade debt securities
which is exempt from federal income of municipal issuers.
taxes.
Investment grade debt securities with a Credit, interest rate, prepayment and other risks that
minimum average portfolio quality being accompany an investment in fixed income securities. May be
investment grade, and dollar weighted sensitive to credit risk during economic downturns.
average maturity generally ranging
between three and ten years.
Investment grade and high yield debt Credit, interest rate, prepayment and other risks that
securities. accompany an investment in debt securities, including high
yield debt securities. May be sensitive to credit risk
during economic downturns.
High yield debt securities. Credit, interest rate and other risks that accompany an
investment in lower-quality debt securities. Particularly
sensitive to credit risk during economic downturns.
High yield debt securities, including Credit, liquidity, interest rate and other risks that
those in the lowest ratings, as well as accompany an investment in lower-quality debt securities.
equities and foreign securities. Particularly sensitive to credit risk during economic
downturns. May also present price volatility from equity
exposure, and foreign securities. May be sensitive to
currency exchange rates, international political and
economic conditions, and other risks.
High yield debt securities, including Credit, liquidity, interest rate and other risks that
those in the lowest ratings, and foreign accompany an investment in lower-quality debt securities.
securities. Particularly sensitive to credit risk during economic
downturns. Foreign securities may be sensitive to currency
exchange rates, international political and economic
conditions, and other risks.
A diversified portfolio of high yield Credit, interest rate, prepayment and other risks that
(high risk) debt securities that are accompany an investment in lower quality debt securities.
unrated or rated below investment grade. Particulary sensitive to credit risk during economic
downturns.
High yield debt securities, including Credit, liquidity, interest rate and other risks that
those in the lowest ratings, and foreign accompany an investment in lower- quality debt securities.
securities. Particularly sensitive to credit risk during economic
downturns. Foreign securities may be sensitive to currency
exchange rates international, political and economic
conditions, and other risks.
Shares of another investment company Credit, interest rate and other risks that accompany an
whose main investments incudes investment in government bonds and mortgage related
short-term securities issued or investments. Presents less credit and interest rate risk
guaranteed by the U.S. Government and than the other income funds.
certain of its agencies and
instrumentalities.
High quality, U.S. dollar-denominated Credit, interest rate and other risks that accompany an
short-term debt securities. investment in U.S. dollar-denominated short-term debt
securities.
</TABLE>
3
<PAGE>
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Income
Funds
------
Adviser
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND ING Pilgrim Investments, Inc.
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OBJECTIVE
[GRAPHIC]
The Fund seeks high current income, consistent with liquidity and preservation
of capital.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund normally invests at least 70% of its total assets in securities issued
or guaranteed by the U.S. Government and the following agencies or
instrumentalities of the U.S. Government: the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corporation (FHLMC). Such securities include direct
obligations of the U.S. Treasury and mortgage-backed securities. The Fund may
fall below the 70% threshold due to changes in the value of the Fund's holdings
or the sale of securities to meet redemptions, in which case the Fund will
purchase only U.S. Government securities until the 70% level is restored. The
remainder of the Fund's assets may be invested in securities issued by other
agencies and instrumentalities of the U.S. Government and in instruments
collateralized by securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The foregoing policies are fundamental and may
not be changed without shareholder approval.
The Fund may invest in securities of any maturity; however, the Fund is expected
to have a dollar-weighted average duration within a range of 20% above or below
that of the Lehman Intermediate Treasury Index. As of September 30, 2000, the
dollar-weighted average duration of the Lehman Intermediate Treasury Index was
3.09 years. The adviser determines the composition of the Fund's portfolio on
the basis of its judgment of existing market conditions, such as the general
direction of interest rates, trends in creditworthiness, expected inflation,
supply and demand of fixed income securities, and other factors. The Fund may
enter into reverse repurchase agreements, dollar roll transactions or pairing
off transactions. The Fund does not invest in highly leveraged derivatives, such
as swaps, interest-only or principal-only stripped mortgage-backed securities,
or interest rate futures contracts.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. This Fund may be particularly sensitive to interest rates
because it primarily invests in U.S. government securities. Debt securities with
longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to less credit risk than the other income funds because it principally invests
in debt securities issued or guaranteed by the U.S. Government, its agencies and
government sponsored enterprises.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
4 ING Pilgrim Government Securities Income Fund
<PAGE>
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND
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HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
11.90 7.46 4.71(8) -3.61 14.51 2.56 7.85 5.61 -1.17
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Lehman Brothers Government/Mortgage Index and the Lehman
Brothers Intermediate Treasury Index.
Average Annual Total Returns(2)
<TABLE>
<CAPTION>
Lehman Lehman
Gov't/ Intermediate
Mortgage Treasury
Class A(2) Class B(3) Class C(4) Class M(5) Index(7) Index(8)
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 % --
Five years, ended
December 31, 2000 % N/A
Ten years, ended
December 31, 2000(9) % N/A N/A
Since inception of
Classes B and M(10) % N/A N/A
Since inception of
Classes C and T(10) % N/A N/A -- N/A -- --
</TABLE>
-------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Class T shares did not have a full year's performance for the year ended
December 31, 2000.
(3) Reflects deduction of sales charge of 4.75%.
(4) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively
for 1 year, 5 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) Reflects deduction of sales charge of 3.25%.
(7) Reflects deduction of deferred sales charge of 4% for the 1 year return.
(8) The Lehman Brothers Government/Mortgage Index is an unmanaged index that
measures the performance of U.S. Government agencies and instrumentalities,
as well as mortgage pass-through instruments issued by FNMA, FHLMC and
GNMA.
(9) The Lehman Brothers Intermediate Treasury Index is an unmanaged index that
measures the performance of U.S. Treasuries with maturities of under 10
years. Information on the Lehman Intermediate Index is presented because
effective May 24, 1999, the Fund seeks an average portfolio duration within
+/-20% of the duration of that Index. Previously, the Fund's average
portfolio maturity was generally longer.
(10) The Fund earned income and realized capital gains as a result of entering
into reverse repurchase agreements during the six-month period from July to
December 1992 that caused the Fund to exceed its 10% investment restriction
on borrowing. Therefore, the Fund's performance was higher than it would
have been had the Fund adhered to its borrowing restriction.
(11) Classes B and M commenced operations on July 17, 1995. Classes C and T
commenced operations on June 11, 1999. Class T commenced operations on
April 5, 2000.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Government Securities Income Fund 5
<PAGE>
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Income
Funds
------
Adviser
ING PILGRIM GNMA INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's investment objective is to seek a high level of current income,
consistent with liquidity and safety of principal, through investment primarily
in Government National Mortgage Association ("GNMA") mortgage-backed securities
(also known as "GNMA Certificates") that are guaranteed as to the timely payment
of principal and interest by the United States Government.
INVESTMENT STRATEGY
[GRAPHIC]
Under normal conditions, the Fund will invest at least 80% of the value of its
total assets in GNMA ("Ginnie Mae") Certificates. The remaining assets of the
Fund will be invested in other securities issued or guaranteed by the U.S.
Government, including U.S. Treasury securities. The Fund may invest in debt
securities of any maturity, although the portfolio manager expects to invest in
long-term debt instruments.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Prepayment Risk -- Through investment in GNMA securities, the Fund may expose
you to certain risks which may cause you to lose money. Mortgage prepayments are
affected by the level of interest rates and other factors, including general
economic conditions and the underlying location and age of the mortgage. In
periods of rising interest rates, the prepayment rate tends to decrease,
lengthening the average life of a pool of GNMA securities. In periods of falling
interest rates, the prepayment rate tends to increase, shortening the life of a
pool. Because prepayments of principal generally occur when interest rates are
declining, it is likely that the Fund may have to reinvest the proceeds of
prepayments at lower interest rates than those of their previous investments. If
this occurs, the Fund's yields will decline correspondingly.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. This Fund may be particularly sensitive to interest rates
because it primarily invests in U.S. government securities. Debt securities with
longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to less credit risk than the other income funds because it principally invests
in debt securities issued or guaranteed by the U.S. Government, its agencies and
government sponsored enterprises.
Please refer to the statement of additional information for a complete
description of GNMA Certificates and Modified Pass Through GNMA Certificates.
The Fund intends to use the proceeds from principal payments to purchase
additional GNMA Certificates or other U.S. Government guaranteed securities.
6 ING Pilgrim GNMA Income Fund
<PAGE>
ING PILGRIM GNMA INCOME FUND
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HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
15.75 5.19 8.06 -2.07 15.91 5.71 10.20 7.52 0.58
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers Mortgage-Backed Securities Index.
Average Annual Total Returns(3)
Lehman Brothers
Class Class Class Mortgage-Backed
A(4) B C Securities Index(5)
------- ------- ------- --------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) This table shows the performance of the Class A shares of the Fund. Class M
and Class T did not have a full year's performance as of December 31, 2000.
(4) Reflects deduction of sales charge of 4.75%.
(5) The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index
comprised of 520 mortgage backed securities with an average yield of 7.58%.
The average coupon of the index is 6.85%. This index is typically used as a
benchmark for intermediate-term bond funds.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim GNMA Income Fund 7
<PAGE>
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Income
Funds
------
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING PILGRIM NATIONAL TAX-EXEMPT BOND FUND Furman Selz Capital Management LLC
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks to provide investors with a high level of current income that is
exempt from federal income taxes, consistent with preservation of capital.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund normally invests at least 80% of its total assets in debt obligations
issued by states, territories and possessions of the United States and the
District of Columbia or their political subdivisions, agencies and
instrumentalities, multi-state agencies or authorities the interest from which
is, in the opinion of bond counsel of the issuer, exempt from federal income
tax. The Fund will invest at least 80% of its total assets in securities the
interest on which is not a preference item for purposes of the federal
alternative minimum tax. The remainder of the Fund's assets may be invested in
taxable debt securities when sufficient tax-exempt municipal obligations are not
available for purchase. The taxable securities in which the Fund may invest
include: U.S. Government securities, instruments of U.S. commercial banks or
savings and loan institutions which have total assets of $1 billion or more as
shown on the last published financial statements at the time of investment, and
repurchase agreements involving any of such securities.
There are no restrictions on the average maturity of the Fund or, on the
maturity of any single investment. Maturities may vary widely depending on the
Sub-Adviser's assessment of interest rate trends and other economic or market
factors. The Fund may purchase the following types of municipal obligations, but
only if such securities, at the time of purchase, either have the requisite
rating, or are of comparable quality if unrated: (i) municipal bonds rated
investment grade (for example, rated at least BBB by Standard & Poor's Rating
Group or Baa by Moody's Investor Services) or have an equivalent rating by a
nationally recognized statistical rating organization, or of comparable quality
if unrated; (ii) municipal notes receiving the highest rating by such a rating
agency; and (iii) tax-exempt commerical paper receiving the highest rating by
such a rating agency.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. The Fund may also purchase other
types of tax-exempt instruments as long as they are of a quality equivalent to
the long-term bond or commercial paper ratings stated above. The Fund will not
invest more than 15% of its net assets in illiquid securities. The Fund may
engage in swap agreements.
Not more than 25% of the Fund's total assets will be invested in either (i)
municipal obligations whose issuers are located in the same state or (ii)
municipal obligations the interest on which is derived from revenues of similar
type projects. The second restriction does not apply to municipal obligations in
any of the following categories: public housing authorities; general obligations
or states and localities; state and local housing finance authorities; or
municipal utilities systems.
In choosing instruments for the Fund, the Sub-Adviser identifies interest rate
trends and then sets a target duration and creates the portfolio around such
target. The Sub-Adviser analyzes sectors of the municipal bond market to
determine the appropriate weighting of such sectors. Individual issues that meet
duration and sector criteria are selected on the basis of yield, quality and
marketability.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. An investment in the Fund is
not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. The Fund may be affected
by the following risks, among others:
Price Volatility -- Debt securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. Debt securities with longer durations tend to be more
sensitive to changes in interest rates, usually making them more volatile than
debt securities with shorter durations.
Spread Risk -- the price of a fixed income security is generally determined by
adding an interest rate spread to a benchmark interest rate, such as the U.S.
Treasury rate. As the spread on a security widens (or increases), the price (or
value) of the security falls.
Default Risk -- an issuer of a security may default on its obligation to pay
principal and/or interest.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. The Fund is subject
to less credit risk than other income funds because it principally invests in
debt securities issued or guaranteed by states, territories and possessions of
the United States and the District of Columbia or their political subdivisions,
agencies and instrumentalities, or multi-state agencies or authorities.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Risk of Municipal Obligations -- there could by economic, business or political
developments which might affect all municipal obligations of a similar type. To
the extent that a significant portion of the Fund's assets are invested in
municipal obligations payable from revenue or similar projects, the Fund will be
subject to the peculiar risks presented by such projects to a greater extent
than it would be if the Fund's assets were not so invested.
8 ING Pilgrim National Tax-Exempt Bond Fund
<PAGE>
ING PILGRIM NATIONAL TAX-EXEMPT BOND FUND
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HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Best and worst quarterly performance during this period:
quarter 19 : %
quarter 19 : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance.
Average Annual Total Returns
Lehman Bros.
Class Class Class Aggregate
A(2) B(3) C(4) Index(5)
------- ------- ------- -------------
One year, ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 4%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of deferred sales charge of 1% for the 1 year return.
(5) The Lehman Bros. Aggregate Index is a widely recognized, unmanaged index of
publicly issued fixed rate U.S. government and investment grade
mortgage-backed and corporated debt securities.
(6) Classes A, B and C commenced operations on December 31, 1999.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim National Tax-Exempt Bond Fund 9
<PAGE>
------
Income
Funds
------
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING PILGRIM INTERMEDIATE BOND FUND ING Investment Management LLC
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks to provide investors with a high level of current income
consistent with the preservation of capital and liquidity.
INVESTMENT STRATEGY
[GRAPHIC]
Under normal market conditions, the Fund will operate as a diversifed fund and
invest at least 65% of its total assets in a portfolio of debt securities which,
at the time of investment, are rated investment grade (for example, rated at
least BBB by Standard & Poor's Rating Group or Baa by Moody's Investor Services)
or have an equivalent rating by a nationally recognized statistical rating
organization, or of comparable quality if unrated. Although the Fund may invest
a portion of its assets in high yield (high risk) debt securities rated below
investment grade, the Fund will seek to maintain a minimum average portfolio
quality rating of at least investment grade. The dollar-weighted average
maturity of the Fund will generally range between three and ten years.
The Fund may invest the remainder of its assets in: convertible securities and
preferred stocks, U.S. Government securities, securities of foreign governments
and supranational organizations, and high-quality money market instruments that
the Sub-Adviser believes are appropriate in light of the Fund's investment
objective; municipal bonds, notes and commercial paper; and debt securities of
foreign issuers. The Fund may purchase structured debt obligations and may
engage in dollar roll transactions and swap agreements. The Fund may also sell
securities short and may use options and futures contracts involving securities,
securities indices and interest rates. A portion of the Fund's assets may be
invested in mortgage-backed securities and asset-backed debt securities.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, five-step investment process which uses fundamental economic and
market research to identify bond market sectors and individual securities
expected to provided above-average returns. The five steps are:
* First, the Sub-Adviser examines the sensitivity to interest rate movements
of the portfolio and of the specific holdings of the portfolio to position
the Fund in a way that attempts to maximize return while minimizing
volatility.
* Second, the Sub-Adviser reviews yields relative to maturity and risk of
bonds to determine the risk/reward characteristics of bonds of different
maturity classes.
* Third, the Sub-Adviser identifies sectors that offer attractive value
relative to other sectors.
* Fourth, the Sub-Adviser selects securities within identified sectors that
offer attractive value relative to other securities within their sectors.
* Finally, the Sub-Adviser seeks trading opportunities to take advantage of
market inefficiencies to purchase bonds at prices below their calculated
value.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. An investment in the Fund is
not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The Fund may be affected
by the following risks, among others:
Price Volatility -- Debt securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.
Changes in Interest Rate -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Spread Risk -- the price of a fixed income security is generally determined by
adding an interest rate spread to a benchmark interest rate, such as the U.S.
Treasury rate. As the spread on a security widens (or increases), the price (or
value) of the security falls.
Default Risk -- an issuer of a security may default on its obligation to pay
principal and/or interest.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns. This Fund may
be subject to more credit risk than other income funds, because it may invest in
high yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Extension Risk -- slower than expected principal payments on a mortgage-backed
or asset-backed security may extend such security's life, thereby locking in a
below-market interest rate, increasing the security's duration and reducing the
value of the security.
Risks of High Yield Bonds -- high yield bonds carry particular market risks and
may experience greater volatility in market value than investment grade bonds.
Changes in interest rates, the market's perception of the issuers and the
creditworthiness of the issuers 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. Certain high yield bonds, such as zero coupon, deferred
interest and payment-in-kind bonds, are issued at deep discounts and may
experience greater volatility in market value. The secondary market for high
yield bonds may be less liquid than the markets for higher quality securities
and this may have an adverse effect on the maket values of certain securities.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
10 ING Pilgrim Intermediate Bond Fund
<PAGE>
ING PILGRIM INTERMEDIATE BOND FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-0.94
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- Lehman Bros. Aggregate Index(5)
Average Annual Total Returns(5)
Lehman Bros.
Aggregate
Class A(2) Class B(3) Class C(4) Index(5)
---------- ----------- ----------- ------------
One year ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The Lehman Bros. Aggregate Index is a widely recognized, unmanaged index of
publicly issued fixed-rate U.S. govern-ment and investment grade
mortgage-backed and corporate debt securities.
(6) Classes A, B and C commenced operations on December 15, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Intermediate Bond Fund 11
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM STRATEGIC INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum total return.
INVESTMENT STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 60% of its total assets in
debt securities issued by U.S. and foreign corporations, U.S. and foreign
governments, and their agencies and instrumentalities that are rated in one of
the top four categories by a nationally recognized statistical rating agency, or
of comparable quality if unrated. These securities include bonds, notes,
mortgage-backed and asset-backed securities with rates that are fixed, variable
or floating. The Fund may invest up to 40% of its total assets in high yield
debt securities, commonly known as "junk bonds." There is no minimum credit
rating for high yield debt securities in which the Fund may invest. The "total
return" sought by the Fund consists of income earned on the Fund's investments,
plus capital appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular sector or
security.
The Fund may invest in debt securities of any maturity; however, the average
portfolio duration of the Fund will generally range from two to eight years. The
Fund may invest up to 30% of its total assets in securities payable in foreign
currencies. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may also use options, futures contracts and interest rate and currency swaps as
hedging techniques. The Fund does not invest in interest-only or principal-only
stripped mortgage-backed securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns. This Fund may
be subject to more credit risk than the other income funds, because it may
invest in high yield debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. A security in the lowest rating categories, that is
unrated, or whose credit rating has been lowered may be particularly difficult
to sell. Foreign securities and mortgage-related and asset-backed debt
securities may be less liquid than other debt securities. The Fund could lose
money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
Other Investment Companies -- because the Fund invests in other investment
companies you may indirectly pay a proportionate share of the expenses of that
other investment company (including management fees, administration fees and
custodial fees) in addition to the expenses of the Fund.
12 ING Pilgrim Strategic Income Fund
<PAGE>
ING PILGRIM STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-1.16
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Aggregate Bond Index.
Average Annual Total Returns
Lehman
Aggregate
Class Class Class Bond
A(3) B (4) C (5) Index(6)
------- ------- ------- ----------
One year, ended
December 31, 2000 %
Since inception of
Classes A, B, and C (7) %
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to May 24, 1999, a different adviser managed the Fund.
(3) Reflects deduction of sales charge of 4.75%.
(4) Reflects deduction of a deferred sales charge of 5% and 3%, respectively,
for the 1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The Lehman Aggregate Bond Index is an unmanaged index that measures the
performance of fixed income securities that are similar, but not identical,
to those in the Fund's portfolio.
(7) Classes A, B and C commenced operations on July 27, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Strategic Income Fund 13
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH YIELD FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a high level of current income, with capital appreciation as a
secondary objective.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its assets in high yield debt
securities, including preferred stock and convertible securities, that do not in
the opinion of the adviser involve undue risk relative to their expected return.
High yield securities, which are commonly known as "junk bonds," are securities
that are rated below investment grade, i.e., rated lower than Baa by Moody's
Investors Service, Inc. or BBB by Standard and Poor's, or of comparable quality
if not rated. Generally, the Fund will invest in securities rated lower than B
by Moody's or S&P only when the adviser believes the financial condition of the
issuer or other available protections reduce the risk to the Fund or that there
is greater value in the securities than is reflected in their prevailing market
price. There is no minimum credit rating for high yield securities in which the
Fund may invest. The Fund may invest in debt securities of any maturity. In
selecting securities for the Fund, preservation of capital is a consideration.
The remainder of the Fund's assets may be invested in common stocks, investment
grade preferred stocks, investment grade debt obligations of all types, U.S.
Government securities, warrants, money market instruments (including repurchase
agreements on U.S. Government securities), mortgage-related securities and
participation interests and assignments in floating rate loans and notes. The
Fund may also invest up to 10% of its assets in foreign debt securities of any
rating. The Fund may invest in financial futures and related options to attempt
to hedge risk, although the Fund has not invested in such instruments since
Pilgrim Investments, Inc. became the adviser in 1995 through the date of this
prospectus.
In selecting equity securities, the portfolio managers use a "bottom-up"
analysis that focuses on individual companies and assesses the company's
valuation, financial condition, management, competitiveness, and other factors.
Differences Between the Fund and High Yield Fund II -- While both Funds invest
primarily in high yield securities, the High Yield Fund normally emphasizes
bonds with stronger credit ratings in the high yield bond universe. Thus, of the
two Funds, High Yield Fund II normally presents the potential for higher income,
but with potentially higher credit risk and volatility.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
The Fund is subject to risks associated with investing in lower rated debt
securities. You could lose money on an investment in the Fund. The Fund may be
affected by the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income mutual funds because it invests in
high yield (or "junk bond") debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments. This is especially true during periods of economic
uncertainty or economic downturns. The Fund is also subject to credit risk
through its investment in floating rate loans.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial. A security whose
credit rating has been lowered may be particularly difficult to sell.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, and the risk of loss due to changes in
interest rates. The use of certain derivatives may also have a leveraging
effect, which may increase the volatility of the Fund. The use of derivatives
may reduce returns for the Fund.
Price Volatility -- Equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks, securities depositories or exchanges than those in the U.S., and
foreign controls on investment.
14 ING Pilgrim High Yield Fund
<PAGE>
ING PILGRIM HIGH YIELD FUND
--------------------------------------------------------------------------------
HOW THEFUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
29.44 16.19 18.52 -1.55 17.71 15.76 14.98 -2.96 -1.14
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers High Yield Bond Index.
Average Annual Total Returns
Lehman
High Yield
Class Class Class Class Bond
A(2) B(3) C(4) M(5) Index(6)
------- ------- --------- ------- ----------
One year, ended
December 31, 2000 % --
Five years, ended
December 31, 2000 % N/A N/A N/A
Ten years, ended
December 31, 2000 % N/A N/A N/A
Since inception of
Classes B and M(7) % N/A N/A
Since inception of
Class C(8) % N/A N/A -- N/A --
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 4.75%.
(3) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively
for 1 year, 5 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) Reflects deduction of a sales charge of 3.25%.
(6) The Lehman Brothers High Yield Bond Index is an unmanaged index that
measures the performance of fixed-income securities that are similar, but
not identical, to those in the Fund's portfolio.
(7) Classes B and M commenced operations on July 17, 1995.
(8) Class C commenced operations on .
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund 15
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH YIELD FUND II ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a high level of current income and capital growth.
INVESTMENT STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
high yield, lower rated debt securities, which are commonly referred to as "junk
bonds," and convertible securities rated below investment grade (i.e., lower
than the four highest rating categories) by a nationally recognized statistical
rating agency, or of comparable quality if unrated. There is no limit on either
the portfolio maturity or the acceptable rating of securities bought by the
Fund. Securities may bear rates that are fixed, variable or floating. The Fund
may invest up to 35% of its total assets in equity securities of U.S. and
foreign companies, including securities of companies in emerging markets. In
selecting equity securities, the portfolio managers use a "bottom-up" analysis
that focuses on individual companies and assesses the company's valuation,
financial condition, management, competitiveness, and other factors.
The Fund is not restricted to investments in companies of any particular size,
but currently intends to invest principally in companies with market
capitalization above $100 million at the time of purchase. The Fund may also use
options, futures contracts and interest rate and currency swaps as hedging
techniques or to help seek the Fund's investment objectives.
Differences Between the Fund and High Yield Fund
While both Funds invest primarily in high yield securities, the High Yield Fund
normally emphasizes bonds with stronger credit ratings in the high yield bond
universe. Thus, of the two Funds, High Yield Fund II normally presents the
potential for higher income, but with potentially higher credit risk and
volatility.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income mutual funds because it invests in
high yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the owners of the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging markets countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.
Risk of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivative instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
Price Volatility -- equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.
16 ING Pilgrim High Yield Fund II
<PAGE>
ING PILGRIM HIGH YIELD FUND II
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.05 4.17 6.12
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the First Boston High Yield Index.
Average Annual Total Returns
First
Boston
High
Class Class Class Class Yield
A(3) B(4) C(5) T(6) Index(7)
------- ------- ------- ------- --------
One year, ended
December 31, 2000 % --
Since inception of
Classes A, B and C(8) % N/A
Since inception
of Class T(8) % N/A N/A N/A --
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to May 24, 1999 a different adviser managed the Fund. The figure
shown for the year 1999 provides performance for the Class A shares of the
Fund. The figures shown for the years 1997 and 1998 provide performance for
Institutional Class shares of the Fund, revised to reflect the higher
expenses of Class A shares.
(3) Reflects deduction of a sales charge of 4.75%.
(4) Reflects deduction of a deferred sales charge of 5% and 3%, respectively,
for the 1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) Reflects deduction of deferred sales charge of 4% for the 1 year return.
(7) The First Boston High Yield Index is an unmanaged index that measures the
performance of fixed income securities similar, but not identical, to those
in the Fund's portfolio.
(8) Classes A, B and C commenced operations on March 27, 1998. Class T
commenced operations on January 4, 2000.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund II 17
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH TOTAL RETURN FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks high income and capital appreciation.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund invests primarily in higher-yielding, lower-rated bonds (junk bonds) to
achieve high current income with potential for capital growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in high-yielding, lower-rated U.S. dollar-denominated debt securities of
any maturity of U.S. and foreign issuers. It may also invest up to 35% of its
total assets in securities denominated in foreign currencies. It may invest up
to 50% of its assets in securities of foreign issuers, including 35% in emerging
market debt. Most of the debt securities the Fund invests in are lower-rated and
considered speculative, including bonds in the lowest rating categories and
unrated bonds. It can invest up to 10%, and can hold up to 25%, of its assets in
securities rated below Caa by Moody's or CCC by S&P. It also holds debt
securities that pay fixed, floating or adjustable interest rates and may hold
pay-in-kind securities and discount obligations, including zero coupon
securities, and mortgage-related or asset-backed debt securities.
The Fund may also invest in equity or equity-related securities, such as common
stock, preferred stock, convertible securities and rights and warrants attached
to debt instruments.
In selecting equity securities, the portfolio managers use a "bottom-up"
analysis that focuses on individual companies and assesses the company's
valuation, financial condition, management, competitiveness, and other factors.
PENDING MERGER -- subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim High Yield Fund II.
You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- The Fund's performance is significantly affected by
changes in interest rates. The value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with longer durations. Debt securities
with longer durations tend to be more sensitive to changes in interest rates,
usually making them more volatile than debt securities with shorter durations.
The value of the Fund's high-yield and zero coupon securities are particularly
sensitive to changes in interest rates.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to more credit risk than many other income mutual funds, because it invests in
high-yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true for bonds in the lowest rating category and
unrated bonds, and during periods of economic uncertainty or economic downturns.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high-yield securities may be less liquid than
higher quality investments. Foreign securities and mortgage-related and
asset-backed debt securities may be less liquid than other debt securities. The
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund. A security in the lowest rating
categories, that is unrated, or whose credit rating has been lowered may be
particularly difficult to sell. Valuing less liquid securities involves greater
exercise of judgement and may be more subjective than valuing securities using
market quotes.
Risk of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund may invest in midcap and smallcap companies, which may be more
susceptible to price swings than larger companies because they have fewer
financial resources, more limited product and market diversification, and many
are dependent on a few key managers.
18 ING Pilgrim High Total Return Fund
<PAGE>
ING PILGRIM HIGH TOTAL RETURN FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-8.57 21.17 15.70 11.44 -7.96 -13.23
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers High Yield Bond Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Lehman
High Yield
Bond
Class A(2) Class B(3) Class C(4) Index(5)
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of Class A(6) % N/A N/A
Since inception of Class B(6) % N/A N/A
Since inception of Class C(6) % N/A N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 4.75%.
(3) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for
1 year and 5 year returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The Lehman Brothers High Yield Bond Index is an unmanaged index that
measures the performance of fixed-income securities that are similar, but
not identical, to those in the Fund's portfolio.
(6) Class A commenced operations on November 8, 1993. Classes B and C commenced
operations on February 9, 1994 and March 21, 1994, respectively.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Total Return Fund 19
<PAGE>
------
Income
Funds
------
Adviser
ING Mutual Management Co. LLC
Sub-Adviser
ING PILGRIM HIGH YIELD BOND FUND ING Investment Management LLC
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks to provide investors with a high level of current income and
total return.
INVESTMENT STRATEGY
[GRAPHIC]
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of high yield (high risk)
bonds. High yield bonds are debt securities that are not rated by a nationally
recognized statistical rating organization or are rated below investment grade
(for example, rated below BBB by Standard & Poor's Rating Group or Baa by
Moody's Investor Services) or have an equivalent rating by a nationally
recognized statistical rating organization. The Fund defines high yield bonds to
include: bank loans; payment-in-kind securities; fixed, variable, floating rate
and deferred interest debt obligations; zero coupon bonds; mortgage-backed and
asset-backed debt obligations; structured debt obligations; and convertible
bonds, provided they are unrated or rated below investment grade. In evaluating
the quality of a particular high yield bond for investment by the Fund, the
Sub-Adviser does not rely exclusively on ratings assigned by the nationally
recognized statistical rating organizations. 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. There are no restrictions on the average maturity of the
Fund or the maturity of any single investment. Maturities may vary widely
depending on the Sub-Adviser's assessment of interest rate trends and other
economic or market factors.
Any remaining assets may be invested in investment grade debt securities; common
and preferred stocks; U.S. Government securities and money market instruments
that the Sub-Adviser believes are appropriate in light of the Fund's investment
objectives; and debt securities of foreign issuers. The Fund may purchase
structured debt obligations and may engage in dollar roll transactions and swap
agreements. The Fund may also use options and futures contracts involving
securities, securities indices and interest rates.
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 in order to attempt to achieve either a
combination of its primary and secondary objectives, in which case the common
stocks will be dividend-paying, or to achieve its secondary objective, in which
case the common stocks may not pay dividends.
In choosing investments for the Fund, the Sub-Adviser combines extensive company
and industry research with relative value analysis to identify high yield bonds
expected to provide above-average returns. Relative value analysis is intended
to enhance returns by moving from overvalued to undervalued sectors of the bond
market. The Sub-Adviser's team approach to decision making includes
contributions from individual managers responsible for specific industry
sectors.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. An investment in the Fund is
not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The Fund may be affected
by the following risks, among others.
Price Volatility -- debt securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Special Risk -- the price of a fixed income security is generally determined by
adding an interest rate spread to a benchmark interest rate, such as the U.S.
Treasury rate. As the spread on a security widens (or increases), the price (or
value) of the security falls.
Default Risk -- an issuer of a security may default on its obligation to pay
principal and/or interest.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns. This Fund may
be subject to more credit risk than other income funds, because it may invest in
high yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Extension Risk -- slower than expected principal payments on a mortgage-backed
or asset-backed security may extend such security's life, thereby locking in a
below-market interest rate, increasing the security's duration and reducing the
value of the security.
Risk of High Yield Bonds -- high yield bonds carry particular market risks and
may experience greater volatility in market value than investment grade bonds.
Changes in interest rates, the market's perception of the issuers, and the
creditworthiness of the issuers 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. Certain high yield bonds, such as zero coupon, deferred
interest and payment-in-kind bonds, may be issued at deep discounts and may
experience greater volatility in market value. The secondary market for high
yield bonds may be less liquid than the markets for higher quality securities
and this may have an adverse effect on the market values of certain securities.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
Risks of Equity Investments -- equity securities face market, issuer and other
risks, and their values may go down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer. Equities generally
have higher volatility than debt securities.
20 ING Pilgrim High Yield Bond Fund
<PAGE>
ING PILGRIM HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
9.14
Best and worst quarterly performance during this period:
quarter 19 : %
quarter 19 : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- Lehman Bros. High Yield Index.
Average Annual Total Returns
Lehman
Bros.
High
Class Class Class Yield
A(2) B(3) C(4) Index(5)
------- ------- ------- ---------
One year, ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns..
(4) Reflects deduction of deferred sales charge of 1% for the 1 year return.
(5) Lehman Bros. High Yield Index is a widely recognized unmanaged index of
high yield debt securities.
(6) Classes A, B and C commenced operations on December 15, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Bond Fund 21
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH TOTAL RETURN FUND II ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks high income and capital appreciation.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund invests primarily in higher-yielding, lower-rated bonds (junk bonds) to
achieve high current income with potential for capital growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in high-yielding, lower-rated U.S. dollar-denominated debt securities of
any maturity of U.S. and foreign issuers. It may also invest up to 35% of its
total assets in securities denominated in foreign currencies. It may invest up
to 50% of its assets in securities of foreign issuers, including 35% in emerging
market debt. Most of the debt securities the Fund invests in are lower-rated and
considered speculative, including bonds in the lowest rating categories and
unrated bonds. It can invest up to 10%, and can hold up to 25%, of its assets in
securities rated below Caa by Moody's or CCC by S&P. It also holds debt
securities that pay fixed, floating or adjustable interest rates and may hold
pay-in-kind securities and discount obligations, including zero coupon
securities, and mortgage-related or asset-backed debt securities.
The Fund may also invest in equity or equity-related securities, such as common
stock, preferred stock, convertible securities and rights and warrants attached
to debt instruments. In selecting equity securities, the portfolio managers use
a "bottom-up" analysis that focuses on individual companies and assesses the
company's valuation, financial condition, management, competitiveness, and other
factors.
PENDING MERGER -- subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim High Yield Fund II.
You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- The Fund's performance is significantly affected by
changes in interest rates. The value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with longer maturities. Debt securities
with longer durations tend to be more sensitive to changes in interest rates,
usually making them more volatile than debt securities with shorter durations.
The value of the Fund's high yield and zero coupon securities are particularly
sensitive to changes in interest rates.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to more credit risk than many other income mutual funds, because it invests in
high-yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true for bonds in the lowest rating catergories and
unrated bonds, and during periods of economic uncertainty or economic downturns.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. An unrated bond, a bond in the lowest rating
catorgories, or a security whose credit rating has been lowered may be
particularly difficult to sell. Foreign securities and mortgage-related and
asset-backed debt securities may be less liquid than other debt securities. The
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Risk of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
22 ING Pilgrim High Total Return Fund II
<PAGE>
ING PILGRIM HIGH TOTAL RETURN FUND II
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-2.93 -13.86
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers High Yield Bond Index.
Average Annual Total Returns
Lehman
High Yield
Bond
Class A(2) Class B(3) Class C(4) Index(5)
---------- ---------- ---------- ----------
One year, ended
December 31, 2000 %
Since inception(6) %
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 4.75%.
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The Lehman Brothers High Yield Bond Index is an unmanaged index that
measures the performance of fixed-income securities that are similar, but
not identical, to those in the Fund's portfolio.
(6) The Fund commenced operations on January 31, 1997.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Total Return Fund II 23
<PAGE>
------
Income
Funds
------
Adviser
PILGRIM MONEY MARKET FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks to provide as high a level of current income as is consistent
with the preservation of capital and liquidity.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund invests all of its assets in Class A shares of the Primary
Institutional Fund, a series of Reserve Institutional Trust, a registered
open-end management investment company, rather than directly in a portfolio of
securities.In turn, the Primary Institutional Fund seeks to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. This structure is different from that of other Pilgrim Funds and many
other investment companies, which directly acquire and manage their own
portfolio of securities.
The Primary Institutional Fund seeks to achieve its investment objective by
investing in instruments issued by the U.S. Government, its agencies and
instrumentalities ("U.S. Government Securities "); high quality deposit-type
obligations, such as negotiable certificates of deposit and time deposits,
bankers' acceptances and letters of credit of domestic, foreign banks and
foreign branches of foreign banks, savings and loan associations and savings
banks; other short-term instruments of similar quality; and instruments fully
collateralized by such obligations. The dollar weighted average portfolio
maturity of the Fund will not exceed 90 days.
The Primary Institutional Fund may invest in obligations of U.S.banking
institutions that are insured by the Federal Deposit Insurance Corporation. The
Primary Institutional Fund may also invest in obligations of foreign branches of
both U.S. banks and foreign banks (Eurodollars). Investment in foreign banks
will be limited to those located in Australia, Canada, Western Europe and Japan
and which, at the time of investment, have more than $25 billion (or the
equivalent in other currencies) in total assets and which, in the opinion of the
Primary Institutional Fund's investment adviser, are of comparable quality to
the obligations of U.S. banks which may be purchased by the Primary
Institutional Fund. The Primary Institutional Fund may also invest in municipal
obligations, the interest on which is not exempt from federal income taxation.
The Primary Institutional Fund may also engage in repurchase agreements and
periodically lend securities on a short-term basis to banks, brokers and dealers
(but not individuals) and receive as collateral cash or securities issued by the
U.S. Government or its agencies or instrumentalities (or any combination
thereof). The value of the securities loaned cannot exceed 25% of the Primary
Institutional Fund's total assets.
The Primary Institutional Fund may invest, without limitation, in U.S.
Government Securities and in instruments secured or collateralized by U.S.
Government Securities. The Primary Institutional Fund will not invest more than
10% of its net assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven (7) days after notice and will not
concentrate more than 25% of its total assets in securities of issuers in a
single industry, except that it may invest more than 25% of its assets in bank
obligations. In addition, the Primary Institutional Fund will not invest more
than 5% of its assets in the securities of any single issuer (except U.S.
Government Securities or repurchase agreements). The Primary Institutional Fund
may borrow money for extraordinary or emergency purposes but not in an amount
exceeding 5% of its total assets.
The Primary Institutional Fund uses the amortized cost method of valuation to
help the Fund maintain a stable $1.00 share price. Of course, there is no
guarantee that the Fund will be able to maintain a $1.00 share price.
Since the Fund invests substantially all of its assets in another investment
company, the fund could be considered a feeder fund in an arrangement resembling
a master/feeder structure.
Investment of the Fund's assets in the Class A shares of the Primary
Institutional Fund is not a fundamental policy of the Fund and a shareholder
vote is not required for the Fund to withdraw its investment in the Primary
Institutional Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
The Fund is subject to the risks associated with investing in debt securities.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The Fund may be affected by these other risks by virtue of its investment in the
Primary Institutional Fund:
Changes in Interest Rates -- money market funds like the Fund are subject to
less interest rate risk than other income funds because they invest in debt
securities with a remaining maturity not greater than 397 days. Still, the value
of the Fund 's investment may fall when interest rates rise.
Credit Risk -- money market funds like the Fund are subject to less credit risk
than other income funds because they invest in short-term debt securities of the
highest quality. Still, the Fund could lose money if the issuer of a debt
security is unable to meet its financial obligations or goes bankrupt.
U.S.Government Securities -- some U.S. Government agency securities may be
subject to varying degrees of credit risk, and all U.S. Government Securities
may be subject to price declines in the securities due to changing interest
rates. If an obligation, such as obligations issued by the Federal National
Mortgage Association, the Student Loan Marketing Association, the Federal Home
Loan Bank and the Federal Home Loan Mortgage Corporation is supported only by
the credit of the agency or instrumentality issuing the obligation, the investor
must look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment. Securities directly supported by the full faith and credit
of the United States have less credit risk.
Risk of Concentration in Banking Obligations -- the risks of concentrating in
investments in the banking industry include credit risk, interest rate risks,and
regulatory risk (the impact of state or federal legislation and regulations).
Because the Fund invests all of its assets in another registered management
investment, company, the Fund and its shareholders will bear the investment
advisory fees and expenses of the Fund and the other registered management
investment company in which it invests with the result that the Fund's expenses
may be higher than those of other money market funds which invest directly in
money market instruments. The Fund is also designed for investors who desire a
short-term investment and may not be appropriate for those investors desiring a
long-term investment.
24 Pilgrim Money Market Fund
<PAGE>
PILGRIM MONEY MARKET FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long term
performance and illustrate the availability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some inidication of the risk of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
4.64
Best and worst quarterly performance during this period:
Quarter: %
Quarter: %
The following performance table discloses the Fund average annual return as of
December 31, 2000 for each class of shares.
Average Annual Total Return(1)
Class A Class B(3) Class C(4)
-------- --------- ----------
One year %
Since inception(2) %
The Fund's seven-day yields as of December 31, 2000 for the Class A, B and C
shares were %, % and %, respectively. The "seven-day yield" is an annual figure
-- the amount you would earn if you kept your investment in the Fund and the
Fund continued to earn the same net interest income throughout the year.
The Fund's seven-day effective yields as of December 31, 2000 for the Class A, B
and C shares were %, % and %, respectively. The "seven-day effective yield"
(also an annualized figure) assumes that dividends are reinvested and
compounded.
----------
(1) Total returns reflect the deduction of the applicable contingent defined
sales load.
(2) The Fund commenced operations on July 12, 1999.
(3) Reflects deduction of deferred sales change of 5% and 4%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Pilgrim Money Market Fund 25
<PAGE>
------
Income
Funds
------
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING MONEY MARKET FUND ING Investment Management LLC
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The 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.
INVESTMENT STRATEGY
[GRAPHIC]
The Fund will operate as a diversified fund and invest in a portfolio of
high-quality. U.S. dollar denominated short-term debt obligations which are
determined by the Sub-Adviser to present minimal credit risks.
Portfolio investments of the Fund are value based on the amortized cost
valuation method pursuant to Rule 2a-7 under the Investment Company Act of 1940.
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.
The Fund will invest in obligations permitted to be purchased under Rule 2a-7
including, but not limited to, (i) U.S. Government securities and obligations of
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 and
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
and 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
underlying indebtedness to vary, and provide for periodic adjustments in the
interest rate. The Fund may enter into repurchase agreements.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, four step investment process designed to ensure preservation of
capital and liquidity as well as adherence to regulatory requirements. The
four-step are:
* First, a formal list of high-quality issuers is actively maintained;
* Second, securities of issuers on the approved list which meet maturity
guidelines and are rated "first tier" (that is, they are given the highest
short-term rating by at least two nationally recognized statistical rating
organizations, or by a single rating organization if a security is rated
only by that organization, or are determined to be of comparable quality by
the Sub-Adviser pursuant to guidelines approved by the Fund's Board of
Trustees) are selected for investment;
* Third, diversification is continuously monitored to ensure that regulatory
limits are not exceeded; and
* Finally, portfolio maturity decisions are made based upon expected cash
flows, income opportunities available in the market and expectations of
future interest rates.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
The Fund is subject to the risks associated with investing in debt securities.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Changes in Interest Rates -- money market funds like the Fund are subject to
less interest rate risk than other income funds because they invest in debt
securities with a remaining maturity not greater than 397 days. Still, the value
of the Fund's investment may fall when interest rates rise.
Credit Risk -- money market funds like the Fund are subject to less credit risk
than other income funds because they invest in short-term debt securities of the
highest quality. Still, the Fund could lose money if the issuer of a debt
security is unable to meet its financial obligations or goes bankrupt.
U.S. Government Securities -- some U.S. Government agency securities may be
subject to varying degrees of credit risk, and all U.S. Government Securities
may be subject to price declines in the securities due to changing interest
rates. If an obligation, such as obligations issued by the Federal National
Mortgage Association, the Student Loan Marketing Association, the Federal Home
Loan Bank and the Federal Home Loan Mortgage Corporation is supported only by
the credit of the agency or instrumentality issuing the obligation, the investor
must look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment. Securities directly supported by the full faith and credit
of the United States have less credit risk.
Risk of Concentration in Banking Obligations -- the risks of concentrating in
investments in the banking industry include credit risk, interest rate risks,
and regulatory risk (the impact of state or federal legislation and
regulations).
26 ING Money Market Fund
<PAGE>
ING MONEY MARKET FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long term
performance and illustrate the availability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some inidication of the risk of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
4.64
Best and worst quarterly performance during this period:
During the period shown in the bar chart, the best and worst quarterly
performance were as follows:
Quarter: %
Quarter: %
The folllowing performance table discloses the Fund average annual return as of
December 31, 1999 for each class of shares.
Average Annual Total Return(1)
iMoney Net, Inc.
First Tier
Class A Class B(3) Class C(4) Retail Index(5)
------- ------- ------- ----------------
One year %
Since inception(2) %
The Fund's seven-day yields as of December 31, 2000 for the Class A, B and C
shares were %, % and %, respectively. The "seven-day yield" is an annual figure
-- the amount you would earn if you kept your investment in the Fund and the
Fund continued to earn the same net interest income throughout the year.
The Fund's seven-day effective yields as of December 31, 2000 for the Class A, B
and C shares were %, % and %, respectively. The "seven-day effective yield"
(also an annualized figure) assumes that dividends are reinvested and
compounded.
----------
(1) Total returns reflect the deduction of the applicable contingent defined
sales load.
(2) The Fund commenced operations on December 15, 1988.
(3) Reflects deduction of deferred sales charge of 5% and 3% respectively, for
1 year and since inception returns.
(4) Reflects deduction of deferred sales charge of 1% for the one year return.
(5) The iMoney Net, Inc. First Tier Retail Index is a weekly report tracking
the performance, assets, average maturities and portfolio composition of
over 1,300 taxable and tax-free money market funds.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Money Market Fund 27
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the Fund. The tables that follow show the
fees and expenses for each of the ING Pilgrim Funds.
Fees You Pay Directly
<TABLE>
<CAPTION>
Class A Class B Class C(1) Class M(1) Class T(2)
------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your investment
(as a % of offering price) %
Income Funds (except Pilgrim Money Market
and ING Money Market) 4.75(3) none none 3.25(3) none
Pilgrim Money Market
and ING Money Market none none none N/A N/A
Maximum deferred sales charge (as a % of
purchase or sales price, whichever is less)
Income Funds (including Pilgrim Money Market
and ING Money Market) none(4) 5.00(5) 1.00(6) none 4.00(7)
</TABLE>
----------
(1) Not all Funds offer Classes C and M. Please see page 32.
(2) Class T shares are available only for certain exchanges or reinvestment of
dividends. Please see page 32.
(3) Reduced for purchases of $50,000 and over. Please see page 32.
(4) A contingent deferred sales charge of no more than 1% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. Please see page 32.
(5) Imposed upon redemption within 6 years from purchase. The fee has scheduled
reductions after the first year. Please see page 32.
(6) Imposed upon redemption within 1 year from purchase.
(7) Imposed upon redemption within 4 years from purchase. The fee has scheduled
reductions after the first year. Please see page 32.
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
<TABLE>
<CAPTION>
Class A
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Securities Income(3) % 0.50 0.25 0.60 1.35 -- 1.35
GNMA Income % 0.54 0.25 -- -- -- --
National Tax-Exempt Bond % 0.50 0.35 -- -- -- --
Intermediate Bond % 0.50 0.35 -- -- -- --
Strategic Income % 0.45 0.35 1.84 2.64 -1.68 0.96
High Yield % 0.60 0.25 0.32 1.17 -0.12 1.05
High Yield II(3) % 0.60 0.35 0.42 1.37 -0.19 1.18
High Total Return(4) % 0.60 0.30 -- -- -- --
High Yield Bond % 0.65 0.35
High Total Return II(4) % 0.60 0.30 -- -- -- --
Pilgrim Money Market % 0.25 0.25 1.78 2.28 -1.43 0.85
ING Money Market % 0.25 0.75 -- -- -- --
Class B(5)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses(2) Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
Government Securities Income(3) % 0.50 1.00 0.60 2.10 -- 2.10
GNMA Income % 0.54 1.00 -- -- --
National Tax-Exempt Bond % 0.50 1.00 -- -- --
Intermediate Bond % 0.50 1.00 -- -- --
Strategic Income % 0.45 0.75 1.84 3.04 -1.68 1.36
High Yield % 0.60 1.00 0.32 1.92 -0.12 1.80
High Yield II(3) % 0.60 1.00 0.42 2.02 -0.19 1.83
High Total Return(4) % 0.60 1.00 -- -- -- --
High Yield Bond % 0.65 1.00
High Total Return II(4) % 0.60 1.00 -- -- -- --
Pilgrim Money Market % 0.25 1.00 1.78 3.03 -1.43 1.60
ING Money Market % 0.25 1.00 -- -- -- --
</TABLE>
28 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class C(6)
<TABLE>
<CAPTION>
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Government Securities Income(3) % 0.50 1.00 0.60 2.10 -- 2.10
GNMA Income % 0.54 1.00 -- -- --
National Tax-Exempt Bond % 0.50 1.00
Intermediate Bond % 0.50 1.00
Strategic Income % 0.45 0.75 1.84 3.04 -1.68 1.36
High Yield % 0.60 1.00 0.32 1.92 -0.12 1.80
High Yield II(3) % 0.60 1.00 0.42 2.02 -0.19 1.83
High Total Return(4) % 0.60 1.00 -- -- --
High Yield Bond % 0.65 1.00
High Total Return II(4) % 0.60 1.00 -- -- --
Pilgrim Money Market % 0.25(8) 1.00 1.78(9) 3.03 -1.43 1.60
ING Money Market % 0.25 1.00 -- -- -- --
Class M
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
Government Securities Income(3) % 0.50 0.75 0.60 1.85 -- 1.85
High Yield % 0.60 0.75 0.32 1.67 -0.12 1.55
GNMA Income % 0.54 0.75 -- -- -- --
Class T(7)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
Government Securities Income(3) % 0.50 0.65 0.60 1.75 -- 1.75
High Yield II(3) % 0.60 0.65 0.42 1.67 -0.19 1.48
GNMA Income % 0.54 0.65
</TABLE>
(1) These tables show the estimated operating expenses for each Fund by class
as a ratio of expenses to average daily net assets. These estimates are
based on each Fund's actual operating expenses for its most recent complete
fiscal year and fee waivers to which the Advisers have agreed for each Fund
except for GNMA Income Fund. For GNMA Income Fund, estimated operating
expenses are based on estimated contractual operating expenses commencing
with ING Pilgrim Investments' management of the Fund.
(2) ING Pilgrim Investments has entered into written expense limitation
agreements with each Fund except Government Securities Income, High Total
Return, and High Total Return II under which it will limit expenses of the
Fund, excluding interest, taxes, brokerage and extraordinary expenses,
subject to possible reimbursement to ING Pilgrim Investments within three
years. The amount of each Fund's expenses waived or reimbursed during the
last fiscal year by ING Pilgrim Investments or ING Mutual Funds Management
Co. LLC is shown under the heading "Fee Waiver by Adviser". For each Fund
except Government Securities Income Fund, the expense limit will continue
through at least October 31, 2001. ING Pilgrim Investments has separately
agreed to reimburse Government Securities Income Fund to the extent that
total Fund operating expenses, excluding interest, taxes, brokerage
commissions, extraordinary expenses, and distribution fees in excess of
0.25%, exceed 1.50% of the Fund's average daily net assets on the first $40
million in net assets and 1% of average daily net assets in excess of $40
million. The expense limit for Government Securities Income Fund will
terminate only with termination of the advisory contract with ING Pilgrim
Investments. Similarly, ING Mutual Funds Management Co. LLC has entered
into written expense limitation agreements with National Tax-Exempt Bond,
Intermediate Bond and High Yield Bond Funds. For each Fund, the expense
limit will continue through at least February 28, 2001.
(3) Effective April 1, 2000, certain ING Pilgrim Funds merged with High Yield
II and Government Securities Income Funds. It is expected that as a result
of the mergers, operating expenses for High Yield II and Government
Securities Income Funds will be lower than the operating expenses prior to
the mergers.
(4) For the High Total Return Fund and High Total Return Fund II, the
management fee shown reflects a fee waiver effective July 26, 2000. Absent
the waiver, the management fees for the High Total Return Fund and High
Total Return Fund II would be 0.71% and 0.75%, respectively.
(5) Because Class B shares are new for GNMA Income Fund, its expenses are
estimated based on Class A expenses.
(6) Because Class C shares are new for Government Securities Income, GNMA
Income and High Yield Funds, their expenses are estimated based on Class B
expenses.
(7) Because Class T shares are new for High Yield II, GNMA Income and
Government Securities Income Funds, their expenses are estimated based on
Class A expenses.
(8) The Primary Institutional Fund charges a comprehensive annual management
fee of 0.25% of average daily net assets for both advisory and ordinary
operating expenses. Pursuant to its investment advisory agreement with the
Fund, ING Pilgrim Investments, Inc. charges a maximum annual advisory fee
equal to 0.50% of average daily net assets if the Fund does not invest
substantially of all of its assets in another investment company. If the
Fund invests substantially all of its assets in another investment
company, ING Pilgrim Investments, Inc. does not charge an advisory fee.
The Fund anticipates investing substantially all of its assets in another
investment company.
(9) ING Pilgrim Investments, Inc. receives an annual administration fee equal
to 0.25% of average daily net assets.
(10) Because Class M shares are now for GNMA Income Fund, its expenses are
estimated based on Class A expenses.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 29
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
<TABLE>
<CAPTION>
Class A
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Securities Income $ 606 882 1,179 2,022
GNMA Income $
National Tax-Exempt Bond $
Intermediate Bond $
Strategic Income $ 568 1,104 1,665 3,188
High Yield $ 577 818 1,077 1,818
High Yield II $ 590 870 1,172 2,027
High Total Return $
High Yield Bond $
High Total Return II $
Pilgrim Money Market $ 87 575 1,090 2,504
ING Money Market $ -- -- -- --
Class B
If you sell your shares If you don't sell your shares
------------------------------------------- -----------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
---- ------ ------- ------- -------- ------ ------- ------- --------
Government Securities Income $ 713 958 1,329 2,240 213 658 1,129 2,240
GNMA Income $
National Tax-Exempt Bond $
Intermediate Bond $
Strategic Income $ 638 1,081 1,649 3,143 138 781 1,449 3,143
High Yield $ 683 891 1,226 2,038 183 591 1,026 2,038
High Yield II $ 686 915 1,271 2,166 186 615 1,071 2,166
High Total Return $
High Yield Bond $
High Total Return II $
Pilgrim Money Market $ 663 1,102 1,666 3,068 163 802 1,466 3,068
ING Money Market $ -- -- -- -- -- -- -- --
</TABLE>
30 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
<TABLE>
<CAPTION>
Class C
If you sell your shares If you don't sell your shares
--------------------------------------------- -------------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
---- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government Securities Income $ 313 658 1,129 2,431 213 658 1,129 2,431
GNMA Income $
National Tax-Exempt Bond $
Intermediate Bond $
Strategic Income $ 238 781 1,449 3,237 138 781 1,449 3,237
High Yield $ 283 591 1,026 2,234 183 591 1,026 2,234
High Yield II $ 286 615 1,071 2,333 186 615 1,071 2,333
High Total Return $
High Yield Bond $
High Total Return II $
Pilgrim Money Market $ 263 802 1,466 3,245 163 802 1,466 3,245
ING Money Market $ -- -- -- -- -- -- -- --
Class M
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
Government Securities Income $ 507 888 1,293 2,424
High Yield $ 478 823 1,194 2,237
GNMA Income $
Class T
If you sell your shares If you don't sell your shares
--------------------------------------- --------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
---- ------ ------- ------- -------- ------ ------- ------- --------
Government Securities Income $ 578 751 949 1,957 178 551 949 1,957
High Yield II $ 557 708 890 1,881 151 508 890 1,881
GNMA Income $
</TABLE>
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 31
<PAGE>
SHAREHOLDER
GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
ING PILGRIM PURCHASE OPTIONSTM
Depending upon the Fund, you may select from up to five separate classes of
shares: Class A, Class B, Class C, Class M and Class T.
Class A
* Front-end sales charge, as described on the next page (except for Pilgrim
Money Market and ING Money Market Funds).
* Distribution and service (12b-1) fees of 0.25% to 0.35%.
Class B
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1% (0.75% for Strategic Income
Fund).
* A contingent deferred sales charge, as described on the next page.
* Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses. Class B shares acquired initially through Funds
that were part of the Nicholas-Applegate Mutual Funds at the time of
purchase will convert after seven years from the date of original purchase.
Class C
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1% (0.75% for Strategic Income
Fund).
* A 1% contingent deferred sales charge on shares sold within one year of
purchase.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
Class M
* Lower front-end sales charge than Class A, as described on the next page.
* Distribution and service (12b-1) fees of 0.75%.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class M level throughout the life of your investment.
* Offered only by Government Securities Income Fund, GNMA Income Fund and
High Yield Fund.
Class T
* No longer available for purchase, unless you are investing income earned on
Class T shares or exchanging Class T Shares of another Fund.
* Distribution and service (12b-1) fees of 0.65%.
* A contingent deferred sales charge, as described in this section.
* Automatic conversion to Class A shares after 8 years, thus reducing future
annual expenses.
* Offered only by Government Securities Income Fund, GNMA Income Fund and
High Yield Fund II.
When choosing between classes, you should carefully consider the ongoing annual
expenses along with the initial sales charge or the contingent deferred sales
charge. The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Higher distribution
fees mean a higher expense ratio, so Class B and Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A or Class M shares. Orders for Class B shares and Class M shares in excess of
$250,000 and $1,000,000, respectively, will be accepted as orders for Class A
shares or declined. You should discuss which Class of shares is right for you
with your investment professional.
Distribution and Shareholder Service Fees
To pay for the cost of promoting the Funds and servicing your shareholder
account, each class of each Fund has adopted a Rule 12b-1 plan which requires
fees to be paid out of the assets of each class. Over time the fees will
increase your cost of investing and may exceed the cost of paying other types of
sales charges.
32 Shareholder Guide
<PAGE>
SHAREHOLDER
CHOOSING A SHARE CLASS GUIDE
--------------------------------------------------------------------------------
SALES CHARGE CALCULATION
Class A(1)
Class A shares of the Funds are sold subject to the following sales charge:
Income Funds
------------------------
As a %
of the As a % of
offering net
Your Investment price asset value
--------------- ----- -----------
Less than $50,000 4.75 4.99
$50,000 - $99,999 4.50 4.71
$100,000 - $249,999 3.50 3.63
$250,000 - $499,999 2.50 2.56
$500,000 - $1,000,000 2.00 2.04
$1,000,000 and over See below
(1) Shareholders that purchased funds that were a part of the Lexington family
of funds at the time of purchase are not subject to sales charges for the
life of their account.
Money Market Fund. There is no sales charge if you purchase Class A shares of
either the Pilgrim Money Market or ING Money Market Funds. However, if the Class
A shares are exchanged for shares of another Pilgrim Fund, you will be charged
the applicable sales load for that fund upon the exchange.
Investments of $1 Million or More. There is no front-end sales charge if you
purchase Class A shares in an amount of $1 million or more. However, the shares
will be subject to a contingent deferred sales charge if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:
Period during which
Your investment CDSC CDSC applies
--------------- ---- ------------
$1,000,000 to $2,499,999 1.00% 2 years
$2,500,000 to $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
However, Class A shares that were purchased in an amount of $1 million or more
through Funds that were part of the Nicholas-Applegate Mutual Funds at the time
of purchase will be subject to a contingent deferred sales charge of 1% within
one year from the date of purchase.
Class A shares that were purchased in an amount of $1 million or more through
funds that were part of the Northstar family of funds and the ING family of
funds at the time of purchase are subject to a different contingent deferred
sales charge period of 18 months and 12 months, respectively, from the date of
purchase. See the SAI for further information.
Class B, Class C and Class T
Class B, Class C and Class T shares are offered at their net asset value per
share without any initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) on shares that you sell within a certain period of
time after you bought them. The amount of the CDSC is based on the lesser of the
net asset value of the shares at the time of purchase or redemption. There is no
CDSC on shares acquired through the reinvestment of dividends and capital gains
distributions. The CDSCs are as follows:
Class B Deferred Sales Charge(2)
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 5%
2nd year 4%
3rd year 3%
4th year 3%
5th year 2%
6th year 1%
After 6th year none
(2) Class B shares that were purchased through funds that were part of the
Northstar family of funds at the time of purchase are subject to a different
contingent deferred sales charge. Please see the SAI for further
information.
Class C Deferred Sales Charge
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 1%
After 1st year none
Class T Deferred Sales Charge
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 4%
2nd year 3%
3rd year 2%
4th year 1%
After 4th year none
To keep your CDSC as low as possible, each time you place a request to redeem
shares the Funds will first redeem shares in your account that are not subject
to a CDSC, and then will sell shares that have the lowest CDSC.
Class M
Class M shares of the Funds are sold subject to the following sales charge:
Government
Securities
Income and
High Yield
Funds
-----------------------
As a % As a % of
of the net
offering asset
Your Investment price value
--------------- ----- -----
Less than $50,000 3.25% 3.36%
$50,000 - $99,999 2.25% 2.30%
$100,000 - $249,999 1.50% 1.52%
$250,000 - $499,999 1.00% 1.01%
$500,000 and over none none
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 33
<PAGE>
SHAREHOLDER
GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
Reduced Sales Charges. You may reduce the initial sales charge on a purchase of
Class A or Class M shares of the Funds by combining multiple purchases to take
advantage of the breakpoints in the sales charge schedules. You may do this by:
* Letter of Intent -- lets you purchase shares over a 13 month period and pay
the same sales charge as if the shares had all been purchased at once.
* Rights of Accumulation -- lets you add the value of shares of any open-end
ING Pilgrim Fund (excluding the Pilgrim Money Market and ING Money Market
Funds) you already own to the amount of your next purchase for purposes of
calculating the sales charge.
* Combination Privilege -- shares held by investors in the ING Pilgrim Funds
which impose a CDSC may be combined with Class A or Class M shares for a
reduced sales charge.
See the Account Application or the Statement of Additional Information for
details, or contact your financial representative or the Shareholder Servicing
Agent for more information.
CDSC Waivers. If you notify the Transfer Agent at the time of redemption, the
CDSC for each Class will be waived in the following cases:
* redemptions following the death or permanent disability of a shareholder if
made within one year of death or the initial determination of permanent
disability. The waiver is available only for shares held at the time of death
or initial determination of permanent disability.
* for Class B Shares, redemptions pursuant to a Systematic Withdrawal Plan, up
to a maximum of 12% per year of a shareholder's account value based on the
value of the account at the time the plan is established and annually
thereafter, provided all dividends and distributions are reinvested and the
total redemptions do not exceed 12% annually.
* mandatory distributions from a tax-deferred retirement plan or an IRA.
However, if you purchased shares that were part of the Nicholas-Applegate
Mutual Funds, you may be eligible for a CDSC waiver prior to the mandatory
distribution age.
* If you think you may be eligible for a CDSC waiver, contact your financial
representative or the Shareholder Servicing Agent.
Reinstatement Privilege. If you sell Class B, Class C or Class T shares of an
ING Pilgrim Fund, you may reinvest some or all of the proceeds in the same share
class within 90 days without a sales charge. Reinstated Class B, Class C and
Class T shares will retain their original cost and purchase date for purposes of
the CDSC. This privilege can be used only once per calendar year. If you want to
use the Reinstatement Privilege, contact your financial representative or the
Shareholder Servicing Agent. Consult the SAI for more information.
Sales Charge Waivers. Class A or Class M shares may be purchased without a sales
charge by certain individuals and institutions. For additional information,
contact the Shareholder Servicing Agent, or see the Statement of Additional
Information.
34 Shareholder Guide
<PAGE>
SHAREHOLDER
HOW TO PURCHASE SHARES GUIDE
--------------------------------------------------------------------------------
The minimum initial investment amounts for the ING Pilgrim Funds are as follows:
* Non-retirement accounts: $1,000
* Retirement accounts: $250
* Pre-Authorized Investment Plan: $100 to open; you must invest at least $100 a
month.
The minimum additional investment is $100.
Make your investment using the table on the right.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. The ING Pilgrim Funds reserve the right to waive minimum
investment amounts. The Funds reserve the right to liquidate sufficient shares
to recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $1,000.00
($250.00 for IRAs).
Retirement Plans
The Funds have available prototype qualified retirement plans for both
corporations and for self-employed individuals. They also have available
prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company (SSB) acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB
currently receives a $12 custodial fee annually for the maintenance of such
accounts.
Initial Additional
Method Investment Investment
------ ---------- ----------
By Contacting An investment
Your professional with an
Investment authorized firm
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Visit or consult an
investment investment professional.
professional. Make Fill out the Account
your check payable to Additions
the ING Pilgrim Funds form included on the
and mail it, along with bottom of your account
a completed statement along with
Application. Please your check payable to
indicate your the Fund and mail
investment professional them to the address on
on the New Account the account statement.
Application Remember to write
your account number
on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the Fund
in the care of:
State Street Bank and
Trust Company ABA #101003621
Kansas City, MO
credit to:____________
(the Fund) A/C #751-8315;
for further credit
to:_____________
Shareholder A/C #__________
(A/C # you received over the
telephone)
Shareholder Name:
________________________
(Your Name Here)
After wiring funds you
must complete the
Account Application
and send it to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 35
<PAGE>
SHAREHOLDER
GUIDE HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
You may redeem shares using the table on the right.
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $10,000.
* Minimum withdrawal amount is $100.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a Fund could elect to make payment in securities
for redemptions in excess of $250,000 or 1% of its net assets during any 90-day
period for any one shareholder. An investor may incur brokerage costs in
converting such securities to cash.
Method Procedures
------ ----------
By Contacting Your You may redeem by contacting your
Investment Professional investment professional. Investment
professionals may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes
any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check: You may have redemption
proceeds (up to a maximum of $100,000) mailed to an
address which has been on record with ING Pilgrim
Funds for at least 30 days.
Receiving Proceeds By Wire:
You may have redemption proceeds (subject to a
minimum of $5,000) wired to your pre-designated bank
account. You will not be able to receive redemption
proceeds by wire unless you check the box on the
Account Application which signifies that you wish to
receive redemption proceeds by wire and attach a
voided check. Under normal circumstances, proceeds
will be transmitted to your bank on the business day
following receipt of your instructions, provided
redemptions may be made. In the event that share
certificates have been issued, you may not request a
wire redemption by telephone.
36 Shareholder Guide
<PAGE>
SHAREHOLDER
TRANSACTION POLICIES GUIDE
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of each class of each
Fund is calculated by taking the value of the Fund's assets attributable to that
class, subtracting the Fund's liabilities attributable to that class, and
dividing by the number of shares of that class that are outstanding. Because
foreign securities may trade on days when the Funds do not price shares, the net
asset value of a Fund that invests in foreign securities may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.
In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
and short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees. Valuing
securities at fair value involves greater reliance on judgment than securities
that have readily available market quotations.
Pilgrim Money Market Fund. The Pilgrim Money Market Fund tries to maintain a
stable NAV of $1.00 per share. Because the Primary Institutional Fund uses the
amortized cost method of valuing the securities held by it and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the Primary Institutional Fund will remain constant at $1.00 per
share. However, the Pilgrim Money Market Fund makes no assurance that either it
or the Primary Institutional Fund can maintain a $1.00 net asset value per
share.
ING Money Market Fund
The ING Money Market Fund uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share,
although there may be circumstances under which this goal cannot be acheived.
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 or the market value of the security. Although the
Board of Trustees has established procedures designed to stabilize to the extent
reasonably possible, the share price of the Fund, there can be no assurance that
the Fund's net asset value can be maintained at $1.00 per share.
Price of Shares
When you buy shares, you pay the NAV plus any applicable sales charge. When you
sell shares, you receive the NAV minus any applicable deferred sales charge.
Exchange orders are effected at NAV.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued
unless you request them in writing.
Telephone Orders
The Funds and their transfer agent will not be responsible for the authenticity
of phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Funds and their transfer agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Funds and
their transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other ING
Pilgrim Fund, except for Lexington Money Market Trust and ING Pilgrim Corporate
Leaders Trust Fund, without paying any additional sales charge, except that
Class A shares of the Pilgrim Money Market and ING Money Market Funds for which
no sales charge was paid must pay the applicable sales load on an exchange into
Class A shares of another Fund. In addition, Class T shares of any Fund may be
exchanged for Class B shares of the Pilgrim Money Market and ING Money Market
Funds. Shares subject to a CDSC will continue to age from the date that the
original shares were purchased. If you exchange shares of a Fund that at the
time you acquired the shares was a Nicholas-Applegate Mutual Fund, the shares
you receive on the exchange will be subject to the current CDSC structure and
conversion rights of the Fund being acquired, although the shares will continue
to age for CDSC and conversion purposes from the date the original shares were
acquired.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 37
<PAGE>
SHAREHOLDER
GUIDE TRANSACTION POLICIES
--------------------------------------------------------------------------------
gain or loss for federal and state income tax purposes. There is no specific
limit on exchange frequency; however, the Funds are intended for long-term
investment and not as a short-term trading vehicle. The Adviser may prohibit
excessive exchanges (more than four per year). The Adviser also may, on 60 days'
prior notice, restrict the frequency of, otherwise modify, or impose charges of
up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
Systematic Exchange Privilege
With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end ING Pilgrim Fund. This exchange privilege may be modified at any time
or terminated upon 60 days' written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at NAV, the shares of any
shareholder whose account (except for IRAs) has a value of less than $1,000,
other than as a result of a decline in the NAV per share.
Account Access
Unless your shares are held through a third-party fiduciary or in an omnibus
registration at your bank or brokerage firm, you may be able to access your
account information over the internet at www.pilgrimfunds.com, or via a touch
tone telephone by calling (800) 992-0180 and selecting Option 1. Should you wish
to speak with a Shareholder Service Representative you may call the toll-free
number listed above and select Option 2.
38 Shareholder Guide
<PAGE>
MANAGEMENT
ADVISER OF THE FUNDS
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds (except the National Tax
Exempt Bond, Intermediate Bond, High Yield Bond, and ING Money Market Funds).
ING Pilgrim has overall responsibility for the management of the Funds. ING
Mutual Funds Management LLC ("IMFC") serves as investment adviser to the
National Tax Exempt Bond, Intermediate Bond, High Yield Bond Funds, and ING
Money Market. ING Pilgrim or IMFC provides or oversees all investment advisory
and portfolio management services for each Fund, and assists in managing and
supervising all aspects of the general day-to-day business activities and
operations of the Funds, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Through its subsidiaries, ReliaStar offers individuals and
institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products and personal finance education.
On July 26, 2000, ReliaStar was acquired by ING Group (NYSE: ING). ING Group is
a global financial institution active in the field of insurance, banking, and
asset management in more than 65 countries, with almost 100,000 employees.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors,
an indirect wholly-owned subsidiary of ReliaStar, merged with ING Pilgrim
Investments. Pilgrim Advisors and ING Pilgrim Investments were sister companies
and shared certain resources and investment personnel.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired
Lexington Global Asset Managers, Inc., the parent company of Lexington, and ING
Pilgrim Investments was approved as Adviser to the Funds formerly advised by
Lexington.
Organized in ______________, IMFC is registered as an investment adviser. IMFC
is a wholly owned Subsidiary of ING Group.
As of December 31, 2000, ING Pilgrim managed over $___ billion in assets.
As of December 31, 2000, IMFC managed over $ billion in assets.
ING Pilgrim's and IMFC's principal address is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.
ING Pilgrim and IMFC receives a monthly fee for their services based on the
average daily net assets of each of the Funds.
The following table shows the aggregate annual management fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
Management
Fund Fee
---- ---
ING Pilgrim Government Securities Income 0.50%
ING Pilgrim GNMA Income 0.54
ING Pilgrim National Tax Exempt Bond 0.50
ING Pilgrim Intermediate Bond 0.50
ING Pilgrim Strategic Income 0.45
ING Pilgrim High Yield 0.60
ING Pilgrim High Yield II 0.60
ING Pilgrim High Total Return 0.71
ING Pilgrim High Yield Bond 0.65
ING Pilgrim High Total Return II 0.75
ING Pilgrim Money Market 0.25
ING Pilgrim Directly Manages the Portfolios of the Following Funds:
GNMA Income Fund
Denis P. Jamison, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim since July 2000, has served as Senior Portfolio Manager of GNMA Income
Fund since July 1981. Prior to July 2000, he was a Senior Vice President at
Lexington (which was acquired by ING Pilgrim's parent company in July 2000). He
is a Chartered Financial Analyst and a member of the New York Society of
Security Analysts.
Roseann G. McCarthy, Assistant Vice President of ING Pilgrim since July 2000,
has served as co-manager of GNMA Income Fund since May 1999. Prior to July 2000,
she was an Assistant Vice President at Lexington (which was acquired by ING
Pilgrim's parent company in July 2000). Prior to joining the Lexington Fixed
Income Department in 1997, she was Mutual Fund Marketing and Research
Coordinator. Prior to 1995, Ms. McCarthy was Fund Statistician and a Shareholder
Service Representative for the Lexington Funds.
High Total Return Fund and High Total Return Fund II
Edwin Schriver, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of the portfolio management team that manages High Total
Return Fund and High Total Return Fund II since October 2000. Prior to joining
ING Pilgrim, Mr. Schriver was a Senior High Yield Analyst for Dreyfus
Corporation since 1998. From 1996 to 1997, Mr. Schriver was the President of
Crescent City Research, an investment research and software firm. Prior to 1996
Mr. Schriver was President of an SEC registered investment adviser and held
various senior portfolio managment positions.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Management of the Funds 39
<PAGE>
MANAGEMENT
OF THE FUNDS SUB-ADVISER
--------------------------------------------------------------------------------
Andy Mitchell, Vice President of ING Pilgrim, has served as Co-Portfolio Manager
of the portfolio management team that manages High Total Return Fund and High
Total Return Fund II since October 2000. Prior to joining ING Pilgrim in July
2000, Mr. Mitchell was a Senior Credit Analyst with Katonah Capital since March
2000. From March 1998 to March 2000, Mr. Mitchell was a Vice President and
Senior High Yield Analyst at Merrill Lynch Asset Management. From March 1994 to
March 1998, Mr. Mitchell was Assistant Vice President and Senior High Yield
Analyst at Schroder Capital Management.
Russ Stiver, Vice President of ING Pilgrim, has served as Co-Portfolio Manager
of the portfolio management team that manages High Total Return Fund and High
Total Return Fund II since October 2000. Prior to joining ING Pilgrim in May
2000, Mr. Stiver was Portfolio Manager (1996-2000) and Acting V.P. at Manulife
Financial (1999-2000). From 1994 to 1996, Mr. Stiver analyzed investment grade,
high yield and emerging market sovereign debt securities for Toronto--Dominion
Bank.
Strategic Income Fund
The following individuals share responsibility for the day-to-day management of
the Strategic Income Fund:
Robert K. Kinsey, Vice President of ING Pilgrim, has served as a Portfolio
Manager of Strategic Income Fund since May 24, 1999. Mr. Kinsey manages
Strategic Income Fund's assets that are invested in assets other than high yield
debt securities. Prior to joining ING Pilgrim, Mr. Kinsey was a Vice President
and Fixed Income Portfolio Manager for Federated Investors from January 1995 to
March 1999. From July 1992 to January 1995, Mr. Kinsey was a Principal and
Portfolio Manager for Harris Investment Management.
Edwin Schriver, whose background is described above, has served as Senior
Portfolio Manager of the high yield portion of Strategic Income Fund's assets
since October 2000.
Government Securities Income Fund
Robert K. Kinsey, whose background is described above, has primary
responsibility for the day-to-day management of Government Securities Income
Fund, and has served as Senior Portfolio Manager of Government Securities Income
Fund since May 24, 1999.
High Yield Fund and High Yield Fund II
Edwin Schriver, whose background is described above, has served as Senior
Portfolio Manager of the portfolio management team that manages High Yield Fund
and High Yield Fund II since October 2000.
Andy Mitchell, whose background is described above, has served as Co-Portfolio
Manager of the portfolio management team that manages High Yield Fund and High
Yield Fund II since October 2000.
Russ Stiver, Vice President of ING Pilgrim, has served as Co-Portfolio Manager
of the portfolio management team that manages High Yield Fund and High Yield
Fund II since October 2000.
For the following Funds, IMFC has engaged a Sub-Adviser to provide the
day-to-day management of the Fund's portfolio. The Sub-Advisers have , at least
in part, been selected on the basis of their successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles
National Tax Exempt Bond Fund
Furman Selz Capital Management LLC. Furman Selz Capital Management LLC ("FSCM")
serves as sub-adviser to the National Tax-Exempt Bond Fund. FSCM is located at
230 Park Avenue, New York, NY 10169. FSCM is engaged in the business of
providing investment advice to institutional and individual client accounts
which, as of October 31, 2000, were valued at approximately $5.1 billion.
Mr. Robert Schonbrunn and Mr. Alan Segars have primary responsibility for
managing the Fund. Mr. Schonbrunn has been an investment professional with FSMC
since 1985 and has 32 years of investment experience. Mr. Segars has been an
investment professional with FSCM since 1993 and has 30 years of investment
experience.
Intermediate Bond Fund and High Yield Bond Fund
ING Investment Management LLC. ING Investment Management LLC ("IIM") serves as
sub-adviser to the ING Intermediate Bond Fund and the ING High Yield Bond Fund.
IIM is located at 5780 Powers Ferry Road, N.W., Suite 300, Atlanta, GA 30327.
IIM is engaged in the business of providing investment advice to portfolios
which, as of September 30, 2000, were valued at $29.67 billion, IIM also advises
other registered investment companies.
Mr. James Kauffman, with 12 years of investment experience, leads a team of
three investment professionals in managing the Intermediate Bond Fund.
Mr. Robert Bowman, with more than 20 years of investment experience, leads a
team of five investment professionals in managing the High Yield Bond Fund. Mr
Bowman has been a Senior Vice President and Managing Director at ING Investment
LLC since 1999.
40 Management of the Funds
<PAGE>
DIVIDENDS,
DISTRIBUTIONS
DIVIDENDS/TAXES AND TAXES
--------------------------------------------------------------------------------
Dividends
The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends, if any, as follows:
Monthly(1)
ING Pilgrim Government Securities Income
ING Pilgrim GNMA Income
ING Pilgrim National Tax-Exempt Bond
ING Intermediate Bond
ING Pilgrim Strategic Income
ING Pilgrim High Yield
ING Pilgrim High Yield II
ING Pilgrim High Total Return
ING Pilgrim High Yield Bond
ING Pilgrim High Total Return II
Pilgrim Money Market
ING Money Market
(1) Distributions normally expected to consist primarily of ordinary income.
Each Fund distributes capital gains, if any, annually.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class A, B, C, M or T shares of a Fund invested in another Pilgrim Fund
which offers the same class shares. If you are a shareholder of Pilgrim Prime
Rate Trust, whose shares are not held in a broker or nominee account, you may,
upon written request, elect to have all dividends invested into a pre-existing
Class A account of any open-end ING Pilgrim Fund.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive. A particular distribution generally will be taxable as either ordinary
income or long-term capital gains. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a Fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.
Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital gains
distributions.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Dividends, Distributions and Taxes 41
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information (the
"SAI").
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the adviser can decide
whether to use them or not. The Funds named below invest in these securities or
use these techniques as part of the Fund's principal investment strategy.
However, the adviser of any Fund may also use these investment techniques or
make investments in securities that are not a part of the Fund's principal
investment strategy.
PRINCIPAL RISKS
Investments in Foreign Securities (All Funds except Government Securities
Income, GNMA Income, National Tax-Exempt Bond and Money Market Funds). There are
certain risks in owning foreign securities, including those resulting from:
fluctuations in currency exchange rates; devaluation of currencies; political or
economic developments and the possible imposition of currency exchange blockages
or other foreign governmental laws or restrictions; reduced availability of
public information concerning issuers; accounting, auditing and financial
reporting standards or other regulatory practices and requirements that are not
uniform when compared to those applicable to domestic companies; settlement and
clearance procedures in some countries that may not be reliable and can result
in delays in settlement; higher transaction and custody expenses than for
domestic securities; and limitations on foreign ownership. Also, securities of
many foreign companies may be less liquid and the prices more volatile than
those of domestic companies. With certain foreign countries, there is the
possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Emerging Markets Investments (High Yield II, High Total Return, High Yield Bond.
Intermediate Bond, and High Total Return II Funds). Because of less developed
markets and economies and, in some countries, less mature governments and
governmental institutions, the risks of investing in foreign securities can be
intensified in the case of investments in issuers domiciled or doing substantial
business in emerging market countries. These risks include: high concentration
of market capitalization and trading volume in a small number of issuers
representing a limited number of industries, as well as a high concentration of
investors and financial intermediaries; political and social uncertainties;
over-dependence on exports, especially with respect to primary commodities,
making these economies vulnerable to changes in commodity prices; overburdened
infrastructure and obsolete or unseasonal financial systems; environmental
problems; less well developed legal systems; and less reliable custodial
services and settlement practices.
Inability to Sell Securities (All Funds except Government Securities Income,
GNMA Income and Money Market Funds). Some securities usually trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small and mid-size U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in emerging markets. The
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.
High Yield Securities (All Funds except National Tax-Exempt Bond, Government
Securities Income, GNMA Income and Money Market Funds). Investments in high
yield securities generally provide greater income and increased opportunity for
capital appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and principal and
income risk. High yield securities are not considered investment grade, and are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of high
yield securities have been found to be less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic downturns
or individual corporate developments. High yield securities structured as zero
coupon or pay-in-kind securities tend to be more volatile. The secondary market
in which high yield securities are traded is generally less liquid than the
market for higher grade bonds. At times of less liquidity, it may be more
difficult to value high yield securities.
Corporate Debt Securities (All Funds except Government Securities Income, GNMA
Income and Pilgrim Money Market Funds). Corporate debt securities are subject to
the risk of the issuer's inability to meet principal and interest payments on
the obligation and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the credit-worthiness of the
issuer and general market liquidity. When
42 More Information About Risks
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
interest rates decline, the value of the Fund's debt securities can be expected
to rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of abond was used as a proxy for the sensitivity of a
bond's price to changes in interest rates, otherwise known as a bond's "interest
rate risk" or "volatility." According to this measure, the longer the maturity
of a bond, the more its price will change for a given change in market interest
rates. However, this method ignores the amount and timing of all cash flows from
the bond prior to final maturity. Duration is a measure of average life of a
bond on a present value basis, which was developed to incorporate a bond's
yield, coupons, final maturity and call features into one measure. For point of
reference, the duration of a noncallable 7% coupon bond with a remaining
maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.
U.S. Government Securities (National Tax-Exempt Bond, International Bond, High
Yield Bond, High Yield, High Yield II, High Total Return and High Total Return
II Funds). Some U.S. Government agency securities may be subject to varying
degrees of credit risk particularly those not backed by the full faith and
credit of the United States Government. All U.S. Government securities may be
subject to price declines in the securities due to changing interest rates.
Convertible Securities (All Funds except National Tax-Exempt Bond, High Yield
II, High Total Return and High Total Return II Funds). The price of a
convertible security will normally fluctuate in some proportion to changes in
the price of the underlying equity security, and as such is subject to risks
relating to the activities of the issuer and general market and economic
conditions. The income component of convertible securities causes fluctuations
based upon changes in interest rates and the credit quality of the issuer.
Convertible securities are often lower rated securities. A Fund may be required
to redeem or convert a convertible security before the holder would otherwise
choose.
Other Investment Companies (National Tax-Exempt Bond, Intermediate Bond,
Strategic Income and High Yield Bond Funds). The Fund may invest up to 10% of
its assets in other investment companies. When a Fund invests in other
investment companies, you indirectly pay a proportionate share of the expenses
of that other investment company (including management fees, administration
fees, and custodial fees) in addition to the expenses of the Fund.
Mortgage-Related Securities (All Funds except Money Market and National
Tax-Exempt Bond Funds). Although mortgage loans underlying a mortgage-backed
security 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. Like other fixed income securities, when interest rates rise,
the value of a mortgage-backed security generally will decline; however, when
interest rates are declining, the value of mortgage-backed securities with
prepayment features may not increase as much as other fixed income securities.
The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of the purchase. Unanticipated rates of prepayment on underlying
mortgages can be expected to increase the volatility of such securities. In
addition, the value of these securities may fluctuate in response to the
market's perception of the creditworthiness of the issuers of mortgage-related
securities owned by a Fund. Additionally, although mortgages and
mortgage-related securities are generally supported by some form of government
or private guarantee and/or insurance, there is no assurance that private
guarantors or insurers will be able to meet their obligations.
Interests in Loans (All Funds except Government Securities Income, GNMA Income
and Money Market Funds). Certain Funds may invest in participation interests or
assignments in secured variable or floating rate loans, which include
participation interests in lease financings. Loans are subject to the credit
risk of nonpayment of principal or interest. Substantial increases in interest
rates may cause an increase in loan defaults. Although the loans will generally
be fully collateralized at the time of acquisition, the collateral may decline
in value, be relatively illiquid, or lose all or substantially all of its value
subsequent to the Fund's investment. Many loans are relatively illiquid, and may
be difficult to value.
Derivatives (National Tax-Exempt Bond, Intermediate Bond, Strategic Income, High
Yield and High Yield II, and High Yield Bond Funds). Generally, derivatives can
be characterized as financial instruments whose performance is derived, at least
in part, from the performance of an underlying asset or assets. Some derivatives
are sophisticated instruments that typically involve a small investment of cash
relative to the magnitude of risks assumed. These may include swap agreements,
options, forwards and futures. Derivative securities are subject to market risk,
which could be significant for those that have a leveraging effect. Many of the
Funds do not invest in these types of derivatives, and some do, so please check
the description of the Fund's policies. Derivatives are also subject to credit
risks related to the counterparty's ability to perform, and any deterioration in
the counterparty's creditworthiness could adversely affect the instrument. A
risk of using derivatives is that the adviser might imperfectly judge the
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
More Information About Risks 43
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk in another security, the hedge might not correlate to the
market's movements and may have unexpected or undesired results, such as a loss
or a reduction in gains.
Portfolio Turnover. Each Fund, except Government Securities Income, GNMA Income,
Pilgrim Money Market and ING Money Market Funds, is generally expected to engage
in frequent and active trading of portfolio securities to achieve its investment
objective. A high portfolio turnover rate involves greater expenses to a Fund,
including brokerage commissions and other transaction costs, and is likely to
generate more taxable short-term gains for shareholders, which may have an
adverse effect on the performance of the Fund.
OTHER RISKS
Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities. If a security is illiquid, the Fund might be unable to sell
the security at a time when the Adviser might wish to sell, and the security
could have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Temporary Defensive Strategies. When the Adviser to a Fund anticipates unusual
market or other conditions, the Fund may temporarily depart from its principal
investment strategies as a defensive measure. To the extent that a Fund invests
defensively, it likely will not achieve capital appreciation.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Lending Portfolio Securities. In order to generate additional income, certain
Funds may lend portfolio securities in an amount up to 331|M/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower default or fail financially.
Borrowing. Certain Funds may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements (all Funds) and Dollar Rolls (all Funds except
National Tax-Exempt Bond Fund). A reverse repurchase agreement or dollar roll
involves the sale of a security, with an agreement to repurchase the same or
substantially similar securities at an agreed upon price and date. Whether such
a transaction produces a gain for a Fund depends upon the costs of the
agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, net asset value will decline
faster than otherwise would be the case. Reverse repurchase agreements and
dollar rolls, as leveraging techniques, may increase a Fund's yield; however,
such transactions also increase a Fund's risk to capital and may result in a
shareholder's loss of principal.
Short Sales. Each Fund (except Government Securities Income, GNMA Income,
National Tax-Exempt Bond, High Yield, High Yield II, and High Total Return I &
II Funds) may make short sales. A "short sale" is the sale by a Fund of a
security which has been borrowed from a third party on the expectation that the
market price will drop. If the price of the security rises, the Fund may have to
cover its short position at a higher price than the short sale price, resulting
in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.
Percentage and Rating Limitations Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
44 More Information About Risks
<PAGE>
FINANCIAL
HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). A report of
each Fund's independent auditors, along with the Fund's financial statements, is
included in the Fund's annual report, which is available upon request.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Financial Highlights 45
<PAGE>
FINANCIAL
HIGHLIGHTS
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended December 31,
2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
Six months
ended Dec.
31, 2000 Year Ended June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.35 12.88 12.71 12.59 12.97
Income (loss) from investment operations:
Net investment income $ 0.75 0.76 0.64 0.69 0.75
Net realized and unrealized gain (loss) on
investments $ (0.43) (0.52) 0.30 0.20 (0.32)
Total from investment operations $ 0.32 0.24 0.94 0.89 0.43
Less distributions from:
Net investment income $ 0.74 0.77 0.77 0.73 0.75
Tax return of capital $ -- -- -- 0.04 0.06
Total distributions $ 0.74 0.77 0.77 0.77 0.81
Net asset value, end of period $ 11.93 12.35 12.88 12.71 12.59
Total Return(2): % 2.79 1.89 7.63 7.33 3.34
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 54,206 21,060 23,682 29,900 38,753
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.35 1.40 1.50 1.42 1.51
Gross expenses prior to expense
reimbursement(3) % 1.35 1.40 1.58 1.42 1.57
Net investment income after expense
reimbursement(3)(4) % 5.87 6.05 5.13 5.78 5.64
Portfolio turnover rate % 44 58 134 172 170
<CAPTION>
Class B
------------------------------------------------------------------
Six months July 17,
ended Dec. 1995(1) to
31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period 12.30 12.84 12.68 12.59 12.95
Income (loss) from investment operations:
Net investment income 0.67 0.69 0.60 0.67 0.66
Net realized and unrealized gain (loss) on
investments (0.42) (0.54) 0.24 0.11 (0.37)
Total from investment operations 0.25 0.15 0.84 0.78 0.29
Less distributions from:
Net investment income 0.66 0.69 0.68 0.69 0.65
Tax return of capital -- -- -- -- --
Total distributions 0.66 0.69 0.68 0.69 0.65
Net asset value, end of period 11.89 12.30 12.84 12.68 12.59
Total Return(2): 2.12 1.09 6.78 6.38 2.25
Ratios/Supplemental Data:
Net assets, end of period (000's) 33,692 12,426 3,220 1,534 73
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) 2.10 2.15 2.25 2.17 2.26
Gross expenses prior to expense
reimbursement(3) 2.10 2.15 2.29 2.17 2.41
Net investment income after expense
reimbursement(3)(4) 5.12 5.30 4.24 4.92 4.98
Portfolio turnover rate 44 58 134 172 170
</TABLE>
<TABLE>
<CAPTION>
Class C Class T
------------------------------------- ---------------------------
Six months Year June 11, Six months April 5,(1)
ended Dec. Ended 1999(1) to ended Dec. to
31, 2000 June 30, June 30, 31, 2000 June 30,
(unaudited) 2000 1999 (unaudited) 2000
----------- ---- ---- ----------- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.43 12.24 11.80
Income (loss) from investment operations:
Net investment income $ 0.68 2.05 0.17
Net realized and unrealized gain (loss) on
investments $ (0.44) (1.86) 0.03
Total from investment operations $ 0.24 0.19 0.20
Less distributions from:
Net investment income $ 0.66 -- 0.11
Tax return of capital $ -- -- --
Total distributions 0.66 -- 0.11
Net asset value, end of period $ 12.01 12.43 11.89
Total Return(2) % 2.09 1.55 .24
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 2,047 7 22,888
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.10 2.15 1.75
Gross expenses prior to expense reimbursement(3) % 2.10 2.15 1.75
Net investment income after expense
reimbursement(3)(4) % 5.12 5.30 5.47
Portfolio turnover rate % 44 58 44
Class M
---------------------------------------------------------------------
Six months Year July 17,
ended Dec. Ended 1995(1) to
31, 2000 June 30, Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period 12.34 12.88 12.72 12.59 12.95
Income (loss) from investment operations:
Net investment income 0.59 0.69 0.64 0.70 0.68
Net realized and unrealized gain (loss) on
investments (0.32) (0.52) 0.23 0.14 (0.36)
Total from investment operations 0.27 0.17 0.87 0.84 0.32
Less distributions from:
Net investment income 0.69 0.71 0.71 0.70 0.68
Tax return of capital -- -- -- 0.01 --
Total distributions 0.69 0.71 0.71 0.71 0.68
Net asset value, end of period 11.92 12.34 12.88 12.72 12.59
Total Return(2) 2.28 1.31 7.02 6.88 2.52
Ratios/Supplemental Data:
Net assets, end of period (000's) 510 751 224 61 24
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) 1.85 1.90 2.00 1.92 2.01
Gross expenses prior to expense reimbursement(3) 1.85 1.90 2.05 1.92 2.16
Net investment income after expense
reimbursement(3)(4) 5.37 5.57 4.29 5.25 5.73
Portfolio turnover rate 44 58 134 172 170
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
46 ING Pilgrim Government Securities Income Fund
<PAGE>
FINANCIAL
HIGHLIGHTS
ING PILGRIM GNMA INCOME FUND
--------------------------------------------------------------------------------
The information in the table below, has been audited by KPMG LLP, independent
auditors.
<TABLE>
<CAPTION>
Year ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 8.53 8.40 8.12 8.19
Net investment income (loss) $ 0.50 0.48 0.51 0.53
Net realized and unrealized gain (loss) from
investment operations $ (0.45) 0.13 0.29 (0.08)
Total income (loss) from investment operations $ 0.05 0.61 0.80 0.45
Less distributions:
Distributions from net investment income $ 0.50 0.48 0.52 0.52
Total distributions $ 0.50 0.48 0.52 0.52
Net asset value, end of period $ 8.08 8.53 8.40 8.12
Total Return(1) % 0.58 7.52 10.20 5.71
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 376,580 273,591 158,071 133,777
Ratio of expenses to average net asset(2) % 0.99 1.01 1.01 1.05
Ratio of net investment income (loss) to average
net assets(2) % 6.04 5.85 6.28 6.56
Portfolio turnover rate % 25.10 54.47 134.28 128.76
</TABLE>
----------
(1) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(2) Annualized for periods less than one year.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim GNMA Income Fund 47
<PAGE>
FINANCIAL
ING PILGRIM NATIONAL TAX-EXEMPT BOND FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
------------------- ------------------- ------------------
Year ended Year ended Year ended
October 31, 2000 October 31, 2000 October 31, 2000
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value per share, beginning of period $
From investment operations:(2)
Net investment income loss $
Net realized and unrealized $
Total from investment operations $
Distributions paid from investment income $
Net asset value per share, end of period $
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $
Total investment return at net asset value(3)(4) %
Ratios to average net assets:(5)
Net expenses %
Gross expenses %
Net investment income %
Porfolio turnover rate(4) %
</TABLE>
----------
(1) Commenced Operations on November 8, 1999.
(2) Per share calculation is based on average number of shares outstanding
during the period.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class B and C shares. Total returns would be
lower if part of the Fund's expenses were not waived or reimbursed.
(4) Not annualized.
(5) Annualized.
48 ING Pilgrim National Tax-Exempt Bond Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM INTERMEDIATE BOND FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
------------------------ ----------------------- ------------------------
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value per share, beginning of period $ 10.00 10.00 10.00
From investment operations:(2)
Net investment income $ 0.45 0.40 0.42
Net realized and unrealized loss $ (0.60) (0.61) (0.63)
Total from investment operations $ (0.15) (0.21) (0.21)
Distributions paid from investment income $ (0.45) (0.39) (0.39)
Net asset value per share, end of period $ 9.40 9.40 9.40
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 32,013 1,958 1,082
Total investment return at net asset value(3)(4) % (1.46) (2.13) (2.10)
Ratios to average net assets:(5)
Net expenses % 0.96 1.70 1.71
Gross expenses % 2.12 2.39 2.44
Net investment income % 5.38 4.83 4.94
Porfolio turnover rate(4) % 431.50 431.50 431.50
</TABLE>
----------
(1) Class A, B and C shares commenced operations on December 15, 1999.
(2) Per share calculation is based on average number of shares outstanding
during the period.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Intermediate Bond Fund 49
<PAGE>
FINANCIAL
ING PILGRIM STRATEGIC INCOME FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
----------------------------------------------
Six months Three
ended Year months July 27,
Dec. 31, Ended ended 1998(1) to
2000 June 30, June 30, March 31,
(unaudited) 2000 1999(2) 1999
----------- ---- ------- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.59 12.89 13.08
Income from investment
operations:
Net investment income $ 0.92 0.26 0.53
Net realized and unrealized
gains (loss) on investments $ (0.52) (0.42) (0.08)
Total from investment operations $ 0.40 (0.16) 0.45
Less distributions from:
Net investment income $ 0.92 0.14 0.53
Net realized gains on
investments $ -- -- 0.11
Net asset value, end of period $ 12.07 12.59 12.89
Total Return(3): % 3.42 (1.23) 5.60
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 2,726 2,736 5,751
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 0.96 0.90 0.96
Gross expenses prior to expense
reimbursement(4) % 2.64 1.56 1.98
Net investment income (loss)
after expense reimbursement(4)(5) % 7.69 5.88 5.81
Portfolio turnover % 168 69 274
Class B
-----------------------------------------------
Six months Three
ended Year months July 27,
Dec. 31, Ended ended 1998(1) to
2000 June 30, June 30, March 31,
(unaudited) 2000 1999(2) 1999
----------- ---- ------- ----
Per Share Operating Performance:
Net asset value, beginning of period 12.33 12.61 12.78
Income from investment
operations:
Net investment income 0.88 0.18 0.45
Net realized and unrealized
gains (loss) on investments (0.53) (0.33) (0.05)
Total from investment operations 0.35 (0.15) 0.40
Less distributions from:
Net investment income 0.88 0.13 0.46
Net realized gains on
investments -- -- 0.11
Net asset value, end of period 11.80 12.33 12.61
Total Return(3): 3.00 (1.20) 5.17
Ratios/Supplemental Data:
Net assets, end of period (000's) 4,460 5,658 6,637
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) 1.36 1.29 1.37
Gross expenses prior to expense
reimbursement(4) .04 1.95 2.42
Net investment income (loss)
after expense reimbursement(4)(5) 7.29 5.49 5.35
Portfolio turnover 168 69 274
Class C
------------------------------------------------
Six months Three
ended Year months July 27,
Dec. 31, Ended ended 1998(1) to
2000 Juned 30, June 30, March 31,
(unaudited) 2000 1999(2) 1999
----------- ---- ------- ----
Per Share Operating Performance:
Net asset value, beginning of period 12.81 13.10 13.27
Income from investment
operations:
Net investment income 0.87 0.19 0.48
Net realized and unrealized
gains (loss) on investments (0.51) (0.35) (0.06)
Total from investment operations 0.36 (0.16) 0.42
Less distributions from:
Net investment income 0.87 0.13 0.48
Net realized gains on
investments -- -- 0.11
Net asset value, end of period 12.30 12.81 13.10
Total Return(3): 3.02 (1.21) 5.19
Ratios/Supplemental Data:
Net assets, end of period (000's) 3,966 7,965 8,128
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) 1.36 1.29 1.36
Gross expenses prior to expense
reimbursement(4) 3.04 1.95 2.41
Net investment income (loss)
after expense reimbursement(4)(5) 7.29 5.49 5.36
Portfolio turnover 168 69 274
</TABLE>
----------
(1) The Fund commenced operations on July 27, 1998.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund and the Fund changed its year end to June
30.
(3) Total returns are not annualized for periods of less than one year and do
not reflect the impact of sales charges.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses.
50 ING Pilgrim Strategic Income Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM HIGH YIELD FUND
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended December 31,
2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Six months
ended
Dec. 31,
2000 Year ended June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 5.93 6.94 6.80 6.36 6.15
Income (loss) from investment
operations:
Net investment income $ 0.56 0.58 0.61 0.61 0.59
Net realized and unrealized gain (loss)
on investments $ (0.85) (0.96) 0.16 0.43 0.16
Total from investment operations $ (0.29) (0.38) 0.77 1.04 0.75
Less distributions from:
Net investment income $ 0.57 0.62 0.63 0.60 0.54
Tax return of capital $ 0.03 0.01 -- -- --
Total distributions $ 0.60 0.63 0.63 0.60 0.54
Net asset value, end of period $ 5.04 5.93 6.94 6.80 6.36
Total Return(2): % (5.20) (5.57) 11.71 17.14 12.72
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 85,870 131,535 102,424 35,940 18,691
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.05 1.00 1.00 1.00 1.00
Gross expenses prior to expense
reimbursement(3) % 1.17 1.12 1.17 1.42 2.19
Net investment income after expense
reimbursement(3)(4) % 10.41 9.32 9.05 9.54 9.46
Portfolio turnover rate % 89 184 209 394 399
Class B
----------------------------------------------------------------
Six months
ended July 17,
Dec. 31, 1995(1) to
2000 Year ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period 5.92 6.92 6.78 6.36 6.20
Income (loss) from investment
operations:
Net investment income 0.53 0.53 0.58 0.57 0.48
Net realized and unrealized gain (loss)
on investments (0.86) (0.96) 0.14 0.41 0.14
Total from investment operations (0.33) (0.43) 0.72 0.98 0.62
Less distributions from:
Net investment income 0.53 0.56 0.58 0.56 0.46
Tax return of capital 0.03 0.01 -- -- --
Total distributions 0.56
Net asset value, end of period 5.03 5.92 6.92 6.78 6.36
Total Return(2): (5.91) (6.23) 10.90 16.04 10.37
Ratios/Supplemental Data:
Net assets, end of period (000's) 199,618 261,589 154,303 40,225 2,374
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) 1.80 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(3) 1.92 1.87 1.92 2.17 2.94
Net investment income after expense
reimbursement(3)(4) 9.66 8.57 8.30 8.64 9.02
Portfolio turnover rate 89 184 209 394 339
Class C
-------------------------------------
Six months
ended Year May 27,
Dec. 31, Ended 1999(1) to
2000 June 30, June 30,
(unaudited) 2000 1999
----------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 5.92 5.91
Income (loss) from investment
operations:
Net investment income $ 0.57 0.05
Net realized and unrealized gain (loss)
on investments $ (0.90) 0.01
Total from investment operations $ (0.33) 0.06
Less distributions from:
Net investment income $ 0.57 0.05
Tax return of capital $ -- --
Total distributions 0.57
Net asset value, end of period $ 5.02 5.92
Total Return(2): % (5.99) 0.34
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 5,930 551
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.80 1.75
Gross expenses prior to expense
reimbursement(3) % 1.92 1.87
Net investment income after expense
reimbursement(3)(4) % 9.66 8.57
Portfolio turnover rate % 89 184
Class M
-----------------------------------------------------------------
Six months
ended Year July 17,
Dec. 31, Ended 1995(1) to
2000 June 30, Year ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period 5.93 6.92 6.78 6.36 6.20
Income (loss) from investment
operations:
Net investment income 0.52 0.55 0.59 0.58 0.50
Net realized and unrealized gain (loss)
on investments (0.85) (0.95) 0.14 0.41 0.14
Total from investment operations (0.33) (0.40) 0.73 0.99 0.64
Less distributions from:
Net investment income 0.54 0.58 0.59 0.57 0.48
Tax return of capital 0.03 0.01 -- -- --
Total distributions 0.57
Net asset value, end of period 5.03 5.93 6.92 6.78 6.36
Total Return(2): (5.86) (5.85) 11.16 16.29 10.69
Ratios/Supplemental Data:
Net assets, end of period (000's) 12,730 24,129 19,785 8,848 1,243
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) 1.55 1.50 1.50 1.50 1.50
Gross expenses prior to expense
reimbursement(3) 1.67 1.62 1.67 1.92 2.69
Net investment income after expense
reimbursement(3)(4) 9.91 8.82 8.55 8.93 9.41
Portfolio turnover rate 89 184 209 394 339
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund 51
<PAGE>
FINANCIAL
ING PILGRIM HIGH YIELD FUND II HIGHLIGHTS
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Six months Three
ended Year months Year March 27,
Dec. 31, ended ended ended 1998 to
2000 June 30, June 30, March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998(1)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.57 11.66 12.72 12.70
Income from investment operations:
Net investment income $ 1.18 0.28 1.12 0.01
Net realized and unrealized gains (loss)
on investments $ (0.75) (0.09) (1.00) 0.01
Total from investment operations $ 0.43 0.19 0.12 0.02
Less distributions from:
Net investment income $ 1.20 0.28 1.18 --
Net asset value, end of period $ 10.80 11.57 11.66 12.72
Total Return(3): % 3.96 1.60 1.13 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 34,416 16,795 17,327 4,690
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.18 1.10 1.12 1.06
Gross expenses prior to expense
reimbursement(4) % 1.37 1.37 1.53 1.06
Net investment income (loss) after
expense reimbursement(4)(5) % 0.63 9.68 9.44 7.22
Portfolio turnover % 113 44 242 484
Class B
-----------------------------------------------------------
Six months Three
ended Year months Year March 27,
Dec. 31, Ended ended ended 1998 to
2000 June 30, June 30, March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998(1)
----------- ---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period 11.58 11.66 12.71 12.69
Income from investment operations:
Net investment income 1.11 0.27 1.04 0.01
Net realized and unrealized gains (loss)
on investments (0.75) (0.09) (0.99) 0.01
Total from investment operations 0.36 0.18 0.05 0.02
Less distributions from:
Net investment income 1.13 0.26 1.10 --
Net asset value, end of period 10.81 11.58 11.66 12.71
Total Return(3): 3.28 1.53 0.55 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) 103,246 41,882 42,960 8,892
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) 1.83 1.75 1.77 1.69
Gross expenses prior to expense
reimbursement(4) 2.02 2.02 2.18 1.69
Net investment income (loss) after
expense reimbursement(4)(5) 9.98 9.03 8.84 6.61
Portfolio turnover 113 44 242 484
Class C Class T
------------------------------------------------------- -----------------------
Six months Three Six months
ended Year months Year March 27, ended March 31,
Dec. 31, ended ended ended 1998 to Dec. 31, 2000(6) to
2000 June 30, June 30, March 31, March 31, 2000 June 30,
(unaudited) 2000 1999(2) 1999 1998(1) (unaudited) 2000
Per Share Operating Performance:
Net asset value, beginning of period $ 11.58 11.66 12.71 12.69 11.07
Income from investment operations:
Net investment income $ 1.10 0.27 1.04 0.01 0.29
Net realized and unrealized gains (loss)
on investments $ (0.74) (0.09) (0.99) 0.01 (0.25)
Total from investment operations $ 0.36 0.18 0.05 0.02 0.04
Less distributions from:
Net investment income $ 1.13 0.26 1.10 -- 0.30
Net asset value, end of period $ 10.81 11.58 11.66 12.71 10.81
Total Return(3): % 3.28 1.53 0.55 0.16 (0.49)
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 23,324 18,618 21,290 4,815 31,342
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.83 1.75 1.77 1.66 1.48
Gross expenses prior to expense
reimbursement(4) % 2.02 2.02 2.18 1.66 1.67
Net investment income (loss) after
expense reimbursement(4)(5) % 9.98 9.03 8.79 6.91 10.33
Portfolio turnover % 113 44 242 484 113
</TABLE>
----------
(1) The Fund commenced operations on March 27, 1998.
(2) Effective May 24, 1999, ING Pilgrim Investments Inc., became the
Investment Manager of the Fund and the Fund changed its year end to June
30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has voluntarily agreed to limit expenses,
excluding, interest, taxes, brokerage and extraordinary expenses.
(6) Commencement of offering of shares.
52 ING Pilgrim High Yield Fund II
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM HIGH TOTAL RETURN FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
------------------------------------------------
Year ended October 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating performance
Net asset value at the beginning
of the period $ 3.77 5.00 4.78 4.48
Net investment income $ 0.37 0.46 0.48 0.46
Net realized and unrealized gain
(loss) on investments $ (0.41) (1.07) 0.20 0.32
Total from investment operations $ (0.04) (0.61) 0.68 0.78
Dividends from net investment
income $ (0.39) (0.47) (0.46) (0.48)
Dividends from net investment
gain on investments sold $ -- (0.15) -- --
Distributions declared from
capital $ (0.05) -- -- --
Total distributions $ (0.44) (0.62) (0.46) (0.48)
Net asset value at the end of the
period $ 3.29 3.77 5.00 4.78
Total investment return(1) % (1.86) (13.65) 15.03 18.14
Ratios and supplemental data
Net assets at the end of the
period ($000s) $ 91,991 148,650 215,361 167,698
Ratio of expenses to average net
assets(2) % 1.34 1.30 1.42 1.52
Ratio of net investment income
to average net assets(2) % 10.16 9.93 9.88 9.86
Portfolio turnover rate % 59 123 183 158
Class B
---------------------------------------------------
Year ended October 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operating performance
Net asset value at the beginning
of the period 3.77 5.00 4.77 4.47
Net investment income 0.34 0.43 0.44 0.43
Net realized and unrealized gain
(loss) on investments (0.41) (1.07) 0.22 0.32
Total from investment operations (0.07) (0.64) 0.66 0.75
Dividends from net investment
income (0.37) (0.44) (0.43) (0.45)
Dividends from net investment
gain on investments sold -- (0.15) -- --
Distributions declared from
capital (0.04) -- -- --
Total distributions (0.41) (0.59) (0.43) (0.45)
Net asset value at the end of the
period 3.29 3.77 5.00 4.77
Total investment return(1) (2.56) (14.28) 14.46 17.08
Ratios and supplemental data
Net assets at the end of the
period ($000s) 280,413 428,903 577,351 346,919
Ratio of expenses to average net
assets(2) 2.06 2.02 2.12 2.23
Ratio of net investment income
to average net assets(2) 9.42 9.20 9.18 9.14
Portfolio turnover rate 59 123 183 158
Class C
--------------------------------------------------
Year ended October 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operating performance
Net asset value at the beginning
of the period $ 3.78 5.02 4.79 4.49
Net investment income $ 0.34 0.43 0.44 0.43
Net realized and unrealized gain
(loss) on investments $ (0.40) (1.08) 0.22 0.32
Total from investment operations $ (0.06) (0.65) 0.66 0.75
Dividends from net investment
income $ (0.37) (0.44) (0.43) (0.45)
Dividends from net investment
gain on investments sold $ -- (0.15) -- --
Distributions declared from
capital $ (0.04) -- -- --
Total distributions $ (0.41) (0.59) (0.43) (0.45)
Net asset value at the end of the
period $ 3.31 3.78 5.02 4.79
Total investment return(1) % (2.24) (14.41) 14.42 17.28
Ratios and supplemental data
Net assets at the end of the
period ($000s) $ 40,503 64,141 97,457 54,382
Ratio of expenses to average net
assets(2) % 2.07 2.03 2.13 2.23
Ratio of net investment income
to average net assets(2) % 9.42 9.19 9.18 9.14
Portfolio turnover rate % 59 123 183 158
</TABLE>
----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) Annualized for periods less than one year.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Total Return Fund 53
<PAGE>
FINANCIAL
ING PILGRIM HIGH YIELD BOND FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1)
---------------------------
October 31, October 31,
2000 1999
---- ----
<S> <C> <C>
Per Share Operating Performance:
Net asset value per share, beginning of period $ 10.00
From investment operations:(3)
Net investment income $ 0.67
Net realized and unrealized loss $ (0.04)
Total from investment operations $ 0.63
Distributions paid from:
Capital gain $ --
Investment income $ (0.67)
Total distributions $ (0.67)
Net asset value per share, end of period $ 9.96
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 30,537
Total investment return at net asset value(4)(5) % 6.37
Ratios to average net assets:(6)
Net expenses % 1.00
Gross expenses % 2.32
Net investment income % 7.53
Porfolio turnover rate(5) % 756.40
<CAPTION>
Class B Shares(1) Class C Shares(1)
------------------------- -------------------------
October 31, October 31, October 31, October 31,
2000 1999 2000 1999
---- ---- ---- ----
Per Share Operating Performance:
Net asset value per share, beginning of period 10.00 10.00
From investment operations:(3)
Net investment income 0.60 0.62
Net realized and unrealized loss (0.05) (0.06)
Total from investment operations 0.55 0.56
Distributions paid from:
Capital gain -- --
Investment income (0.59) (0.60)
Total distributions (0.59) (0.60)
Net asset value per share, end of period 9.96 9.96
Ratios/Supplemental Data:
Net assets, end of period (in thousands) 2,374 776
Total investment return at net asset value(4)(5) 5.57 5.67
Ratios to average net assets:(6)
Net expenses 1.72 1.73
Gross expenses 2.64 2.66
Net investment income 6.90 7.01
Porfolio turnover rate(5) 756.40 756.40
</TABLE>
----------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Per share calculation is based on average number of shares outstanding
during the period.
(3) Total return assumes reinvestment of all dividends and capital gain
distributions, if any, and does not reflect the deduction of the applicable
contingent deferred sales charges with respect to Class B and C shares.
Total returns would be lower if the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
54 ING Pilgrim High Yield Bond Fund
<PAGE>
FINANCIAL
HIGHLIGHTS
ING PILGRIM HIGH TOTAL RETURN FUND II
--------------------------------------------------------------------------------
The information in the table below, has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A(1) Class B(1)
------------------------------------- -----------------------------------
Year ended October 31, Year ended October 31,
2000 1999 1998 1997 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance
Net asset value at the beginning of the period $ 4.78 5.49 5.00 4.18 5.49 5.00
Net investment income $ 0.43 0.50 0.28 0.21 0.47 0.25
Net realized and unrealized (loss) on
investments $ (0.55) (0.70) 0.53 (0.66) (0.70) 0.53
Total from investment operations $ (0.12) (0.20) 0.81 (0.45) (0.23) 0.78
Dividends from net investment income $ (0.43) (0.48) (0.28) (0.20) (0.44) (0.25)
Distributions declared from capital $ (0.05) (0.03) (0.04) -- (0.03) (0.04)
Total distributions $ (0.48) (0.51) (0.32) (0.20) (0.47) (0.29)
Net asset value at the end of the period $ 4.18 4.78 5.49 3.53 4.79 5.49
Total investment return(2) % (3.10) (4.23) 16.53 (11.61) (4.90) 15.91
Ratios and supplemental data
Net assets at the end of the period ($000s) $ 20,003 40,924 8,548 66,348 168,859 38,076
Ratio of expenses to average net assets(3) % 1.40 1.44 1.26 2.15 2.17 1.95
Ratio of expense reimbursement to average
net assets(3) % -- 0.01 3.36 -- 0.02 0.75
Ratio of net investment income to average
net assets(3) % 9.46 8.90 5.89 10.65 8.17 5.20
Portfolio turnover rate % 110 150 164 60 150 164
Class C(1)
----------------------------------------
Year ended October 31,
2000 1999 1998 1997
---- ---- ---- ----
Operating performance
Net asset value at the beginning of the period $ 4.79 5.50 5.00
Net investment income $ 0.40 0.47 0.25
Net realized and unrealized (loss) on
investments $ (0.55) (0.71) 0.54
Total from investment operations $ (0.15) (0.24) 0.79
Dividends from net investment income $ (0.41) (0.44) (0.25)
Distributions declared from capital $ (0.04) (0.03) (0.04)
Total distributions $ (0.45) (0.47) (0.29)
Net asset value at the end of the period $ 4.19 4.79 5.50
Total investment return(2) % (3.77) (4.90) 16.12
Ratios and supplemental data
Net assets at the end of the period ($000s) $ 31,014 53,703 12,334
Ratio of expenses to average net assets(3) % 2.12 2.17 1.95
Ratio of expense reimbursement to average
net assets(3) % -- 0.01 0.78
Ratio of net investment income to average
net assets(3) % 8.70 8.16 5.17
Portfolio turnover rate % 110 150 164
</TABLE>
----------
(1) Classes A, B & C commenced operations on January 31, 1997.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized for periods less than one year.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Total Return Fund II 55
<PAGE>
FINANCIAL
PILGRIM MONEY MARKET FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended December 31,
2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A Class B Class C
------------------------ ------------------------ ----------------------
Six months Six months Six months
ended Period ended Period ended Period
Dec. 31, ended Dec. 31, ended Dec. 31, ended
2000 June 30, 2000 June 30, 2000 June 30,
(unaudited) 2000(1) (unaudited) 2000(2) (unaudited) 2000(2)
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 1.00 1.00
Income from investment operations:
Net investment income $ 0.02 0.03 0.02
Net realized and unrealized gains (loss) on
investments $ -- -- --
Total from investment operations $ 0.02 0.03 0.02
Less distributions from:
Net investment income $ 0.02 0.03 0.02
Net realized gains on investments $ -- -- --
Net asset value, end of period $ 1.00 .00 1.00
Total Return(3): % 3.58 3.60 3.58
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,430 12,035 5,431
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.85 1.60 1.60
Gross expenses prior to expense reimbursement(4) % 2.28 3.03 3.03
Net investment income (loss) after expense
reimbursement(4)(5) % 5.18 3.96 3.96
</TABLE>
----------
(1) Commenced operations on November 24, 1999.
(2) Commenced operations on July 12, 1999.
(3) Total returns are not annualized for periods of less than one year and do
not reflect the impact of sales charges.
(4) Annualized for periods less than one year.
(5) The investment manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
56 Pilgrim Money Market Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING MONEY MARKET FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A(1)
---------------------------
October 31, October 31,
2000 1999
---- ----
<S> <C> <C>
Per Share Operating Performance:
Net asset value per share, beginning of period $ 1.00
From investment operations:(3)
Net investment income $ 0.04
Net realized and unrealized gains (loss) on
investments $ --
Total from investment operations $ 0.04
Distributions paid from investment income $ (0.04)
Net asset value per share, end of period $ 1.00
Net asset value per share, end of period $ 1.00
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 228,124
Ratio of investment return at net asset value(4) % 3.98
Ratios to average net assets:(6)
Net expenses % 0.73
Gross expenses % 1.67
Net investment income % 4.59
<CAPTION>
Class B(1) Class C(1)
--------------------------- --------------------------
October 31, October 31, October 31, October 31,
2000 1999 2000 1999
---- ---- ---- ----
Per Share Operating Performance:
Net asset value per share, beginning of period 1.00 1.00
From investment operations:(3)
Net investment income 0.03 0.03
Net realized and unrealized gains (loss) on
investments -- --
Total from investment operations 0.03 0.03
Distributions paid from investment income (0.03) (0.03)
Net asset value per share, end of period 1.00 1.00
Net asset value per share, end of period 1.00 1.00
Ratios/Supplemental Data:
Net assets, end of period (in thousands) 1,173 444
Ratio of investment return at net asset value(4) 3.31 3.30
Ratios to average net assets:(6)
Net expenses 1.41 1.41
Gross expenses 1.79 1.78
Net investment income 3.85 3.89
</TABLE>
----------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Unaudited.
(3) Per share calculation is based on average number of shares outstanding
during the period.
(4) Total return assumes reinvestment of all dividends and capital gain
distributions, if any, and does not reflect the deduction of the
applicable contingent deferred sales charges with respect to Class B and C
shares. Total returns would be lower if the Fund's expenses were not
waived or reimbursed.
(5) Not annualized.
(6) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Money Market Fund 57
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC). Please write or
call for a free copy of the current Annual/Semi-Annual reports, the SAI or other
Fund information, or to make shareholder inquiries:
THE ING PILGRIM FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim GNMA Income Fund, Inc. 811-2401
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim Government Securities Income Fund, Inc. 811-4031
ING Pilgrim Investment Funds, Inc. 811-1939
ING Pilgrim Mutual Funds 811-7428
ING Funds Trust 811-8895
INCPROSXXXXXX-XXXXXX
<PAGE>
March 1, 2001
Classes A, B, C and M
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth
ING Pilgrim Global Corporate Leaders
ING Pilgrim International Value
ING Pilgrim International
ING Pilgrim International Core Growth
ING Pilgrim International SmallCap Growth
ING Pilgrim Emerging Markets Value
ING Pilgrim Emerging Countries
ING Pilgrim Worldwide Emerging Markets
ING Pilgrim Global Technology
ING Pilgrim Global Communications
ING Pilgrim Global Information Technology
ING Pilgrim Asia-Pacific Equity
ING Pilgrim SmallCap Asia Growth
ING Pilgrim European Equity
ING Pilgrim Troika Dialog Russia
Precious Metals Funds
ING Pilgrim Gold
ING Pilgrim Silver
International Income Fund
ING Pilgrim Global Income
This prospectus contains important information about investing in the ING
Pilgrim Funds. You should read it carefully before you invest, and keep it for
future reference. Please note that your investment: is not a bank deposit, is
not insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
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OBJECTIVE
These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy and risks.
INVESTMENT STRATEGY
You'll also find:
RISKS
HOW THE FUND HAS PERFORMED
How the Fund has performed. A chart that shows the Fund's financial performance
for the past ten years (or since inception, if shorter).
What you pay to invest. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
An Introduction to the ING Pilgrim Funds 1
Funds At A Glance 2
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth 6
ING Pilgrim Global Corporate Leaders 8
ING Pilgrim International Value 10
ING Pilgrim International 12
ING Pilgrim International Core Growth 14
ING Pilgrim International SmallCap Growth 16
ING Pilgrim Emerging Markets Value 18
ING Pilgrim Emerging Countries 20
ING Pilgrim Worldwide Emerging Markets 22
ING Pilgrim Global Technology 24
ING Pilgrim Global Communications 26
ING Pilgrim Global Information Technology 28
ING Pilgrim Asia-Pacific Equity 30
ING Pilgrim SmallCap Asia Growth 32
ING Pilgrim European Equity 34
ING Pilgrim Troika Dialog Russia 36
PRECIOUS METALS FUNDS
ING Pilgrim Gold 38
ING Pilgrim Silver 40
INTERNATIONAL INCOME FUND
ING Pilgrim Global Income 42
What You Pay to Invest 44
Shareholder Guide 48
Management of the Funds 55
Dividends, Distributions and Taxes 59
More Information About Risks 60
Financial Highlights 64
Where To Go For More Information Back cover
<PAGE>
INTRODUCTION TO THE ING PILGRIM FUNDS
--------------------------------------------------------------------------------
Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
INTERNATIONAL EQUITY FUNDS
ING Pilgrim offers International Equity Funds that emphasize a growth
approach to international investing, as well as International Equity Funds
that apply the technique of "value investing". These Funds focus on
long-term growth by investing primarily in foreign equities.
They may suit you if you:
* are investing for the long-term -- at least several years
* are looking for exposure to international markets
* are willing to accept higher risk in exchange for long-term growth.
PRECIOUS METALS FUNDS
ING Pilgrim's Precious Metals Funds seek long-term growth.
They may suit you if you:
* are investing for the long-term -- at least several years
* are looking for exposure to international markets and precious metals
* are willing to accept higher risk in exchange for long-term growth.
INTERNATIONAL INCOME FUND
ING Pilgrim's Global Income Fund seeks high current income.
It may suit you if you:
* want a regular stream of income
* want greater growth potential than a money market fund
* are willing to accept more risk than a money market fund.
If you have any questions, please call 1-800-992-0180.
1
<PAGE>
Funds At A Glance
This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 6.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
-------------------------------------------------------------------------------
<S> <C> <C>
International Worldwide Growth Fund Long-term capital appreciation
Equity Funds Adviser: ING Pilgrim Investments, Inc.
Global Corporate Leaders Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
International Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Brandes
Investment Partners, L.P.
International Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
International Core Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
International SmallCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Nicholas-Applegate Capital Mgt.
Emerging Markets Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Brandes Investment
Partners, L.P.
Emerging Countries Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Worldwide Emerging Markets Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
Global Technology Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
ING Global Communications Fund Long-term capital appreciation
Adviser: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
ING Global Information Technology Fund Long-term capital appreciation
Adviser: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
Asia-Pacific Equity Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
</TABLE>
2
<PAGE>
MAIN INVESTMENTS MAIN RISKS
--------------------------------------------------------------------------------
Equity securities of companies Price volatility and other risks
located in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility and other risks
equivalents of foreign and U.S. that accompany an investment in
companies. [growth-oriented] foreign equities.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility and other risks
located in countries outside the that accompany an investment in
U.S., believed to have prices below foreign equities. Sensitive to
their long-term value. currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility and other risks
equivalents of companies outside of that accompany an investment in
the U.S. [growth-oriented] foreign equities.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of larger Price volatility and other risks
companies in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of small-sized Price volatility, liquidity and
companies in countries around the other risks that accompany an
world, which may include the U.S., investment in equity securities of
believed to have growth potential. foreign, small-sized companies.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility, liquidity and
located in countries with emerging other risks that accompany an
securities markets believed to have investment in equities from
prices below their long-term value. emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility, liquidity and
located in countries with emerging other risks that accompany an
securities markets believed to have investment in equities from
growth potential. emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility, liquidity and
equivalents of emerging market other risks that accompany an
companies. investment in equities from
emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities or equity Price volatility due to
equivalents of technology or non-diversification and
information infrastructure related concentration in stocks in the
companies. technology sector. May be sensitive
to currency exchange rates,
international, political and
economic conditions and other risks
that affect foreign securities.
Equity securities of communications Price volatility and risks related
companies located throughout the to investments in equity
world, including the United States. securities. Sensitive to currency
exchange rates, international,
political and economic conditions
and other risks that affect foreign
securities. Products and services
of companies engaged in the
communications sector are subject
to relatively high risks of rapid
obsolescence caused by scientific
and technological advances.
Equity securities of information Price volatility and risks related
technology companies located to investments in equity
throughout the world, including the securities. Products and services
United States. of companies engaged in the
information technology sector are
subject to relatively high risks of
rapid obsolescence caused by
scientific and technological
advances.
Equity securities of companies Price volatility and other risks
based in the Asia-Pacific region, that accompany an investment in
excluding Australia and Japan. foreign equities and in securities
of issuers in a single region.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
3
<PAGE>
Funds At A Glance
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
<S> <C> <C>
International SmallCap Asia Growth Fund Long-term capital appreciation
Equity Funds Adviser: ING Pilgrim Investments, Inc.
ING European Equity Fund Long-term capital appreciation
Advisor: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
Troika Dialog Russia Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Precious Metals Gold Fund Capital appreciation and a hedge against the loss of
Funds Adviser: ING Pilgrim Investments, Inc. buying power of the U.S. Dollar
Silver Fund Maximum total return from long-term growth of capital
Adviser: ING Pilgrim Investments, Inc. and income
International Global Income Fund High current income, with capital appreciation as a
Income Fund Adviser: ING Pilgrim Investments, Inc. secondary objective
</TABLE>
4
<PAGE>
MAIN INVESTMENTS MAIN RISKS
--------------------------------------------------------------------------------
Equity securities and equity Price volatility, liquidity and
equivalents of companies in the other risks that accompany an
Asia region having market investment in equity securities of
capitalizations of less than $1 issuers in a single region.
billion. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers which Price volatility and risks related
are principally traded in the to investments in equity
European capital markets, or that securities. Sensitive to currency
derive a majority of their total exchange rates, international,
revenues from either goods produced political and economic conditions
or services rendered within Europe, and other risks that affect foreign
or that are organized under the securities of companies in a single
laws of and have a principal office region.
in a European country.
Equity securities of Russian Risk due to extremely volatile and
companies. often illiquid nature of the
Russian securities markets, and
volatility due to
non-diversification of investments.
Particularly sensitive to Russian
political and economic conditions,
currency exchange rates, and other
risks that affect funds investing
in securities of a single country.
Potential for expropri- ation,
dilution, devaluation, default or
excessive taxation by the Russian
government.
Gold and securities of companies Price volatility due to
engaged in mining or processing non-diversification and
gold throughout the world. concentration in the gold/precious
metals industry. The market for
gold and other precious metals is
widely unregulated and is located
in foreign countries that have the
potential for instability. Precious
metals earn no income, have higher
transaction/storage costs, and
realize gain only with an increase
in market price.
Securities of companies which are Price volatility due to
engaged in the exploration, mining, non-diversification and
processing, fabrication or concentration in stocks in the
distribution of silver and in silver industry. The market for
silver bullion. silver is limited and widely
unregulated and is located in
foreign countries that have the
potential for instability. Precious
metals earn no income, have higher
transaction/storage costs, and
realize gain only with an increase
in market price.
Foreign and domestic high yield, Credit, liquidity, interest rate
lower rated or unrated debt and other risks that accompany an
securities. investment in lower-quality debt
securities. Particularly sensitive
to credit risk during economic
downturns. May also present price
volatility from foreign securities.
May be sensitive to currency
exchange rates, international
political and economic conditions,
and other risks.
5
<PAGE>
International
Equity Funds
-------------
Adviser
ING Pilgrim
ING PILGRIM WORLDWIDE GROWTH FUND Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in at least three countries, one of which
may be the U.S. The Fund generally invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. The Fund may
invest in companies located in countries with emerging securities markets when
the portfolio managers believe they present attractive investment opportunities.
International Component. The portfolio managers primarily use a "bottom-up"
fundamental analysis to identify stocks which they believe offer good value
relative to their peers in the same industry, sector or region. The portfolio
managers will invest at least 65% of the Fund in assets of companies which,
based upon a fundamental analysis of a company's earning prospects, they believe
will experience faster earnings per share growth than that of other companies
located in one or more of the same market, sector, or industry. In conducting
its fundamental analysis, the portfolio managers focus on various factors,
including valuation of the companies, potential catalysts to stock price
appreciation, quality of management, and financial measures, especially cash
flow and the cash flow return on capital. They also use a "top-down" analysis to
identify important themes or issues which may affect the investment environment
in certain regions or sectors and to estimate regional market risks.
U.S. Component. The Fund normally invests in equity securities of large U.S.
companies that the portfolio managers feel have above-average prospects for
growth. The Fund considers a company to be large if its market capitalization
corresponds at the time of purchase to the upper 90% of the S&P 500 Index. As of
December 31, 2000 this meant market capitalizations in the range of $ billion to
$ billion. Capitalization of companies in the S&P 500 Index will change with
market conditions.
The portfolio managers emphasize a growth approach by searching for companies
that they believe are managing change advantageously and may be poised to exceed
growth expections. The portfolio managers focus on both a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies and a "top-down" thematic approach and a sell discipline. The
portfolio managers seek to identify themes that reflect the major social,
economic and technological trends that they believe are likely to shape the
future of business and commerce over the next three to five years, and seek to
provide a framework for identifying the industries and companies they believe
may benefit most. This "top-down" approach is combined with rigorous fundamental
research (a "bottom-up" approach) to guide stock selection and portfolio
structure.
From time to time, the Adviser reviews the allocation between U.S. stocks and
non-U.S. stocks in the portfolio, and may rebalance the portfolio using factors
that the Adviser deems appropriate.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund may also invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of foreign companies may trade in
lower volume and may be less liquid than securities of U.S. companies. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
6 ING Pilgrim Worldwide Growth Fund
<PAGE>
ING PILGRIM WORLDWIDE GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994 2.45
1995 14.74
1996 17.92
1997 17.28
1998 37.34
1999 83.52
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International World Index (MSCI World
Index).
Average Annual Total Returns
MSCI
World
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI World Index is an unmanaged index that measures the performance of
over 1,400 securities listed on exchanges in the U.S., Europe, Canada,
Australia, New Zealand and the Far East.
(7) Classes A and C commenced operations on April 19, 1993. Class B commenced
operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Growth Fund 7
<PAGE>
International
Equity Funds
Adviser
ING Pilgrim
ING PILGRIM GLOBAL CORPORATE LEADERS FUND Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of foreign and U.S.
companies.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of its total assets in a diversified
portfolio of blue chip securities (including common and preferred stock,
warrants and convertible securities) that the portfolio managers believe
represents "corporate leaders" in their respective industries. The portfolio
managers consider whether these companies have a sustainable competitive edge.
The Fund may invest in the securities of companies and governments of the
following regions:
* Asia Region (including Japan);
* Europe;
* Latin America;
* Africa;
* North America (including U.S. and Canada); and
* Other areas and countries as the Adviser may decide from time to time.
The Fund will normally invest in at least three different countries. The Fund
intends to select the countries, currencies and companies that provide the
greatest potential for long-term growth.
The Fund may invest 35% of its total assets in:
* securities of smaller capitalization companies;
* debt securities; and
* other investments.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Worldwide Growth
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
8 ING Pilgrim Global Corporate Leaders Fund
<PAGE>
ING PILGRIM GLOBAL CORPORATE LEADERS FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 15.55
1992 -3.55
1993 31.88
1994 1.84
1995 10.69
1996 16.43
1997 6.90
1998 19.06
1999 39.06
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International World Index (MSCI World
Index).
Average Annual Total Returns
MSCI
World
Class A(3) Index(4)
------------ ---------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The MSCI World Index is an unmanaged index that measures the performance of
over 1,400 securities listed on exchanges in the U.S., Europe, Canada,
Australia, New Zealand, and the Far East.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Corporate Leaders Fund 9
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Brandes Investment
Partners, L.P.
ING PILGRIM INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests primarily in foreign companies with market capitalizations
greater than $1 billion, but it may hold up to 25% of its assets in companies
with smaller market capitalizations.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.
The Fund holds common stocks, preferred stocks, American, European and Global
depository receipts, as well as convertible securities.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in securities of companies located in at least three countries other than
the U.S. The Fund may invest up to the greater of:
* 20% of its assets in any one country or industry, or,
* 150% of the weighting of the country or industry in the Morgan Stanley
Capital International Europe, Australia and Far East (MSCI EAFE) Index, as
long as the Fund meets any industry concentration or diversification
requirements under the Investment Company Act.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. However, the Fund may also invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
value-oriented stocks in which the Fund invests. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies and some foreign
companies may trade in lower volume and may be less liquid than securities of
larger, more established companies or U.S. companies. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.
10 ING Pilgrim International Value Fund
<PAGE>
ING PILGRIM INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991
1992
1993
1994
1995
1996 15.23
1997 17.86
1998 13.46
1999 51.49
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years ended
December 31, 2000 % N/A
Since inception of
Classes A and C(6) % N/A
Since inception
of Class B(6) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(6) Classes A and C commenced operations on March 6, 1995. Class B commenced
operations on April 18, 1997.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Value Fund 11
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM INTERNATIONAL FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of companies outside of
the U.S.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside of the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund also
may invest up to 35% of its assets in securities of U.S. issuers, including
investment-grade debt securities.
The portfolio managers primarily use "bottom-up" fundamental analysis to
identify stocks which they believe offer good value relative to their peers in
the same industry, sector or region. They also use "top-down" analysis to
identify important themes or issues which may affect the investment environment
in certain regions or sectors and to estimate regional market risks. In
conducting its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, catalysts to stock price
appreciation, quality of management and financial measures, especially cash flow
and the cash flow return on capital.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund invests primarily in equity securities of larger companies, which
sometimes have more stable prices than smaller companies. However, the Fund may
also invest in small and medium-sized companies, which may be more susceptible
to price swings than larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
12 ING Pilgrim International Fund
<PAGE>
ING PILGRIM INTERNATIONAL FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994 5.87
1995 5.77
1996 13.57
1997 1.61
1998 19.02
1999 47.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(3)(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Class A(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) This table shows the performance of the Class A shares of the Fund. Class B
and Class C shares of the Fund did not have a full year's performance
during the period ended December 31, 2000.
(4) Reflects deduction of sales charge of 5.75%.
(5) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
(6) Class A commenced operations on January 3, 1994.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Fund 13
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund may
also invest up to 35% of its assets in securities of U.S. issuers, including
investment-grade debt securities.
In pursuing the Fund's investment strategy, the portfolio managers primarily use
a "bottom-up" fundamental analysis to identify stocks which they believe offer
good value relative to their peers in the same industry, sector or region. The
portfolio managers will invest 65% of the Fund in asset of companies which,
based upon a fundamental analysis of a company's earnings prospects, they
believe will experience faster earnings per share growth than that of other
companies located in one or more of the same market, sector, or industry. In
conducting its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, potential catalysts to stock
price appreciation, quality of management and financial measures, especially
cash flow and the cash flow return on capital. They also use a "top-down"
analysis to identify important themes or issues which may affect the investment
environment in certain regions or sectors and to estimate regional market risks.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in large companies, which sometimes
have more stable prices than smaller companies.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or smaller company stocks, or may not favor equities at
all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
14 ING Pilgrim International Core Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997
1998 20.92
1999 66.69
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since inception(7) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
Sub-Adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 3% respectively for 1
year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(7) The Fund commenced operations on February 28, 1997.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Core Growth Fund 15
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Nicholas-Applegate
Capital Management
ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its total assets in
securities of small companies located outside the U.S. The Fund may invest up to
35% of its total assets in U.S. issuers.
The Fund invests primarily in smaller-capitalized companies ("small cap stocks")
located worldwide. In the opinion of the Fund's Sub-Adviser, small cap stocks
are those whose stock market capitalizations are predominantly in the bottom 25%
of publicly traded companies as measured by stock market capitalizations in over
50 countries. The market capitalization ranges of the various countries' small
cap stocks may vary greatly due to fluctuating currency values, differences in
the size of the respective economies, and movements in the local stock markets.
The Fund normally invests at least 75% of its total assets in common and
preferred stocks, warrants and convertible securities. The Fund may invest in
companies located in countries with emerging securities markets when the
Sub-Adviser believes they present attractive investment opportunities.
The Fund's Sub-Adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The Sub-Adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price.
In analyzing specific companies for possible investment, the Sub-Adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Sub-Adviser usually considers whether to sell a particular security when any of
those factors materially changes.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Sub-Adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a Fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in small companies, which may
be more susceptible to greater price swings than larger companies because they
may have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
16 ING Pilgrim International SmallCap Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995 5.51
1996 17.58
1997 13.46
1998 35.57
1999 121.93
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Salomon Europe Pacific, Australia and Composite Market Index
(Salomon EPAC EM Index).
Average Annual Total Returns
Salomon
EPAC
EM
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than Sub-Adviser, to the Fund.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The Salomon EPAC EM Index is an unmanaged index that measures the
performance of securities of smaller-capitalization companies in 22
countries excluding the U.S. and Canada.
(7) Classes A and C commenced operations on August 31, 1994. Class B commenced
operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 17
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Brandes Investment
Partners, L.P.
ING PILGRIM EMERGING MARKETS VALUE FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests primarily in companies located in countries with emerging
markets, including companies that may be smaller and lesser-known.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.
The Fund may invest in common stocks, preferred stocks, American, European and
Global depositary receipts, as well as convertible securities.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in securities of companies located in countries with emerging markets.
Countries with emerging markets include those countries that are generally
considered to be emerging market countries by the international financial
community. The Fund may invest up to the greater of:
* 20% of its assets in any one country or industry, or,
* 150% of the weighting of the country or industry in the Morgan Stanley
Capital International Emerging Markets Free (MSCI EMF) Index, as long as
the Fund meets any industry concentration or diversification requirements
under the Investment Company Act.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim Emerging Countries
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. For emerging market countries, the risks may be greater,
partly because emerging market countries may be less politically and
economically stable than other countries. It may also be more difficult to buy
and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may
not favor the value-oriented stocks in which the Fund invests. Rather, the
market could favor growth-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller and emerging market
companies trade in lower volume and may be less liquid than securities of
companies in larger, more established markets. The Fund could lose money if it
cannot sell a security at the time and price that would be most beneficial to
the Fund.
18 ING Pilgrim Emerging Markets Value Fund
<PAGE>
ING PILGRIM EMERGING MARKETS VALUE FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998 -22.58
1999 67.11
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI EMF Index).
Average Annual Total Return
MSCI
EMF
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since Inception(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(6) The Fund commenced operations on January 1, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Markets Value Fund 19
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests at least 65% of its net assets in securities of issuers located
in at least three countries with emerging securities markets. Countries with
emerging securities markets are those countries which generally are considered
to be emerging market countries by the international financial community.
The Fund may invest up to 35% of its total assets in securities of U.S. and
other developed market issuers, including investment-grade debt securities of
U.S. issuers. Under normal conditions, the Fund invests at least 75% of its
total assets in common and preferred stocks, warrants and convertible
securities.
In selecting securities located in emerging market countries, the Adviser uses a
"bottom-up" fundamental analysis to identify companies which it believes have
good earnings growth prospects and that can be bought at a price which seems
reasonable. To help in this process, the Adviser scores the emerging markets
stocks on a wide range of quantitive and qualitative measures, with particular
attention paid to long-term and short-term earnings growth prospects and
valuation measures. The Adviser seeks securities of emerging market issuers
which are relatively liquid and covered by professional securities analysts.
In selecting stocks in developed markets, the portfolio managers seek the most
attractive opportunities in such markets. For such securities, the portfolio
managers use "bottom-up" analysis to choose companies which offer good value
relative to their peers in the same industry, sector or region. They also use
"top-down" analysis to identify important themes or issues which may affect the
investment environment in certain regions or sectors and to estimate regional
market risks. In conducting their fundamental analysis, the portfolio managers
focus on various matters, including valuation of the companies, potential
catalysts to stock price appreciation, quality of management, and financial
measures, especially cash flow and cash flow return on capital.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
20 ING Pilgrim Emerging Countries Fund
<PAGE>
ING PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995 6.34
1996 27.50
1997 9.44
1998 -22.19
1999 75.80
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI EMF Index).
Average Annual Total Returns
MSCI
EMF
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(7) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Countries Fund 21
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital primarily
through investment in equity securities and equity equivalents of emerging
market companies.
INVESTMENT STRATEGY
The Fund will invest at least 65% of its total assets according to its
investment objective. The Fund's definition of emerging markets includes, but is
not limited to, the following:
Africa -- Botswana, Egypt, Ghana, Ivory Coast, Kenya, Mauritius, Morocco,
Namibia, South Africa, Swaziland, Tunisia, Zambia and Zimbabwe;
Asia: -- Bahrain, Bangladesh, China, Hong Kong, India, Indonesia, Malaysia,
Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and
Thailand;
Europe -- Croatia, Cyprus, Czech Republic, Estonia, Finland, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia and Slovenia;
The Middle East -- Israel, Jordan, Lebanon, Oman and Turkey;
Latin America -- Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Nicaragua, Peru and Venezuela.
The Adviser considers an emerging markets company to be any company domiciled in
an emerging market country, or any company that derives 50% or more of its total
revenue from either goods or services produced or sold in countries with
emerging markets.
The Fund may invest the remaining 35% of its assets in equity securities without
regard to whether the issuer qualifies as an emerging market company,
investment-grade debt securities denominated in the currency of an emerging
market country or issued or guaranteed by an emerging market company or the
government of an emerging market country or short-term or medium-term investment
grade debt securities.
The Fund's investment approach is to focus on positive returns through long-term
capital gains. The investment strategy is based on a "top-down" approach that
compares macro trends, such as economics, politics, industry trends, and
commodity trends on a relative basis. Countries are grouped regionally and
globally and ranked based on their macro scores. Once specific countries are
identified as relative outperformers, specific companies are selected as
investments. The selection process for selecting individual companies is based
on fundamental research, industry themes, and identifying specific catalysts for
growth.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Emerging Countries
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many are dependent on a few key
managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
22 ING Pilgrim Worldwide Emerging Markets Fund
<PAGE>
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991 24.19
1992 3.77
1993 63.37
1994 -13.81
1995 -5.93
1996 7.38
1997 -11.40
1998 -29.06
1999 112.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI Emerging Markets Free Index) and the MSCI EAFE Index.
Average Annual Total Returns
MSCI MSCI
EMF EAFE
Class A(4) Index(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund. Lexington Management Corporation engaged a sub-adviser
to manage the Fund until June 7, 2000. Prior to July 26, 2000, the Fund's
shares were sold on a no-load basis. Effective July 31, 2000, the Fund's
outstanding shares were classified as "Class A" shares.
(3) Prior to June 17, 1991, the Fund operated under a different investment
objective.
(4) Reflects deduction of sales charge of 5.75%.
(5) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(6) The Morgan Stanley Capital International Europe, Australia and Far East
(MSCI EAFE) Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Emerging Markets Fund 23
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GLOBAL TECHNOLOGY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long term growth of capital. This
objective may not be changed without the approval of shareholders, and there is
no assurance that the Fund will achieve its objective.
INVESTMENT STRATEGY
The Fund seeks to achieve its objective by investing at least 80% of its total
assets in equity securities or equity equivalents (including common and
preferred stocks, warrants and convertible securities) of technology or
information infrastructure related companies of any capitalization. The Adviser
considers technology or information infrastructure related companies to be in
the following industries within the technology or information sectors:
biotechnology, broadcasting and media content, computers, electronic components
and equipment, electronic commerce and data services, data processing,
information systems, internet, medical technology, networking, office
automation, on-line services, semiconductors, semiconductor capital equipment,
server hardware producers, software companies, telecommunications,
telecommunications equipment and services, and companies involved in the
distribution, servicing, science and development of these industries.
The Fund expects that such companies will be located within Africa, Asia,
Europe, the Middle East and Latin America. However, the Fund is not limited to
these countries and may invest in any country so long as it meets the Fund's
objective. Many of the regions in which the Fund will invest will include
emerging market countries.
The Fund's portfolio managers use a "bottom-up" approach in stock selection
focusing on those companies that they believe have rising earnings expectations
and rising valuations. The Fund seeks growth companies with long-term capital
appreciation potential. In selecting individual securities the Adviser looks for
companies that it believes display or are expected to display the following
characteristics:
* Robust growth prospects
* High profit margins or return on capital
* Attractive valuations relative to expected earnings or cash flow
* Quality management
* Unique technological and competitive advantages
The Fund generally sells a stock if the Adviser believes that its target price
has been reached, its earnings are disappointing, its revenue growth has slowed
or its underlying fundamentals have deteriorated. In addition, the Adviser will
overlay a top-down macro economic and political screening process in order to
assess country specific risks and enhance returns. The Fund may invest in
larger, more established companies or in smaller or unseasoned companies.
The Fund may invest the remaining 20% of its assets in investment-grade debt
securities of any maturity denominated in U.S. or foreign currencies.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Global Information
Technology Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many are dependent on a few key
managers.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Risks of Concentration in the Technology Sector -- because the Fund's
investments are concentrated in the technology sector, the value of the Fund may
be subject to greater volatility than a fund with a portfolio that is less
concentrated. If the securities of companies in the technology sector fall out
of favor, the Fund could underperform funds that focus on other types of
companies. In addition, investments in companies in the rapidly changing fields
of technology and science face special risks such as competitive pressures and
technological obsolescence and may be subject to greater governmental regulation
than many other industries.
Non-Diversification Risk -- the Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
24 ING Pilgrim Global Technology Fund
<PAGE>
ING PILGRIM GLOBAL TECHNOLOGY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Pacific Stock Exchange Technology Index (PSE Technology
Index).
Average Annual Total Returns
PSE
Class Technology
A(3) Index(4)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 % 21.04
Since inception % -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to August 1, 2000, Lexington Management Corporation served as the
adviser to the Fund. Lexington Management Corporation engaged a sub-adviser
to manage the Fund until June 7, 2000. Prior to August 1, 2000, the Fund's
shares were sold on a no-load basis. Effective July 31, 2000, the Fund's
outstanding shares were classified as "Class A" shares.
(3) Reflects a deduction of sales charge of 5.75%.
(4) The PSE Technology Index is a price-weighted index of the top 100 U.S.
technology stocks.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Technology Fund 25
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Advisors B.V.
ING PILGRIM GLOBAL COMMUNICATIONS FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
communications companies. This portion of the portfolio will have investments
located in at least three different countries, including the United States. As a
general matter, the Fund expects these investments to be in common stocks of
large, mid-sized and small companies.
The Fund considers communications companies to be those that derive at least 50%
of their total revenues or earnings from designing, developing, operating,
financing, manufacturing or providing the following activities, products and
services: communications equipment and service (including equipment and services
for both data and voice transmission); electronic components and equipment;
broadcast (including television and radio, satellite, microwave and cable
television); computer equipment, mobile telecommunications and cellular radio
and paging; electronic mail; local and wide area networking and linkage of work
and data processing systems (collectivley, "communications activities").
The Sub-Adviser believes that because of rapid advances in communications,
investment in companies within this sector should offer substantial
opportunities for long-term capital appreciation. The communications 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. Generally, the Sub-Adviser's overall stock selection for the Fund will
be based on an assessment of the company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
The Sub-Adviser combines broad industry analysis and "bottom-up" company
analysis to identify the stocks of companies it believes will become tomorrow's
communications leaders. In choosing investments for the Fund, the Sub-Adviser
first identifies themes that address industry and technological changes. Using
intensive fundamental research, the Sub-Adviser then analyzes individual
companies worldwide to find those firms most likely to benefit from the selected
investment themes.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Industry Concentration -- as a result of the Fund concentrating its assets in
securities related to a particular industry, the Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Communications Technology Risk -- communications companies are generally subject
to the rate of change in technology, which is higher than other industries. In
addition, products and services of companies engaged in the communications
industry are subject to relatively high risks of rapid obsolescence caused by
scientific and technological advances. Swings in investor psychology or
significant trading by large institutional investors can result in significant
price fluctuations and stock price declines.
Governmental Regulation -- certain communications industries, such as the
telecommunications industry, may be subject to greater governmental regulation
than
26 ING Pilgrim Global Communications Fund
<PAGE>
ING PILGRIM GLOBAL COMMUNICATIONS FUND
--------------------------------------------------------------------------------
many other industries. Accordingly, such industries may be subject to changes in
governmental policies and the need for regulatory approvals may have a material
effect on the products and services offered. Telephone operating companies in
the United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered.
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The Fund does not have a performance history because it has not yet commenced
operation.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Communications Fund 27
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Advisors B.V.
ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
information technology companies. The Fund defines information technology
companies as those companies that derive at least 50% of their total revenues or
earnings from information technology, hardware or software, or related
consulting and services industries. This portion of the portfolio will have
investments located in at least three different countries, including the United
States. As a general matter, the Fund expects these investments to be in common
stocks of large, mid-sized and small companies.
The Sub-Adviser believes that because of rapid advances in information
technology, investment in companies within this sector should offer substantial
opportunities for long-term capital appreciation. 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. Generally, the Sub-Adviser's overall stock selection for the
Fund will be based on an assessment of the company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
The Sub-Adviser combines broad industry analysis and "bottom-up" company
analysis to identify the stocks of companies it believes will become tomorrow's
information technology leaders. In choosing investments for the Fund, the
Sub-Adviser first identifies themes that address industry and technological
changes. Using intensive fundamental research, the Sub-Adviser then analyzes
individual companies worldwide to find those firms most likely to benefit from
the selected investment themes.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Industry Concentration -- as a result of the Fund concentrating its assets in
securities related to a particular industry, the Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Information Technology Risk -- information technology companies are generally
subject to the rate of change in technology, which is higher than other
industries. In addition, products and services of companies engaged in the
information technology industry are subject to relative high risks of rapid
obsolescence caused by scientific and technological advances. Swings in investor
psychology or significant trading by large institutional investors can result in
significant price fluctuations and stock price declines.
28 ING Pilgrim Global Information Technology Fund
<PAGE>
ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998
1999 140.15
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Goldman Sachs Technology Industry Composite Index.
Average Annual Total Returns
Goldman
Sachs
Tech.
Industry
Class Class Class Comp.
A(2) B(3) C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns..
(4) Reflects deduction of deferred sales charge of 1% for the 1 year return
(5) The Goldman Sachs Technology Industry Composite Index is a widely
recongnized, unmanaged index of technology stocks.
(6) Classes A, B and C commenced operations on December 15, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Information Technology Fund 29
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of its total assets in equity securities
listed on stock exchanges in countries in the Asia-Pacific region or issued by
companies based in this region. Asia-Pacific countries in which the Fund invests
include, but are not limited to, China, Hong Kong, Indonesia, Korea, Malaysia,
Philippines, Singapore, Taiwan and Thailand, but do not include Japan and
Australia. The equity securities in which the Fund may invest include common
stock, convertible securities, preferred stock, warrants, American Depositary
Receipts, European Depositary Receipts and other depositary receipts.
The Adviser bases investment decisions on a disciplined approach that takes into
consideration the following factors: a macroeconomic overview of the region,
specific country analysis, setting target country weightings, evaluation of
industry sectors within each country, and selection of specific stocks. In
selecting specific securities, the Adviser emphasizes a value approach that
seeks growth at a reasonable price. This approach involves analysis of such
fundamental factors as absolute rates of change of earnings growth, earnings
growth relative to the market and industry, quality of earnings and stability of
earnings growth, quality of management and product line, interest rate
sensitivity and liquidity of the stock.
The criteria used by the Fund to determine whether an issuer is based in the
Asia-Pacific region are: the country in which the issuer was organized; the
country in which the principal securities market for that issuer is located; the
country in which the issuer derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed; or the country
in which at least 50% of the issuer's assets are located.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the value
securities in which the Fund invests. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Risks of the Asia-Pacific Region -- the Asia-Pacific region includes countries
in various stages of economic development, including emerging market countries.
In 1997 and 1998, securities markets in Asian countries suffered significant
downturns and volatility, and currencies lost value in relation to the U.S.
dollar. Currency devaluation in any one country may have a significant effect on
the entire region. Increased political or social unrest in some or all Asian
countries could cause further economic and market uncertainty.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a Fund that
invests globally. If Asia-Pacific securities fall out of favor, it may cause the
Fund to underperform funds that focus on other types of stocks.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
30 ING Pilgrim Asia-Pacific Equity Fund
<PAGE>
ING PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996 9.46
1997 -43.73
1998 -15.51
1999 74.41
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- Morgan Stanley Capital International Far East Free ex-Japan Index
(MSCI Far East ex-Japan Index).
Average Annual Total Returns
MSCI
Far East
Free
ex-Japan
Class A(2) Class B(3) Class M(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to January 2, 2001, the Fund was managed by a sub-adviser.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of sales charge of 3.5% for the 1 year return.
(5) The MSCI Far East ex-Japan Index is an unmanaged index that measures the
performance of securities listed on exchanges in the Far East markets,
excluding Japan.
(6) The Fund commenced operations on September 1, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Asia-Pacific Equity Fund 31
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM SMALLCAP ASIA GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term capital appreciation
primarily by investing in equity securities and equity equivalents of companies
in the Asia Region having market capitalizations of less than $1 billion.
INVESTMENT STRATEGY
The Fund will normally invest at least 65% of its total assets in equity
securities and equity equivalents (including common and preferred stocks,
warrants and convertible securities) of smaller companies in the Asia Region.
The Fund will primarily invest in listed securities but may also invest in
unlisted securities.
The Fund intends to invest primarily in companies which:
* have proven management;
* are undervalued and under-researched by the investment community;
* are within industry sectors with strong growth prospects; and
* which have potential investment returns that are superior to the Asian
market as a whole.
The Fund may invest 35% of its total assets in:
* companies with market capitalizations of $1 billion or more;
* companies outside the Asia Region (e.g. Australia or New Zealand); and
* Investment-grade debt securities of any maturity
* The Fund considers the following countries to be in the Asia Region:
Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan,
The Philippines, Singapore, Sri Lanka, Vietnam, Taiwan and Thailand. The
Fund considers a company to be within the Asia Region if its principal
securities' trading market is located in the Asia Region. The Fund will
normally invest in at least three different countries. The Fund does not
intend to invest in Japanese securities.
During times that the Adviser believes that stock of smaller companies presents
undue risk, the Fund may adopt a defensive investment posture, and invest in
equity securities and equity equivalents of medium and large companies in the
Asia region. At a meeting held on December 8, 2000, the Adviser informed the
Fund's Board of Directors that the Fund likely will continue to be invested
primarily in such securities for the immediate future, and potentially through
the reorganization of the Fund with the ING Pilgrim Asia-Pacific Equity Fund, to
the extent warranted by market conditions. At times that the Fund is primarily
invested in securities of medium and large companies, it will not realize
capital appreciation from a primary investment in smaller companies.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Asia-Pacific Equity
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund invests in small companies, which may be more susceptible to price
swings than larger companies because they may have fewer financial resources,
more limited product and market diversification and many are dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Risks of the Asia Region -- the Asia region includes countries in various stages
of economic, development, including emerging market countries. In 1997 and 1998,
securities markets in Asian countries suffered significant downturns and
volatility, and currencies lost value in relation to the U.S. dollar. Currency
devaluation in any one country may have a significant effect on the entire
region. Increased political or social unrest in some or all Asian countries
could cause further economic and market uncertainty.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a Fund that
invests globally. If Asian securities fall out of favor, it may cause the Fund
to underperform funds that focus on other types of stocks.
Inability to Sell Securities -- securities of smaller and emerging market
companies trade in lower volume and may be less liquid than securities of
companies in larger, more established markets. The Fund could lose money if it
cannot sell a security at the time and price that would be most beneficial to
the Fund.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in intrest rates, usually making them more volatile than debt securities
with shorter maturities.
32 ING Pilgrim SmallCap Asia Growth Fund
<PAGE>
ING PILGRIM SMALLCAP ASIA GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991
1992
1993
1994
1995
1996 25.50
1997 -42.32
1998 -19.41
1999 57.29
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- The Morgan Stanley Capital International Far East Free ex Japan
Index (MSCI Far East Free ex-Japan Index) and The Morgan Stanley Capital
International Europe, Australia and Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI MSCI
Far East Free EAFE
Class A(4)(5) ex Japan Index(6) Index(7)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Class A(8) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and another firm served as sub-adviser to the Fund.
Prior to July 26, 2000, the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Prior to January 2, 2001, the Fund was advised by a sub-adivser.
(4) This table shows the per-formance of the Class A shares of the Fund. Class
B shares of the Fund did not have a full year's performance during the
period ended December 31, 2000.
(5) Reflects deduction of sales charge of 5.75%.
(6) The MSCI Far East Free ex Japan Index is an unmanaged index that measures
the performance of securities listed on exchanges in the Far East markets
except Japan.
(7) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
(8) Class A commenced operations on July 3, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Asia Growth Fund 33
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Adivsors B.V.
ING PILGRIM EUROPEAN EQUITY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
European issuers. The Sub-Adviser considers European issuers to be companies
whose securities are principally traded in the European capital markets, that
derive at least 50% of their total reveues or earnings 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.
As a general matter, the Fund expects these investments to be in common stocks
of large companies whose market capitalizations are generally in excess of $10
billion.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, five-step investment process that seeks to identify underpriced
earnings growth in European companies. The five steps are:
* First, the Sub-Adviser ranks possible investments according to trading
volume and liquidity relative to their peers;
* Second, the Sub-Adviser performs additional screens to determine which
companies should be further researched;
* Third, the Sub-Adviser performs fundamental analysis of cyclical and
non-cyclical market sectors and companies to identify underpriced earnings
or cash flow growth.
* Fourth, the Sub-Adviser determines portfolio weightings within each sector.
* Finally, the Sub-Adviser continuously monitors the portfolio to maintain
favorable risk-reward relationships.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the The Fund may be affected by the
following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
34 ING Pilgrim European Equity Fund
<PAGE>
ING PILGRIM EUROPEAN EQUITY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998
1999 18.59
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- FT-Europe Index.
Average Annual Total Returns(5)
FT-Europe
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The FT-Europe Index is widely recognized, unmanaged index of European stock
markets.
(6) Classes A, B and C commenced operations on December 15, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim European Equity Fund 35
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term capital appreciation
through investment primarily in equity securities of Russian companies.
INVESTMENT STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its total
assets in equity securities (including common and preferred stocks, warrants and
convertible securities) of Russian companies. The portfolio manager may invest
in companies with any market capitalization. The Fund may invest the other 35%
of its total assets in debt securities issued by Russian companies and debt
securities issued or guaranteed by the Russian government without any
restrictions based on investment quality or maturity of the debt securities. The
Fund may also invest in the equity securities of issuers outside of Russia which
the Fund believes will experience growth in revenue and profits from
participation in the development of the economies of the former Soviet Union.
When the Fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the Fund avoid losses, but may mean lost
opportunities.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Risks of Investing in Securities of Russian Companies
The following risks apply to all mutual funds that invest in securities of
Russian companies including ING Pilgrim Troika Dialog Russia Fund.
Political Risk -- Since the breakup of the Soviet Union in 1991, Russia has
experienced and continues to experience dramatic political and social change.
Russia is undergoing a rapid transition from a centrally-controlled command
system to a more market-oriented democratic model. The Fund may be affected
unfavorably by political developments, social instability, changes in government
policies, and other political and economic developments.
Market Concentration and Liquidity Risk -- The Russian securities markets are
substantially smaller, less liquid and more volatile than the securities markets
in the United States. A few issuers represent a large percentage of market
capitalization and trading volume. Due to these factors and despite the Fund's
policy on liquidity, it may be difficult for the Fund to buy or sell some
securities because of the poor liquidity.
Lack of Reliable Financial Information -- There may not be available reliable
financial information which has been prepared and audited in accordance with
U.S. or Western European generally accepted accounting principles and auditing
standards.
Unfavorable Actions -- There is the potential for unfavorable action such as
expropriation, dilution, devaluation, default or excessive taxation by the
Russian government or any of its agencies or political subdivisions with respect
to investments in Russian securities by or for the benefit of foreign entities.
The Fund's investments will include investments in Russian companies that have
characteristics and business relationships common to companies outside of
Russia, and as a result, outside economic forces may cause fluctuations in the
value of securities held by the Fund.
Settlement and Custody Risk -- Ownership of shares in Russian companies is
recorded by the companies themselves and by registrars instead of through a
central registration system. It is possible that the Fund's ownership rights
could be lost through fraud or negligence. Since the Russian banking
institutions and registrars are not guaranteed by the state, the Fund may not be
able to pursue claims on behalf of the Fund's shareholders.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a fund that
invests globally. If Russian securities fall out of favor, it may cause the Fund
to underperform funds that focus on other types of stocks.
Lower Quality Debt Securities -- Junk bonds are highly speculative. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity of issuers of securities to make principal and interest payments than
with higher-grade debt securities.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
Debt Securities -- The value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
36 ING Pilgrim Troika Dialog Russia Fund
<PAGE>
ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997 67.50
1998 -82.99
1999 159.76
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- the Moscow Times Index and the Russian Trading System Index.
Average Annual Total Returns
Russian
Moscow Trading
Times System
Class A(3)(4) Index(5) Index(6)
-------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since inception of Class A(7) %
-------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Prior to January 2, 2001, the Fund was advised by a
sub-adviser.
(3) This table shows the performance of the Class A shares of the Fund.
(4) Reflects deduction of sales charge of 5.75%.
(5) The Moscow Times Index is an unmanaged index that measures the performance
of 50 Russian stocks considered to represent the most liquid and most
highly capitalized Russian stocks.
(6) The Russian Trading System Index is a capitalization-weighted index that is
calculated in U.S. dollars. The index is comprised of 100 stocks traded on
the Russian Trading System.
(7) Class A commenced operations on July 3, 1996.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Troika Dialog Russia Fund 37
<PAGE>
Precious Metals Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GOLD FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to attain capital appreciation and hedge
against the loss of buying power of the U.S. Dollar as may be obtained through
investment in gold and securities of companies engaged in mining or processing
gold throughout the world.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of the value of its total assets in gold
bullion and the equity securities of companies engaged in the exploration,
mining, processing, fabrication or distribution of gold ("gold-related
companies"). The Fund may invest the remaining 35% of its total assets in other
precious metal, including silver, platinum, and palladium, and in the equity
securities of companies engaged in the exploration, mining, processing,
fabrication or distribution of other precious metals or materials. From time to
time, the Fund invests to in silver bullion or the common stock of companies
engaged in the exploration, mining, processing, fabrication or distribution of
silver ("silver-related companies"). The Fund may also invest in other types of
securities, including convertible securities, preferred stocks, bonds, notes and
warrants, of gold-related companies, silver-related companies, or companies
related to other precious metals. The Fund intends to invest less than half of
the value of its assets directly in bullion or other direct forms of gold,
silver, and other precious metals (as opposed to securities).
The Fund's performance and ability to meet its objective will be largely
dependent on the market value of gold, and, to a lesser degree, silver and other
precious metals. A substantial portion of the Fund's investment will be in the
securities of foreign issuers.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Precious Metals Risk -- the Fund's focus on precious metals and precious metal
stocks may expose the investor to additional risks. Precious metal prices can
swing sharply in response to cyclical economic conditions, political events or
the monetary policies of various countries. The supply and demand for gold may
vary widely and may be affected by actions of governments or their agencies or
national banks, all of which may affect the price of a precious metal or a
related company. Under current U.S. tax law, the Fund may not receive more than
10% of its yearly income from selling precious metals or any other physical
commodity. That law may require the Fund, for example, to hold precious metals
when it would rather sell, or to sell other securities when it would rather hold
them -- both may cause investment losses or lost opportunities for profit.
Direct investments in precious metals such a bullion have the following
characteristics: they earn no income; transaction and storage costs may be
higher than for securities; and the Fund will realize gain only with an increase
in the market price.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging, market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
38 ING Pilgrim Gold Fund
<PAGE>
ING PILGRIM GOLD FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 -6.14
1992 -20.51
1993 86.96
1994 -7.28
1995 -1.89
1996 7.84
1997 -42.98
1998 -6.39
1999 8.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- Standard & Poor's 500 Stock Price Index (S&P 500 Index) and Gold
Bullion.
Average Annual Total Returns
S&P 500 Gold
Class A(3) Index(4) Bullion(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Gold Bullion is a commodity traded on the New York Mercantile Exchange.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Gold Fund 39
<PAGE>
Precious Metals Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to maximize total return on its assets from
long-term growth of capital and income principally through investment in a
portfolio of securities which are engaged in the exploration, mining,
processing, fabrication or distribution of silver ("silver-related companies")
and in silver bullion.
INVESTMENT STRATEGY
The Fund will seek to achieve its objective through investment in common stocks
of established silver-related companies and in silver bullion which have the
potential for long-term growth of capital or income, or both. The common stocks
of silver-related companies in which the Fund intends to invest may or may not
pay dividends. The Fund may also invest in other types of securities of
silver-related companies including convertible securities, preferred stocks,
bonds, notes and warrants. The Fund invests primarily in companies with a large
market capitalization, but may also invest in mid- and small-size companies.
When the Adviser believes that the return on debt securities will equal or
exceed the return on common stocks, the Fund may, in pursuing its objective of
maximizing growth and income, substantially increase its holding in
investment-grade debt securities of any maturity.
The securities in which the Fund invests include issues of established
silver-related companies domiciled in the United States, Canada and Mexico as
well as other silver producing countries throughout the world. At least 80% of
the Fund's assets will be invested in established silver-related companies which
have been in business more than three years. Approximately 80% of silver is
provided as a by-product or co-product of other mining operations, such as gold
mining. The Fund has the ability to significantly increase its exposure to
silver by increasing its holding of silver bullion.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Gold Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Precious Metals Risk -- the Fund's focus on precious metals and precious metal
stocks may expose the investor to additional risks. The market for silver is
relatively limited, the sources of silver are concentrated in countries that
have the potential for instability and the market for silver is widely
unregulated. As a result, the price of silver, and therefore the Fund, may
fluctuate significantly. Precious metal investments have the following
characteristics: they earn no income; transaction and storage costs may be
higher; and the Fund will realize gain only with an increase in the market
price.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging, market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries: It may
also be more difficult to buy and sell securities in emerging market countries.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
40 ING Pilgrim Silver Fund
<PAGE>
ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992 -19.01
1993 76.52
1994 -8.37
1995 12.37
1996 2.38
1997 -8.05
1998 -29.64
1999 8.70
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index)
and Silver Bullion.
Average Annual Total Returns
S&P 500 Silver
Class A(3) Index(4) Bullion(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of Class A(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Silver Bullion is a commodity traded on the New York Mercantile Exchange.
(6) Class A commenced operations on January 2, 1992.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Silver Fund 41
<PAGE>
International Income Fund
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated or unrated debt securities.
INVESTMENT STRATEGY
The Fund invests in a variety of foreign and domestic high yield, lower rated or
unrated debt securities.
The Fund, under normal conditions, invests substantially all of its assets in
lower rated or unrated debt securities of domestic companies, companies in
developed foreign countries, and companies in emerging markets. The credit
quality of the foreign debt securities which the Fund intends to buy is
generally equal to U.S. corporate debt securities known as "junk bonds". The
debt securities in which the Fund invests consist of bonds, notes, debentures
and other similar instruments. The Fund may invest in debt securities issued by
foreign governments, their agencies and instrumentalities, central banks,
commercial banks and other corporate entities. The Fund may invest up to 100% of
its total assets in domestic and foreign debt securities that are rated below
investment grade or are of comparable quality. The Fund may also invest in
securities that are in default as to payment of principal and/or interest, and
bank loan participations and assignments.
The Fund's investment strategy stresses diversification to help reduce the
Fund's price volatility. Global fixed income securities are divided into four
categories. The categories reflect whether the securities are U.S. dollar
denominated or not and whether borrowers are in developed markets or emerging
markets. The Fund then seeks to select the best values in each of these four
segments. The balance the Fund maintains between these sectors attempts to limit
the price volatility.
The Fund may invest in debt securities of any maturity, although the portfolio
manager expects to invest in long-term debt instruments.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim Strategic Income
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income funds because it invests in high
yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging markets countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.
42 ING Pilgrim Global Income Fund
<PAGE>
ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1990 6.62
1991 10.03
1992 6.51
1993 10.90
1994 -6.52
1995 20.10
1996 13.33
1997 5.00
1998 8.21
1999 -.31
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers Global Treasury Index.
Average Annual Total Returns
Lehman Brothers
Global Treasury
Class A(4)(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Prior to December 31, 1994, the Fund operated under a different investment
objective.
(4) This table shows the performance of the Class A shares of the Fund. Class B
and Class C shares of the Fund did not have a full year's performance
during the period ended December 31, 2000.
(5) Reflects deduction of sales charge of 4.75%.
(6) The Lehman Brothers Global Treasury Index is an unmanaged index that is
comprised of 19 countries with an average maturity of 7.46%. The index is
overweighted in the U.S. and Japan, 27% and 25%, respectively. The average
coupon is 5.37%. The index returns are calculated in three ways: U.S.
Dollar, hedged U.S. Dollar, and local returns (local currencies). The
modified adjusted duration of the index is 5.5 years.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Income Fund 43
<PAGE>
WHAT YOU PAY TO INVEST
-----------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the Fund. The tables that follow show the
fees and expenses for each of the ING Pilgrim Funds.
Fees You Pay Directly
<TABLE>
<CAPTION>
Class A Class B(1) Class C(1) Class M(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge on your investment
(as a % of offering price) %
International Equity Funds and Precious Metals
Funds 5.75(2) none none 3.50(2)
International Income Fund 4.75(2) none none 3.25(2)
Maximum deferred sales charge (as a % of
purchase or sales price, whichever is less)
All Funds none(3) 5.00(4) 1.00(5) none
Redemption fee (as a % of amount redeemed,
if applicable)
Global Technology Fund and Troika Dialog
Russia Fund 2.00(6) N/A N/A N/A
</TABLE>
(1) Not all Funds offer Classes B, C and M. Please page 48.
(2) Reduced for purchases of $50,000 and over. Please see page 49.
(3) A contingent deferred sales charge of no more than 1% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. Please see page 49.
(4) Imposed upon redemption within 6 years from purchase. The fee has scheduled
reductions after the first year. Please see page 49.
(5) Imposed upon redemption within 1 year from purchase.
(6) The 2.0% redemption fee applies only to shares held less than 90 days for
Global Technology Fund and less than 365 days for Troika Dialog Russia
Fund.
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
<TABLE>
<CAPTION>
Class A
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 0.35 -- -- -- --
Global Corporate Leaders % 1.00 0.25 -- -- -- --
International Value % 1.00 0.30 -- -- -- --
International % 1.00 0.25 -- -- -- --
International Core Growth % 1.00 0.35 -- -- -- --
International SmallCap Growth % 1.00 0.35 -- -- -- --
Emerging Markets Value % 1.00 0.30 -- -- -- --
Emerging Countries % 1.25 0.35 -- -- -- --
Worldwide Emerging Markets % 1.00 0.25 -- -- -- --
Global Technology % 1.25 0.25 -- -- -- --
Global Communications % 1.00 0.35 -- -- -- --
Global Information Technology % 1.25 0.35 -- -- -- --
Asia-Pacific Equity % 1.25 0.25 -- -- -- --
SmallCap Asia Growth % 1.25 0.25 -- -- -- --
European Equity % 1.15 0.35 -- -- -- --
Troika Dialog Russia % 1.25 0.25 -- -- -- --
Gold % 0.95 0.25 -- -- -- --
Silver % 1.00 0.25 -- -- -- --
Global Income % 1.00 0.25 -- -- -- --
</TABLE>
44 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class B(3)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 1.00 -- -- -- --
International Value % 1.00 1.00 -- -- -- --
International % 1.00 1.00 -- -- -- --
International Core Growth % 1.00 1.00 -- -- -- --
International SmallCap Growth % 1.00 1.00 -- -- -- --
Emerging Markets Value % 1.00 1.00 -- -- -- --
Emerging Countries % 1.25 1.00 -- -- -- --
Global Communications % 1.00 1.00 -- -- -- --
Global Information Technology % 1.25 1.00 -- -- -- --
Asia-Pacific Equity % 1.25 1.00 -- -- -- --
SmallCap Asia Growth % 1.25 1.00 -- -- -- --
European Equity % 1.15 1.00 -- -- -- --
Global Income % 1.00 1.00 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class C(4)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 1.00 0.32 -- -- --
International Value % 1.00 1.00 0.41 -- -- --
International % 1.00 1.00 0.70 -- -- --
International Core Growth % 1.00 1.00 0.81 -- -- --
International SmallCap Growth % 1.00 1.00 0.32 -- -- --
Emerging Markets Value % 1.00 1.00 0.91 -- -- --
Emerging Countries % 1.25 1.00 0.74 -- -- --
Global Communications % 1.00 1.00 -- -- -- --
Global Information Technology % 1.25 1.00 -- -- -- --
European Equity % 1.15 1.00 -- -- -- --
Global Income % 1.00 1.00 0.51 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class M
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asia-Pacific Equity % 1.25 0.75 -- -- -- --
</TABLE>
--------------------------------------------------------------------------------
(1) These tables show the estimated operating expenses for each Fund by class
as a ratio of expenses to average daily net assets. These estimates are
based on each Fund's actual operating expenses for its most recent complete
fiscal year and fee waivers to which the Adviser has agreed for each Fund
except Global Corporate Leaders, Global Technology, International,
Worldwide Emerging Markets, SmallCap Asia Growth, Troika Dialog Russia,
Gold, Silver and Global Income Funds. For those Funds, estimated operating
expenses are based on estimated contractual operating expenses commencing
with ING Pilgrim Investments' management of these Funds.
(2) ING Pilgrim Investments has entered into written expense limitation
agreements with each Fund except International Value and Emerging Markets
Value, under which it will limit expenses of the Fund, excluding interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Pilgrim Investments within three years. The amount of
each Fund's expenses waived or reimbursed during the last fiscal year by
ING Pilgrim Investments is shown under the heading "Fee Waiver by Adviser".
For each Fund (other than Global Communications, Global Information
Technology and European Equity Funds) the expense limit will continue
through at least October 31, 2001. For Global Communications, Global
Information Technology and European Equity Funds the expense limit will
continue through at least . Nicholas-Applegate Capital Management bears 50%
of the cost of maintaining the expense limit for the International SmallCap
Growth Fund.
(3) Because Class B shares are new for International, SmallCap Asia Growth and
Global Income Funds, their expenses are estimated based on Class A
expenses.
(4) Because Class C shares are new for International Fund and Global Income
Fund, expenses are estimated based on Class A expenses.
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 45
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
<TABLE>
<CAPTION>
Class A
Fund 1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- --
Global Corporate Leaders $ -- -- -- --
International Value $ -- -- -- --
International $ -- -- -- --
International Core Growth $ -- -- -- --
International SmallCap Growth $ -- -- -- --
Emerging Markets Value $ -- -- -- --
Emerging Countries $ -- -- -- --
Worldwide Emerging Markets $ -- -- -- --
Global Technology(1) $ -- -- -- --
Global Communications $ -- -- -- --
Global Information Technology $ -- -- -- --
Asia-Pacific Equity $ -- -- -- --
SmallCap Asia Growth $ -- -- -- --
European Equity $ -- -- -- --
Troika Dialog Russia (1) $ -- -- -- --
Gold $ -- -- -- --
Silver $ -- -- -- --
Global Income $ -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
If you sell your shares If you don't sell your shares
Class B ----------------------------------------- ---------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- -- -- -- -- --
International Value $ -- -- -- -- -- -- -- --
International $ -- -- -- -- -- -- -- --
International Core Growth $ -- -- -- -- -- -- -- --
International SmallCap Growth $ -- -- -- -- -- -- -- --
Emerging Markets Value $ -- -- -- -- -- -- -- --
Emerging Countries $ -- -- -- -- -- -- -- --
Global Communications $ -- -- -- -- -- -- -- --
Global Information Technology $ -- -- -- -- -- -- -- --
Asia-Pacific Equity $ -- -- -- -- -- -- -- --
SmallCap Asia Growth $ -- -- -- -- -- -- -- --
European Equity $ -- -- -- -- -- -- -- --
Global Income $ -- -- -- -- -- -- -- --
</TABLE>
46 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you sell your shares If you don't sell your shares
Class C ---------------------------------------- -------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- -- -- -- -- --
International Value $ -- -- -- -- -- -- -- --
International $ -- -- -- -- -- -- -- --
International Core Growth $ -- -- -- -- -- -- -- --
International SmallCap Growth $ -- -- -- -- -- -- -- --
Emerging Markets Value $ -- -- -- -- -- -- -- --
Emerging Countries $ -- -- -- -- -- -- -- --
Global Communications $ -- -- -- -- -- -- -- --
Global Information Technology $ -- -- -- -- -- -- -- --
European Equity $ -- -- -- -- -- -- -- --
Global Income $ -- -- -- -- -- -- -- --
</TABLE>
Class M
Fund 1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
Asia-Pacific Equity $ -- -- -- --
--------------------------------------------------------------------------------
(1) The cost of investing in the Global Technology Fund and the Troika Dialog
Russia Fund for one year is ____, and ____, respectively, if shares were
held for less than 90 and 365 days, respectively.
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 47
<PAGE>
SHAREHOLDER GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
ING PILGRIM PURCHASE OPTIONS TM
Depending upon the Fund, you may select from up to four separate classes of
shares: Class A, Class B, Class C and Class M.
Class A
* Front-end sales charge, as described on the next page.
* Distribution and service (12b-1) fees of 0.25% to 0.30%.
Class B
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A contingent deferred sales charge, as described on the next page.
* Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses. Class B shares acquired initially through Funds
that were part of the Nicholas-Applegate Mutual Funds at the time of
purchase will convert after seven years from the date of original purchase.
* Not offered by Global Corporate Leaders Fund, Worldwide Emerging Markets
Fund, Troika Dialog Russia Fund, Gold Fund and Silver Fund.
Class C
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A 1% contingent deferred sales charge on shares sold within one year of
purchase.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
* Not offered by Asia-Pacific Equity Fund, Global Corporate Leaders Fund,
Worldwide Emerging Markets Fund, SmallCap Asia Growth Fund, Troika Dialog
Russia Fund, Gold Fund and Silver Fund.
Class M
* Lower front-end sales charge than Class A, as described on the next page.
* Distribution and service (12b-1) fees of 0.75%.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class M level throughout the life of your investment.
* Offered only by Asia-Pacific Equity Fund.
When choosing between classes, you should carefully consider the ongoing annual
expenses along with the initial sales charge or the contingent deferred sales
charge. The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Higher distribution
fees mean a higher expense ratio, so Class B and Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A or Class M shares. Orders for Class B shares and Class M shares in excess of
$250,000 and $1,000,000, respectively, will be accepted as orders for Class A
shares or declined. You should discuss which Class of shares is right for you
with your investment professional.
Distribution and Shareholder Service Fees
To pay for the cost of promoting the Funds and servicing your shareholder
account, each class of each Fund has adopted a Rule 12b-1 plan which requires
fees to be paid out of the assets of each class. Over time the fees will
increase your cost of investing and may exceed the cost of paying other types of
sales charges.
48 Shareholder Guide
<PAGE>
CHOOSING A SHARE CLASS SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
SALES CHARGE CALCULATION
Class A(1)
Class A shares of the Funds are sold subject to the following sales charge:
International
Equity Funds, International
and Precious Metals Funds Income Fund
-------------------------- -------------------------
As a % As a %
of the As a % of of the As a % of
offering net offering net
Your Investment price asset value price asset value
Less than $50,000 5.75 6.10 4.75 4.99
$50,000 - $99,999 4.50 4.71 4.50 4.71
$100,000 - $249,999 3.50 3.63 3.50 3.63
$250,000 - $499,999 2.50 2.56 2.50 2.56
$500,000 - $1,000,000 2.00 2.04 2.00 2.04
$1,000,000 and over See below See below
(1) Shareholders that purchased funds that were a part of the Lexington family
of funds at the time of purchase are not subject to sales charges for the
life of their account.
Investments of $1 Million or More. There is no front-end sales charge if you
purchase Class A shares in an amount of $1 million or more. However, the shares
will be subject to a contingent deferred sales charge if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:
Period during which
Your investment CDSC CDSC applies
$1,000,000 to $2,499,999 1.00% 2 years
$2,500,000 to $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
However, Class A shares that were purchased in an amount of $1 million or more
through Funds that were part of the Nicholas-Applegate Mutual Funds at the time
of purchase will be subject to a contingent deferred sales charge of 1% within
one year from the date of purchase.
Class A shares that were purchased in an amount of $1 million or more through
funds that were part of the Northstar family of funds and the ING family of
funds at the time of purchase may be subject to a different contingent deferred
sales charge period of 18 months and 12 months respectively, from the date of
purchase. See the SAI for further information.
Class B and Class C
Class B and Class C shares are offered at their net asset value per share
without any initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) on shares that you sell within a certain period of
time after you bought them. The amount of the CDSC is based on the lesser of the
net asset value of the shares at the time of purchase or redemption. There is no
CDSC on shares acquired through the reinvestment of dividends and capital gains
distributions. The CDSCs are as follows:
Class B Deferred Sales Charge(2)
CDSC on shares
Years after purchase being sold
1st year 5%
2nd year 4%
3rd year 3%
4th year 3%
5th year 2%
6th year 1%
After 6th year none
(2) Class B shares that were purchased through funds that were part of the
Northstar family of funds at the time of purchase are subject to a
different contingent deferred sales charge. Please see the SAI for further
information.
Class C Deferred Sales Charge
CDSC on shares
Years after purchase being sold
1st year 1%
After 1st year none
To keep your CDSC as low as possible, each time you place a request to redeem
shares the Funds will first redeem shares in your account that are not subject
to a CDSC, and then will sell shares that have the lowest CDSC.
Class M
Class M shares are sold subject to the following sales charge.
Asia-Pacific
Equity Fund
-------------------------------
As a % As a %
of the of net
offering asset
Your investment price value
Less than $50,000 3.50% 3.63%
$50,000 - $99,999 2.50% 2.56%
$100,000 - $249,999 1.50% 1.52%
$250,000 - $499,999 1.00% 1.01%
$500,000 and over none none
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 49
<PAGE>
SHAREHOLDER GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
Reduced Sales Charges. You may reduce the initial sales charge on a purchase of
Class A or Class M shares of the Funds by combining multiple purchases to take
advantage of the breakpoints in the sales charge schedules. You may do this by:
* Letter of Intent -- lets you purchase shares over a 13 month period and pay
the same sales charge as if the shares had all been purchased at once.
* Rights of Accumulation -- lets you add the value of shares of any open-end
Pilgrim Fund (excluding the Money Market Fund) you already own to the
amount of your next purchase for purposes of calculating the sales charge.
* Combination Privilege -- shares held by investors in the Pilgrim Funds
which impose a CDSC may be combined with Class A or Class M shares for a
reduced sales charge.
See the Account Application or the Statement of Additional Information for
details, or contact your financial representative or the Shareholder Servicing
Agent for more information.
CDSC Waivers. If you notify the Transfer Agent at the time of redemption, the
CDSC for each Class will be waived in the following cases:
* redemptions following the death or permanent disability of a shareholder if
made within one year of death or the initial determination of permanent
disability. The waiver is available only for shares held at the time of
death or initial determination of permanent disability.
* for Class B Shares, redemptions pursuant to a Systematic Withdrawal Plan,
up to a maximum of 12% per year of a shareholder's account value based on
the value of the account at the time the plan is established and annually
thereafter, provided all dividends and distributions are reinvested and the
total redemptions do not exceed 12% annually.
* mandatory distributions from a tax-deferred retirement plan or an IRA.
However, if you purchased shares that were part of the Nicholas-Applegate
Mutual Funds, you may be eligible for a CDSC waiver prior to the mandatory
distribution age.
* If you think you may be eligible for a CDSC waiver, contact your financial
representative or the Shareholder Servicing Agent.
Reinstatement Privilege. If you sell Class B and Class C shares of a Pilgrim
Fund, you may reinvest some or all of the proceeds in the same share class
within 90 days without a sales charge. Reinstated Class B and Class C shares
will retain their original cost and purchase date for purposes of the CDSC. This
privilege can be used only once per calendar year. If you want to use the
Reinstatement Privilege, contact your financial representative or the
Shareholder Servicing Agent. Consult the SAI for more information.
Sales Charge Waivers. Class A or Class M shares may be purchased without a sales
charge by certain individuals and institutions. For additional information,
contact the Shareholder Servicing Agent, or see the Statement of Additional
Information.
50 Shareholder Guide
<PAGE>
HOW TO PURCHASE SHARES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
The minimum initial investment amounts for the Pilgrim Funds are as follows:
* Non-retirement accounts: $1,000
* Retirement accounts: $250
* Pre-Authorized Investment Plan: $100 to open; you must invest at least $100
a month.
The minimum additional investment is $100.
Make your investment using the table on the right.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. The Pilgrim Funds reserve the right to waive minimum
investment amounts. The Funds reserve the right to liquidate sufficient shares
to recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $1,000.00
($250.00 for IRAs).
Retirement Plans
The Funds have available prototype qualified retirement plans for both
corporations and for self-employed individuals. They also have available
prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company (SSB) acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB
currently receives a $12 custodial fee annually for the maintenance of such
accounts.
Initial Additional
Method Investment Investment
-----------------------------------------------------------------------
By Contacting An investment
Your professional with an
Investment authorized firm
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Visit or consult an
investment investment
professional. Make professional. Fill out
your check payable to the Account Additions
the Pilgrim Funds and form included on the
mail it, along with a bottom of your account
completed Application. statement along with
Please indicate your your check payable to
investment professional the Fund and mail
on the New Account them to the address on
Application the account statement.
Remember to write
your account number
on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the
Fund in the care of:
State Street Bank and
Trust Company ABA
#101003621 Kansas
City, MO credit to:
-------------- (the
Fund) A/C #751-8315;
for further credit
to: -----------------
Shareholder A/C
#----------------
(A/C # you received
over the telephone)
Shareholder Name:
---------------------
(Your Name Here)
After wiring funds
you must complete the
Account Application
and send it to: ING
Pilgrim Funds P.O.
Box 219368 Kansas
City, MO 64121-6368
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 51
<PAGE>
SHAREHOLDER GUIDE HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
You may redeem shares using the table on the right.
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $10,000.
* Minimum withdrawal amount is $100.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a Fund could elect to make payment in securities
for redemptions in excess of $250,000 or 1% of its net assets during any 90-day
period for any one shareholder. An investor may incur brokerage costs in
converting such securities to cash.
Redemption Fee
A 2% redemption fee will be charged on the redemption of shares of the Pilgrim
Troika Dialog Russia Fund held less than 365 days and shares of the Pilgrim
Global Technology Fund held less than 90 days. The redemption fee will not apply
to shares representing the reinvestment of dividends and capital gains
distributions. The redemption fee will be applied on a share by share basis
using the "first shares in, first shares out" (FIFO) method. Therefore, the
oldest shares are sold first.
Method Procedures
By Contacting Your You may redeem by contacting your
Investment Professional investment professional. Investment
professionals may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes
any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check: You may have redemption
proceeds (up to a maximum of $100,000) mailed to an
address which has been on record with Pilgrim Funds
for at least 30 days. Receiving Proceeds By Wire: You
may have redemption proceeds (subject to a minimum of
$5,000) wired to your pre-designated bank account.
You will not be able to receive redemption proceeds
by wire unless you check the box on the Account
Application which signifies that you wish to receive
redemption proceeds by wire and attach a voided
check. Under normal circumstances, proceeds will be
transmitted to your bank on the business day
following receipt of your instructions, provided
redemptions may be made. In the event that share
certificates have been issued, you may not request a
wire redemption by telephone.
52 Shareholder Guide
<PAGE>
TRANSACTION POLICIES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of each class of each
Fund is calculated by taking the value of the Fund's assets attributable to that
class, subtracting the Fund's liabilities attributable to that class, and
dividing by the number of shares of that class that are outstanding. Because
foreign securities may trade on days when the Funds do not price shares, the net
asset value of a Fund that invests in foreign securities may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.
In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
and short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees. Valuing
securities at fair value involves greater reliance on judgment than securities
that have readily available market quotations.
Price of Shares
When you buy shares, you pay the NAV plus any applicable sales charge. When you
sell shares, you receive the NAV minus any applicable deferred sales charge.
Exchange orders are effected at NAV.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued
unless you request them in writing.
Telephone Orders
The Funds and their transfer agent will not be responsible for the authenticity
of phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Funds and their transfer agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Funds and
their transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other ING
Pilgrim Fund, except for Lexington Money Market Trust and ING Pilgrim Corporate
Leaders Trust Fund, without paying any additional sales charge, except that
Class A shares of the Pilgrim Money Market Fund for which no sales charge was
paid must pay the applicable sales load on an exchange into Class A shares of
another Fund. Shares subject to a CDSC will continue to age from the date that
the original shares were purchased. If you exchange shares of a Fund that at the
time you acquired the shares was a Nicholas-Applegate Mutual Fund, the shares
you receive on the exchange will be subject to the current CDSC structure and
conversion rights of the Fund being acquired, although the shares will continue
to age for CDSC and conversion purposes from the date the original shares were
acquired.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes. There is no specific limit on exchange frequency;
however, the Funds are intended for long-term investment and not as a short-term
trading vehicle. The Adviser may prohibit excessive exchanges (more than four
per year). The adviser also may, on 60 days' prior notice, restrict the
frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 53
<PAGE>
SHAREHOLDER GUIDE TRANSACTION POLICIES
--------------------------------------------------------------------------------
Systematic Exchange Privilege
With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end Pilgrim Fund. This exchange privilege may be modified at any time or
terminated upon 60 days' written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at Net Asset Value (NAV), the
shares of any shareholder whose account (except for IRAs) has a value of less
than $1,000, other than as a result of a decline in the NAV per share.
Account Access
Unless your ING Pilgrim shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the internet at www.pilgrimfunds.com, or via touch
tone telephone by calling (800) 992-0180 and selecting Option 1. Should you wish
to speak with a Shareholder Service Representative you may call the toll-free
number listed above and select Option 2.
54 Shareholder Guide
<PAGE>
ADVISERS MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds (except Global
Communications, Global Information Technology and European Equity Funds). ING
Pilgrim has overall responsibility for the management of these Funds. ING Mutual
Funds Management Co. LLC ("IMFC") serves as the investment adviser to the Global
Communications, Global Information Technology and European Equity Funds, ING
Pilgrim and IMFC provide or oversee all investment advisory and portfolio
management services for each Fund, and assist in managing and supervising all
aspects of the general day-to-day business activities and operations of the
Funds, including custodial, transfer agency, dividend disbursing, accounting,
auditing, compliance and related services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Through its subsidiaries, ReliaStar offers individuals and
institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products, and personal finance education.
On July 26, 2000, ReliaStar was acquired by ING Group (NYSE: ING). ING Group is
a global financial institution active in the field of insurance, banking, and
asset management in more than 65 countries, with almost 100,000 employees.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors,
an indirect wholly-owned subsidiary of ReliaStar, merged with ING Pilgrim
Investments. Pilgrim Advisors and ING Pilgrim Investments were sister companies
and shared certain resources and investment personnel.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired
Lexington Global Asset Managers, Inc., the parent company of Lexington, and ING
Pilgrim Investments was approved as Adviser to the Funds formerly advised by
Lexington.
Organized in ,IMFC is registered as an investment adviser. IMFC is a
wholly-owned subsidiary of ING Group.
As of December 31, 2000, ING Pilgrim managed over $ billion in assets.
As of December 31, 2000, IMFC managed over $ billion in assets.
ING Pilgrim's and IMFC's principal address is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.
ING Pilgrim and IMFC receive a monthly fee for their services based on the
average daily net assets of each of the Funds.
The following table shows the aggregate annual management fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
Management
Fund Fee
Worldwide Growth 1.00%
Global Corporate Leaders 1.00
International Value 1.00
International 1.00
International Core Growth 1.00
International SmallCap Growth 1.00
Emerging Markets Value 1.00
Emerging Countries 1.25
Worldwide Emerging Markets 1.00
Global Technology 1.25
Global Communications 1.00
Global Information Technology 1.25
Asia-Pacific Equity 1.25
SmallCap Asia Growth 1.25
European Equity 1.15
Troika Dialog Russia 1.25
Gold 0.95
Silver 1.00
Global Income 1.00
ING Pilgrim Directly Manages the Portfolios of the Following Funds:
Worldwide Growth Fund
The following individuals share responsibility for the day-to-day management of
the Worldwide Growth Fund: Mary Lisanti, Executive Vice President and Chief
Investment Officer--Domestic Equities of ING Pilgrim, has served as a Senior
Portfolio Manager of the domestic equity portion of the Worldwide Growth Fund's
assets since October 2000. Prior to joining ING Pilgrim in October 1999, Ms.
Lisanti was Executive Vice President and Chief Investment Officer -- Domestic
Equities with Northstar Investment Management Corp., which subsequently merged
into ING Pilgrim. From 1996 to 1998, Ms. Lisanti was a Portfolio Manager at
Strong Capital Management. >From 1993 to 1996, Ms. Lisanti was a Managing
Director and Head of Small- and Mid-Capitalization Equity Strategies at Bankers
Trust Corp. Thomas J. Sullivan, Vice President of ING Pilgrim, has served as a
Portfolio Manager of the domestic equity portion of the Worldwide Growth Fund's
assets since October 1, 2000. Prior to joining ING Pilgrim in September 2000,
Mr. Sullivan was a Partner and Equity Trader for First NY Securities, LLC. From
April, 1994 to March, 2000, Mr. Sullivan was Vice President and portfolio
manager at Nicholas-Applegate Capital Management.
Richard T. Saler, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
the international portion of the Worldwide Growth Fund's assets since October
2000. From 1986 until July 2000, he was Senior Vice President and Director of
International Equity Strategy at Lexington (which was acquired by ING Pilgrim's
parent company in July 2000).
If you have any questions, please call 1-800-992-0180.
Management of the Funds 55
<PAGE>
MANAGEMENT OF THE FUNDS ADVISERS
--------------------------------------------------------------------------------
Phillip A. Schwartz, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
the international portion of the Worldwide Growth Fund's assets since October,
2000. Prior to joining ING Pilgrim in July 2000, Mr. Schwartz was Senior Vice
President and Director of International Equity Investment Strategy at Lexington
(which was acquired by ING Pilgrim's parent company in July 2000). Prior to
1993, Mr. Schwartz was a Vice President of European Research Sales with
Cheuvreux de Virieu in Paris and New York.
Global Corporate Leaders Fund
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Global Corporate Leaders Fund since
July 1994.
Philip A. Schwartz, whose background is described above, has served as as a
member of the portfolio management team that manages Global Corporate Leaders
Fund since January 1998.
Alan H. Wapnick, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim, has served as a member of the portfolio management team that manages
Global Corporate Leaders Fund since January 1998. Mr. Wapnick joined ING Pilgrim
in July 2000. Prior to July 2000, he was Senior Vice President and Senior
Portfolio Manager at Lexington (which was acquired by ING Pilgrim's parent
company in July 2000).
International Fund and International Core Growth Fund
Richard T. Saler, whose background is described above, has served as the Senior
Portfolio Manager of the portfolio management team that manages International
Fund since January 1994, and International Core Growth Fund since October 2000.
Philip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages International Fund since January
1998 and International Core Growth Fund since October 2000.
Worldwide Emerging Markets Fund and Emerging Countries Fund.
Richard T. Saler, whose background is described above, has served as the Senior
Portfolio Manager of the portfolio management team that manages Worldwide
Emerging Markets Fund since June 7, 2000, and Emerging Countries Fund since
October 2000.
Phillip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Worldwide Emerging Markets Fund
since June 7, 2000, and Emerging Countries Fund since October 2000.
Jan Wim Derks, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Derks also serves as Director of Global Emerging Markets
Equities at ING Investment Management -- Europe. Prior to joining ING Investment
Management -- Europe in 1997, Mr. Derks managed a Latin American equity fund
with ABN AMRO.
Eric Anderson, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Anderson also serves as Senior Portfolio Manager -- Global
Emerging Markets Equities at ING Investment Management -- Americas. Prior to
joining ING Investment Management -- Americas in 1997, Mr. Anderson managed a
Latin America equity portfolio and participated in the management of an emerging
market debt portfolio at Offitbank in New York.
Bratin Sanyal, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Sanyal serves as the Senior Portfoio Manager -- Global Emerging
Markets Equities at ING Investment Management -- Europe. Mr. Sanyal has held
several positions with ING Investment Management -- Europe, most recently as an
Asian equity fund manager. Prior to joining ING Investment Management -- Europe
in 1993, he was an economist at the World Bank where he structured debt workouts
for the Highly Indebted Countries.
Global Technology Fund
The following individuals share responsibility for the day-to-day management of
Global Technology Fund:
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Global Technology Fund since June
2000.
Phillip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Global Technology Fund since June
2000.
Alan H. Wapnick, whose background is described above, has served as a member of
the portfolio management team that manages Global Technology Fund since June
2000.
Asia-Pacific Equity Fund and SmallCap Asia Growth Fund
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Asia-Pacific Equity Fund and SmallCap
Asia Growth Fund since January 2000.
Philip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Asia-Pacific Equity Fund and
SmallCap Asia Growth Fund since January 2000.
Troika Dialog Russia Fund
Jan Wim Derks, whose background is described above, has served as a member of
the portfolio management team that manages Troika Dialog Russia Fund since
January 2000.
56 Management of the Funds
<PAGE>
SUB-ADVISERS MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
Mr. Oubadia has seven years experience in portfolio management. He is Vice
President of ING Pilgrim. Mr. Oubadia is responsible for investments in the
emerging markets of Europe, including Russia. He joined IIM in September 1996
when he was the Senior Equity Manager at IIM's office in Prague in the Czech
Republic. He joined IIM's global emerging markets team in January 1998. Mr.
Oubadia holds an MBA from Concordia University in Montreal, Canada.
Gold Fund and Silver Fund
James A. Vail has served as the Portfolio Manager of Gold Fund and Silver Fund
since June 1998.
Mr. Vail has served as Vice President and Portfolio Manager of ING Pilgrim since
July 2000. He is a Chartered Financial Analyst, a member of the New York Society
of Security Analysts and has 25 years of investment experience. Prior to joining
ING Pilgrim in July 2000, he was a Vice President at Lexington (which was
acquired by ING Pilgrim's parent company in July 2000) Prior to joining
Lexington in 1991, Mr. Vail held investment research positions with Chemical
Bank, Oppenheimer & Co., Robert Fleming, Inc. and most recently, Beacon Trust
Company, where he was a Senior Investment Analyst.
Global Income Fund
Denis P. Jamison, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim, since July 2000, has served as Senior Portfolio Manager of Global
Income Fund since July 1986. Prior to July 2000, he was a Senior Vice President
at Lexington (which was acquired by ING Pilgrim's parent company in July 2000).
He is a Chartered Financial Analyst and a member of the New York Society of
Security Analysts.
For the following Funds, ING Pilgrim or IMFC has engaged a Sub-Adviser to
provide the day-to-day management of the Fund's portfolio. The Sub-Advisers are
among the most respected institutional investment advisers in the world, and
have been selected primarily on the basis of their successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles
International Value Fund and Emerging Markets Value Fund
Brandes Investment Partners, L.P.
A registered investment adviser, Brandes Investment Partners, L.P. (Brandes)
serves as Sub-Adviser to the Pilgrim International Value Fund and the Pilgrim
Emerging Markets Value Fund. The company was formed in May 1996 as the successor
to its general partner, Brandes Investment Partners, Inc. which has been
providing investment advisory services (through various predecessor entities)
since 1974. Brandes currently manages over $33 billion in international
portfolios. Brandes' principal address is 12750 High Bluff Drive, San Diego,
California 92130.
Charles Brandes has co-managed the Pilgrim International Value Fund and the
Pilgrim Emerging Markets Value Fund since the Funds were formed in March 1995
and January 1998, respectively. Mr. Brandes has over 31 years of investment
management experience. He founded the general partner of Brandes in 1974 and
owns a controlling interest in it. At Brandes, he serves as a Managing Partner.
He is a Chartered Financial Analyst and a Member of the Association for
Investment Management and Research.
Ian Sunder has co-managed the Pilgrim Emerging Markets Value Fund since the Fund
was formed in January 1998. Mr. Sunder has over nine years of investment
management experience. At Brandes, he serves as a Portfolio Manager. He is a
Chartered Financial Analyst, and a Member of the Association for Investment
Management and Research and the Financial Analysts Society.
Jeff Busby has co-managed the Pilgrim International Value Fund since the fund
was formed in March 1995. Mr. Busby has over 13 years of investment management
experience. At Brandes, he serves as a Managing Partner. He is also responsible
for overseeing all trading activities for the firm. He is a Chartered Financial
Analyst, and a Member of the Association for Investment Management and Research
and the Financial Analysts Society.
International SmallCap Growth Fund
Nicholas-Applegate Capital Management (NACM)
NACM serves as Sub-Adviser to the Fund listed above. Founded in 1984, NACM
manages over $40 billion of discretionary assets for numerous clients, including
employee benefit plans of corporations, public retirement systems and unions,
university endowments, foundations, and other institutional investors and
individuals. The Fund listed above is managed by a team of portfolio managers
and analysts employed by NACM. NACM has offices in San Diego, New York, Chicago
and San Francisco. It's principal business address is 600 West Broadway, San
Diego, California 92101.
If you have any questions, please call 1-800-992-0180.
Management of the Funds 57
<PAGE>
MANAGEMENT OF THE FUNDS SUB-ADVISERS
--------------------------------------------------------------------------------
Global Communications Fund, Global Information Technology Fund and European
Equity Fund
ING Investment Management LLC. ING Investment Management Advisors B.V. ("IIMA")
serves as Sub-Adviser to the ING Pilgrim European Equity Fund, the ING Pilgrim
Global Information Technology Fund and the ING Pilgrim Global Communications
Fund. IIMA is located at Schenkkade 65, 2595 AS the Hague, The Netherlands. IIMA
is a company organized to manage investments and provide investment advice on a
worldwide basis to entities affiliated and unaffiliated with ING Group. IIMA
operates under the collective management of ING Investment Management which has
assets under management of $ billion as of December 31, 2000.
ING Global Communications Fund. Mr. Daniel Hayes has primary responsibility in
managing the Fund. Mr. Hayes has been employed by IIMA and its affiliates since
1998 and has ten years of investment experience.
ING Global Information Technology Fund. Mr. Guy Uding has primary responsibility
for managing the Fund and heads a three member team of investment professionals.
Mr. Uding has been employed by IIMA and it affiliates since 1995 and has five
years of investment experience.
ING European Equity Fund. Mr. Adrian van Tiggelen has primary responsibility for
managing the Fund and heads an eight member team of investment professionals.
The average experience of the team is nine years. Mr. van Tiggelen has been
employed by IIMA and its affiliates since 1988 and has eleven years of
investment experience.
58 Management of the Funds
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS/TAXES
--------------------------------------------------------------------------------
Dividends
The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends and capital gains, if any, annually, except
for Global Income Fund, which pays dividends quarterly.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class A, B, C or M shares of a Fund invested in another ING Pilgrim Fund
which offers the same class shares. If you are a shareholder of ING Pilgrim
Prime Rate Trust, whose shares are not held in a broker or nominee account, you
may, upon written request, elect to have all dividends invested into a
pre-existing Class A account of any open-end Pilgrim Fund.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely on your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive. A particular distribution generally will be taxable as either ordinary
income or long-term capital gains. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a Fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.
Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital gains
distributions.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
59 Dividends, Distributions and Taxes
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All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information
(SAI).
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the Adviser or Sub-Adviser
can decide whether to use them or not. The Funds named below invest in these
securities or use these techniques as part of the Fund's principal investment
strategy. However, the Adviser or Sub-Adviser of any Fund may also use these
investment techniques or make investments in securities that are not a part of
the Fund's principal investment strategy.
PRINCIPAL RISKS
Investments in Foreign Securities (All Funds). There are certain risks in owning
foreign securities, including those resulting from: fluctuations in currency
exchange rates; devaluation of currencies; political or economic developments
and the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions; reduced availability of public information
concerning issuers; accounting, auditing and financial reporting standards or
other regulatory practices and requirements that are not uniform when compared
to those applicable to domestic companies; settlement and clearance procedures
in some countries that may not be reliable and can result in delays in
settlement; higher transaction and custody expenses than for domestic
securities; and limitations on foreign ownership of equity securities. Also,
securities of many foreign companies may be less liquid and the prices more
volatile than those of domestic companies. With certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Emerging Markets Investments (All Funds) Because of less developed markets and
economies and, in some countries, less mature governments and governmental
institutions, the risks of investing in foreign securities can be intensified in
the case of investments in issuers domiciled or doing substantial business in
emerging market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete or unseasonal financial systems; environmental problems; less well
developed legal systems; and less reliable custodial services and settlement
practices.
Inability to Sell Securities (All Funds). Some securities usually trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small and mid-size U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in emerging markets. The
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.
High Yield Securities (Troika Dialog Russia Fund and Global Income Fund).
Investments in high yield securities generally provide greater income and
increased opportunity for capital appreciation than investments in higher
quality debt securities, but they also typically entail greater potential price
volatility and principal and income risk. High yield securities are not
considered investment grade, and are regarded as predominantly speculative with
respect to the issuing company's continuing ability to meet principal and
interest payments. The prices of high yield securities have been found to be
less sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
High yield securities structured as zero coupon or pay-in-kind securities tend
to be more volatile. The secondary market in which high yield securities are
traded is generally less liquid than the market for higher grade bonds. At times
of less liquidity, it may be more difficult to value high yield securities.
Corporate Debt Securities (Global Corporate Leaders, International, Worldwide
Emerging Markets and Global Income Funds). Corporate debt securities are subject
to the risk of the issuer's inability to meet principal and interest payments on
the obligation and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the credit-worthiness of the
issuer and general market liquidity. When
If you have any questions, please call 1-800-992-0180.
More Information About Risks 60
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interest rates decline, the value of the Fund's debt securities can be expected
to rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility." According to this measure, the longer the
maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.
Convertible Securities (All Funds). The price of a convertible security will
normally fluctuate in some proportion to changes in the price of the underlying
equity security, and as such is subject to risks relating to the activities of
the issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.
Interests in Loans (Global Income Fund). Certain Funds may invest in
participation interests or assignments in secured variable or floating rate
loans, which include participation interests in lease financings. Loans are
subject to the credit risk of nonpayment of principal or interest. Substantial
increases in interest rates may cause an increase in loan defaults. Although the
loans will generally be fully collateralized at the time of acquisition, the
collateral may decline in value, be relatively illiquid, or lose all or
substantially all of its value subsequent to the Fund's investment. Many loans
are relatively illiquid, and may be difficult to value.
Portfolio Turnover. Each Fund, except International Value, Emerging Markets
Value, Troika Dialog Russia, Gold, Silver and Global Income Funds, is generally
expected to engage in frequent and active trading of portfolio securities to
achieve its investment objective. A high portfolio turnover rate involves
greater expenses to a Fund, including brokerage commissions and other
transaction costs, and is likely to generate more taxable short-term gains for
shareholders, which may have an adverse effect on the performance of the Fund.
Communications Technology Risk (Global Communications Fund). Communications
companies are generally subject to the rate of change in technology, which is
higher than other industries. In addition, products and services of companies
engaged in the communications industry are subject to relatively high risks of
rapid obsolescence caused by scientific and technological advances. Swings in
investor psychology or significant trading by large institutional investors can
result in significant price fluctuations and stock price declines.
Governmental Regulation (Global Communications Fund). Certain communications
industries, such as the telecommunications industry, may be subject to greater
governmental regulation than many other industries. Accordingly, such industries
may be subject to changes in governmental policies and the need for regulatory
approvals may have a material effect on the products and services offered.
Telephone operating companies in the United States, for example, are subject to
both federal and state regulation affecting permitted rates of return and the
kinds of services that may be offered.
Industry Concentration (Global Communications and Global Information Technology
Funds). As a result of the Funds concentrating their assets in securities
related to a particular industry, the Funds may be subject to greater market
fluctuation than a fund which has securities representing a broader range of
investment alternatives.
Information Technology Risk (Global Information Technology Fund). Information
technology companies are generally subject to the rate of change in technology,
which is higher than other industries. In addition, products and services of
companies engaged in the information technology industry are subject to
relatively high risks of rapid obsolescence caused by scientific and
technological advances. Swings in investor psychology or significant trading by
large institutional investors can result in significant price fluctuations and
stock price declines.
61 More Information About Risks
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OTHER RISKS
U.S. Government Securities. Some U.S. Government agency securities may be
subject to varying degrees of credit risk particularly those not backed by the
full faith and credit of the United States Government. All U.S. Government
securities may be subject to price declines in the securities due to changing
interest rates.
Other Investment Companies. Each Fund may invest up to 10% of its assets in
other investment companies. When a Fund invests in other investment companies,
you indirectly pay a proportionate share of the expenses of that other
investment company (including management fees, administration fees, and
custodial fees) in addition to the expenses of the Fund.
Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities If a security is illiquid, the Fund might be unable to sell
the security at a time when the Adviser might wish to sell, and the security
could have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Mortgage-Related Securities. Although mortgage loans underlying a
mortgage-backed security 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. Like other fixed income securities, when interest
rates rise, the value of a mortgage-backed security generally will decline;
however, when interest rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as much as other fixed
income securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have the effect
of shortening or extending the effective maturity of the security beyond what
was anticipated at the time of the purchase. Unanticipated rates of prepayment
on underlying mortgages can be expected to increase the volatility of such
securities. In addition, the value of these securities may fluctuate in response
to the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by a Fund. Additionally, although mortgages
and mortgage-related securities are generally supported by some form of
government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.
Derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Some derivatives are sophisticated instruments
that typically involve a small investment of cash relative to the magnitude of
risks assumed. These may include swap agreements, options, forwards and futures.
Derivative securities are subject to market risk, which could be significant for
those that have a leveraging effect. Many of the Funds do not invest in these
types of derivatives, and some do, so please check the description of the Fund's
policies. Derivatives are also subject to credit risks related to the
counterparty's ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. A risk of using
derivatives is that the Adviser or Sub-Adviser might imperfectly judge the
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk in another security, the hedge might not correlate to the
market's movements and may have unexpected or undesired results, such as a loss
or a reduction in gains.
Temporary Defensive Strategies. When the Adviser or Sub-Adviser to a Fund
anticipates unusual market or other conditions, the Fund may temporarily depart
from its principal investment strategies as a defensive measure. To the extent
that a Fund invests defensively, it likely will not achieve capital
appreciation.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Lending Portfolio Securities. In order to generate additional income, certain
Funds may lend portfolio securities in an amount up to 331|M/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower default or fail financially.
Borrowing. Certain Funds may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar
If you have any questions, please call 1-800-992-0180.
More Information About Risks 62
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securities at an agreed upon price and date. Whether such a transaction produces
a gain for a Fund depends upon the costs of the agreements and the income and
gains of the securities purchased with the proceeds received from the sale of
the security. If the income and gains on the securities purchased fail to exceed
the costs, net asset value will decline faster than otherwise would be the case.
Reverse repurchase agreements and dollar rolls, as leveraging techniques, may
increase a Fund's yield; however, such transactions also increase a Fund's risk
to capital and may result in a shareholder's loss of principal.
Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a
Fund of a security which has been borrowed from a third party on the expectation
that the market price will drop. If the price of the security rises, the Fund
may have to cover its short position at a higher price than the short sale
price, resulting in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.
Percentage and Rating Limitations Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
63 More Information About Risks
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). A report of
each Fund's independent auditors, along with the Fund's financial statements, is
included in the Fund's annual report, which is available upon request.
If you have any questions, please call 1-800-992-0180.
63
<PAGE>
ING PILGRIM WORLDWIDE GROWTH FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.58 21.39 19.33 16.88 16.57 14.29
Income from investment operations:
Net investment income (loss) $ (0.15) -- (0.02) 0.04 (0.16) (0.07)
Net realized and unrealized gains
(loss) on investments $ 9.62 2.19 5.78 5.33 2.20 2.86
Total from investment operations $ 9.47 2.19 5.76 5.37 2.04 2.79
Less distributions from:
Net investment income $ -- -- 0.06 -- -- 0.12
Net realized gains on investments $ 3.07 -- 3.64 2.92 1.73 0.39
Net asset value, end of period $ 29.98 23.58 21.39 19.33 16.88 16.57
Total Return(4): % 42.43 10.24 33.56 34.55 12.51 19.79
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 235,341 66,245 49,134 38,647 24,022 23,481
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.67 1.75 1.86 1.86 1.85 1.85
Gross expenses prior to expense
reimbursement(5) % 1.67 1.75 2.02 2.21 2.17 2.17
Net investment income (loss) after
expense reimbursement(5)(6) % (0.79) (0.03) (0.62) (0.69) (0.93) (0.35)
Portfolio turnover % 169 57 247 202 182 132
<CAPTION>
Class B
------------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year ended March 31, 1995(3) to
Oct. 31, June 30, June 30, -------------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 26.64 24.21 20.10 16.02 14.34 12.50
Income from investment operations:
Net investment income (loss) (0.28) (0.03) (0.08) (0.17) (0.14) (0.05)
Net realized and unrealized gains
(loss) on investments 10.76 2.46 6.25 5.44 1.82 1.89
Total from investment operations 10.48 2.43 6.17 5.27 1.68 1.84
Less distributions from:
Net investment income -- -- 0.01 -- -- --
Net realized gains on investments 3.46 -- 2.05 1.19 -- --
Net asset value, end of period 33.66 26.64 24.21 20.10 16.02 14.34
Total Return(4): 41.54 10.04 32.74 34.03 11.72 14.72
Ratios/Supplemental Data:
Net assets, end of period (000's) 130,988 27,938 18,556 10,083 5,942 1,972
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(5) 2.32 2.40 2.67 2.70 4.81 9.50
Net investment income (loss) after
expense reimbursement(5)(6) (1.44) (0.68) (1.31) (1.37) (1.62) (1.28)
Portfolio turnover 169 57 247 202 182 132
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.69 21.52 19.05 16.92 16.76 14.44
Income from investment operations:
Net investment income (loss) $ (0.33) (0.04) (0.20) (0.19) (0.28) (0.21)
Net realized and unrealized gains
(loss) on investments $ 9.65 2.21 5.83 5.41 2.23 2.92
Total from investment operations $ 9.32 2.17 5.63 5.22 1.95 2.71
Less distributions from:
Net investment income $ -- -- 0.01 -- -- 0.01
Net realized gains on investments $ 3.09 -- 3.15 3.09 1.79 0.38
Net asset value, end of period $ 29.92 23.69 21.52 19.05 16.92 16.76
Total Return(4): % 41.48 10.08 32.73 33.72 11.81 18.95
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 239,432 111,250 98,470 84,292 70,345 71,155
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(5) % 2.32 2.40 2.67 2.77 2.61 2.57
Net investment income (loss) after
expense reimbursement(5)(6) % (1.44) (0.68) (1.28) (1.34) (1.57) (0.99)
Portfolio turnover % 169 57 247 202 182 132
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) Effective May 24, 1999, ING Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Commencement of offering shares.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
64 ING Pilgrim Worldwide Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL CORPORATE LEADERS FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, -------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.46 10.59 11.28 11.32 11.17
Net investment income (loss) $ (0.02) 0.99 0.03 0.01 0.09
Net realized and unrealized gain (loss) from
investment operations $ 3.67 1.02 0.73 1.84 1.10
Total income (loss) from investment operations $ 3.65 2.01 0.76 1.85 1.19
Less distributions:
Distributions from net investment income $ 0.74 0.80 0.09 0.16 0.29
Distributions in excess of net investment income $ -- -- -- -- 0.13
Distributions from net realized gains $ 0.08 2.34 1.36 1.73 0.62
Total distributions $ 0.82 3.14 1.45 1.89 1.04
Net asset value, end of period $ 12.29 9.46 10.59 11.28 11.32
Total Return(2) % 39.06 19.06 6.90 16.43 10.69
Ratios/Supplemental Data
Net asset, end of period (thousands) $ 19,617 17,803 35,085 37,223 53,614
Ratio of expenses to average net assets(3) % 1.96 2.12 1.75 1.90 1.67
Ratio of net investment income (loss) to average net
assets(3) % (0.65) (0.06) 0.23 0.11 0.48
Portfolio Turnover Rate % 12.76 137.33 177.48 128.05 166.35
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December
31 to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Corporate Leaders Fund 65
<PAGE>
ING PILGRIM INTERNATIONAL VALUE FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the years ended 2000, 1999, 1998 and 1997, the information in the table
below has been audited by PricewaterhouseCoopers LLP, independent auditors. For
all periods ending prior to October 31, 1997, the financial information was
audited by other independent auditors.
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------ ---------------------------------
Year ended October 31, Year ended October 31,
----------------------------------------------------------------------------------------- ---------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 11.88 10.90 9.05 8.10 11.76 10.87 10.00
Net investment income (loss) $ 0.08 0.11 (0.09) 0.14 0.01 0.07 (0.02)
Net realized and unrealized gain on
investments $ 3.58 0.96 2.30 0.85 3.51 0.91 0.89
Total from investment operations $ 3.66 1.07 2.21 0.99 3.52 0.98 0.87
Dividends from net investment
income $ (0.12) -- (0.14) (0.04) (0.04) -- --
Distributions from net realized gain $ (0.67) (0.09) (0.22) -- (0.67) (0.09) --
Total distributions $ (0.79) (0.09) (0.36) (0.04) (0.71) (0.09) --
Net asset value, end of the period $ 14.75 11.88 10.90 9.05 14.57 11.76 10.87
Total return(2) % 32.55 9.86 27.59 12.15 31.55 9.16 8.70
Ratios and supplemental data:
Net assets, end of the period (000's) $ 451,815 211,018 60,539 16,777 278,871 145,976 59,185
Ratio of expenses to average net
assets after reimbursement (4) % 1.68 1.74 1.80 1.85 2.41 2.47 2.50(3)
Ratio of expenses to average net
assets prior to expense
reimbursement % 1.68 1.74 2.07 2.82 2.41 2.47 2.58(3)
Ratio of net investment income
(loss) to average net assets % 0.92 1.62 0.46 1.52 0.18 0.69 (0.71)(3)
Portfolio turnover % 29 32 26 74 29 32 26
</TABLE>
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------
Year ended October 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of the period $ 11.75 10.86 8.93 8.05
Net investment (income loss) $ -- 0.06 (0.06) 0.05
Net realized and unrealized gain on
investments $ 3.51 0.92 2.20 0.86
Total from investment operations $ 3.51 0.98 2.14 0.91
Dividends from net investment
income $ (0.04) -- (0.04) (0.03)
Distributions from net realized gain $ (0.67) (0.09) (0.17) --
Total distributions $ (0.71) (0.09) (0.21) (0.03)
Net asset value, end of the period $ 14.55 11.75 10.86 8.93
Total return(2) % 31.50 9.07 25.92 11.39
Ratios and supplemental data:
Net assets, end of the period (000's) $ 310,227 137,651 62,103 14,530
Ratio of expenses to average net
assets after reimbursement (4) % 2.41 2.47 2.50 2.50
Ratio of expenses to average net
assets prior to expense
reimbursement % 2.41 2.47 2.74 3.71
Ratio of net investment income (loss)
to average net assets % 0.19 0.68 (0.23) 0.62
Portfolio turnover % 29 32 26 74
</TABLE>
--------------------------------------------------------------------------------
(1) Class B commenced operations on April 17, 1997.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement
66 ING Pilgrim International Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM INTERNATIONAL FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below,
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Ten months ended Year ended December 31,
October 31, ------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.61 10.10 10.86 10.60 10.37
Net investment income (loss) $ (0.01) 0.17 0.07 (0.02) (0.01)
Net realized and unrealized gain (loss) from
investment operations $ 5.46 1.74 0.10 1.45 0.61
Total income (loss) from investment operations $ 5.45 1.91 0.17 1.43 0.60
Less distributions:
Distributions from net investment income $ 0.03 0.06 0.13 0.20 --
Distributions in excess of net investment income $ -- -- -- -- 0.35
Distributions from net realized gains $ 3.58 0.34 0.80 0.97 0.02
Total distributions $ 3.61 0.40 0.93 1.17 0.37
Net asset value, end of period $ 13.45 11.61 10.10 10.86 10.60
Total Return(1) % 47.85 19.02 1.61 13.57 5.77
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 25,304 24,000 19,949 18,891 17,855
Ratio of expenses to average net assets, before
reimbursement or waiver(2) % 1.98 2.25 2.15 2.45 2.46
Ratio of expenses to average net assets, net of
reimbursement or waiver(2) % 1.98 1.75 1.75 2.45 2.46
Ratio of net investment income (loss) to
average net assets, before reimbursement
or waiver(2) % (0.21) (0.16) 0.13 (0.39) (0.12)
Ratio of net investment income (loss) to
average net assets, net of reimbursement
or waiver(2) % (0.21) 0.35 0.53 (0.39) (0.12)
Portfolio Turnover Rate % 143.82 143.67 122.56 113.55 137.72
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December
31 to October 31
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Fund 67
<PAGE>
ING PILGRIM INTERNATIONAL CORE GROWTH FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, -------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $ 18.92 17.71 17.01 12.73 12.50
Income from investment operations:
Net investment income (loss) $ (0.17) 0.04 (0.01) (0.02) --
Net realized and unrealized gains on
investments $ 6.25 1.17 1.02 4.56 0.23
Total from investment operations $ 6.08 1.21 1.01 4.54 0.23
Less distributions from:
Net investment income $ -- -- 0.18 -- --
Net realized gains on investments $ 1.16 -- 0.13 0.26 --
Net asset value, end of period $ 23.84 18.92 17.71 17.01 12.73
Total Return(4): % 32.83 6.83 5.90 36.10 1.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 23,003 12,409 21,627 12,664 2
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.85 1.77 1.89 1.96 1.95
Gross expenses prior to expense
reimbursement(5) % 2.16 1.86 2.13 3.02 4,579.78
Net investment income (loss) after
expense reimbursement(5)(6) % (0.83) 0.50 (0.51) (0.45) 0.00
Portfolio turnover % 200 67 214 274 76
<CAPTION>
Class B
----------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, -------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 19.08 17.89 17.10 12.68 12.50
Income from investment operations:
Net investment income (loss) (0.30) -- (0.16) (0.11) --
Net realized and unrealized gains on
investments 6.21 1.19 1.05 4.66 0.18
Total from investment operations 5.91 1.19 0.89 4.55 0.18
Less distributions from:
Net investment income -- -- 0.03 -- --
Net realized gains on investments 1.16 -- 0.07 0.13 --
Net asset value, end of period 23.83 19.08 17.89 17.10 12.68
Total Return(4): 31.62 6.65 5.24 35.31 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) 21,543 12,034 11,033 7,942 1
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.50 2.36 2.53 2.61 2.59
Gross expenses prior to expense
reimbursement(5) 2.81 2.45 2.77 3.04 16,000.25
Net investment income (loss) after
expense reimbursement(5)(6) (1.48) (0.09) (1.13) (1.32) 0.00
Portfolio turnover 200 67 214 274 76
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, --------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.14 17.94 17.16 12.68 12.50
Income from investment operations:
Net investment income (loss) $ (0.27) -- (0.05) (0.07) --
Net realized and unrealized gains
on investments $ 6.22 1.20 0.94 4.55 0.18
Total from investment operations $ 5.95 1.20 0.89 4.48 0.18
Less distributions from:
Net investment income $ -- -- 0.11 -- --
Net realized gains on investments $ 1.16 -- -- -- --
Net asset value, end of period $ 23.93 19.14 17.94 17.16 12.68
Total Return(4): % 31.73 6.69 5.22 35.25 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 26,734 11,936 10,400 3,517 43
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.50 2.36 2.55 2.61 2.41
Gross expenses prior to expense
reimbursement(5) % 2.81 2.45 2.79 5.10 25.55
Net investment income (loss) after
expense reimbursement(5)(6) % (1.48) (0.09) (1.19) (1.27) (0.07)
Portfolio turnover % 200 67 214 274 76
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-advisor and the Fund changed its year end
to June 30.
(3) The Fund commenced operations on February 28, 1997.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
68 ING Pilgrim International Core Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 40.94 23.80 21.03 19.29 14.92 13.15 11.51
Income from investment operations:
Net investment income (loss) $ (0.11) (0.18) (0.03) 0.02 (0.15) 0.04 (0.02)
Net realized and unrealized gains on
investments $ (4.76) 19.38 2.80 3.21 5.36 1.88 1.79
Total from investment operations $ -- 19.20 2.77 3.23 5.21 1.92 1.77
Less distributions from:
Net investment income $ -- -- -- -- -- 0.01 0.13
Net realized gains on investments $ -- 2.06 -- 1.49 0.84 0.14 --
Net asset value, end of period $ 36.07 40.94 23.80 21.03 19.29 14.92 13.15
Total Return(4): % (11.90) 82.89 13.17 17.26 36.31 14.67 15.46
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 273,362 278,480 37,490 25,336 11,183 5,569 1,056
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.67 1.84 1.94 1.96 1.95 1.95
Gross expenses prior to expense
reimbursement(5) % 1.67 1.86 2.08 2.75 3.76 10.06
Net investment income (loss) after
expense reimbursement(5)(6) % (0.80) (0.69) (0.82) (1.56) (1.05) (0.27)
Portfolio turnover % 56 44 146 198 206 141
<CAPTION>
Class B
-------------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year ended March 31, 1995(3) to
Oct. 31, June 30, June 30, ---------------------------- March 31,
2000(6) 2000 1999(2) 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 43.27 25.33 22.43 20.16 15.89 13.96 12.50
Income from investment operations:
Net investment income (loss) (0.19) (0.37) (0.07) (0.20) (0.15) (0.15) (0.02)
Net realized and unrealized gains on
investments (5.03) 20.50 2.97 3.46 5.56 2.09 1.48
Total from investment operations (5.22) 20.13 2.90 3.26 5.41 1.94 1.46
Less distributions from:
Net investment income -- -- -- -- -- 0.01 --
Net realized gains on investments -- 2.19 -- 0.99 1.14 -- --
Net asset value, end of period 38.0 43.27 25.33 22.43 20.16 15.89 13.96
Total Return(4): (12.05) 81.63 12.93 16.55 35.73 13.96 11.68
Ratios/Supplemental Data:
Net assets, end of period (000's) 126,846 132,028 19,331 16,158 12,033 5,080 1,487
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.32 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(5) 2.32 2.32 2.51 2.73 2.98 4.89 16.15
Net investment income (loss) after
expense reimbursement(5)(6) (1.46) (1.41) (1.34) (1.45) (2.20) (1.66) (0.64)
Portfolio turnover 56 164 44 146 198 206 141
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, ---------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 39.71 23.34 20.60 18.53 14.87 13.05 11.32
Income from investment operations:
Net investment income (loss) $ (0.18) (0.31) (0.06) (0.10) (0.11) (0.16) 0.01
Net realized and unrealized gains on
investments $ (4.60) 18.69 2.80 3.09 5.09 1.98 1.72
Total from investment operations $ (4.28) 18.38 2.74 2.99 4.98 1.82 1.73
Less distributions from:
Net investment income $ -- -- -- -- -- -- --
Net realized gains on investments $ -- 2.01 -- 0.92 1.32 -- --
Net asset value, end of period $ 34.93 39.71 23.34 20.60 18.53 14.87 13.05
Total Return(4): % (12.04) 80.89 13.31 16.55 35.63 13.98 15.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 136,814 144,068 18,354 13,226 8,014 3,592 933
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.32 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(5) % 2.32 2.32 2.51 2.73 3.38 3.95 16.15
Net investment income (loss) after
expense reimbursement(5)(6) % (1.46) (1.41) (1.34) (1.45) (2.18) (1.67) (1.02)
Portfolio turnover % 56 164 44 146 198 206 141
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-advisor and the Fund changed its year end
to June 30.
(3) Commencement of share offerings.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 69
<PAGE>
ING PILGRIM EMERGING MARKETS VALUE FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A Class B
------------------------------------- ---------------------------
Year ended October 31, Year ended October 31,
------------------------------------------------------------------------------- ---------------------------
2000 1999 1998(1) 2000 1999 1998(1)
Operating performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of the period $ 7.69 10.00 7.65 10.00
Net investment income $ 0.12 0.12 0.08 0.09
Net realized and unrealized gain (loss) on
investments $ 3.01 (2.43) 2.97 (2.44)
Total from investment operations $ 3.13 (2.31) 3.05 (2.35)
Dividends from net investment income $ (0.14) -- (0.10) --
Distributions from net realized gain $ -- -- -- --
Total distributions $ (0.14) -- (0.10) --
Net asset value, end of the period $ 10.68 7.69 10.60 7.65
Total return(2) % 41.48 (23.10) 40.41 (23.50)
Ratios and supplemental data:
Net assets, end of the period (000's) $ 9,281 3,815 3,823 3,583
Ratio of expenses to average net assets
after reimbursement(4) % 2.06 1.80(3) 2.70 2.50(3)
Ratio of expenses to average net assets
prior to expense reimbursement % 2.21 3.88(3) 2.93 4.74(3)
Ratio of net investment income to
average net assets % 1.36 3.38(3) 0.67 2.55(3)
Portfolio turnover % 38 7 38 7
</TABLE>
Class C
----------------------------------
Year ended October 31,
----------------------------------
2000 1999 1998(1)
-------------------------------------------------------------------------------
Operating performance:
Net asset value, beginning of the period 7.63 10.00
Net investment income 0.04 0.09
Net realized and unrealized gain (loss) on
investments 3.00 (2.46)
Total from investment operations 3.04 (2.37)
Dividends from net investment income (0.11) --
Distributions from net realized gain -- --
Total distributions (0.11) --
Net asset value, end of the period 10.56 7.63
Total return(2) 40.49 (23.70)
Ratios and supplemental data:
Net assets, end of the period (000's) 6,674 2,304
Ratio of expenses to average net assets
after reimbursement(4) 2.75 2.50(3)
Ratio of expenses to average net assets
prior to expense reimbursement 2.91 4.87(3)
Ratio of net investment income to
average net assets 0.61 2.68(3)
Portfolio turnover 38 7
--------------------------------------------------------------------------------
(1) Class A, B and C commenced operations on January 1, 1998.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement.
70 ING Pilgrim Emerging Markets Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM EMERGING COUNTRIES FUND
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year Ended March 31,
Oct. 31, June 30, June 30, ------------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00
Income from investment operations:
Net investment income (loss) $ (0.20) (0.05) (0.06) 0.03 (0.06) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.63 3.36 (3.81) 1.22 3.51 3.15
Total from investment operations $ 3.43 3.31 (3.87) 1.25 3.45 3.11
Less distributions from:
Net investment income $ -- -- 0.02 -- -- 0.02
Net realized gains on investments $ -- -- 0.07 1.06 0.28 0.06
Net asset value, end of period $ 20.17 16.74 13.43 17.39 17.20 14.03
Total Return(4): % 20.49 24.65 (22.23) 8.06 24.79 28.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,311 53,483 47,180 71,014 38,688 4,718
Ratio to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.19 2.13 2.27 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(5) % 2.34 2.66 2.56 2.48 3.08 6.72
Net investment income (loss) after
expense reimbursement(5)(6) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35)
Portfolio turnover % 211 67 213 243 176 118
<CAPTION>
Class B
-----------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year Ended March 31, 1995(3) to
Oct. 31, June 30, June 30, ---------------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 16.98 13.64 17.64 17.29 14.02 12.50
Income from investment operations:
Net investment income (loss) (0.35) (0.07) (0.22) (0.07) (0.11) (0.04)
Net realized and unrealized gains
(loss) on investments 3.67 3.41 (3.70) 1.26 3.47 1.56
Total from investment operations 3.32 3.34 (3.92) 1.19 3.36 1.52
Less distributions from:
Net investment income -- -- -- -- -- --
Net realized gains on investments -- -- 0.08 0.84 0.09 --
Net asset value, end of period 20.30 16.98 13.64 17.64 17.29 14.02
Total Return(4): 19.55 24.49 (22.23) 7.47 24.00 12.16
Ratios/Supplemental Data:
Net assets, end of period (000's) 30,322 26,342 22,338 38,796 24,558 3,557
Ratio to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.84 2.75 2.91 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(5) 2.99 3.28 3.20 3.06 3.66 7.58
Net investment income (loss) after
expense reimbursement(5)(6) (1.80) (1.92) (0.80) (0.20) (1.77) (1.05)
Portfolio turnover 211 67 213 243 176 118
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year Ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79
Income from investment operations:
Net investment income (loss) $ (0.32) (0.07) (0.27) (0.12) (0.10) (0.05)
Net realized and unrealized gains
(loss) on investments $ 3.53 3.28 (3.49) 1.26 3.37 2.97
Total from investment operations $ 3.21 3.21 (3.76) 1.14 3.27 2.92
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.97 0.17 --
Net asset value, end of period $ 19.56 16.35 13.14 16.98 16.81 13.71
Total Return(4): % 19.63 24.43 (22.21) 7.47 23.94 27.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 29,610 24,230 19,246 36,986 29,376 4,345
Ratio to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.84 2.75 2.90 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(5) % 2.99 3.28 3.19 3.09 3.12 6.23
Net investment income (loss) after
expense reimbursement(5)(6) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06)
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) Effective May 24, 1999, INC Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-advisor and the Fund changed its year end
to June 30.
(3) Commencement of offering shares.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Countries Fund 71
<PAGE>
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, ------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ -- 7.13 10.18 11.49 10.70 11.47
Net investment income (loss) $ -- (0.05) 0.12 0.01 -- 0.08
Net realized and unrealized gain (loss) from investment
operations $ -- 8.05 (3.08) (1.32) 0.79 (0.76)
Total income (loss) from investment operations $ -- 8.00 (2.96) (1.31) 0.79 (0.68)
Less distributions:
Distributions from net investment income $ -- 0.03 0.09 -- -- 0.08
Distributions in excess of net investment income $ -- -- -- -- -- 0.01
Total distributions $ -- 0.03 0.09 -- -- 0.09
Net asset value, end of period $ -- 15.10 7.13 10.18 11.49 10.70
Total Return(2) % -- 112.58 (29.06) (11.40) 7.38 (5.93)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ -- 154,994 65,323 137,686 254,673 265,544
Ratio of expenses to average net assets(3) % -- 2.00 1.85 1.82 1.76 1.88
Ratio of net investment income (loss) to average net
assets(3) % -- (0.66) 1.14 0.09 (0.01) 0.70
Portfolio Turnover Rate % -- 184.39 107.19 112.05 86.26 92.85
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
72 ING Pilgrim Worldwide Emerging Markets Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL TECHNOLOGY FUND
-----------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers,
LLP, independent auditors.
Ten
months
ended
October 31,
2000
-------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning of Period $
Net investment income (loss) $
Net realized and unrealized gain (loss) from investment
operations $
Total income (loss) from investment operations $
Net asset value, end of period $
Total Return(2) %
Ratios/Supplemental Data
Net assets, end of period (thousands) $
Ratio of expenses to average net assets, before
reimbursement or waiver(3) %
Ratio of expenses to average net assets, net of
reimbursement or waiver(3) %
Ratio of net investment income (loss) to average net
assets, before reimbursement or waiver(3) %
Ratio of net investment income (loss) to average net
assets, net of reimbursement or waiver(3) %
Portfolio Turnover Rate %
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Technology Fund 73
<PAGE>
ING PILGRIM GLOBAL COMMUNICATIONS FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
Year ended October 31, Year ended October 31, Year ended October 31,
2000 2000 2000
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $
Net investment operations:
Net investment loss $
Net realized and unrealized loss(2) $
Total income from investment operations $
Distributions paid from investment income $
Net asset value per share, end of period $
Net assets, end of period (thousands) $
Total investment return at net asset value(3)(4) %
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses %
Gross expenses %
Net investment loss %
Portfolio Turnover Rate(4) %
</TABLE>
--------------------------------------------------------------------------------
(1) Commenced operations on March 1, 2000.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
74 ING Pilgrim Global Communications Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
------------------- ------------------- ------------------
Year ended October Year ended October Year ended October
31, 31, 31,
2000 1999 2000 1999 2000 1999
-------------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $ 10.00 10.00 10.00
Net investment operations:
Net investment loss $ (0.13) (0.08) (0.05)
Net realized and unrealized gains(2) $ 7.51 7.36 7.33
Total income from investment operations $ 7.38 7.28 7.28
Distributions paid from capital gain $ -- -- --
Net asset value per share, end of period $ 17.38 17.28 17.38
Net assets, end of period (thousands) $ 54.198 5.964 2.102
Total investment return at net asset value(3)(4) % 73.80 72.80 72.80
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses % 1.37 2.25 2.24
Gross expenses % 2.55 3.22 3.20
Net investment loss % (1.29) (2.04) 2.05
Portfolio Turnover Rate(6) % 56.88 56.88 56.88
</TABLE>
--------------------------------------------------------------------------------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Information Technology Fund 75
<PAGE>
ING PILGRIM ASIA-PACIFIC EQUITY FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ------------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 7.22 4.46 10.93 10.35 10.00
Income from investment operations:
Net investment income (loss) $ (0.05) -- 0.03 0.02 0.03
Net realized and unrealized gain (loss) on
investments $ 0.06 2.76 (6.50) 0.58 0.34
Total from investment operations $ 0.01 2.76 (6.47) 0.60 0.37
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.02
Tax return of capital $ -- -- -- 0.02 --
Net asset value, end of period $ 7.23 7.22 4.46 10.93 10.35
Total Return(3): % 0.14 61.88 (59.29) 5.78 3.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,726 14,417 11,796 32,485 18,371
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.11 2.00 2.00 2.00 2.00
Gross expenses prior to expense
reimbursement(4) % 2.55 2.98 2.80 2.54 3.47
Net investment income (loss) after expense
reimbursement(4)(5) % (0.56) 0.01 0.38 0.00 0.33
Portfolio turnover rate % 138 111 81 38 15
<CAPTION>
Class B
-------------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ------------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 7.02 4.37 10.83 10.31 10.00
Income from investment operations:
Net investment income (loss) (0.11) (0.04) (0.03) (0.07) (0.01)
Net realized and unrealized gain (loss) on
investments 0.06 2.69 (6.43) 0.59 0.32
Total from investment operations (0.05) 2.65 (6.46) 0.52 0.31
Less distributions from:
Net investment income -- -- -- -- --
In excess of net investment income -- -- -- -- --
Tax return of capital -- -- -- -- --
Net asset value, end of period 6.97 7.02 4.37 10.83 10.31
Total Return(3): (0.71) 60.64 (59.65) 5.04 3.19
Ratios/Supplemental Data:
Net assets, end of period (000's) 12,228 12,959 9,084 30,169 17,789
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) 2.86 2.75 2.75 2.75 2.75
Gross expenses prior to expense
reimbursement(4) 3.30 3.73 3.55 3.29 4.10
Net investment income (loss) after expense
reimbursement(4)(5) (1.31) (0.74) (0.39) (0.79) (0.38)
Portfolio turnover rate 138 111 81 38 15
</TABLE>
<TABLE>
<CAPTION>
Class M
-----------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ----------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 7.07 4.40 10.86 10.32 10.00
Income from investment operations:
Net investment income (loss) $ (0.11) (0.02) -- (0.05) --
Net realized and unrealized gain (loss)
on investments $ 0.08 2.69 (6.46) 0.59 0.33
Total from investment operations $ (0.03) 2.67 (6.46) 0.54 0.33
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.01
Tax return of capital $ -- -- -- -- --
Net asset value, end of period $ 7.04 7.07 4.40 10.86 10.32
Total Return(3): % (0.42) 60.68 (59.48) 5.26 3.32
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,749 5,184 4,265 11,155 6,476
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.61 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 3.05 3.48 3.30 3.04 3.88
Net investment income (loss) after expense
reimbursement(4)(5) % (1.06) (0.49) (0.07) (0.55) (0.16)
Portfolio turnover rate % 138 111 81 38 15
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) The Fund commenced operations on September 1, 1995.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
76 ING Pilgrim Asia-Pacific Equity Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM SMALLCAP ASIA GROWTH FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, ------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 5.69 7.06 12.24 9.76 10.00
Net investment income (loss) $ (0.10) -- (0.05) (0.05) 0.02
Net realized and unrealized gain (loss) from
investment operations $ 3.36 (1.37) (5.13) 2.54 (0.24)
Total income (loss) from investment operations $ 3.26 (1.37) (5.18) 2.49 (0.22)
Less distributions:
Distributions from net investment income $ -- -- -- -- 0.02
Distributions in excess of net investment income $ -- -- -- 0.01 --
Total distributions $ -- -- -- 0.01 0.02
Net asset value, end of period $ 8.95 5.69 7.06 12.24 9.76
Total Return(3) % 57.29 (19.41) (42.32) 25.50 4.39
Ratios/Supplemental Data
Net asset, end of period (thousands) $ 14,392 18,278 13,867 23,796 8,936
Ratio of expenses to average net assets, before
reimbursement or waiver(4) % 3.00 2.86 2.30 2.64 3.51
Ratio of expenses to average net assets, net of
reimbursement or waiver(4) % 2.50 2.50 2.30 2.42 1.75
Ratio of net investment income (loss)to average net
assets, before reimbursement or waiver(4) % (1.56) (0.57) (0.32) (0.86) (1.24)
Ratio of net investment income (loss)to average net
assets, net of reimbursement or waiver(4) % (1.05) (0.21) (0.32) (0.64) 0.52
Portfolio Turnover Rate % 172.89 193.48 187.41 176.49 40.22
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) The Fund commenced operations on July 3, 1995.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Asia Growth Fund 77
<PAGE>
ING PILGRIM EUROPEAN EQUITY FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A(1) Class B(1) Class C(1)
--------------------- ----------------------- ----------------------
Year ended October 31, Year ended October 31, Year ended October 31,
2000(2) 1999 2000(2) 1999 2000(2) 1999
---------------------------------------------------------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $ 10.00 10.00 10.00
Net investment operations:
Net investment income (loss) $ 0.04 0.00(7) (0.01)
Net realized and unrealized gains(2) $ 0.91 0.89 0.90
Total from investment operations $ 0.95 0.89 0.89
Distributions paid from:
Capital gain $ -- -- --
Investment income $ -- -- --
Total distributions $ -- -- --
Net asset value per share, end of period $ 10.95 10.89 10.89
Net assets, end of period (thousands) $ 28,746 849 62
Total investment return at net asset value(3)(4) % 9.50 8.90 8.90
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses % 1.61 2.27 2.26
Gross expenses % 3.06 3.35 3.34
Net investment loss % 0.48 (0.08) (0.15)
Portfolio Turnover Rate(4) % 62.91 62.91 62.91
</TABLE>
--------------------------------------------------------------------------------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
(6) Amount represents less than $0.01.
78 ING Pilgrim European Equity Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, --------------------------------------------
2000(1) 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 2.64 17.50 11.24 12.12
Net investment income (loss) $ 0.18 0.15 (0.01) (0.05)
Net realized and unrealized gain (loss) from investment
operations $ 3.99 (14.70) 7.57 (0.51)
Total income (loss) from investment operations $ 4.17 (14.55) 7.56 (0.56)
Less distributions:
Distributions from net investment income $ 0.07 0.07 -- --
Distributions from net realized gains $ -- 0.24 1.30 0.32
Total distributions $ 0.07 0.31 1.30 0.32
Net asset value, end of period $ 6.74 2.64 17.50 11.24
Total Return(3) % 159.76 82.99 67.50 (9.01)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 59,011 19,147 137,873 13,846
Ratio of expenses to average net assets, before
redemption fee proceeds(4) % 3.32 2.64 2.89 5.07
Ratio of expenses to average net assets, net of
redemption fee proceeds(4) % 2.23 1.84 1.85 2.65
Ratio of net investment income (loss) to average net
assets, before redemption fee proceeds(4) % 3.30 0.57 (1.14) (3.69)
Ratio of net investment income (loss) to average net
assets, net of redemption fee proceeds(4) % 4.39 1.36 (0.11) (1.27)
Portfolio Turnover Rate % 91.14 65.76 66.84 115.55
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) The Fund's commencement of operations was June 3, 1996 with the investment
of its initial capital. The Fund's registration statement with the
Securities and Exchange Commission became effective on July 3, 1996.
Financial results prior to the effective date of the Fund's registration
statement are not presented in this Financial Highlights Table.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value.Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Troika Dialog Russia Fund 79
<PAGE>
ING PILGRIM GOLD FUND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended
October 31, Year ended December 31,
2000(1) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 3.03 3.24 5.97 6.24 6.37
Net investment income (loss) $ (0.01) -- -- 0.02 --
Net realized and unrealized gain (loss) from
investment operations $ 0.27 (0.21) (2.52) 0.50 (0.12)
Total income (loss) from investment operations $ 0.26 (0.21) (2.52) 0.52 (0.12)
Less distributions:
Distributions from net investment income $ -- -- 0.21 0.79 0.01
Total distributions $ -- -- 0.21 0.79 0.01
Net asset value, end of period $ 3.29 3.03 3.24 5.97 6.24
Total Return(2) % 8.58 (6.39) (42.98) 7.84 (1.89)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 72,516 50,841 53,707 109,287 135,779
Ratio of expenses to average net assets(3) % 1.94 1.74 1.65 1.60 1.70
Ratio of net investment income (loss) to
average net assets(3) % (0.02) 0.08 0.17 (0.32) 0.07
Portfolio Turnover Rate % 78.55 28.93 38.32 31.04 40.41
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
80 ING Pilgrim Gold Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months Six month
ended Year ended period ended Year ended June 30,
October 31, December 31, December 31, -----------------------------------
2000(1) 1999 1998(2) 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 2.73 3.26 3.95 4.46 4.00 3.92
Net investment income (loss) $ 0.01 (0.01) (0.02) (0.04) (0.03) (0.03)
Net realized and unrealized gain (loss) from investment
operations $ 0.23 (0.52) (0.66) (0.43) 0.51 0.11
Total income (loss) from investment operations $ 0.24 (0.53) (0.68) (0.47) 0.48 0.08
Less distributions:
Distributions from net investment income $ 0.01 -- -- -- -- --
Distributions in excess of net investment income $ -- -- 0.01 0.04 0.02 --
Total distributions $ 0.01 -- 0.01 0.04 0.02 --
Net asset value, end of period $ 2.96 2.73 3.26 3.95 4.46 4.00
Total Return(3) % 8.70 (16.26) (17.32) (10.76) 12.02 2.04
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 25,413 25,560 34,921 42,035 73,945 65,517
Ratio of expenses to average net assets(4) % 2.11 2.37 1.90 1.96 1.73 1.82
Ratio of net investment income (loss) to average net
assets(4) % 0.49 (0.61) (0.54) (0.78) (0.72) (0.83)
Portfolio Turnover Rate % 29.44 5.68 28.78 18.76 44.30 44.22
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) The Fund changed its fiscal year-end from June 30 to December 31.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Silver Fund 81
<PAGE>
ING PILGRIM GLOBAL INCOME FUND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended
October 31, Year ended December 31,
2000(1) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.36 10.58 11.22 10.75 9.80
Net investment income (loss) $ 1.16 0.90 1.04 1.01 0.96
Net realized and unrealized gain (loss) from
investment operations $ (1.20) (0.07) (0.50) 0.36 0.95
Total income (loss) from investment operations $ 0.04 0.83 0.54 1.37 1.91
Less distributions:
Distributions from net investment income $ 0.82 0.87 0.91 0.86 0.96
Distributions from net realized gains $ 0.05 0.18 0.27 0.04 --
Total distributions $ 0.87 1.05 1.18 0.90 0.96
Net asset value, end of period $ 9.45 10.36 10.58 11.22 10.75
Total Return(2) % (0.31) 8.21 5.00 13.33 20.10
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 31,696 36,407 23,668 29,110 12,255
Ratio of expenses to average net assets, before
reimbursement or waiver(3) % 1.86 (4) 1.89 2.17 2.33 3.07
Ratio of expenses to average net assets, net of
reimbursement or waiver(3) % 1.86 (4) 1.50 1.50 1.50 2.75
Ratio of net investment income (loss) to average net
assets, before reimbursement or waiver(3) % 11.52 10.99 8.99 9.49 9.48
Ratio of net investment income (loss) to average net
assets, net of reimbursement or waiver(3) % 11.52 11.38 9.66 10.32 9.80
Portfolio turnover rate % 24.56 45.25 117.94 71.83 164.72
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Fund incepted operation on October 23, 2000.
(5) Annualized for periods less than one year.
82 ING Pilgrim Global Income Fund
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/Semi-Annual reports,
the SAI or other Fund information, or to make shareholder inquiries:
THE ING PILGRIM FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim Advisory Funds, Inc. 811-9040
ING Pilgrim Mutual Funds 811-7428
ING Pilgrim Global Corporate Leaders Fund, Inc. 811-5113
ING Pilgrim International Fund, Inc. 811-8172
ING Pilgrim Worldwide Emerging Markets Fund, Inc. 811-1838
ING Pilgrim Global Technology Fund, Inc. 811-9649
ING Pilgrim SmallCap Asia Growth Fund, Inc. 811-7287
ING Pilgrim Troika Dialog Russia Fund, Inc. 811-7587
ING Pilgrim Gold Fund, Inc. 811-2881
ING Pilgrim Silver Fund, Inc. 811-4111
ING Pilgrim Global Income Fund 811-4675
ING Funds Trust 811-8895
INTLPROSXXXXXX-XXXXXX
<PAGE>
March 1, 2001
Classes A, B, C, M and T
U.S. EQUITY FUNDS
ING Pilgrim MagnaCap
ING Pilgrim Growth and Income
ING Pilgrim LargeCap Leaders
ING Pilgrim Research Enhanced Index
ING Pilgrim Tax Efficient Equity
ING Pilgrim Growth Opportunities
ING Pilgrim LargeCap Growth
ING Pilgrim MidCap Value
ING Pilgrim MidCap Opportunities
ING Pilgrim MidCap Growth
ING Pilgrim Growth + Value
ING Pilgrim SmallCap Opportunities
ING Pilgrim SmallCap Growth
ING Pilgrim Bank and Thrift
ING Pilgrim Internet
Equity & Income Funds
ING Pilgrim Balanced
ING Pilgrim Convertible
This prospectus contains important information about investing in the ING
Pilgrim Funds. You should read it carefully before you invest, and keep it for
future reference. Please note that your investment: is not a bank deposit, is
not insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
--------------------------------------------------------------------------------
These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy and risks.
[GRAPHIC]
OBJECTIVE
[GRAPHIC]
INVESTMENT STRATEGY
You'll also find:
[GRAPHIC]
RISKS
HOW THE FUND HAS PERFORMED.
A chart that shows the Fund's financial performance for the past ten years (or
since inception, if shorter).
[GRAPHIC]
HOW THE FUND HAS PERFORMED
WHAT YOU PAY TO INVEST. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
An Introduction to the ING Pilgrim Funds 1
Funds At A Glance 2
U.S. EQUITY FUNDS
ING Pilgrim MagnaCap 4
ING Pilgrim Growth and Income 6
ING Pilgrim LargeCap Leaders 8
ING Pilgrim Research Enhanced Index 10
ING Pilgrim Tax Efficient Equity 12
ING Pilgrim Growth Opportunities 14
ING Pilgrim LargeCap Growth 16
ING Pilgrim MidCap Value 18
ING Pilgrim MidCap Opportunities 20
ING Pilgrim MidCap Growth 22
ING Pilgrim Growth + Value 24
ING Pilgrim SmallCap Opportunities 26
ING Pilgrim SmallCap Growth 28
ING Pilgrim Bank and Thrift 30
ING Pilgrim Internet 32
EQUITY & INCOME FUNDS
ING Pilgrim Balanced 34
ING Pilgrim Convertible 36
WHAT YOU PAY TO INVEST 38
SHAREHOLDER GUIDE 43
MANAGEMENT OF THE FUNDS 50
DIVIDENDS, DISTRIBUTIONS AND TAXES 53
MORE INFORMATION ABOUT RISKS 54
FINANCIAL HIGHLIGHTS 57
WHERE TO GO FOR MORE INFORMATION Back cover
<PAGE>
INTRODUCTION TO THE
ING PILGRIM FUNDS
--------------------------------------------------------------------------------
Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
U.S. EQUITY FUNDS
ING Pilgrim's U.S. Equity Funds focus on long-term growth by investing primarily
in domestic equities. They may suit you if you:
* are investing for the long-term -- at least several years
* are willing to accept higher risk in exchange for long-term growth.
EQUITY AND INCOME FUNDS
ING Pilgrim's Equity and Income Funds seek income and growth of capital.
They may suit you if you:
* want both regular income and capital appreciation
* are looking for growth potential, but don't feel comfortable with the
level of risk associated with the Equity Funds.
[GRAPHIC]
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
1
<PAGE>
--------
Funds
At A
Glance
--------
This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 4.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
---- --------------------
<S> <C> <C>
U.S. Equity MagnaCap Fund Growth of capital, with dividend income as a
Funds Adviser: ING Pilgrim Investments, Inc. secondary consideration
Growth and Income Fund Long-term capital appreciation, with income
Adviser: ING Pilgrim Investments, Inc. as a secondary objective
LargeCap Leaders Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Research Enhanced Index Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: J.P. Morgan
Investment Management Inc.
Tax Efficient Equity Fund High total return on an after-tax basis
Adviser: ING Mutual Funds Management Co. LLC.
Sub-Adviser: Delta Asset Management.
Growth Opportunities Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
LargeCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Opportunities Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Growth + Value Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Navellier Fund
Management, Inc.
SmallCap Opportunities Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
SmallCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Bank and Thrift Fund Long-term capital appreciation, with income
Adviser: ING Pilgrim Investments, Inc. as a secondary objective
Internet Fund
Adviser: ING Mutual Funds Management Co. LLC. Long-term capital appreciation
Sub-Adviser: ING Investment Management Advisors B.V.
Equity & Balanced Fund Long-term capital appreciation and current income
Income Funds Adviser: ING Pilgrim Investments, Inc.
Convertible Fund Total return, consisting of capital appreciation
Adviser: ING Pilgrim Investments, Inc. and current income
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MAIN INVESTMENTS MAIN RISKS
---------------- ----------
<S> <C>
Equity securities that meet disciplined Price volatility and other risks that accompany an investment in
selection criteria designed to identify equity securities.
companies capable of paying rising
dividends.
Equity securities of large, ably Price volatility and other risks that accompany an investment in
managed, and well-financed U.S. equity securities.
companies.
Equity securities of large U.S. Price volatility and other risks that accompany an investment in
companies believed to be leaders in equity securities.
their industries.
Equity securities of large U.S. Price volatility and other risks that accompany an investment in
companies that make up the S&P 500 equity securities.
Index.
Equity securities and instruments whose Price volatility and other risks that accompany an investment in
returns depend upon stock market prices, equity securities. May not provide as high a return before taxes
managed in a manner that will attempt to as other funds, and as a result may not be suitable for investors
reduce net realized gains each year. who are not subject to current income tax.
Equity securities of large, medium, and Price volatility and other risks that accompany an investment in
small U.S. companies believed to have growth-oriented equity securities.
growth potential.
Equity securities of large U.S. Price volatility and other risks that accompany an investment in
companies believed to have growth growth-oriented equity securities.
potential.
Equity securities of medium-sized U.S. Price volatility and other risks that accompany an investment in
companies that meet disciplined equity securities of medium-sized companies. Particularly
selection criteria designed to identify sensitive to price swings during periods of economic uncertainty.
companies with prices below their
long-term value.
Equity securities of medium-sized U.S. Price volatility and other risks that accompany an investment in
companies believed to have growth equity securities of growth-oriented and medium-sized companies.
potential. Particularly sensitive to price swings during periods of economic
uncertainty.
Equity securities of medium-sized U.S. Price volatility and other risks that accompany an investment in
companies believed to have growth equity securities of medium-sized companies. Particularly
potential. sensitive to price swings during periods of economic uncertainty.
Equity securities of small-sized U.S. Price volatility and other risks that accompany an investment in
companies. equity securities of growth-oriented and small-sized companies.
Particularly sensitive to price swings during periods of economic
uncertainty.
Equity securities of small-sized U.S. Price volatility and other risks that accompany an investment in
companies believed to have growth equity securities of growth-oriented and small-sized companies.
potential. Particularly sensitive to price swings during periods of economic
uncertainty.
Equity securities of small-sized U.S. Price volatility and other risks that accompany an investment in
companies believed to have growth equity securities of growth-oriented and small-sized companies.
potential. Particularly sensitive to price swings during periods of economic
uncertainty.
Equity securities of banks and thrifts Price volatility and other risks that accompany an investment in
or their holding or parent companies, equity securities. Susceptible to risks of decline in the price
and savings accounts of mutual thrifts. of securities concentrated in the banking and thrift industries.
U.S. and non-U.S. internet technology Price volatility and other risks that accompany an investment in
companies. equity securities and maintaining a non diversified portfolio
will also experience risks related to investments in foreign
securities (for example, currency exchange rate fluctuations).
Products and services of companies engaged in internet-related
activities are subject to relatively high risks of rapid
obsolescence caused by scientific and technological advances.
A mix of equity and debt securities. Price volatility and other risks that accompany an investment in
equity securities. Credit, interest rate and other risks that
accompany an investment in debt securities.
Convertible securities of companies of Price volatility and other risks that accompany an investment in
various sizes, as well as equities, and equity securities. Credit, interest rate, liquidity and other
high-yield debt. risks that accompany an investment in debt securities,and lower
quality debt securities.
</TABLE>
3
<PAGE>
------------
U.S. Equity
Funds
------------
ING PILGRIM MAGNACAP FUND Adviser
ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks growth of capital, with dividend income as a secondary
consideration.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund is managed with the philosophy that companies that can best meet the
Fund's objectives have paid increasing dividends or have had the capability to
pay rising dividends from their operations. The Fund normally invests at least
65% of its assets in equity securities of companies that meet the following
disciplined criteria:
Consistent Dividends -- A company must have paid or had the financial capability
from its operations to pay a dividend in eight out of the last 10 years.
Substantial Dividend Increases -- A company must have increased its dividends or
had the financial capability from its operations to have increased its dividends
at least 100% over the past 10 years.
Reinvested Earnings -- Dividend payout must be less than 65% of current
earnings.
Strong Balance Sheet -- Long term debt should be no more than 25% of the
company's total capitalization or a company's bonds must be rated at least A- or
A-3.
Attractive Price -- A company's current share price should be in the lower half
of the stock's price/earnings ratio range for the past ten years, or the ratio
of the share price to its anticipated future earnings must be an attractive
value in relation to the average for its industry peer group or that of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index).
The equity securities in which the Fund may invest include common stocks,
convertible securities, and rights or warrants. Normally, the Fund's investments
are primarily in larger companies that are included in the largest 500 U.S.
companies. The remainder of the Fund's assets may be invested in equity
securities that the adviser believes have growth potential because they
represent an attractive value.
In selecting securities for the Fund, preservation of capital is also an
important consideration. Although the Fund normally will be invested as fully as
practicable in equity securities, assets that are not invested in equity
securities may be invested in high quality debt securities. The Fund may invest
up to 5% of its assets, measured at the time of investment, in foreign
securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the value
securities that meet the Fund's disciplined investment criteria. Rather, the
market could favor growth-oriented stocks or small company stocks, or may not
favor equities at all.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
4 ING Pilgrim MagnaCap Fund
<PAGE>
ING PILGRIM MAGNACAP FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
25.28 8.02 9.25 4.15 35.22 18.51 27.73 16.09 12.20
Best and worst quarterly performance during this period:
quarter : up %
quarter : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P 500 Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P
500
Class A(3) Class B(4) Class C(4) Class M(5) Index(6)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 % N/A
Ten years, ended
December 31, 2000 % N/A
Since inception of
Classes B and M(7) % N/A
Since inception of
Classes C(8) % N/A N/A -- N/A --
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5%, 2% and 1% respectively,
for 1 year, five year and since inception returns.
(4) Reflects deduction of deferred sales charge of 1% for 1 year return.
(5) Reflects deduction of sales charge of 3.5%.
(6) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(7) Classes B and M commenced operations on July 17, 1995.
(8) Class C commenced operations on ___________.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim MagnaCap Fund 5
<PAGE>
-----------
U.S. Equity
Funds
-----------
ING PILGRIM GROWTH AND INCOME FUND
Adviser
ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's principal investment objective is long-term capital appreciation.
Income is a secondary objective.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund will invest at least 65% of its total assets in common stocks of U.S.
companies, which may include dividend paying securities and securities
convertible into shares of common stock. The Fund seeks to invest in large, ably
managed and well financed companies. The investment approach is to identify high
quality companies with good earnings and price momentum which sell at attractive
valuations.
The Fund may invest the remaining 35% of its assets in foreign securities and
smaller capitalization companies.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
6 ING Pilgrim Growth and Income Fund
<PAGE>
ING PILGRIM GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.87 12.36 13.22 -3.11 22.57 26.46 30.36 21.42 15.54
Best and worst quarterly performance during this period:
quarter 1998: up %
quarter 1990: down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
S&P
500
Class A(3)(4) Index(5)
------------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) This table shows the performance of the Class A shares of the Fund. Class B
and Class C shares of the Fund did not have a full year's performance
during the year ended December 31, 2000.
(4) Reflects a deduction of sales charge of 5.75%.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth and Income Fund 7
<PAGE>
-----------
U.S. Equity
Funds
-----------
ING PILGRIM LARGECAP LEADERS FUND Adviser
ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its total assets in equity securities
of large U.S. companies that the adviser believes are leaders in their
industries. The portfolio managers consider whether these companies have a
sustainable competitive edge.
The portfolio managers emphasize a value approach, and seek securities whose
prices in relation to projected earnings are believed to be reasonable in
comparison to the market. For this Fund, a company with a market capitalization
(outstanding shares multiplied by price per share) of over $5 billion is
considered to be a large company, although the Fund may also invest to a limited
degree in companies that have a market capitalization between $1 billion and $5
billion.
The equity securities in which the Fund may invest include common stock,
convertible securities, preferred stock, American Depositary Receipts, and
warrants. The Fund normally invests as fully as practicable (at least 80%) in
equity securities.
Pending Merger -- Subject to Shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim MagnaCap Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
8 ING Pilgrim LargeCap Leaders Fund
<PAGE>
ING PILGRIM LARGECAP LEADERS FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.07 20.15 20.08 18.94
Best and worst quarterly performance during this period:
quarter 1998: up %
quarter 1998: down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P 500
Class A(3) Class B(4) Class C(5) Class M(6) Index(7)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> C> <C> <C>
One year, ended
December 31 2000 %
--
Five years, ended
December 31, 2000 % -- -- N/A -- --
Since inception of N/A
Classes A, B and M(8) %
Since inception of
Class C(9) % N/A N/A -- N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to November 1, 1998, the Fund's investment policies were different in
that they emphasized large company value stocks without necessarily
emphasizing industry leaders. ING Pilgrim Investments, Inc. has been the
Fund's investment adviser since the Fund commenced operations; however,
prior to November 1, 1997, the Fund was managed by a sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of deferred sales charge of 1% for 1 year return.
(6) Reflects deduction of sales charge of 3.5%.
(7) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(8) Classes A, B and M commenced operations on September 1, 1995.
(9) Class C shares commenced operations on ____________.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Leaders Fund 9
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
ING PILGRIM RESEARCH ENHANCED INDEX FUND J.P. Morgan Investment Management Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in large companies that make up the Standard & Poor's
500 Composite Stock Price Index (S&P 500 Index). Based on extensive research
regarding projected company earnings and dividends, a valuation model ranks
companies in each industry group according to their relative value. Using this
valuation model, the portfolio managers select stocks for the Fund. Within each
industry, the Fund modestly overweights stocks that are ranked as undervalued or
fairly valued while modestly underweighting or not holding stocks that appear
overvalued. Industry by industry, the Fund's assets are invested so that the
Fund's industry sector allocations and market cap weightings closely parallel
those of the S&P 500 Index.
By owning a large number of stocks within the S&P 500 Index, with an emphasis on
those that appear undervalued or fairly valued, and by tracking the industry
weightings and other characteristics of that index, the Fund seeks returns that
modestly exceed those of the S&P 500 Index over the long term with virtually the
same level of volatility.
Under normal market conditions, the Fund invests at least 80% of its total
assets in common stocks included in the S&P 500 Index. It may also invest in
other common stocks not included in the S&P 500 Index. The Fund may also invest
in certain higher-risk investments, including derivatives (generally these
investments will be limited to S&P 500 Index options).
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The portfolio managers try to remain fully invested in
companies included in the S&P 500 Index, and generally do not change this
strategy even temporarily, which could make the Fund more susceptible to poor
market conditions.
Market Trends -- from time to time, the stock market may not favor the large
company securities that are ranked as undervalued or fairly valued in which the
Fund invests. Rather, the market could favor small company stocks, growth-
oriented stocks, or may not favor equities at all.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
10 ING Pilgrim Research Enhanced Index Fund
<PAGE>
ING PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.59
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P 500 Index.
Average Annual Total Return
<TABLE>
<CAPTION>
S&P 500
Class A(2) Class B(3) Class C(4) Index(5)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000(6) %
Since inception(6) % -- -- -- --
</TABLE>
----------
(1) These figures are for the year ended December 31, of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3% respectively, for
the 1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(6) The Fund commenced operations on December 30, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Research Enhanced Index Fund 11
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING PILGRIM TAX EFFICIENT EQUITY FUND Delta Asset Management
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks capital appreciation. The Fund seeks to provide taxable investors
with a high total return on an after-tax basis.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 80% of its total assets in a portfolio of equity securities
whose returns depend upon stock market prices. The Sub-Adviser will manage the
Fund's portfolio in a manner that will attempt to reduce net realized capital
gains each year. An emphasis will be placed on common stocks of companies which
the Sub-Adviser believes to have superior appreciation potential. As a general
matter, the Fund expects these investments to be in common stocks of large,
mid-sized, and small companies.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined investment process, combining macroeconomic analysis and fundamental
company research that seeks to identify growth at a reasonable price:
* The Sub-Adviser first determines the outlook for market sectors and
industries based on business cycle characteristics.
* The Sub-Adviser next searches for companies with improving fundamentals and
accelerating growth.
* Finally, the Sub-Adviser assesses company stock prices relative to their
expected earnings growth rates and to the overall equity markets.
The Sub-Adviser attempts to minimize tax consequences to investors by focusing
on non-dividend paying or low-dividend paying stocks and by reducing annual
portfolio turnover.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the
securities that meet the Fund's disciplined investment criteria. Rather, the
market could favor value-oriented stocks or may not favor equities at all.
Tax Efficient Management -- The Fund is managed to provide high after-tax
returns. Therefore, it may not provide as high a return before tax as other
funds, and as a result may not be suitable for investors who are not subject to
current income tax (for example, those investing through a tax-deferred
retirement account, such as an IRA or a 401(k) Plan).
12 ING Pilgrim Tax Efficient Equity Fund
<PAGE>
ING PILGRIM TAX EFFICIENT EQUITY FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.53
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund,
comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
S&P 500
Class A(2) Class B(3) Class C(4) Index(5)
---------- ---------- ---------- --------
One year, ended
December 31, 2000
Since inception(6)
----------
(1) These figures are for the year ended December 31, of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3% respectively, for
the 1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The S&P 500 Index is an unregulated index that measures performance of
securities of approximately 500 large capitalization U.S. companies.
(6) The Fund commenced operations on December 15, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Tax Efficient Equity Fund 13
<PAGE>
------------
U.S. Equity
Funds
------------
Adviser
ING PILGRIM GROWTH OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks long-term growth of capital.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in common stock of U.S. companies that the portfolio
manager feels have above average prospects for growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap or small-cap
companies.
The portfolio managers use a "top down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a Fund that emphasizes other styles,
such as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
14 ING Pilgrim Growth Opportunities Fund
<PAGE>
ING PILGRIM GROWTH OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
38.10 8.05 10.36 -7.66 24.40 20.54 23.59 23.61 93.26
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P 500
Class A(2) Class B(3) Class C(4) Class T(5) Index(6)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
Since inception of
Classes A, B, and C(7) %
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did. The figures shown for
1996 to 2000 provide performance for Class A shares of the Fund. The
figures shown for the years 1991 to 1995 provide performance for Class T
shares of the Fund. Class T shares would have substantially similar annual
returns as the Class A shares because the classes are invested in the same
portfolio of securities. Annual returns would differ only to the extent
Class A shares and Class T shares have different expenses.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively,
for 1 year, five year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) Reflects deduction of a deferred sales charge of 4% for the 1 year return.
(6) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(7) Classes A, B and C commenced operations on June 5, 1995. Class T commenced
operations on February 3, 1986.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth Opportunities Fund 15
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM LARGECAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its net assets in equity securities of
large U.S. companies that the portfolio managers believe have above-average
prospects for growth. The equity securities in which the Fund may invest include
common and preferred stock, warrants, and convertible securities. The Fund
considers a company to be large if its market capitalization corresponds at the
time of purchase to the upper 90% of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 Index). As of December 31, 2000, this meant market
capitalizations in the range of $ billion to $ billion. Capitalization of
companies in the S&P 500 Index will change with market conditions.
The portfolio managers emphasize a growth approach by searching for companies
that they believe are managing change advantageously and may be poised to exceed
growth expectations. The portfolio managers focus on both a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies and a "top-down" thematic approach and a sell discipline. The
portfolio managers seek to identify themes that reflect the major social,
economic and technological trends that they believe are likely to shape the
future of business and commerce over the next three to five years, and seek to
provide a framework for identifying the industries and companies they believe
may benefit most. This "top-down" approach is combined with rigorous fundamental
research (a "bottom-up" approach) to guide stock selection and portfolio
structure.
The Fund also may lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests primarily in equity securities of
larger companies, which sometimes have more stable prices than smaller
companies.
Market Trends -- from time to time, the stock market may not favor the large
company, growth-oriented securities in which the Fund invests. Rather, the
market could favor value stocks or small company stocks, or may not favor
equities at all.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
16 ING Pilgrim LargeCap Growth Fund
<PAGE>
ING PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
59.45 96.41
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 1000 Growth Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell 1000
Growth S&P 500
Class A(3) Class B(4) Class C(5) Index(6) Index (7)
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Since inception(8) %
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The Russell 1000 Growth Index is an unmanaged index that measures the
performance of those companies among the Russell 1000 Index with higher
than average price-to-book ratios and forecasted growth.
(7) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large capitalization U.S. companies.
(8) The Fund commenced operations on July 21, 1997.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Growth Fund 17
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP VALUE FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests as fully as practicable (at least 80% of its assets)
in equity securities of medium-sized U.S. companies. The Fund will normally
invest at least 65% of its assets in equity securities of companies that meet
the following disciplined criteria, which are intended to identify companies
that are attractive values:
Consistent Dividends -- The company must have paid or had the financial
capability from its operations to pay a dividend in its last five fiscal years.
Strong Balance Sheet -- If the company has debt that is rated, that debt is
rated investment grade by a nationally recognized rating agency. If the company
does not have debt that is rated, the company's long-term debt to capitalization
ratio is below 25%.
Reinvested Earnings -- The company currently pays out in dividends less than 65%
of current earnings, or less than the dividend payout as a percentage of current
earnings of at least half of the medium-sized companies in similar industries.
Attractive Price -- The ratio of the stock's price to the next fiscal year's
anticipated earnings is less than the corresponding ratio for at least half of
the medium-sized companies in similar industries.
The Fund considers a company to be medium-sized if it has a market
capitalization between $1 billion and $8 billion. The equity securities in which
the Fund may invest include common stock, convertible securities, preferred
stock and warrants.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into Pilgrim MagnaCap Fund. You
could therefore ultimately hold shares of that fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests in medium-sized
companies, which may be more susceptible to price swings than larger companies,
but usually tend to have less volatile price swings than smaller companies.
Securities of medium-size companies may be more susceptible to price swings than
larger companies because they have fewer financial resources, more limited
product and market diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
value securities that meet the Fund's disciplined investment criteria. Rather,
the market could favor growth-oriented stocks or large or small company stocks,
or may not favor equities at all.
Inability to Sell Securities -- securities of mid-size companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
18 ING Pilgrim MidCap Value Fund
<PAGE>
ING PILGRIM MIDCAP VALUE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
29.56 21.87 4.89 -7.32
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Russell Midcap Index and the Russell Midcap Value Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell
Russell Midcap
Midcap Value
Class A(3) Class B(4) Class C(5) Class M(6) Index(7) Index(8)
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years ended
December 31, 2000 % N/A
Since inception of
Classes A, B and M(9) % N/A
Since inception of
Class C(10) % N/A N/A N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to October 1, 1999, the Fund's investment policies were different in
that they emphasized midcap value stocks without employing the current
disciplined selection criteria. ING Pilgrim Investments, Inc. has been the
Fund's investment adviser since the Fund commenced operations; however,
prior to October 1, 1999, the Fund was managed by a sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively,
for 1 year, 5 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) Reflects deduction of a sales charge of 3.5%.
(7) The Russell Midcap Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(8) The Russell MidCap Value Index measures the performance of companies in the
Russell Midcap Index with lower book-to-price ratios and lower forecasted
growth values.
(9) Classes A, B and M commenced operations on September 1, 1995.
(10) Class C commenced operations on May 24, 1999.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Value Fund 19
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its total assets in the common stocks
of mid-sized U.S. companies that the portfolio managers feel have above average
prospects for growth. For this Fund, mid-sized companies are companies with
market capitalizations that fall within the range of companies in the Standard &
Poor's MidCap 400 Index (S&P MidCap 400 Index). As of December 31, 2000, the
market capitalization of companies in the S&P MidCap 400 Index ranged from $
million to $ billion. The market capitalization range will change as the range
of the companies included in the S&P MidCap 400 Index changes.
The portfolio managers use a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from the major social, economic and
technological trends that are likely to shape the future of business and
commerce over the next three to five years, and attempt to provide a framework
for identifying the industries and companies expected to benefit most. This
top-down approach is combined with rigorous fundamental research (a bottom-up
approach) to guide stock selection and portfolio structure.
The Fund may invest in initial public offerings.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio managers feel have the potential for growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market diversification, and
may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of mid-size companies usually trade
in lower volume and may be less liquid than securities of larger, more
established companies. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
20 ING Pilgrim MidCap Opportunities Fund
<PAGE>
ING PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
103.24
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : up %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P MidCap 400 Index.
Average Annual Total Return
<TABLE>
<CAPTION>
S&P
MidCap 400
Class A(2) Class B(3) Class C(4) Index(5)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Since Inception(6) %
</TABLE>
----------
(1) These figures are for the year ended December 31, of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
the 1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The S&P MidCap 400 Index is an unmanaged index that measures the
performance of the mid-size company segment of the U.S. market.
(6) The Fund commenced operations on August 20, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Opportunities Fund 21
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of medium-sized U.S. companies, and at least 75% of its total
assets in common stocks that the portfolio managers feel have above average
prospects for growth. Medium-sized companies are companies with market
capitalizations between $1.6 billion and $10.7 billion. The market
capitalization range will change as the range of the companies included in the
Standard & Poor's MidCap 400 Index (S&P MidCap 400 Index) changes and with
market conditions.
The portfolio managers emphasize a growth approach by searching for successful,
growing companies that are managing change advantageously and may be poised to
exceed growth expectations. It focuses on both a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual companies
and a thematic approach in structuring the portfolio and a sell discipline.
Themes attempt to articulate the major social, economic and technological trends
that are likely to shape the future of business and commerce over the next three
to five years, and provide a framework for identifying the industries and
companies expected to benefit most. This top down approach is combined with
rigorous fundamental research (a "bottom up" approach) to guide stock selection
and portfolio structure.
The Fund may invest in initial public offerings.
In periods of unusual market conditions, the Fund may temporarily invest part or
all of its assets in cash or high quality money market securities. In these
circumstances, the Fund may not achieve its objective.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources and more limited product and market diversification,
and may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of mid-size companies usually trade
in lower volume and may be less liquid than securities of larger, more
established companies. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
22 ING Pilgrim MidCap Growth Fund
<PAGE>
ING PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-11.00 37.64 15.84 15.88 14.14 97.56
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the S&P MidCap 400 Index and the Russell Midcap Growth Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P Russell
MidCap Midcap
400 Growth
Class A(3) Class B(4) Class C(5) Index(6) Index(7)
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(8) % N/A (9)
Since inception
of Class B(8) % N/A N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to April 1, 2000, the Fund was managed by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively,
for 1 year, 5 year and since inception returns.
(5) Reflects deduction of a sales charge of 1% for the 1 year return.
(6) The S&P MidCap 400 Index is an unmanaged index that measures the
performance of the mid-size company segment of the U.S. market.
(7) The Russell Midcap Growth Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(8) Classes A and C commenced operations on April 19, 1993. Class B commenced
operations on May 31, 1995.
(9) Index return is for period beginning April 30, 1993.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Growth Fund 23
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
ING PILGRIM GROWTH + VALUE FUND Navellier Fund Management, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in a diversified portfolio of equity securities,
including common and preferred stock, warrants and convertible securities.
The Fund invests in common stock of companies the portfolio manager believes are
poised to rise in price. The Sub-Adviser uses a "bottom-up" quantitative
screening process designed to identify and select inefficiently priced stocks
that achieved superior returns compared to their risk characteristics. The
Sub-Adviser first uses a proprietary computer model designed to identify stocks
with above average market returns and risk levels which are reasonable for
higher return rates. The Sub-Adviser then applies a quantitative analysis which
focuses on growth and value fundamental characteristics, such as earnings
growth, earnings momentum, price to earnings (P/E) ratios, and internal
reinvestment rates. The Sub-Adviser then allocates stocks according to how they
complement other portfolio holdings.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap, or small-cap
companies.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund's performance will be affected
if the Sub-Adviser makes an inaccurate assessment of economic conditions and
investment opportunities, and chooses growth companies that do not grow as
quickly as hoped, or value companies that continue to be undervalued by the
market. Although the sub-adviser invests in value companies to decrease
volatility, these investments may also lower the Fund's performance. The Fund's
investments in smaller and mid-sized companies may be more susceptible to price
swings than investments in larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mix of
growth and value securities in which the Fund invests. Rather, the market could
favor growth stocks to the exclusion of value stocks, or favor value stocks to
the exclusion of growth stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller and mid-sized companies
usually trade in lower volume and may be less liquid than securities of larger,
more established companies. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund.
Changes in Interest Rates -- the value of the Fund's convertible securities may
fall when interest rates rise. Convertible securities with longer durations tend
to be more sensitive to changes in interest rates, usually making them more
volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a convertible security
is unable to meet its financial obligations or goes bankrupt.
24 ING Pilgrim Growth + Value Fund
<PAGE>
ING PILGRIM GROWTH + VALUE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.10 17.72 86.10
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Russell 2000 Index and the Russell 3000 Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell Russell
2000 3000
Class A(2) Class B(3) Class C(4) Index(5) Index(6)
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Since inception(7) %
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of smaller U.S. companies.
(6) The Russell 3000 Index is an unmanaged index that measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
(7) The Fund commenced operations on November 18, 1996.
(8) Index return is for period beginning December 1, 1996.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth + Value Fund 25
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM SMALLCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests at least 65% of its total assets in the common stock of
smaller, lesser-known U.S. companies that the portfolio manager believes have
above average prospects for growth. For this Fund, smaller companies are those
with market capitalizations that fall within the range of companies in the
Russell 2000 Index, which is an index that measures the performance of small
companies. The market capitalization range will change as the range of the
companies included in the Russell 2000 changes. The market capitalization of
companies held by the Fund as of December 31, 2000 ranged from $ million to $
billion.
The portfolio manager uses a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a brand-oriented approach in structuring
the portfolio and a sell discipline. The portfolio manager seeks to invest in
companies expected to benefit most from the major social, economic and
technological trends that are likely to shape the future of business and
commerce over the next three to five years, and attempts to provide a framework
for identifying the industries and companies expected to benefit most. This
top-down approach is combined with rigorous fundamental research (a bottom-up
approach) to guide stock selection and portfolio structure.
The Fund may invest in initial public offerings.
The Fund was closed to new investors effective February 29, 2000. Investors who
were shareholders of the Fund on that day may continue to buy shares after that
date into accounts existing on that day. The Fund may reopen in the future
subject to the discretion of the Board of Trustees.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a Fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small
sized growth securities in which the Fund invests. Rather, the market could
favor value-oriented stocks or large company stocks, or may not favor equities
at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of smaller companies usually trade in
lower volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
26 ING Pilgrim SmallCap Opportunities Fund
<PAGE>
ING PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
57.27 14.54 20.16 -4.86 11.34 18.16 14.92 7.59 146.94
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell
2000
Class A(2) Class B(3) Class C(4) Class T(5) Index(6)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
Since inception of
Classes A, B, and C(7) % N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did. The figures shown for
the years 1996 to 2000 provide performance for Class A shares of the Fund.
The figures shown for the years 1991 to 1995 provide performance for Class
T shares of the Fund. Class T shares would have substantially similar
annual returns as the Class A shares because the classes are invested in
the same portfolio of securities. Annual returns would differ only to the
extent Class A shares and Class T shares have different expenses.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively,
for 1 year, 5 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) Reflects deduction of a deferred sales charge of 4% for the 1 year return.
(6) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(7) Classes A, B and C commenced operations on June 5, 1995. Class T commenced
operations on February 3, 1986.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Opportunities Fund 27
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM SMALLCAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of small U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio manager feels have above average prospects
for growth. Smaller companies are companies with market capitalizations that
fall within the range of companies in the Russell 2000 Growth Index. As of
December 31, 2000, the market capitalization of companies held by the Fund
ranged from $ million to $ billion. The market capitalization range will change
as the range of the companies included in the Russell 2000 changes.
The Fund emphasizes a growth approach by searching for successful, growing
companies that are managing change advantageously and may be poised to exceed
growth expectations. It focuses on both a "bottom-up" analysis that evaluates
the financial condition and competitiveness of individual companies and a
thematic approach in structuring the portfolio and a sell discipline. Themes
attempt to articulate the major social, economic and technological trends that
are likely to shape the future of business and commerce over the next three to
five years, and provide a framework for identifying the industries and companies
expected to benefit most. This top down approach is combined with rigorous
fundamental research (a "bottom up" approach) to guide stock selection and
portfolio structure.
The Fund may invest in initial public offerings.
In periods of unusual market conditions, the Fund may temporarily invest part or
all of its assets in cash or high quality money market securities. In these
circumstances, the Fund may not achieve its objective.
The Fund considers a company to be small if it has a market capitalization
corresponding at the time of purchase to the middle 90% of the Russell 2000
Growth Index. In the Adviser's opinion, the middle 90% includes companies with
capitalizations between $255 million and $1.4 billion. Capitalization of
companies in the Index will change with market conditions.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a Fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in small-cap companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
28 ING Pilgrim SmallCap Growth Fund
<PAGE>
ING PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-4.03 34.87 18.27 11.24 3.68 89.97
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Growth Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell
2000
Growth
Class A(3) Class B(4) Class C(5) Index(6)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A (8)
Since inception
for Class B(7) % N/A N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to April 1, 2000, the Fund was managed by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5%, 2% and 1%, respectively,
for 1 year, 5 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The Russell 2000 Growth Index is an unmanaged index that measures the
performance of securities of smaller U.S. companies with
greater-than-average growth orientation.
(7) Classes A and C commenced operations on December 27, 1993. Class B
commenced operations on May 31, 1995.
(8) Index return is for period beginning December 31, 1993.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Growth Fund 29
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM BANK AND THRIFT FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund primarily seeks long-term capital appreciation; a secondary objective
is income.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests, under normal market conditions, at least 65% of its total
assets in equity securities of national and state-chartered banks (other than
money center banks), thrifts, and the holding or parent companies of such
depository institutions, and in savings accounts of mutual thrifts that may
allow the Fund to participate in stock conversions of the mutual thrift. This
policy may only be changed with approval of the shareholders of the Fund. The
equity securities described above include common stocks, convertible securities
(including convertible preferred stock) and warrants, but do not include
non-convertible preferred stocks or adjustable rate preferred stocks. The Fund
invests primarily in banking organizations that are small- to medium-sized.
The Fund may invest up to 35% of its total assets in equity securities,
including preferred stocks or adjustable rate preferred stocks, of other types
of issuers, including money center banks, other financial services companies,
and companies that are not in financial services industries, and in
nonconvertible debt securities (including certificates of deposit, commercial
paper, notes, bonds or debentures) of any maturity that are either issued or
guaranteed by the United States Government or an agency thereof or issued by a
corporation or other issuer and rated in one of the top four categories by
Moody's (Baa and better) or S&P (BBB and better) or similarly rated by another
nationally recognized rating organization. The Fund may invest up to 10% of its
assets in securities of other investment companies.
The portfolio manager emphasizes a value approach, and selects securities that
are undervalued relative to the market and have potential for future growth,
including securities of institutions that the portfolio manager believes are
well positioned to take advantage of investment opportunities in the banking and
thrift industries.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- The value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in small- to
medium-sized companies, which may be more susceptible to price swings than
larger companies.
Market Trends -- from time to time, the stock market may not favor the value
securities in which the Fund invests. Rather, the market could favor
growth-oriented stocks or large company stocks, or may not favor equities at
all.
Risks of Concentration -- because the Fund's investments are concentrated in the
banking and thrift industries, the value of the Fund may be subject to greater
volatility than a fund with a portfolio that is less concentrated. If securities
of banks and thrifts as a group falls out of favor, the Fund could underperform
funds that focus on other types of companies.
Other Investment Companies -- because the Fund invests in other investment
companies, you may indirectly pay a proporationate share of the expenses of that
other investment company (including management fees, administration fees, and
custodial fees) in addition to the expenses of the Fund.
Debt Securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
30 ING Pilgrim Bank and Thrift Fund
<PAGE>
ING PILGRIM BANK AND THRIFT FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
49.49 32.36 7.79 -1.89 49.69 41.10 64.86 -1.83 -18.64
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of three broad measures of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index), the S&P Major Regional Banks Index and the NASDAQ 100 Financial Index.
Average Annual Total Returns(2)
<TABLE>
<CAPTION>
S&P Major
Regional NASDAQ 100
S&P 500 Banks Financial
Class A(3) Class B(4) Index(5) Index(6) Index(7)
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 % N/A N/A
Since inception
of Class B(8) % N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to October 17, 1997, the Fund operated as a closed-end investment
company.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(6) The S&P Major Regional Banks Index is an unmanaged index that measures the
performance of securities of major regional banks in the S&P 500 Index.
(7) The NASDAQ 100 Financial Index is an unmanaged index that measures the
performance of securities of the 100 largest financial companies traded on
NASDAQ.
(8) Class B shares commenced operations on October 17, 1997.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Bank and Thrift Fund 31
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING PILGRIM INTERNET FUND ING Investment Management Advisors B.V.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal market conditions, the Fund will operate as a non-diversified fund
and invest at least 65% of its total assets in a portfolio of equity securities
of U.S. and non-U.S. internet technology companies. The Fund defines internet
technology companies as those companies with internet businesses or internet
related consulting or services businesses, or that derive at least 50% of their
total revenues or earnings from business operations in internet related
hardware, software or infrastructure industries. As a general matter, the Fund
expects these investments to be in common stocks of large, mid-sized, and small
companies.
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.
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.
In choosing investments for the Fund, the Sub-Adviser first identifies themes
which it believes will drive the internet in the future. Then, by conducting
extensive fundamental research, the Sub-Adviser analyzes individual companies
worldwide to identify those firms that are most likely to benefit from the
selected investment themes.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the
securities that meet the Fund's disciplined investment criteria. Rather, the
market could favor value-oriented stocks or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
Lack of Diversification -- The Fund is classified as a non-diversified
investment company, which means that, compared with other funds, the Fund may
invest a greater percentage of its assets in a particular issuer. The investment
of a large percentage of the Fund's assets in the securities of a smaller number
of issuers may cause the Fund's share price to fluctuate more than that of a
diversified investment company.
Industry Concentration -- As a result of the Fund concentrating its assets in
securities related to a particular industry, the Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Internet Technology Risk -- Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, products and services of companies engaged in
internet and internet-related activities are subject to relatively high risks of
rapid obsolescence caused by scientific and technological advances. Swings in
investor psychology or significant trading by large institutional investors can
result in significant price fluctuations and stock price declines.
32 ING Pilgrim Internet Fund
<PAGE>
ING PILGRIM INTERNET FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Best and worst quarterly performance during this period:
quarter 2000: up %
quarter 2000: down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P 500 Index.
Average Annual Total Return
<TABLE>
<CAPTION>
S&P 500 @Net
Class A(2) Class B(3) Class C(4) Index(5) Index (6)
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Since inception(7) % -- -- -- --
</TABLE>
----------
(1) These figures are for the year ended December 31, of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 4% respectively, for
the 1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies
(6) The @Net Index encompasses 50 companies which are key components in the
development of the Internet. The Index is weighted based upon market
capitalization of each of the component stocks.
(7) The Fund commenced operations on July 1, 1999.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Internet Fund 33
<PAGE>
------------
Equity &
Income Funds
------------
Adviser
ING PILGRIM BALANCED FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a balance of long-term capital appreciation and current income.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund's adviser actively manages a blended portfolio of equity and debt
securities with an emphasis on overall total return. The Fund normally maintains
40% to 60% of its assets in debt securities of any maturity issued by
corporations or other business entities and the U.S. Government and its agencies
and instrumentalities, and government sponsored enterprises, and normally seeks
a target allocation of 50%, although this may vary with market conditions.
The remainder of the Fund's assets are normally invested in equity securities of
large companies that the adviser believes are leaders in their industries. The
adviser considers whether these companies have a sustainable competitive edge.
The portfolio managers emphasize a value approach in equity selection, and seek
securities whose prices in relation to projected earnings are believed to be
reasonable in comparison to the market. For this Fund, a company with a market
capitalization of over $5 billion is considered to be a large company, although
the Fund may also invest to a limited degree in companies that have a market
capitalization between $1 billion and $5 billion.
A portion of the Fund's net assets (up to 35%) may be invested in high yield
debt securities (commonly known as "junk bonds") rated below investment grade
(i.e., lower than the four-highest rating categories) by a nationally recognized
statistical rating agency, or of comparable quality if unrated. There is no
minimum credit quality for the high yield debt securities in which the Fund may
invest. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may invest up to 20% of its total assets in foreign securities. The Fund may use
options on securities, securities indices, interest rates and foreign currencies
as a hedging technique or in furtherance of its investment objective. The Fund
may invest up to 35% of its net assets in zero coupon securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund also may invest in smaller
companies, which may be more susceptible to price swings than larger companies.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Changes in Interest Rates -- the value of debt and equity securities can change
in response to changes in interest rates. The value of the debt securities held
by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in debt securities with
intermediate and long terms to maturity. Debt securities with longer maturities
tend to be more sensitive to changes in interest rates, usually making them more
volatile than debt securities with shorter maturities. Zero coupon securities
are particularly sensitive to changes in interest rates.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than the other income funds, because it may invest
in high yield debt securities, which are considered predominantly speculative
with respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.
Inability to Sell Securities -- high yield securities and securities of smaller
companies may be less liquid than other investments. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
34 ING Pilgrim Balanced Fund
<PAGE>
ING PILGRIM BALANCED FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-6.29 23.43 16.39 20.50 23.35 6.46
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of broad measures of market
performance -- the Standard & Poor's Barra Value Index (S&P Barra Value Index),
the Lehman Aggregate Bond Index, the Lipper Balanced Fund Index and a composite
index consisting of 60% S&P 500 Composite Stock Price Index and 40% Lehman
Brothers Government/Corporate Bond Index.
Average Annual Total Returns(3)
<TABLE>
<CAPTION>
S&P Lehman Lipper
Barra Aggregate Balanced
Class Class Class Value Bond Fund Composite
A(4) B(5) C(6) Index(7) Index(8) Index(9) Index
---- ---- ---- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Class A and C(10) %
Since inception of
Class B(10) %
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to May 24, 1999, a different adviser managed the Fund.
(3) Class T did not have a full year's performance as of December 31, 2000.
(4) Reflects deduction of sales charge of 5.75%.
(5) Reflects deduction of deferred sales charge of 5%, 2% and 1% respectively,
for 1 year, 5 year and since inception returns.
(6) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(7) The S&P Barra Value Index is a capitalization-weighted index of all stocks
in the Standard and Poor's 500 Composite Stock Price Index ("S&P 500
Index") that have low price-to-book ratios. It is designed so that
approximately 50% of the market capitalization of the S&P 500 Index is in
the S&P Barra Value Index.
(8) The Lehman Aggregate Bond Index is an unmanaged index that measures the
performance of the U.S. investment grade fixed rate bond market, including
government and corporate securities, mortgage pass-through securities, and
asset-backed securities.
(9) The Lipper Balanced Fund Index is an unmanaged index that measures the
performance of balanced funds (funds that seek current income balanced with
capital appreciation).
(10) Classes A and C commenced operations on April 19, 1993. Class B commenced
operations on May 31, 1995. Class T commenced operations on January 4,
2000.
(11) Index return is for period beginning May 1, 1993.
(12) Index return is for period beginning April 30, 1993.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Balanced Fund 35
<PAGE>
------------
Equity &
Income Funds
------------
Adviser
ING PILGRIM CONVERTIBLE FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum total return, consisting of capital appreciation and
current income.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
convertible securities. Convertible securities are generally preferred stock or
other securities, including debt securities, that are convertible into common
stock. The Fund emphasizes companies with market capitalizations above $500
million. Through investments in convertible securities, the Fund seeks to
capture the upside potential of the underlying equities with less downside
exposure.
The Fund normally invests a minimum of 25% of its total assets in common and
preferred stocks, and 25% in other income producing convertible and debt
securities. The Fund may also invest up to 35% of its net assets in high yield
debt or convertible securities (commonly known as "junk bonds") rated below
investment grade by a nationally recognized statistical rating agency, or of
comparable quality if unrated. There is no minimum credit rating for high yield
securities in which the Fund may invest. The Fund may also invest in securities
issued by the U.S. government and its agencies and instrumentalities.
In evaluating convertibles, the Fund's Adviser evaluates each security's
investment characteristics as a fixed income instrument as well as its potential
for capital appreciation.
In analyzing specific companies for possible investment, the Adviser ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Adviser usually considers whether to sell a particular security when any of
those factors materially changes.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Convertible securities have investment
characteristics of both equity and debt securities. Equity securities face
market, issuer and other risks, and their values may go up or down, sometimes
rapidly and unpredictably. Market risk is the risk that securities may decline
in value due to factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security may decline for
reasons relating to the issuer, such as changes in the financial condition of
the issuer. While equities may offer the potential for greater long-term growth
than most debt securities, they generally have higher volatility. The Fund may
invest in small and medium-sized companies, which may be more susceptible to
greater price swings than larger companies because they may have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Changes in Interest Rates -- the value of the convertible and debt securities
held by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in securities with intermediate
and long terms to maturity. Securities with longer durations tend to be more
sensitive to changes in interest rates, usually making them more volatile than
securities with shorter durations. Zero coupon securities are particularly
sensitive to changes in interest rates.
Credit Risk -- the Fund could lose money if the issuer of a security is unable
to meet its financial obligations or goes bankrupt. This is especially true
during periods of economic uncertainty or economic downturns. This Fund may be
subject to more credit risk than many bond funds, because the convertible
securities and debt securities in which it invests may be lower-rated
securities.
Inability to Sell Securities -- convertible securities and lower rated debt and
covertible securities may be less liquid than other investments. The Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
36 ING Pilgrim Convertible Fund
<PAGE>
ING PILGRIM CONVERTIBLE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-8.23 21.67 20.29 22.58 20.86 50.20
Best and worst quarterly performance during this period:
quarter 19 : up %
quarter 19 : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the First Boston Convertible Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
First
Boston
Convertible
Class A(3) Class B(4) Class C(5) Index(6)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception of
Class B(7) % N/A N/A
</TABLE>
----------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5%, 2% and 1% respectively
for 1 year, 5 year and since inception returns.
(5) Reflects deduction of sales charge of 1% for the 1 year return.
(6) The First Boston Convertible Index is an unmanaged index that measures the
performance of a universe of convertible securities that are similar, but
not identical, to those in the Fund's portfolio.
(7) Classes A and C commenced operations on April 19, 1993. Class B commenced
operations on May 31, 1995.
(8) Index returns for period beginning April 30, 1993.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Convertible Fund 37
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the Fund. The tables that follow show the
fees and expenses for each of the ING Pilgrim Funds.
FEES YOU PAY DIRECTLY
<TABLE>
<CAPTION>
Class A Class B Class C(1) Class M(1) Class T(2)
------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your investment
(as a % of offering price) %
Equity Funds and Equity & Income Funds 5.75(3) none none 3.50(3) none
Maximum deferred sales charge (as a % of
purchase or sales price, whichever is less)
Equity Funds and Equity & Income Funds none(4) 5.00(5) 1.00(6) none 4.00(7)
</TABLE>
----------
(1) Not all Funds offer Classes C and M. Please see page 39.
(2) Class T shares are available only for certain exchanges or reinvestment of
dividends. Please see page 39.
(3) Reduced for purchases of $50,000 and over. Please see page 40.
(4) A contingent deferred sales charge of no more than 1% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. Please see page 40.
(5) Imposed upon redemption within 6 years from purchase. The fee has scheduled
reductions after the first year. Please see page 40.
(6) Imposed upon redemption within 1 year from purchase.
(7) Imposed upon redemption within 4 years from purchase. The fee has scheduled
reductions after the first year. Please see page 40.
<TABLE>
<CAPTION>
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class A
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
---- --- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MagnaCap % 0.71 0.30 0.28 1.29 -- 1.29
Growth and Income % 0.62 0.25 0.42 1.29 -- 1.29
LargeCap Leaders(3) % 0.85 0.25 0.59 1.69 -- 1.69
Research Enhanced Index % 0.70 0.30 0.56 1.56 -- 1.56
Tax Efficient Equity % 0.80 0.35 -- --
Growth Opportunities % 0.95 0.30 0.34 1.59 -- 1.59
LargeCap Growth % 0.75 0.35 0.26 1.36 -- 1.36
MidCap Value(3) % 0.85 0.25 0.63 1.73 -- 1.73
MidCap Opportunities % 1.00 0.30 0.44 1.74 -- 1.74
MidCap Growth % 0.75 0.35 0.26 1.36 -- 1.36
Growth + Value % 1.00 0.30 0.39 1.69 -- 1.69
SmallCap Opportunities % 1.00 0.30 0.38 1.68 -- 1.68
SmallCap Growth % 1.00 0.35 0.32 1.67 -0.05 1.62
Bank and Thrift % 0.72 0.25 0.44 1.41 -- 1.41
Internet % 1.25 0.35 0.64 -- --
Balanced(4) % 0.75 0.35 0.51 1.61 -0.21 1.40
Convertible % 0.75 0.35 0.25 1.35 -- 1.35
</TABLE>
38 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class B(5)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(3) Expenses
---- --- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MagnaCap % 0.71 1.00 0.28 1.99 -- 1.99
Growth and Income % 0.62 1.00 0.42 2.04 -- 2.04
LargeCap Leaders % 0.85 1.00 0.59 2.44 -- 2.44
Research Enhanced Index % 0.70 1.00 0.59 2.29 -- 2.29
Tax Efficient Equity % 0.80 1.00 -- --
Growth Opportunities % 0.95 1.00 0.35 2.30 -- 2.30
LargeCap Growth % 0.75 1.00 0.26 2.01 -- 2.01
MidCap Value % 0.85 1.00 0.63 2.48 -- 2.48
MidCap Opportunities % 1.00 1.00 0.40 2.40 -- 2.40
MidCap Growth % 0.75 1.00 0.26 2.01 -- 2.01
Growth + Value % 1.00 1.00 0.39 2.39 -- 2.39
SmallCap Opportunities % 1.00 1.00 0.40 2.40 -- 2.40
SmallCap Growth % 1.00 1.00 0.32 2.32 -0.05 2.27
Bank and Thrift % 0.72 1.00 0.44 2.16 -- 2.16
Internet % 1.25 1.00 -- --
Balanced(4) % 0.75 1.00 0.51 2.26 -0.21 2.05
Convertible % 0.75 1.00 0.25 2.00 -- 2.00
Class C(6)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(3) Expenses
---- --- ---- -------- -------- ---------- --------
MagnaCap % 0.71 1.00 0.28 1.99 -- 1.99
Growth and Income % 0.62 1.00 0.42 2.04 -- 2.04
LargeCap Leaders % 0.85 1.00 0.59 2.44 -- 2.44
Research Enhanced Index % 0.70 1.00 0.57 2.27 -- 2.27
Tax Efficient Equity % 0.80 1.00 0.70 2.50
Growth Opportunities % 0.95 1.00 0.35 2.30 -- 2.30
LargeCap Growth % 0.75 1.00 0.26 2.01 -- 2.01
MidCap Value % 0.85 1.00 0.63 2.48 -- 2.48
MidCap Opportunities % 1.00 1.00 0.36 2.36 -- 2.36
MidCap Growth % 0.75 1.00 0.26 2.01 -- 2.01
Growth + Value % 1.00 1.00 0.40 2.40 -- 2.40
SmallCap Opportunities % 1.00 1.00 0.43 2.43 -- 2.43
SmallCap Growth % 1.00 1.00 0.32 2.32 -0.05 2.27
Internet % 1.25 1.00 0.64 2.89
Balanced(4) % 0.75 1.00 0.51 2.26 -0.21 2.05
Convertible % 0.75 1.00 0.25 2.00 -- 2.00
</TABLE>
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 39
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class M
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(3) Expenses
---- --- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MagnaCap % 0.71 0.75 0.28 1.74 -- 1.74
LargeCap Leaders % 0.85 0.75 0.59 2.19 -- 2.19
MidCap Value % 0.85 0.75 0.63 2.23 -- 2.23
Class T(7)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(3) Expenses
---- --- ---- -------- -------- ---------- --------
Growth Opportunities % 0.95 0.95 0.33 2.23 -- 2.23
SmallCap Opportunities % 1.00 0.95 0.36 2.31 -- 2.31
Balanced(4) % 0.75 0.75 0.51 2.01 -0.21 1.80
</TABLE>
----------
(1) These tables show the estimated operating expenses for each Fund by class
as a ratio of expenses to average daily net assets. These estimates are
based on each Fund's actual operating expenses for its most recent complete
fiscal year, as adjusted for contractual changes, and fee waivers to which
the Adviser has agreed for each Fund except Growth and Income. For Growth
and Income, estimated operating expenses are based on estimated contractual
operating expenses commencing with ING Pilgrim Investments' management of
the Fund.
(2) ING Pilgrim Investments has entered into written expense limitation
agreements with each Fund which it advises except MagnaCap, Bank and
Thrift, Research Enhanced Index, Growth Opportunities, MidCap
Opportunities, Growth + Value, and SmallCap Opportunities, under which it
will limit expenses of the Fund, excluding interest, taxes, brokerage and
extraordinary expenses, subject to possible reimbursement to ING Pilgrim
Investments within three years. The amount of each Fund's expenses waived
or reimbursed during the last fiscal year by ING Pilgrim Investments is
shown under the heading "Fee Waiver by Adviser". For each Fund, the expense
limit will continue through at least October 31, 2001.
(3) IMFC has entered into written expense limitation agreements with the Tax
Efficient Equity and Internet Funds, under which it will limit expenses of
the Fund excluding interest, taxes, brokerage and extraordinary expenses.
The amount of each Fund's expenses waived during the last fiscal year by
IMFC is shown under the heading "Fee Waiver by Adviser." For each Fund, the
expense limit will continue through at least ______________ , 2001.
(4) Effective April 1, 2000, certain ING Pilgrim Funds merged into Balanced
Fund. As a result of the mergers, it is expected that operating expenses
for Balanced Fund will be lower than the operating expenses prior to the
mergers.
(5) Because Class B Shares are new for Growth and Income Fund, its expenses are
estimated based on Class A expenses.
(6) Because Class C shares are new for Growth and Income, its expenses are
estimated based on Class A expenses.
(7) Because Class T shares are new for Balanced Fund, its expenses are
estimated based on Class A expenses.
40 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
Class A
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
MagnaCap $ 699 960 1,242 2,042
Growth and Income $ 699 960 1,242 2,042
LargeCap Leaders $ 737 1,077 1,440 2,458
Research Enhanced Index $ 725 1,039 1,376 2,325
Tax Efficient Equity
Growth Opportunities $ 727 1,048 1,391 2,356
LargeCap Growth $ 706 981 1,277 2,116
MidCap Value $ 741 1,089 1,460 2,499
MidCap Opportunities $ 742 1,091 1,464 2,509
MidCap Growth $ 706 981 1,277 2,116
Growth + Value $ 737 1,077 1,440 2,458
SmallCap Opportunities $ 736 1,074 1,435 2,448
SmallCap Growth $ 730 1,067 1,426 2,434
Bank and Thrift $ 710 996 1,302 2,169
Internet
Balanced $ 709 1,034 1,382 2,360
Convertible $ 705 978 1,272 2,105
<TABLE>
<CAPTION>
Class B
If you sell your shares If you don't sell your shares
--------------------------------------------- --------------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
----------------------- -------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MagnaCap $ 702 924 1,273 2,136 202 624 1,073 2,136
Growth and Income $ 707 940 1,298 2,176 207 640 1,098 2,176
LargeCap Leaders $ 747 1,061 1,501 2,591 247 761 1,301 2,591
Research Enhanced Index $ 732 1,015 1,425 2,443 232 715 1,225 2,443
Tax Efficient Equity
Growth Opportunities $ 733 1,018 1,430 2,458 233 718 1,230 2,458
LargeCap Growth $ 704 931 1,283 2,170 204 631 1,083 2,170
MidCap Value $ 751 1,073 1,521 2,632 251 773 1,321 2,632
MidCap Opportunities $ 743 1,048 1,480 2,573 243 748 1,280 2,573
MidCap Growth $ 704 931 1,283 2,170 204 631 1,083 2,170
Growth + Value $ 742 1,045 1,475 2,553 242 745 1,275 2,553
SmallCap Opportunities $ 743 1,048 1,480 2,558 243 748 1,280 2,558
SmallCap Growth $ 730 1,020 1,436 2,490 230 720 1,236 2,490
Bank and Thrift $ 719 976 1,359 2,303 219 676 1,159 2,303
Internet
Balanced $ 708 986 1,391 2,415 208 686 1,191 2,415
Convertible $ 703 927 1,278 2,160 203 627 1,078 2,160
</TABLE>
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 41
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
<TABLE>
<CAPTION>
Class C
If you sell your shares If you don't sell your shares
--------------------------------------------- --------------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
---- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MagnaCap $ 302 624 1,073 2,317 202 624 1,073 2,317
Growth and Income $ 307 640 1,098 2,369 207 640 1,098 2,369
LargeCap Leaders $ 347 761 1,301 2,776 247 761 1,301 2,776
Research Enhanced Index $ 330 709 1,215 2,605 230 709 1,215 2,605
Tax Efficient Equity
Growth Opportunities $ 333 718 1,230 2,636 233 718 1,230 2,636
LargeCap Growth $ 304 631 1,083 2,338 204 631 1,083 2,338
MidCap Value $ 351 773 1,321 2,816 251 773 1,321 2,816
MidCap Opportunities $ 339 736 1,260 2,696 239 736 1,260 2,696
MidCap Growth $ 304 631 1,083 2,338 204 631 1,083 2,338
Growth + Value $ 343 748 1,280 2,736 243 748 1,280 2,736
SmallCap Opportunities $ 346 758 1,296 2,766 246 758 1,296 2,766
SmallCap Growth $ 330 720 1,236 2,652 230 720 1,236 2,652
Internet Balanced $ 308 686 1,191 2,579 208 686 1,191 2,579
Convertible $ 303 627 1,078 2,327 203 627 1,078 2,327
</TABLE>
Class M
Fund 1 year 3 years 5 years 10 years
------------------- -------- --------- --------- ---------
MagnaCap $ 521 879 1,261 2,330
LargeCap Leaders $ 564 1,011 1,483 2,785
MidCap Value $ 568 1,023 1,503 2,825
<TABLE>
<CAPTION>
Class T
If you sell your shares If you don't sell your shares
--------------------------------------------- --------------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
---------------------- -------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Opportunities $ 626 897 1,195 2,403 226 697 1,195 2,403
SmallCap Opportunities $ 634 921 1,235 2,488 234 721 1,235 2,488
Balanced $ 583 810 1,064 2,218 183 610 1,064 2,218
</TABLE>
42 What You Pay to Invest
<PAGE>
SHAREHOLDER GUIDE
CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
ING PILGRIM PURCHASE OPTIONS(TM)
Depending upon the Fund, you may select from up to five separate classes of
shares: Class A, Class B, Class C, Class M and Class T.
Class A
* Front-end sales charge, as described on the next page.
* Distribution and service (12b-1) fees of 0.25% to 0.35%.
Class B
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A contingent deferred sales charge, as described on the next page.
* Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses. Class B shares acquired initially through Funds
that were part of the Nicholas-Applegate Mutual Funds at the time of
purchase will convert after seven years from the date of original purchase.
Class C
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A 1% contingent deferred sales charge on shares sold within one year of
purchase.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
* Not offered by Bank and Thrift Fund.
Class M
* Lower front-end sales charge than Class A, as described on the next page.
* Distribution and service (12b-1) fees of 0.75%.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class M level throughout the life of your investment.
* Offered only by MagnaCap Fund, LargeCap Leaders Fund and MidCap Value Fund.
Class T
* No longer available for purchase, unless you are investing income earned on
Class T shares or exchanging Class T Shares of another Fund.
* Distribution and service (12b-1) fees of 0.75 to 0.95% (varies by fund).
* A contingent deferred sales charge, as described on the next page.
* Automatic conversion to Class A shares after 8 years, thus reducing future
annual expenses.
* Offered only by Growth Opportunities Fund, SmallCap Opportunities Fund and
Balanced Fund.
When choosing between classes, you should carefully consider the ongoing annual
expenses along with the initial sales charge or the contingent deferred sales
charge. The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Higher distribution
fees mean a higher expense ratio, so Class B and Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A or Class M shares. Orders for Class B shares and Class M shares in excess of
$250,000 and $1,000,000, respectively, will be accepted as orders for Class A
shares or declined. You should discuss which Class of shares is right for you
with your investment professional.
Distribution and Shareholder Service Fees
To pay for the cost of promoting the Funds and servicing your shareholder
account, each class of each Fund has adopted a Rule 12b-1 plan which requires
fees to be paid out of the assets of each class. Over time the fees will
increase your cost of investing and may exceed the cost of paying other types of
sales charges.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 43
<PAGE>
SHAREHOLDER GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
SALES CHARGE CALCULATION
Class A(1)
Class A shares of the Funds are sold subject to the following sales charge:
U.S. Equity Funds and
Equity & Income Funds
-------------------------
As a %
of the As a % of
offering net
Your Investment price asset value
--------------- ----- -----------
Less than $50,000 5.75 6.10
$50,000 - $99,999 4.50 4.71
$100,000 - $249,999 3.50 3.63
$250,000 - $499,999 2.50 2.56
$500,000 - $1,000,000 2.00 2.04
$1,000,000 and over See below
----------
(1) Shareholders that purchased funds that were a part of the Lexington family
of funds at the time of purchase are not subject to sales charges for the
life of their account.
Investments of $1 Million or More. There is no front-end sales charge if you
purchase Class A shares in an amount of $1 million or more. However, the shares
will be subject to a contingent deferred sales charge if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:
Period during which
Your investment CDSC CDSC applies
--------------- ---- ------------
$1,000,000 to $2,499,999 1.00% 2 years
$2,500,000 to $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
However, Class A shares that were purchased in an amount of $1 million or more
through Funds that were part of the Nicholas-Applegate Mutual Funds at the time
of purchase will be subject to a contingent deferred sales charge of 1% within
one year from the date of purchase.
Class A shares that were purchased in an amount of $1 million or more through
funds that were part of the Northstar family of funds and the ING Family of
Funds at the time of purchase may be subject to a different contingent deferred
sales charge period of 18 months and 12 months, respectively, from the date of
purchase. See the SAI for further information.
Class B, Class C and Class T
Class B, Class C and Class T shares are offered at their net asset value per
share without any initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) on shares that you sell within a certain period of
time after you bought them. The amount of the CDSC is based on the lesser of the
net asset value of the shares at the time of purchase or redemption. There is no
CDSC on shares acquired through the reinvestment of dividends and capital gains
distributions. The CDSCs are as follows:
Class B Deferred Sales Charge(2)
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 5%
2nd year 4%
3rd year 3%
4th year 3%
5th year 2%
6th year 1%
After 6th year none
(2) Class B shares that were purchased through funds that were part of the
Northstar family of funds at the time of purchase are subject to a
different contingent deferred sales charge. Please see the SAI for further
information.
Class C Deferred Sales Charge
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 1%
After 1st year none
Class T Deferred Sales Charge
CDSC on shares
Years after purchase being sold
-------------------- ----------
1st year 4%
2nd year 3%
3rd year 2%
4th year 1%
After 4th year none
To keep your CDSC as low as possible, each time you place a request to redeem
shares the Funds will first redeem shares in your account that are not subject
to a CDSC, and then will sell shares that have the lowest CDSC.
Class M
Class M shares of the Funds are sold subject to the following sales charge.
MagnaCap,
LargeCap Leaders and
MidCap Value Funds
-------------------------
As a % As a %
of the of net
offering asset
Your investment price value
--------------- ----- -----
Less than $50,000 3.50% 3.63%
$50,000 - $99,999 2.50% 2.56%
$100,000 - $249,999 1.50% 1.52%
$250,000 - $499,999 1.00% 1.01%
$500,000 and over none none
44 Shareholder Guide
<PAGE>
CHOOSING A SHARE CLASS SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
Reduced Sales Charges. You may reduce the initial sales charge on a purchase of
Class A or Class M shares of the Funds by combining multiple purchases to take
advantage of the breakpoints in the sales charge schedules. You may do this by:
* Letter of Intent -- lets you purchase shares over a 13 month period and pay
the same sales charge as if the shares had all been purchased at once.
* Rights of Accumulation -- lets you add the value of shares of any open-end
ING Pilgrim Fund (excluding the Money Market Fund) you already own to the
amount of your next purchase for purposes of calculating the sales charge.
* Combination Privilege -- shares held by investors in the ING Pilgrim Funds
which impose a CDSC may be combined with Class A or Class M shares for a
reduced sales charge.
See the Account Application or the Statement of Additional Information for
details, or contact your financial representative or the Shareholder Servicing
Agent for more information.
CDSC Waivers. If you notify the Transfer Agent at the time of redemption, the
CDSC for each Class will be waived in the following cases:
* redemptions following the death or permanent disability of a shareholder if
made within one year of death or the initial determination of permanent
disability. The waiver is available only for shares held at the time of death
or initial determination of permanent disability.
* for Class B Shares, redemptions pursuant to a Systematic Withdrawal Plan, up
to a maximum of 12% per year of a shareholder's account value based on the
value of the account at the time the plan is established and annually
thereafter, provided all dividends and distributions are reinvested and the
total redemptions do not exceed 12% annually.
* mandatory distributions from a tax-deferred retirement plan or an IRA.
However, if you purchased shares that were part of the Nicholas-Applegate
Mutual Funds, you may be eligible for a CDSC waiver prior to the mandatory
distribution age.
* If you think you may be eligible for a CDSC waiver, contact your financial
representative or the Shareholder Servicing Agent.
Reinstatement Privilege. If you sell Class B, Class C or Class T shares of a ING
Pilgrim Fund, you may reinvest some or all of the proceeds in the same share
class within 90 days without a sales charge. Reinstated Class B, Class C and
Class T shares will retain their original cost and purchase date for purposes of
the CDSC. This privilege can be used only once per calendar year. If you want to
use the Reinstatement Privilege, contact your financial representative or the
Shareholder Servicing Agent. Consult the SAI for more information.
Sales Charge Waivers. Class A or Class M shares may be purchased without a sales
charge by certain individuals and institutions. For additional information,
contact the Shareholder Servicing Agent, or see the Statement of Additional
Information.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 45
<PAGE>
SHAREHOLDER GUIDE HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------
The minimum initial investment amounts for the ING Pilgrim Funds are as follows:
* Non-retirement accounts: $1,000
* Retirement accounts: $250
* Pre-Authorized Investment Plan: $100 to open; you must invest at least $100
a month.
The minimum additional investment is $100.
Make your investment using the table on the right.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. The ING Pilgrim Funds reserve the right to waive minimum
investment amounts. The Funds reserve the right to liquidate sufficient shares
to recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $1,000.00
($250.00 for IRAs).
Retirement Plans
The Funds have available prototype qualified retirement plans for both
corporations and for self-employed individuals. They also have available
prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust -- Kansas City (SSB) acts as the custodian under these plans. For
further information, contact the Shareholder Servicing Agent at (800) 992-0180.
SSB currently receives a $12 custodial fee annually for the maintenance of such
accounts.
Initial Additional
Method Investment Investment
------ ---------- ----------
By Contacting An investment
Your professional with an
Investment authorized firm
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Visit or consult an
investment investment
professional. Make professional. Fill out
your check payable to the Account Additions
the ING Pilgrim Funds form included on the
and mail it, along with bottom of your account
a completed statement along with
Application. Please your check payable to
indicate your the Fund and mail
investment professional them to the address on
on the New Account the account statement.
Application Remember to write
your account number
on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the Fund
in the care of:
State Street Bank and
Trust -- Kansas City
ABA #101003621
Kansas City, MO
credit to: ____________
(the Fund)
A/C #751-8315; for
further credit to: _________
Shareholder
A/C #_________________
(A/C # you received over
the telephone)
Shareholder Name:
---------------------
(Your Name Here)
After wiring funds you must
complete the Account
Application and send it to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
46 Shareholder Guide
<PAGE>
HOW TO REDEEM SHARES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
You may redeem shares using the table on the right.
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $10,000.
* Minimum withdrawal amount is $100.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a Fund could elect to make payment in securities
for redemptions in excess of $250,000 or 1% of its net assets during any 90-day
period for any one shareholder. An investor may incur brokerage costs in
converting such securities to cash.
Method Procedures
------ ----------
By Contacting Your You may redeem by contacting your
Investment Professional investment professional. Investment
professionals may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes
any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check: You may have redemption
proceeds (up to a maximum of $100,000) mailed to an
address which has been on record with ING Pilgrim
Funds for at least 30 days. Receiving Proceeds By
Wire: You may have redemption proceeds (subject to a
minimum of $5,000) wired to your pre-designated bank
account. You will not be able to receive redemption
proceeds by wire unless you check the box on the
Account Application which signifies that you wish to
receive redemption proceeds by wire and attach a
voided check. Under normal circumstances, proceeds
will be transmitted to your bank on the business day
following receipt of your instructions, provided
redemptions may be made. In the event that share
certificates have been issued, you may not request a
wire redemption by telephone.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 47
<PAGE>
SHAREHOLDER GUIDE
TRANSACTION POLICIES
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of each class of each
Fund is calculated by taking the value of the Fund's assets attributable to that
class, subtracting the Fund's liabilities attributable to that class, and
dividing by the number of shares of that class that are outstanding. Because
foreign securities may trade on days when the Funds do not price shares, the net
asset value of a Fund that invests in foreign securities may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.
In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
and short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees. Valuing
securities at fair value involves greater reliance on judgment than securities
that have readily available market quotations.
Price of Shares
When you buy shares, you pay the NAV plus any applicable sales charge. When you
sell shares, you receive the NAV minus any applicable deferred sales charge.
Exchange orders are effected at NAV.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued
unless you request them in writing.
Telephone Orders
The Funds and their transfer agent will not be responsible for the authenticity
of phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Funds and their transfer agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Funds and
their transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other ING
Pilgrim Fund, except for Lexington Money Market Trust and ING Pilgrim Corporate
Leaders Trust Fund, without paying any additional sales charge, except that
Class A shares of the Pilgrim Money Market Fund for which no sales charge was
paid must pay the applicable sales load on an exchange into Class A shares of
another Fund. In addition, Class T shares of any Fund may be exchanged for Class
B shares of the Pilgrim Money Market Fund. Shares subject to a CDSC will
continue to age from the date that the original shares were purchased. If you
exchange shares of a Fund that at the time you acquired the shares was a
Nicholas-Applegate Mutual Fund, the shares you receive on the exchange will be
subject to the current CDSC structure and conversion rights of the Fund being
acquired, although the shares will continue to age for CDSC and conversion
purposes from the date the original shares were acquired.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes. There is no specific limit on exchange frequency;
however, the Funds are intended for long-term investment and not as a short-term
trading vehicle. The Adviser may prohibit excessive exchanges (more than four
per year). The Adviser also may, on 60 days' prior notice, restrict the
frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
48 Shareholder Guide
<PAGE>
TRANSACTION POLICIES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
Systematic Exchange Privilege
With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end ING Pilgrim Fund. This exchange privilege may be modified at any time
or terminated upon 60 days' written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at Net Asset Value (NAV), the
shares of any shareholder whose account (except for IRAs) has a value of less
than $1,000, other than as a result of a decline in the NAV per share.
Account Access
Unless your ING Pilgrim shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your acount information over the internet at www.pilgrimfunds.com, or via a
touch tone telephone by calling (800) 992-0180 and selecting Option 1. Should
you wish to speak with a Shareholder Service Representative you may call the
toll-free number listed above and select Option 2.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 49
<PAGE>
MANAGEMENT OF THE FUNDS ADVISERS
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds (except the Tax Efficient
Equity and Internet Funds). ING Mutual Funds Management Co. LLC ("IMFC") serves
as the investment adviser to the Tax Efficient Equity and Internet Funds. ING
Pilgrim and IMFC have overall responsibility for the management of the Funds.
ING Pilgrim and IMFC provide or oversee all investment advisory and portfolio
management services for each Fund, and assist in managing and supervising all
aspects of the general day-to-day business activities and operations of the
Funds, including custodial, transfer agency, dividend disbursing, accounting,
auditing, compliance and related services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Through its subsidiaries, ReliaStar offers individuals and
institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products, and personal finance education.
On July 26, 2000, ReliaStar was acquired by ING Group (NYSE: ING). ING Group is
a global financial institution active in the field of insurance, banking, and
asset management in more than 65 countries, with almost 100,000 employees.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors,
an indirect wholly-owned subsidiary of ReliaStar, merged with ING Pilgrim
Investments. Pilgrim Advisors and ING Pilgrim Investments were sister companies
and shared certain resources and investment personnel.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired
Lexington Global Asset Managers, Inc. the parent company of Lexington, and ING
Pilgrim Investments was approved as Adviser to the Funds formerly advised by
Lexington.
Organized in _____________ , IMFC is registered as an investment adviser. IMFC
is a wholly owned subsidiary of ING Group.
As of December 31, 2000, ING Pilgrim managed over $ billion in assets.
As of December 31, 2000, IMFC managed over $ billion in assets.
ING Pilgrim's and IMFC's principal address is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.
ING Pilgrim and IMFC receives a monthly fee for their services based on the
average daily net assets of each of the Funds.
The following table shows the aggregate annual management fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
Management
Fund Fee
---- ---
MagnaCap 0.71%
Growth and Income 0.62
LargeCap Leaders 1.00
Research Enhanced Index 0.70
Tax Efficient Equity 0.80
Growth Opportunities 0.75
LargeCap Growth 0.75
MidCap Value 1.00
MidCap Opportunities 1.00
MidCap Growth 0.75
Growth + Value 1.00
SmallCap Opportunities 0.75
SmallCap Growth 1.00
Bank and Thrift 0.72
Internet 1.25
Balanced 0.75
Convertible 0.75
ING Pilgrim Directly Manages the Portfolios of the Following Funds:
Growth Opportunities Fund, MidCap
Opportunities Fund and MidCap Growth Fund.
The following individuals share responsibility for the day-to-day management of
the Growth Opportunities Fund, MidCap Opportunities Fund and MidCap Growth Fund.
Mary Lisanti, Executive Vice President and Chief Investment Officer -- Domestic
Equities of ING Pilgrim, has served as a Senior Portfolio Manager of MidCap
Opportunities Fund since the fund was formed in August 1998, Growth
Opportunities Fund since August 1998, and ING Pilgrim MidCap Growth Fund since
April 2000. Prior to joining ING Pilgrim in October 1999, Ms. Lisanti was
Executive Vice President and Chief Investment Officer -- Domestic Equities with
Northstar Investment Management Corp., which subsequently merged into ING
Pilgrim. From 1996 to 1998, Ms. Lisanti was a Portfolio Manager at Strong
Capital Management. From 1993 to 1996, Ms. Lisanti was a Managing Director and
Head of Small- and Mid-Capitalization Equity Strategies at Bankers Trust Corp.
Jeffrey Bernstein, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of MidCap Opportunities Fund since the fund was formed in
August 1998, Growth Opportunities Fund since August 1998, and ING Pilgrim MidCap
Growth Fund since April 2000. Prior to joining ING Pilgrim in October 1999, Mr.
Bernstein was a portfolio manager at Northstar Investment Management Corp.,
which subsequently merged into ING Pilgrim. Prior to May 1998, Mr. Bernstein was
a Portfolio Manager at Strong Capital Management. From 1995 to 1997, Mr.
Bernstein was a Portfolio Manager at Berkeley Capital.
50 Management of the Funds
<PAGE>
ADVISERS MANAGEMENT OF THE FUNDS
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SmallCap Opportunities Fund and SmallCap Growth Fund
Mary Lisanti, whose background is described above, has served as a manager of
the SmallCap Opportunities Fund since July 1998 and SmallCap Growth Fund since
April 2000.
MagnaCap Fund
This Fund is managed by a team led by Howard N. Kornblue, Senior Vice President
and Senior Portfolio Manager for ING Pilgrim. Mr. Kornblue has served as a
Portfolio Manager of MagnaCap Fund since 1989. The other individual on the team
is G. David Underwood.
Growth and Income Fund
Alan H. Wapnick, Senior Vice President and Senior Portfolio Manager of Growth
and Income Fund has been managing the Fund's portfolio since January, 1994. He
joined ING Pilgrim in July 2000. Prior to July 2000, he was Senior Vice
President and Senior Portfolio Manager at Lexington (which was acquired by ING
Pilgrim's parent company in July 2000). Prior to joining Lexington in 1986, Mr.
Wapnick was an equity analyst with Merrill Lynch, J.W. Seligman, Dean Witter and
most recently Union Carbide Corporation.
LargeCap Leaders and MidCap Value Fund
The LargeCap Leaders and MidCap Value Funds are managed by a team led by G.
David Underwood, Senior Vice President and Senior Portfolio Manager for ING
Pilgrim. Mr. Underwood is the Lead Portfolio Manager of LargeCap Leaders Fund.
Prior to joining ING Pilgrim in December, 1996, Mr. Underwood served as
Director of Funds Management for First Interstate Capital Management. Mr.
Underwood's prior experience includes a 10 year association with Integra Trust
Company of Pittsburgh where he served as Director of Research and Senior
Portfolio Manager.
LargeCap Growth Fund
Mary Lisanti, whose background is described above, has served as Senior
Portfolio Manager of the LargeCap Growth Fund since October 1, 2000.
Thomas J. Sullivan, Vice President of ING Pilgrim, has served as a Portfolio
Manager of LargeCap Growth Fund since October 1, 2000. Prior to joining ING
Pilgrim, Mr. Sullivan was a Partner and Equity Trader for First NY Securities,
LLC since April, 2000. From April, 1994 to March, 2000, Mr. Sullivan was Vice
President and portfolio manager at Nicholas-Applegate Capital Management.
Bank and Thrift Fund
Carl Dorf, Senior Vice President and Senior Portfolio Manager of Bank and Thrift
Fund has been managing the Fund's portfolio since January 1991, when he joined
ING Pilgrim's predecessor. Mr. Dorf is also a Senior Vice President of ING
Pilgrim.
Balanced Fund
The following individuals share responsibility for the day-to-day management of
the Balanced Fund:
G. David Underwood, whose background is described above, has served as Senior
Portfolio Manager of the equity portion of the Balanced Fund's assets since May
24, 1999.
Robert K. Kinsey, Vice President and Portfolio Manager, has served as a
Portfolio Manager of Balanced Fund since May 24, 1999. Mr. Kinsey manages
Balanced Fund's assets that are invested in assets other than high yield debt
securities. Prior to joining ING Pilgrim, Mr. Kinsey was a Vice President and
Fixed Income Portfolio Manager for Federated Investors from January 1995 to
March 1999. From July 1992 to January 1995, Mr. Kinsey was a Principal and
Portfolio Manager for Harris Investment Management.
Edwin Schriver, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of the high yield portion of the Balanced Fund's assets since
October 2000. Prior to joining ING Pilgrim, Mr. Schriver was a Senior High Yield
Analyst for Dreyfus Corporation since 1998. From 1996 to 1997, Mr. Schriver was
the President of Crescent City Research, an investment research and software
firm. Prior to 1996, Mr. Schriver was President of an SEC registered investment
adviser and held various senior portfolio management positions.
Convertible Fund
Andrew Chow, Vice President of ING Pilgrim, has served as a Portfolio Manager of
Convertible Fund since October 1, 2000. Prior to joining ING Pilgrim, Mr. Chow
was the portfolio manager of the Conseco Convertible Securities Fund since 1998.
He joined Conseco in 1991 where he was also responsible for managing convertible
securities accounts.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Management of the Funds 51
<PAGE>
MANAGEMENT OF THE FUNDS SUB-ADVISERS
--------------------------------------------------------------------------------
For the following Funds, ING Pilgrim and IMFC has engaged a Sub-Adviser to
provide the day-to-day management of the Fund's portfolio. The Sub-Advisers are
among the most respected institutional investment advisers in the world, and
have been selected primarily on the basis of their successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles.
Research Enhanced Index Fund
J.P. Morgan Investment Management Inc.
A registered investment adviser, J.P. Morgan Investment Management Inc. (J.P.
Morgan) serves as Sub-Adviser to the ING Pilgrim Research Enhanced Index Fund.
The firm was formed in 1984. The firm evolved from the Trust and Investment
Division of Morgan Guaranty Trust Company which acquired its first tax-exempt
client in 1913 and its first pension account in 1940. J.P. Morgan currently
manages approximately $349 billion for institutions and pension funds. The
company is a wholly owned subsidiary of J.P. Morgan & Co. J.P. Morgan's
principal address is 522 Fifth Avenue, New York, New York 10036.
Nanette Buziak, Timothy Devlin and Bernard Kroll share the responsibility for
the day-to-day management of the ING Pilgrim Research Enhanced Index Fund.
Ms. Buziak has co-managed the ING Pilgrim Research Enhanced Index Fund since
April 1999. At J.P. Morgan, she serves as a Portfolio Manager and Member of the
Structured Equity Group.
Ms. Buziak has over 8 years of investment management experience. Before joining
J.P. Morgan in 1997, Ms. Buziak was an index arbitrage trader and convertible
bond portfolio manager at First Marathon America, Inc.
Mr. Devlin has co-managed the ING Pilgrim Research Enhanced Index Fund since
the Fund was formed in December 1998. At J.P. Morgan, he serves as a Portfolio
Manager and Member of the Structured Equity Group.
Mr. Devlin has over 12 years of investment management experience. Before
joining J.P. Morgan in 1996, Mr. Devlin was a Portfolio Manager for nine years
at Mitchell Hutchins Asset Management, Inc. where he managed
quantitatively-driven portfolios for institutional and retail investors.
Mr. Kroll has co-managed the ING Pilgrim Research Enhanced Index Fund since
March 2000. At J.P. Morgan he serves as a Portfolio Manager and Member of the
Structured Equity Group.
Mr. Kroll has over 20 years of investment experience. Before joining J.P. Morgan
in 1996, Mr. Kroll was an equity derivatives specialist at Goldman Sachs & Co.
Earlier, he managed his own software development firm and options broker-dealer,
and managed several derivatives businesses at Kidder, Peabody & Co.
Tax Efficient Equity Fund
Delta Asset Management
A registered investment adviser, Delta Asset Management ("Delta") serves as
Sub-Advisor to the ING Pilgrim Tax Efficient Equity Fund. Delta is a division of
Furman Selz Capital Management LLC ("FSCM"). Delta manages over $5 billion for
institutions and high net worth individuals. Delta's principal address is 333
South Grand Avenue, Los Angeles, CA 90071.
Mr. Robert Sandroni, Mr. Carl Goldsmith and Ms. Marla K. Ryan have primary
responsibility for managing the Fund. Mr. Sandroni and Mr. Goldsmith have been
investment professionals with Delta since 1991 and each has over 20 years of
investment experience. Ms. Ryan has been an investment professional with Delta
since 1998 and has over 10 years of investment experience.
Growth + Value Fund
Navellier Fund Management, Inc.
A registered investment adviser, Navellier Fund Management Inc. (Navellier)
serves as Sub-Adviser to the ING Pilgrim Growth + Value Fund. Navellier and its
affiliate, Navellier & Associates, Inc., manage over $5 billion for
institutions, pension funds and high net worth individuals. Navellier's
principal address is 1 East Liberty, Third Floor, Reno, Nevada 89501.
Louis Navellier has managed the ING Pilgrim Growth + Value Fund since the Fund
was formed in November 1996. Mr. Navellier has over 19 years of investment
management experience and is the principal owner of Navellier & Associates,
Inc., a registered investment adviser that manages investments for institutions,
pension funds and high net worth individuals. Mr. Navellier's investment
newsletter, MPT Review, has been published for over 19 years and is widely
renowned throughout the investment community.
Internet Fund
ING Investment Management Advisors B.V.
A registered investment adviser, ING Investment Management Advisors B.V.
("IIMA") serves as sub-advisor to the ING Pilgrim Internet Fund. IIMA manages
over $159 billion for entities affiliated and unaffiliated with ING Group.
IIMA's principal address is Schenkkede 65, 2595 AS The Hague, The Netherlands.
Mr. Guy Uding has primary responsibility for managing the Fund and heads a
three-member team of investment professionals. Mr. Uding has been employed by
IIMA and its affiliates since 1995 and has five years of investment experience.
52 Management of the Funds
<PAGE>
DIVIDENDS/TAXES DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Dividends
The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends, if any, as follows:
Annually(1) Semi-Annually(1) Quarterly(2)
----------- ---------------- ------------
LargeCap Leaders MagnaCap Balanced
Research Enhanced Growth and Convertible
Index Income
Tax Efficient Equity
Growth
Opportunities
LargeCap Growth
MidCap Value
MidCap
Opportunities
MidCap Growth
Growth + Value
SmallCap
Opportunities
SmallCap Growth
Bank and Thrift
Internet
----------
(1) Distributions normally expected to consist primarily of capital gains.
(2) Distributions normally expected to consist on an annual basis of a variable
combination of capital gains and ordinary income.
Each Fund distributes capital gains, if any, annually.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class A, B, C, M or T shares of a Fund invested in another ING Pilgrim
Fund which offers the same class shares. If you are a shareholder of ING Pilgrim
Prime Rate Trust, whose shares are not held in a broker or nominee account, you
may, upon written request, elect to have all dividends invested into a
pre-existing Class A account of any open-end ING Pilgrim Fund.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely on your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive. A particular distribution generally will be taxable as either ordinary
income or long-term capital gains. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a Fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.
Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital gains
distributions.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Dividends, Distributions and Taxes 53
<PAGE>
MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information (the
"SAI").
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the adviser or sub-adviser
can decide whether to use them or not. The Funds named below invest in these
securities or use these techniques as part of the Fund's principal investment
strategy. However, the Adviser or Sub-Adviser of any Fund may also use these
investment techniques or make investments in securities that are not a part of
the Fund's principal investment strategy.
PRINCIPAL RISKS
Investments in Foreign Securities (MagnaCap, Balanced and Growth and Income
Funds). There are certain risks in owning foreign securities, including those
resulting from: fluctuations in currency exchange rates; devaluation of
currencies; political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions;
reduced availability of public information concerning issuers; accounting,
auditing and financial reporting standards or other regulatory practices and
requirements that are not uniform when compared to those applicable to domestic
companies; settlement and clearance procedures in some countries that may not be
reliable and can result in delays in settlement; higher transaction and custody
expenses than for domestic securities; and limitations on foreign ownership of
equity securities. Also, securities of many foreign companies may be less liquid
and the prices more volatile than those of domestic companies. With certain
foreign countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Funds, including the withholding of dividends.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Inability to Sell Securities (All Funds except MagnaCap, Research Enhanced
Index, LargeCap Growth and Bank and Thrift Funds). Some securities usually trade
in lower volume and may be less liquid than securities of large established
companies. These less liquid securities could include securities of small and
mid-size U.S. companies, high-yield securities, convertible securities, unrated
debt and convertible securities, securities that originate from small offerings,
and foreign securities, particularly those from companies in emerging markets.
The Fund could lose money if it cannot sell a security at the time and price
that would be most beneficial to the Fund.
High Yield Securities (Balanced and Convertible Funds). Investments in high
yield securities generally provide greater income and increased opportunity for
capital appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and principal and
income risk. High yield securities are not considered investment grade, and are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of high
yield securities have been found to be less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic downturns
or individual corporate developments. High yield securities structured as zero
coupon or pay-in-kind securities tend to be more volatile. The secondary market
in which high yield securities are traded is generally less liquid than the
market for higher grade bonds. At times of less liquidity, it may be more
difficult to value high yield securities.
Corporate Debt Securities (Balanced and Convertible Funds). Corporate debt
securities are subject to the risk of the issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the credit-worthiness of the issuer and general market liquidity. When
interest rates decline, the value of the Fund's debt securities can be expected
to rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility." According to this measure, the longer the
maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.
54 More Information About Risks
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MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
Convertible Securities (All Funds except Research Enhanced Index and Growth
Opportunities Funds). The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.
Other Investment Companies (Bank and Thrift and Balanced Funds). Each Fund may
invest up to 10% of its assets in other investment companies. When a Fund
invests in other investment companies, you indirectly pay a proportionate share
of the expenses of that other investment company (including management fees,
administration fees, and custodial fees) in addition to the expenses of the
Fund.
Interests in Loans (Balanced Fund). The Fund may invest in participation
interests or assignments in secured variable or floating rate loans, which
include participation interests in lease financings. Loans are subject to the
credit risk of nonpayment of principal or interest. Substantial increases in
interest rates may cause an increase in loan defaults. Although the loans will
generally be fully collateralized at the time of acquisition, the collateral may
decline in value, be relatively illiquid, or lose all or substantially all of
its value subsequent to the Fund's investment. Many loans are relatively
illiquid, and may be difficult to value.
Derivatives (Balanced Fund). Generally, derivatives can be characterized as
financial instruments whose performance is derived, at least in part, from the
performance of an underlying asset or assets. Some derivatives are sophisticated
instruments that typically involve a small investment of cash relative to the
magnitude of risks assumed. These may include swap agreements, options, forwards
and futures. Derivative securities are subject to market risk, which could be
significant for those that have a leveraging effect. Many of the Funds do not
invest in these types of derivatives, and some do, so please check the
description of the Fund's policies. Derivatives are also subject to credit risks
related to the counterparty's ability to perform, and any deterioration in the
counterparty's creditworthiness could adversely affect the instrument. A risk of
using derivatives is that the adviser or sub-adviser might imperfectly judge the
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk in another security, the hedge might not correlate to the
market's movements and may have unexpected or undesired results, such as a loss
or a reduction in gains. Portfolio Turnover. Each Fund (except the MagnaCap,
LargeCap Leaders, Research Enhanced Index, MidCap Value and Bank and Thrift
Funds) is generally expected to engage in frequent and active trading of
portfolio securities to achieve its investment objective. A high portfolio
turnover rate involves greater expenses to a Fund, including brokerage
commissions and other transaction costs, and is likely to generate more taxable
short-term gains for shareholders, which may have an adverse effect on the
performance of the Fund.
Investments in Small- and Mid-Capitalization Companies (MidCap Value, MidCap
Opportunities, MidCap Growth, SmallCap Opportunities, SmallCap Growth, Tax
Efficient Equity and Internet Funds). The Funds may invest in small and mid
capitalization companies. 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.
Non-diversified Investment Companies (Internet Fund). Certain 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 (Bank and Thrift and Internet Funds). Certain Funds "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.
OTHER RISKS
Emerging Markets Investments. Because of less developed markets and economies
and, in some countries, less mature governments and governmental institutions,
the risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in emerging
market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete or unseasonal financial systems; environmental problems; less well
developed legal systems; and less reliable custodial services and settlement
practices.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
More Information About Risks 55
<PAGE>
MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
U.S. Government Securities. Some U.S. Government agency securities may be
subject to varying degrees of credit risk particularly those not backed by the
full faith and credit of the United States Government. All U.S. Government
securities may be subject to price declines in the securities due to changing
interest rates.
Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities (except MagnaCap Fund may not invest in restricted
securities). If a security is illiquid, the Fund might be unable to sell the
security at a time when the adviser might wish to sell, and the security could
have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Mortgage-Related Securities. Although mortgage loans underlying a
mortgage-backed security 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. Like other fixed income securities, when interest
rates rise, the value of a mortgage-backed security generally will decline;
however, when interest rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as much as other fixed
income securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have the effect
of shortening or extending the effective maturity of the security beyond what
was anticipated at the time of the purchase. Unanticipated rates of prepayment
on underlying mortgages can be expected to increase the volatility of such
securities. In addition, the value of these securities may fluctuate in response
to the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by a Fund. Additionally, although mortgages
and mortgage-related securities are generally supported by some form of
government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations. Temporary
Defensive Strategies. When the Adviser or Sub-Adviser to a Fund anticipates
unusual market or other conditions, the Fund may temporarily depart from its
principal investment strategies as a defensive measure. To the extent that a
Fund invests defensively, it likely will not achieve capital appreciation.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Lending Portfolio Securities. In order to generate additional income, certain
Funds may lend portfolio securities in an amount up to 331|M/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower default or fail financially.
Borrowing. Certain Funds may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar securities at an agreed upon price and date.
Whether such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, net asset value will decline
faster than otherwise would be the case. Reverse repurchase agreements and
dollar rolls, as leveraging techniques, may increase a Fund's yield; however,
such transactions also increase a Fund's risk to capital and may result in a
shareholder's loss of principal.
Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a
Fund of a security which has been borrowed from a third party on the expectation
that the market price will drop. If the price of the security rises, the Fund
may have to cover its short position at a higher price than the short sale
price, resulting in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.
Percentage and Rating Limitations Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
56 More Information About Risks
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). A report of
each Fund's independent auditors, along with the Fund's financial statements, is
included in the Fund's annual report, which is available upon request.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Financial Highlights 57
<PAGE>
FINANCIAL
ING PILGRIM MAGNACAP FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended December 31,
2000 has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Six months
ended
12-31-00 Year Ended June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.69 17.07 15.92 16.69 14.03
Income from investment operations:
Net investment income (loss) $ 0.07 0.07 0.04 0.10 0.09
Net realized and unrealized gains on
investments $ (0.08) 2.37 3.02 4.16 2.87
Total from investment operations $ (0.01) 2.44 3.06 4.26 2.96
Less distributions from:
Net investment income $ 0.05 0.04 0.06 0.12 0.06
Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.84 17.69 17.07 15.92 16.69
Total Return(2): % (0.36) 15.93 20.53 30.82 21.31
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 303,864 368,508 348,759 290,355 235,393
Ratios to average net assets:
Expenses(3) % 1.29 1.35 1.37 1.46 1.68
Net investment income (loss)(3) % 0.41 0.41 0.29 0.64 0.54
Portfolio turnover rate % 26 48 53 77 15
Class B
--------------------------------------------------------------------------
Six months July 17,
ended 1995(1) to
12-31-00 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
Per Share Operating Performance:
Net asset value, beginning of period $ 17.36 16.86 15.81 16.59 14.22
Income from investment operations:
Net investment income (loss) $ (0.05) (0.04) (0.04) -- 0.06
Net realized and unrealized gains on
investments $ (0.08) 2.32 2.97 4.13 2.61
Total from investment operations $ (0.13) 2.28 2.93 4.13 2.67
Less distributions from:
Net investment income $ -- -- 0.03 -- 0.06
Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.44 17.36 16.86 15.81 16.59
Total Return(2): % (1.11) 15.12 19.76 29.92 18.98
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 87,167 116,227 77,787 37,427 10,509
Ratios to average net assets:
Expenses(3) % 1.99 2.05 2.07 2.16 2.38
Net investment income (loss)(3) % (0.29) (0.29) (0.41) (0.04) 0.07
Portfolio turnover rate % 6 48 53 77 15
Class C
-------------------------------------
Six months Year June 1,
ended ended 1999(1) to
12-31-00 June 30, June 30,
(unaudited) 2000 1999
----------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 17.37 16.69
Income from investment operations:
Net investment income (loss) $ (0.10) --
Net realized and unrealized gains on
investments $ (0.04) 0.68
Total from investment operations $ (0.14) 0.68
Less distributions from:
Net investment income $ -- --
Net realized gains on investments $ 1.79 --
Net asset value, end of period $ 15.44 17.37
Total Return(2): % (1.17) 4.07
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,660 601
Ratios to average net assets:
Expenses(3) % 1.99 1.12
Net investment income (loss)(3) % (0.29) 0.42
Portfolio turnover rate % 26 48
Class M
---------------------------------------------------------------------------
Six months July 17,
ended 1995(1) to
12-31-00 Year ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 17.51 16.95 15.87 16.63 14.22
Income from investment operations:
Net investment income (loss) $ (0.01) (0.01) -- 0.02 0.08
Net realized and unrealized gains on
investments $ (0.06) 2.35 2.98 4.16 2.63
Total from investment operations $ (0.07) 2.34 2.98 4.18 2.71
Less distributions from:
Net investment income $ 0.01 -- 0.05 0.03 0.06
Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.64 17.51 16.95 15.87 16.63
Total Return(2): % (0.71) 15.41 20.00 30.26 19.26
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 13,050 16,351 14,675 6,748 1,961
Ratios to average net assets:
Expenses(3) % 1.74 1.80 1.82 1.91 2.13
Net investment income (loss)(3) % (0.04) (0.04) (0.16) 0.22 0.32
Portfolio turnover rate % 26 48 53 77 15
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
58 ING Pilgrim MagnaCap Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by KPMG LLP, independent
auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 21.91 20.27 18.56 15.71 14.36
Net investment income (loss) $ 0.05 -- 0.05 0.07 0.22
Net realized and unrealized gain (loss) from
investment operations $ 3.33 4.30 5.46 4.08 3.00
Total income (loss) from investment operations $ 3.38 4.30 5.51 4.15 3.22
Less distributions:
Distributions from net investment income $ 0.05 -- 0.07 0.13 0.22
Distributions from net realized gains $ 2.86 2.66 3.73 1.17 1.65
Total distributions $ 2.91 2.66 3.80 1.30 1.87
Net asset value, end of period $ 22.38 21.91 20.27 18.56 15.71
Total return(1) % 15.54 21.42 30.36 26.46 22.57
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 254,532 245,790 228,037 200,309 138,901
Ratio of expenses to average net assets(2) % 0.95 1.16 1.17 1.13 1.09
Ratio of net investment income (loss)
to average net assets(2) % 0.21 0.06 0.21 0.43 1.38
Portfolio Turnover Rate % 86.31 63.20 88.15 101.12 159.94
</TABLE>
----------
(1) Total returns is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(2) Annualized for periods less than one year.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth and Income Fund 59
<PAGE>
FINANCIAL
ING PILGRIM LARGECAP LEADERS FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except the six months ended December 31,
2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998(2) 1997 1996(1)
----------- ---- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.35 14.70 14.17 11.77 10.00
Income from investment operations:
Net investment income (loss) $ (0.04) -- 0.01 0.06 0.07
Net realized and unrealized gains on
investments $ 0.57 3.00 2.30 2.63 1.87
Total from investment operations $ 0.53 3.00 2.31 2.69 1.94
Less distributions from:
Net investment income $ -- -- -- 0.05 0.08
Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period $ 15.88 17.35 14.70 14.17 11.77
Total Return(4): % 3.05 20.66 17.71 23.24 19.56
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 10,024 8,506 7,606 8,961 2,530
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.75 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(5) % 1.84 1.98 2.28 2.33 5.44
Net investment income (loss) after
expense reimbursement(5)(6) % (0.27) (0.04) 0.03 0.41 0.65
Portfolio turnover rate % 39 87 78 86 59
Class B
---------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998(2) 1997 1996(1)
----------- ---- ---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 16.90 14.44 14.04 11.71 10.00
Income from investment operations:
Net investment income (loss) $ (0.17) (0.09) (0.10) (0.02) 0.06
Net realized and unrealized gains on
investments $ 0.57 2.90 2.28 2.59 1.81
Total from investment operations $ 0.40 2.81 2.18 2.57 1.87
Less distributions from:
Net investment income $ -- -- -- -- 0.07
Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period $ 15.30 16.90 14.44 14.04 11.71
Total Return(4): % 2.30 19.71 16.91 22.23 18.85
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 21,544 24,213 15,605 13,611 1,424
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.50 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(5) % 2.59 2.73 3.03 3.08 5.79
Net investment income (loss) after
expense reimbursement(5)(6) % (1.02) (0.79) (0.72) (0.35) (0.25)
Portfolio turnover rate % 39 87 78 86 59
Class C
---------------------------------------
Six months Year June 17,
ended Ended 1999(3) to
Dec. 31, 2000 June 30, June 30,
(unaudited) 2000 1999
----------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.92 16.54
Income from investment operations:
Net investment income (loss) $ (0.06) --
Net realized and unrealized gains on
investments $ 0.46 0.38
Total from investment operations $ 0.40 0.38
Less distributions from:
Net investment income $ -- --
Net realized gains on investments $ 2.00 --
Net asset value, end of period $ 15.32 16.92
Total Return(4): % 2.30 2.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 1,364 --
Ratios to average net assets:
Net expenses after expense reimbursement(5)(6) % 2.50 --
Gross expenses prior to expense
reimbursement(5) % 2.59 --
Net investment income (loss) after expense
reimbursement(5)(6) % (1.02) --
Portfolio turnover rate % 39 87
Class M
------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998(2) 1997 1996(1)
----------- ---- ---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period 17.08 14.55 14.10 11.73 10.00
Income from investment operations:
Net investment income (loss) (0.14) (0.09) (0.07) -- 0.06
Net realized and unrealized gains on
investments 0.58 2.97 2.30 2.62 1.83
Total from investment operations 0.44 2.88 2.23 2.62 1.89
Less distributions from:
Net investment income -- -- -- 0.01 0.07
Net realized gains on investments 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period 15.52 17.08 14.55 14.10 11.73
Total Return(4): 2.54 20.04 17.20 22.58 19.06
Ratios/Supplemental Data:
Net assets, end of period (000's) 4,677 5,661 5,533 4,719 1,240
Ratios to average net assets:
Net expenses after expense reimbursement(5)(6) 2.25 2.25 2.25 2.25 2.25
Gross expenses prior to expense
reimbursement(5) 2.34 2.48 2.78 2.83 5.90
Net investment income (loss) after expense
reimbursement(5)(6) (0.77) (0.54) (0.47) (0.10) 0.06
Portfolio turnover rate 39 87 78 86 59
</TABLE>
----------
(1) The Fund commenced operations on September 1, 1995.
(2) Effective November 1, 1997, ING Pilgrim Investments, Inc. assumed the
portfolio investment responsibilities of the Fund from ARK Asset Management
Company, Inc.
(3) Commencement of offering shares.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses.
60 ING Pilgrim LargeCap Leaders Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A Class B Class C
--------------------- ---------------------- --------------------
Year Period Year Period Year Period
ended ended ended ended ended ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2000 1999(1) 2000 1999(1) 2000 1999(1)
---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 10.00 10.00 10.00
Net investment income (loss) $ 0.01 (0.02) (0.02)
Net realized and unrealized gain on
investments $ 1.13 1.11 1.11
Total from investment operations $ 1.14 1.09 1.09
Distributions from net realized gain $ -- -- --
Total distributions $ -- -- --
Net asset value, end of the period $ 11.14 11.09 11.09
Total return(2) % 11.40 10.90 10.90
Ratios and supplemental data:
Net assets, end of the period (000's) $ 27,091 99,249 75,941
Ratio of expenses to average net assets
after reimbursement(4) % 1.29 (3) 1.99 (3) 1.99 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 1.56 (3) 2.29 (3) 2.27 (3)
Ratio of net investment income (loss) to
average net assets % 0.23 (3) (0.49)(3) (0.49)(3)
Portfolio turnover % 26 26 26
</TABLE>
----------
(1) Class A, B and C commenced operations on December 30, 1998.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Research Enhanced Index Fund 61
<PAGE>
FINANCIAL
ING TAX EFFICIENT EQUITY FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------- ---------------------- ----------------------
Year ended October 31, Year ended October 31, Year ended October 31,
---------------------- ---------------------- ----------------------
2000 1999(1) 2000 1999(1) 2000 1999(1)
---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on
investments $
Total from investment operations $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets, end of the period (000's) $
Ratio of expenses to average net assets
after reimbursement(4) %
Ratio of expenses to average net assets
prior to expense reimbursement %
Ratio of net investment income (loss) to
average net assets %
Portfolio turnover %
</TABLE>
----------
(1) Class A, B and C commenced operations on December 15, 1998.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Expenses calculated net of taxes and advisor reimbursement.
62 ING Tax Efficient Equity Fund
<PAGE>
FINANCIAL
ING PILGRIM GROWTH OPPORTUNITIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below has
been audited by KPMG LLP, independent auditors. For all periods ending prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class A
Year ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 26.06 21.26 17.92 15.53
Net investment income (loss) $ (0.15) (0.08) 0.03 0.02
Net realized and unrealized gain
on investments $ 20.10 5.09 4.16 3.18
Total from investment operations $ 19.95 5.01 4.19 3.20
Dividends from net
investment income $ -- -- -- --
Distributions from net realized gain $ (12.84) (0.21) (0.85) (0.81)
Total distributions $ (12.84) (0.21) (0.85) (0.81)
Net asset value, end of the period $ 33.17 26.06 21.26 17.92
Total return(2) % 93.26 23.61 23.59 20.54
Ratios and supplemental data:
Net assets at the end
of the period (000s) $ 101,260 29,358 9,334 4,750
Ratio of expenses to average net
assets after reimbursement % 1.39 1.37 1.37 150
Ratio of expenses to average net
assets prior to expense
reimbursement % 1.39 1.37 1.40 1.56
Ratio of net investment income
(loss) to average net assets % (0.98) (0.47) 0.04 0.11
Portfolio turnover % 286 98 32 62
Class B
Year ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 25.46 20.93 17.76 15.50
Net investment income (loss) $ (0.18) (0.23) (0.15) (0.06)
Net realized and unrealized gain
on investments $ 19.26 4.97 4.17 3.13
Total from investment operations $ 19.08 4.74 4.02 3.07
Dividends from net
investment income $ -- -- -- --
Distributions from net realized gain $ (12.84) (0.21) (0.85) (0.81)
Total distributions $ (12.84) (0.21) (0.85) (0.81)
Net asset value, end of the period $ 31.70 25.46 20.93 17.76
Total return(2) % 91.84 22.69 22.84 19.74
Ratios and supplemental data:
Net assets at the end
of the period (000s) $ 88,305 15,480 8,815 4,444
Ratio of expenses to average net
assets after reimbursement % 2.10 2.13 2.14 2.20
Ratio of expenses to average net
assets prior to expense
reimbursement % 2.10 2.13 2.14 2.24
Ratio of net investment income
(loss) to average net assets % (1.69) (1.26) (0.95) (0.55)
Portfolio turnover % 286 98 32 62
Class C
Year ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
Operating performance:
Net asset value, beginning of the period $ 25.48 20.91 17.76 15.50
Net investment income (loss) $ (0.10) (0.27) (0.13) (0.05)
Net realized and $
unrealized gain on investments $ 19.21 5.05 4.13 3.12
Total from investment operations $ 19.11 4.78 4.00 3.07
Dividends from net $
investment income $ -- -- -- --
Distributions from net realized gain $ (12.84) (0.21) (0.85) (0.81)
Total distributions $ (12.84) (0.21) (0.85) (0.81)
Net asset value, end of the period $ 31.75 25.48 20.91 17.76
Total return(2) % 91.90 22.90 22.73 19.74
Ratios and supplemental data:
Net assets at the end of the
period (000s) $ 21,006 1,625 1,152 365
Ratio of expenses to average net assets
after reimbursement % 2.10 2.13 2.17 2.20
Ratio of expenses to average net assets
prior to expense reimbursement 2.10 2.13 2.17 2.35
Ratio of net investment income (loss) to %
average net assets (1.69) (1.24) (1.00) (0.57)
Portfolio turnover % 286 98 32 62
Class T
Year ended December 31,
-------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of the period $ 25.59 21.02 17.82 15.53
Net investment income (loss) $ (0.39) (0.36) (0.17) (0.06)
Net realized and
unrealized gain on investments $ 19.57 5.14 4.22 3.16
Total from investment operations $ 19.18 4.78 4.05 3.10
Dividends from net
investment income $ -- -- -- --
Distributions from net realized gain $ (12.84) (0.21) (0.85) (0.81)
Total distributions $ (12.84) (0.21) (0.85) (0.81)
Net asset value, end of the period $ 31.93 25.59 21.02 17.82
Total return(2) % 91.72 22.79 22.94 19.90
Ratios and supplemental data:
Net assets at the end of the
period (000s) $ 83,772 52,023 73,674 70,406
Ratio of expenses to average net assets
after reimbursement % 2.03 2.05 2.03 2.00
Ratio of expenses to average net assets
prior to expense reimbursement 2.03 2.05 2.03 2.04
Ratio of net investment income (loss) to %
average net assets (1.62) (1.19) (0.81) (3.05)
Portfolio turnover % 286 98 32 62
</TABLE>
----------
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
63 ING Pilgrim Growth Opportunities Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by another independent auditor.
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------
Six months Year Three months Year July 21,
ended Ended ended ended 1997(1) to
Dec. 31, 2000 June 30, June 30, March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998
----------- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 28.09 24.94 15.73 12.50
Income from investment operations:
Net investment income (loss) $ (0.22) (0.02) (0.08) (0.03)
Net realized and unrealized gains on
investments $ 15.63 3.17 9.77 3.29
Total from investment operations $ 15.41 3.15 9.69 3.26
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.48 0.03
Net asset value, end of period $ 43.12 28.09 24.94 15.73
Total Return(3): % 55.35 12.63 63.06 62.35
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 186,261 30,108 12,445 4,742
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.43 1.59 1.60
Gross expenses prior to expense
reimbursement(4) % 1.36 1.45 2.24 4.70
Net investment income (loss) after
expense reimbursement(4)(5) % (0.87) (0.56) (0.65) (0.87)
Portfolio turnover % 139 27 253 306
Class B
------------------------------------------------------------------
Six months Year Three months Year July 21,
ended Ended ended ended 1997(1) to
Dec. 31, 2000 June 30, June 30, March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998
----------- ---- ------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 28.15 25.04 15.64 12.50
Income from investment operations:
Net investment income (loss) $ (0.39) (0.05) (0.08) (0.07)
Net realized and unrealized gains on
investments $ 15.56 3.16 9.71 3.24
Total from investment operations $ 15.17 3.11 9.63 3.17
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.23 0.03
Net asset value, end of period $ 42.94 28.15 25.04 15.64
Total Return(3): % 55.37 12.42 62.28 61.08
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 333,256 49,057 20,039 3,187
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.08 2.24 2.25
Gross expenses prior to expense
reimbursement(4) % 2.01 2.10 2.89 4.78
Net investment income (loss) after
expense reimbursement(4)(5) % (1.52) (1.21) (1.28) (1.36)
Portfolio turnover % 139 27 253 306
Class C
---------------------------------------------------------------
Six months Year Three months Year July 21,
ended Ended ended ended 1997(1) to
Dec. 31, 2000 June 30, June 30, March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998
----------- ---- ------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 28.07 24.97 15.63 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.06) (0.07) (0.05)
Net realized and unrealized gains on
investments $ 15.48 3.16 9.65 3.24
Total from investment operations $ 15.13 3.10 9.58 3.19
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.24 0.06
Net asset value, end of period $ 42.82 28.07 24.97 15.63
Total Return(3): % 54.38 12.41 61.97 61.38
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 152,682 17,755 8,004 960
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.01 2.08 2.25 2.25
Gross expenses prior to expense reimbursement(4) % 2.01 2.10 2.90 7.79
Net investment income (loss) after expense
reimbursement(4)(5) % (1.52) (1.21) (1.26) (1.49)
Portfolio turnover % 139 27 253 306
</TABLE>
----------
(1) The Fund commenced operations on July 21, 1997.
(2) Effective May 24, 1999, ING Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-adviser and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Growth Fund 64
<PAGE>
FINANCIAL
ING PILGRIM MIDCAP VALUE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended December 31,
2000, has been audited by KMPG LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996(1)
----------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 15.65 16.79 14.64 11.99 10.00
Income from investment operations:
Net investment income (loss) $ (0.09) (0.09) (0.07) (0.02) 0.13
Net realized and unrealized gains
on investments $ (1.17) 0.12 2.71 2.85 1.91
Total from investment operations $ (1.26) 0.03 2.64 2.83 2.04
Less distributions from:
Net investment income $ -- -- -- 0.07 0.05
Net realized gains on investments $ 0.09 1.17 0.49 0.11 --
Net asset value, end of period $ 14.30 15.65 16.79 14.64 11.99
Total Return(3): % (8.05) 0.95 18.40 23.89 20.48
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 8,875 18,621 27,485 16,985 2,389
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.75 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(4) % 1.88 1.79 1.78 1.94 4.91
Net investment income (loss) after expense
reimbursement(4)(5) % (0.49) (0.48) (0.53) (0.13) 2.00
Portfolio turnover rate % 122 109 85 86 60
Class B
---------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996(1)
Per Share Operating Performance:
Net asset value, beginning of period $ 15.21 16.47 14.49 11.94 10.00
Income from investment operations:
Net investment income (loss) $ (0.23) (0.21) (0.18) (0.05) 0.07
Net realized and unrealized gains
on investments $ (1.11) 0.12 2.65 2.76 1.90
Total from investment operations $ (1.34) (0.09) 2.47 2.71 1.97
Less distributions from:
Net investment income $ -- -- -- 0.05 0.03
Net realized gains on investments $ 0.09 1.17 0.49 0.11 --
Net asset value, end of period $ 13.78 15.21 16.47 14.49 11.94
Total Return(3): % (8.81) 0.21 17.40 22.95 19.80
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 15,840 31,223 40,575 23,258 2,123
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.50 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 2.63 2.54 2.53 2.69 5.32
Net investment income (loss) after expense
reimbursement(4)(5) % (1.24) (1.23) (1.28) (0.90) 1.27
Portfolio turnover rate % 122 109 85 86 60
Class C
-------------------------------------
Six months Year June 2,
ended Ended 1999 to
Dec. 31, 2000 June 30, June 30,
(unaudited) 2000 1999(2)
----------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 15.20 14.84
Income from investment operations:
Net investment income (loss) $ (0.02) (0.02)
Net realized and unrealized gains
on investments $ (1.31) 0.38
Total from investment operations $ (1.33) 0.36
Less distributions from:
Net investment income $ -- --
Net realized gains on investments $ 0.09 --
Net asset value, end of period $ 13.78 15.20
Total Return(3): % (8.75) 2.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 2,688 47
Ratios to average net assets:
Net expenses after expense reimbursement:(4)(5) % 2.50 2.50
Gross expenses prior to expense
reimbursement:(4) % 2.63 2.54
Net investment income (loss) after expense
reimbursement:(4)(5) % (1.24) (1.23)
Portfolio turnover rate % 122 109
Class M
---------------------------------------------------------------------
Six months Sept. 1,
ended 1995 to
Dec. 31, 2000 Year Ended June 30, June 30,
(unaudited) 2000 1999 1998 1997 1996(1)
----------- ---- ---- ---- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 15.30 16.52 14.49 11.93 10.00
Income from investment operations:
Net investment income (loss) $ (0.23) (0.17) (0.15) (0.03) 0.06
Net realized and unrealized gains
on investments $ (1.07) 0.12 2.67 2.76 1.91
Total from investment operations $ (1.30) (0.05) 2.52 2.73 1.97
Less distributions from:
Net investment income $ -- -- -- 0.06 0.04
Net realized gains on investments $ 0.09 1.17 0.49 0.11 --
Net asset value, end of period $ 13.91 15.30 16.52 14.49 11.93
Total Return(3): % (8.49) 0.46 17.76 23.21 19.82
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,873 10,504 13,232 8,378 1,731
Ratios to average net assets:
Net expenses after expense reimbursement:(4)(5) % 2.25 2.25 2.25 2.25 2.25
Gross expenses prior to expense
reimbursement:(4) % 2.38 2.29 2.28 2.44 4.72
Net investment income (loss) after expense
reimbursement:(4)(5) % (0.99) (0.98) (1.03) (0.63) 1.16
Portfolio turnover rate % 122 109 85 86 60
</TABLE>
----------
(1) The Fund commenced operations on September 1, 1995.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
65 ING Pilgrim MidCap Value Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
For the year ended December 31, 2000, the information in the table below has
been audited by KPMG LLP, independent auditors. For all periods ending prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class A Class B
------------------------- ---------------------------
Year ended Year ended
Dec. 31, Dec. 31,
------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1998(1) 2000 1999 1998(1)
Operating performance
Net asset value, beginning of the period $ 12.96 10.00 12.97 10.00
Net investment loss $ (0.09) (0.03) (0.07) (0.03)
Net realized and unrealized gain on
investments $ 12.01 2.99 11.81 3.00
Total from investment operations $ 11.92 2.96 11.74 2.97
Distributions from net realized gain $ (3.59) -- (3.59) --
Total distributions $ (3.59) -- (3.59) --
Net asset value, end of the period $ 21.29 12.96 21.12 12.97
Total return(2): % 103.24 29.60 101.73 29.70
Ratios and supplemental data
Net assets, end of the period (000s) $ 6,291 610 8,252 140
Ratio of expenses to average net assets
after reimbursement % 1.74 1.80 (3) (3) 2.40 2.50 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 1.74 2.42 (3) (3) 2.40 3.27 (3)
Ratio of net investment loss to average
net assets % (1.34) (1.10)(3) (3) (2.00) (2.05)(3)
Portfolio turnover % 201 61 201 61
Class C
-------------------------------------
Year ended
Dec. 31,
-------------------------------------
<S> <C> <C> <C>
2000 1999 1998(1)
Operating performance
Net asset value, beginning of the period 12.96 10.00
Net investment loss (0.07) (0.04)
Net realized and unrealized gain on
investments 11.73 3.00
Total from investment operations 11.66 2.96
Distributions from net realized gain (3.59) --
Total distributions (3.59) --
Net asset value, end of the period 21.03 12.96
Total return(2): 101.16 29.60
Ratios and supplemental data
Net assets, end of the period (000s) 4,560 87
Ratio of expenses to average net assets
after reimbursement (3) 2.36 2.50 (3)
Ratio of expenses to average net assets
prior to expense reimbursement (3) 2.36 3.22 (3)
Ratio of net investment loss to average
net assets (3) (1.98) (2.04)(3)
Portfolio turnover 201 61
</TABLE>
----------
(1) Class A, B and C commenced operations on August 20, 1998.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Opportunities Fund 66
<PAGE>
FINANCIAL
ING PILGRIM MIDCAP GROWTH FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------
Six Three
months Year months
ended Ended ended
Dec. 31, 2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 21.34 19.93 18.63 16.80 18.37 13.61
Income from investment operations:
Net investment income (loss) $ (0.22) (0.06) (0.50) (0.14) (0.17) (0.18)
Net realized and unrealized gains on
investments $ 14.08 1.47 3.17 6.50 0.57 4.94
Total from investment operations $ 13.86 1.41 2.67 6.36 0.40 4.76
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 7.03 -- 1.37 4.53 1.97 --
Net asset value, end of period $ 28.17 21.34 19.93 18.63 16.80 18.37
Total Return(3): % 77.33 7.07 15.36 41.81 1.09 35.07
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 155,976 66,586 67,550 90,619 76,108 77,275
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.49 1.56 1.57 1.60 1.58
Gross expenses prior to expense
reimbursement(4) % 1.36 1.50 1.64 1.66 1.56 1.56
Net investment income (loss) after
expense reimbursement(4)(5) % (1.10) (1.20) (1.04) (1.33) (1.05) (0.91)
Portfolio turnover % 148 55 154 200 153 114
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------
Six Three
months Year months May 31,
ended Ended ended 1995(2) to
Dec. 31, 2000 June 30, June 30, Year ended March 31, March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 25.18 23.54 21.55 16.33 16.25 12.50
Income from investment operations:
Net investment income (loss) $ (0.41) (0.11) (0.42) (0.25) (0.17) (0.09)
Net realized and unrealized gains on
investments $ 16.55 1.75 3.42 6.74 0.25 3.84
Total from investment operations $ 16.14 1.64 3.00 6.49 0.08 3.75
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 8.28 -- 1.01 1.27 -- --
Net asset value, end of period $ 33.04 25.18 23.54 21.55 16.33 16.25
Total Return(3): % 76.28 6.97 14.59 40.84 (0.49) 30.00
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 116,334 49,335 45,876 46,806 29,002 11,186
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.14 2.22 2.22 2.25 2.22
Gross expenses prior to expense
reimbursement(4) % 2.01 2.14 2.29 2.21 2.66 3.39
Net investment income (loss) after
expense reimbursement(4)(5) % (1.75) (1.85) (1.69) (1.99) (1.69) (1.61)
Portfolio turnover % 148 55 154 200 153 114
</TABLE>
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------------------------
Six Three
months Year months
ended Ended ended
Dec. 31, 2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.78 18.49 17.15 16.48 18.06 13.45
Income from investment operations:
Net investment income (loss) $ (0.38) (0.09) (0.61) (0.28) (0.32) (0.27)
Net realized and unrealized gains on
investments $ 13.04 1.38 2.97 6.26 0.62 4.88
Total from investment operations $ 12.66 1.29 2.36 5.98 0.30 4.61
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 6.50 -- 1.02 5.31 1.88 --
Net asset value, end of period $ 25.94 19.78 18.49 17.15 16.48 18.06
Total Return(3): % 76.18 6.98 14.60 40.95 0.56 34.28
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 249,255 144,832 141,685 166,849 157,501 177,461
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.14 2.23 2.27 2.14 2.14
Gross expenses prior to expense
reimbursement(4) % 2.01 2.14 2.30 2.33 2.17 2.14
Net investment income (loss) after
expense reimbursement(4)(5) % (1.75) (1.85) (1.70) (2.01) (1.59) (1.47)
Portfolio turnover % 148 55 154 200 153 114
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments Inc. became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-adviser and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
67 ING Pilgrim MidCap Growth Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM GROWTH + VALUE FUND
--------------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------
Year ended October 31,
-------------------------------------
2000 1999 1998 1997(1)
---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 10.44 12.15 10.00
Net investment loss $ (0.17) (0.11) (0.05)
Net realized and unrealized gain (loss)
on investments $ 9.49 (1.42) 2.20
Total from investment operations $ 9.32 (1.53) 2.15
Distributions from net realized gain $ -- (0.18) --
Total distributions $ -- (0.18) --
Net asset value, end of the period $ 19.76 10.44 12.15
Total return(2) % 89.27 (12.63) 21.50
Ratios and supplemental data:
Net assets, end of the period (000's) $ 81,225 33,425 34,346
Ratio of expenses to average net assets
after reimbursement(4) % .69 1.72 1.84 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 1.69 1.72 1.86 (3)
Ratio of net investment loss to average
net assets % (1.30) (0.92) (0.94) (3)
Portfolio turnover % 197 162 144
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------
Year ended October 31,
-------------------------------------
2000 1999 1998 1997(1)
---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 10.29 12.08 10.00
Net investment loss $ (0.27) (0.16) (0.08)
Net realized and unrealized gain (loss)
on investments $ 9.32 (1.45) 2.16
Total from investment operations $ 9.05 (1.61) 2.08
Distributions from net realized gain $ -- (0.18) --
Total distributions $ -- (0.18) --
Net asset value, end of the period $ 19.34 10.29 12.08
Total return(2) % 87.95 (13.38) 20.80
Ratios and supplemental data:
Net assets, end of the period (000's) $ 227,227 105,991 76,608
Ratio of expenses to average net assets
after reimbursement(4) % 2.39 2.45 2.55 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 2.39 2.45 2.57 (3)
Ratio of net investment loss to average
net assets % (2.00) (1.67) (1.68)(3)
Portfolio turnover % 197 162 144
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------
Year ended October 31,
-------------------------------------
2000 1999 1998 1997(1)
---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 10.29 12.08 10.00
Net investment loss $ (0.26) (0.16) (0.08)
Net realized and unrealized gain (loss)
on investments $ 9.30 (1.45) 2.16
Total from investment operations $ 9.04 (1.61) 2.08
Distributions from net realized gain $ -- (0.18) --
Total distributions $ -- (0.18) --
Net asset value, end of the period $ 19.33 10.29 12.08
Total return(2) % 87.85 (13.38) 20.80
Ratios and supplemental data:
Net assets, end of the period (000's) $ 84,391 37,456 26,962
Ratio of expenses to average net assets
after reimbursement(4) % 2.40 2.46 2.56 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 2.40 2.46 2.58 (3)
Ratio of net investment loss to average
net assets % (2.01) (1.69) (1.70) (3)
Portfolio turnover % 197 162 144
</TABLE>
----------
(1) Class A, B and C commenced operations on November 18, 1996.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth + Value Fund 68
<PAGE>
FINANCIAL
ING PILGRIM SMALLCAP OPPORTUNITIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below has
been audited by KPMG, LLP, independent auditors. For all periods ended prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year Ended
December 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 29.00 27.77 24.72 20.92 19.56
Net investment loss $ (0.32) (0.27) (0.02) (0.04) (0.09)
Net realized and unrealized gain on
investments $ 38.23 2.23 3.68 3.84 2.48
Total from investment operations $ 37.91 1.96 3.66 3.80 2.39
Distributions from net realized gain $ (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 59.35 29.00 27.77 24.72 20.92
Total return(2) % 146.94 7.59 14.92 18.16 12.20
Ratios and supplemental data:
Net assets at the end of the period
(000s) $ 123,377 45,461 78,160 65,660 2,335
Ratio of expenses to average net
assets after reimbursement % .43 1.47 1.43 1.46 1.50 (3)
Ratio of expenses to average net
assets prior to expense
reimbursement % 1.43 1.47 1.43 1.47 1.50 (3)
Ratio of net investment loss to
average net assets % (1.21) (0.70) (0.07) (0.30) (0.91) (3)
Portfolio turnover % 223 257 175 140 71
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------
Year Ended
December 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 28.26 27.27 24.46 20.84 19.56
Net investment loss $ (0.60) (0.48) (0.19) (0.12) (0.12)
Net realized and unrealized gain on
investments $ 36.96 2.20 3.61 3.74 2.43
Total from investment operations $ 36.36 1.72 3.42 3.62 2.31
Distributions from net realized gain $ (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 57.06 28.26 27.27 24.46 20.84
Total return(2) % 145.24 6.84 14.10 17.37 11.79
Ratios and supplemental data:
Net assets at the end of the period
(000s) 264,677 124,065 169,516 126,859 1,491
Ratio of expenses to average net $
assets after reimbursement 2.15 2.18 2.15 2.17 2.20 (3)
Ratio of expenses to average net %
assets prior to expense
reimbursement 2.15 2.18 2.15 2.18 2.21 (3)
Ratio of net investment loss to %
average net assets (1.93) (1.43) (0.78) (1.01) (1.64) (3)
Portfolio turnover % 223 257 175 140 71
</TABLE> %
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------
Year Ended
December 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 28.24 27.26 24.46 20.84 19.56
Net investment loss $ (0.53) (0.55) (0.20) (0.13) (0.15)
Net realized and unrealized gain
(loss) on investments $ 36.83 2.26 3.61 3.75 2.46
Total from investment operations $ 36.30 1.71 3.41 3.62 2.31
Distributions from net realized gain $ (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 56.98 28.24 27.26 24.46 20.84
Total return(2) % 145.12 6.81 14.06 17.37 11.79
Ratios and supplemental data:
Net assets at the end of the period
(000s) $ 72,581 29,746 51,460 37,342 62
Ratio of expenses to average net
assets after reimbursement % 2.18 2.22 2.18 2.20 2.20 (3)
Ratio of expenses to average net
assets prior to expense reimbursement % 2.18 2.22 2.18 2.21 2.23 (3)
Ratio of net investment loss to
average net assets % (1.96) (1.45) (0.82) (1.03) (1.60) (3)
Portfolio turnover % 223 257 175 140 71
</TABLE>
<TABLE>
<CAPTION>
Class T
---------------------------------------------------------------
Year Ended
December 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 28.36 27.34 24.48 20.84 19.64
Net investment loss $ (0.65) (0.51) (0.18) (0.21) (0.34)
Net realized and unrealized gain
(loss) on investments $ 37.24 2.26 3.65 3.85 2.57
Total from investment operations $ 36.59 1.75 3.47 3.64 2.23
Distributions from net realized gain $ (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 57.39 28.36 27.34 24.48 20.84
Total return(2) % 145.51 6.94 14.29 17.47 11.34
Ratios and supplemental data:
Net assets at the end of the period
(000s) $ 33,634 18,203 32,800 35,670 33,557
Ratio of expenses to average net
assets after reimbursement % 2.06 2.10 1.99 2.07 2.16
Ratio of expenses to average net
assets prior to expense reimbursement % 2.06 2.10 1.99 2.11 2.16
Ratio of net investment loss to
average net assets % (1.85) (1.33) (0.62) (0.89) (1.50)
Portfolio turnover % 223 257 175 140 71
</TABLE>
----------
(1) Classes A, B & C commenced operations on June 5, 1995.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
69 ING Pilgrim SmallCap Opportunities Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, Ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.08 16.72 19.75 15.15 17.93 13.06
Income from investment operations:
Net investment income (loss) $ (0.20) (0.06) (0.85) (0.08) (0.22) (0.20)
Net realized and unrealized gains (loss)
on investments $ 9.24 2.42 0.69 6.91 (0.66) 5.09
Total from investment operations $ 9.04 2.36 (0.16) 6.83 (0.88) 4.89
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 9.73 -- 2.87 2.23 1.90 0.02
Net asset value, end of period $ 18.39 19.08 16.72 19.75 15.15 17.93
Total Return(3): % 60.66 14.11 0.37 46.32 (6.26) 37.48
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 168,239 102,641 94,428 201,943 121,742 138,155
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.62 1.70 1.85 1.89 1.72 1.74
Gross expenses prior to expense
reimbursement(4) % 1.67 1.74 1.95 1.90 1.72 1.74
Net investment income (loss) after
expense reimbursement(4)(5) % (1.31) (1.46) (1.32) (1.85) (1.26) (1.20)
Portfolio turnover % 127 32 90 92 113 130
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, Ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 24.05 21.12 22.53 15.51 16.69 12.50
Income from investment operations:
Net investment income (loss) $ (0.34) (0.12) (0.53) (0.27) (0.21) (0.14)
Net realized and unrealized gains (loss)
on investments $ 11.56 3.05 0.33 7.29 (0.97) 4.33
Total from investment operations $ 11.22 2.93 (0.20) 7.02 (1.18) 4.19
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 12.24 -- 1.21 -- -- --
Net asset value, end of period $ 23.03 24.05 21.12 22.53 15.51 16.69
Total Return(3): % 59.68 13.87 (0.29) 45.26 (7.07) 33.52
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 97,239 49,448 45,140 55,215 28,030 13,626
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.27 2.35 2.57 2.62 2.61 2.58
Gross expenses prior to expense
reimbursement(4) % 2.32 2.39 2.66 2.63 2.73 3.26
Net investment income (loss) after
expense reimbursement(4)(5) % (1.96) (2.11) (2.03) (2.59) (2.13) (2.09)
Portfolio turnover % 127 32 90 92 113 130
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, Ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.81 16.51 18.62 14.69 17.62 12.96
Income from investment operations:
Net investment income (loss) $ (0.30) (0.09) (0.84) (0.38) (0.31) (0.29)
Net realized and unrealized gains on
investments $ 9.07 2.39 0.61 6.84 (0.63) 5.03
Total from investment operations $ 8.77 2.30 (0.23) 6.46 (0.94) 4.74
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 9.57 -- 1.88 2.53 1.99 0.08
Net asset value, end of period $ 18.01 18.81 16.51 18.62 14.69 17.62
Total Return(3): % 59.67 13.93 (0.24) 45.40 (6.81) 37.18
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 229,473 153,471 144,597 225,025 182,907 207,332
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.27 2.35 2.51 2.57 2.35 2.35
Gross expenses prior to expense
reimbursement(4) % 2.32 2.39 2.60 2.59 2.35 2.35
Net investment income (loss) after
expense reimbursement(4)(5) % (1.96) (2.11) (1.97) (2.53) (1.89) (1.81)
Portfolio turnover % 127 32 90 92 113 130
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-adviser and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Growth Fund 70
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM BANK AND THRIFT FUND
--------------------------------------------------------------------------------
For the year ended June 30, 1999 and 2000, the six-month period ended June 30,
1998 and the years ended December 31, 1997, 1996, and 1995, the information in
the table below, with the exception of the information in the row labeled "Total
Investment Return at Net Asset Value" for periods prior to January 1, 1997, have
been audited by KPMG LLP, independent auditors. The information in the row
labeled "Total Investment Return at Net Asset Value" has not been audited for
periods prior to January 1, 1997. Prior to October 17, 1997, the Class A shares
were designated as Common Stock and the Fund operated as a closed-end investment
company.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------
Six months Six
ended Year Year months
Dec. 31, Ended ended ended
2000 June 30, June 30, June 30, Year ended December 31,
(unaudited) 2000 1999 1998(3) 1997 1996 1995
----------- ---- ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 24.38 27.52 25.87 17.84 14.83 10.73
Income (loss) from investment operations:
Net investment income $ 0.32 0.29 0.11 0.34 0.32 0.31
Net realized and unrealized gains (loss) on
investments $ (5.30) (2.70) 1.54 10.83 5.18 4.78
Total from investment operations $ (4.98) (2.41) 1.65 11.17 5.50 5.09
Less distributions from:
Net investment income $ 0.25 0.18 -- 0.31 0.35 0.34
Net realized gains on investments $ 2.73 0.55 -- 2.65 2.14 0.65
Tax return of capital $ -- -- -- 0.18 -- --
Net asset value, end of year $ 16.42 24.38 27.52 25.87 17.84 14.83
Closing market price, end of year -- -- -- -- 15.75 12.88
Total Investment Return At Market Value(4) % -- -- -- -- 43.48 52.81
Total Investment Return At Net Asset Value(5) % (22.44) (8.61) 6.38 64.86 41.10 49.69
Ratios/Supplemental Data:
Net assets, end of year ($millions) $ 210 403 549 383 252 210
Ratio to average net assets:
Expenses(6) % 1.41 1.39 1.20 1.10 1.01 1.05
Net investment income(6) % 1.46 1.09 0.94 1.39 1.94 2.37
Portfolio turnover rate % 10 29 2 22 21 13
</TABLE>
<TABLE>
<CAPTION>
Class B
--------------------------------------------------------
Six months Six
ended Year Year months Oct. 20,
Dec. 31, Ended ended ended 1997(2) to
2000 June 30, June 30, June 30, Dec. 31,
(unaudited) 2000 1999 1998(3) 1997
----------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 24.21 27.40 25.85 25.25
Income (loss) from investment operations:
Net investment income $ 0.22 0.08 0.01 0.04
Net realized and unrealized gains (loss) on
investments $ (5.32) (2.66) 1.54 2.92
Total from investment operations $ (5.10) (2.58) 1.55 2.96
Less distributions from:
Net investment income $ 0.03 0.06 -- 0.04
Net realized gains on investments $ 2.73 0.55 -- 2.04
Tax return of capital $ -- -- -- 0.28
Net asset value, end of year $ 16.35 24.21 27.40 25.85
Closing market price, end of year -- -- -- --
Total Investment Return At Market Value(4) % -- -- -- --
Total Investment Return At Net Asset Value(5) % (23.00) (9.31) 6.00 11.88
Ratios/Supplemental Data:
Net assets, end of year ($millions) $ 148 343 360 76
Ratio to average net assets:
Expenses(6) % 2.16 2.14 1.95 1.89
Net investment income(6) % 0.71 0.34 0.19 0.99
Portfolio turnover rate % 10 29 2 22
</TABLE>
----------
(1) ING Pilgrim Investments, Inc., the Fund's Investment Manager, acquired
certain assets of Pilgrim Management Corporation, the Fund's former
Investment Manager, in a transaction that closed on April 7, 1995.
(2) Commencement of offering shares.
(3) Effective June 30, 1998, Bank and Thrift Fund changed its year end to June
30.
(4) Total return was calculated at market value without deduction of sales
commissions and assuming reinvestment of all dividends and distributions
during the period.
(5) Total return is calculated at net asset value without deduction of sales
commissions and assumes reinvestment of all dividends and distributions
during the period. Total investment returns based on net asset value, which
can be higher or lower than market value, may result in substantially
different returns than total return based on market value. For all periods
prior to January 1, 1997, the total returns presented are unaudited.
(6) Annualized for periods less than one year.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Bank and Thrift Fund 71
<PAGE>
FINANCIAL
ING PILGRIM INTERNET FUND HIGHLIGHTS
--------------------------------------------------------------------------------
TO COME
72 ING Pilgrim Internet Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM BALANCED FUND
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(2) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.23 19.03 19.53 15.54 16.16 13.74
Income from investment operations:
Net investment income $ 0.51 0.10 0.36 0.26 0.32 0.34
Net realized and unrealized gains on
investments $ (0.60) 0.17 2.58 5.70 0.84 2.42
Total from investment operations $ (0.09) 0.27 2.94 5.96 1.16 2.76
Less distributions from:
Net investment income $ 0.39 0.07 0.43 0.27 0.32 0.34
Net realized gains on investments $ 3.71 -- 3.01 1.70 1.46 --
Net asset value, end of period $ 15.04 19.23 19.03 19.53 15.54 16.16
Total Return(3): % (1.01) 1.42 17.10 39.34 6.74 20.16
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 63,592 9,619 9,519 6,675 4,898 5,902
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.40 1.49 1.59 1.61 1.60 1.60
Gross expenses prior to expense
reimbursement(4) % 1.61 1.75 1.97 2.56 3.00 3.30
Net investment income (loss) after
expense reimbursement(4)(5) % 3.26 2.06 2.08 3.58 1.87 2.16
Portfolio turnover % 173 63 165 260 213 197
Class B
----------------------------------------------------------------------
Six months Three
ended Year months May 31,
Dec. 31, ended ended 1995(1) to
2000 June 30, June 30, Year ended March 31, March 31,
(unaudited) 2000 1999(2) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 20.59 20.38 20.07 14.88 14.18 12.50
Income from investment operations:
Net investment income $ 0.44 0.07 0.28 0.15 0.17 0.12
Net realized and unrealized gains on
investments $ (0.64) 0.18 2.74 5.58 0.70 1.68
Total from investment operations $ (0.20) 0.25 3.02 5.73 0.87 1.80
Less distributions from:
Net investment income $ 0.33 0.04 0.31 0.15 0.17 0.12
Net realized gains on investments $ 3.97 -- 2.40 0.39 -- --
Net asset value, end of period $ 16.09 20.59 20.38 20.07 14.88 14.18
Total Return(3): % (1.58) 1.24 16.49 38.79 6.10 14.45
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 41,026 7,157 6,048 4,254 2,133 673
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.05 2.14 2.24 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.26 2.40 2.62 2.71 6.44 13.05
Net investment income (loss) after
expense reimbursement(4)(5) % 2.61 1.41 1.43 2.99 1.25 1.38
Portfolio turnover % 173 63 165 260 213 197
Class C
------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(2) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.53 18.35 19.90 15.59 16.20 13.76
Income from investment operations:
Net investment income $ 0.45 0.06 0.26 0.15 0.21 0.24
Net realized and unrealized gains
on investments $ (0.62) 0.16 2.52 5.71 0.85 2.44
Total from investment operations $ (0.17) 0.22 2.78 5.86 1.06 2.68
Less distributions from:
Net investment income $ 0.34 0.04 0.28 0.15 0.21 0.24
Net realized gains on investments $ 3.57 -- 4.05 1.40 1.46 --
Net asset value, end of period $ 14.45 18.53 18.35 19.90 15.59 16.20
Total Return(3): % (1.53) 1.21 16.34 38.35 6.05 19.58
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 25,838 21,331 21,655 20,784 16,990 16,586
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.05 2.14 2.23 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.26 2.40 2.61 2.68 2.83 3.01
Net investment income (loss) after
expense reimbursement(4)(5) % 2.61 1.41 1.43 2.93 1.23 1.53
Portfolio turnover % 173 63 165 260 213 197
Class T
-------------------------
Six months
ended March 31,
Dec. 31, 2000(1) to
2000 June 30,
(unaudited) 2000
----------- ----
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 16.83
Income from investment operations:
Net investment income 0.09
Net realized and unrealized gains
on investments (0.82)
Total from investment operations (0.73)
Less distributions from:
Net investment income --
Net realized gains on investments --
Net asset value, end of period 16.10
Total Return(3): (4.34)
Ratio/Supplemental Data:
Net assets, end of period (in thousands) 10,953
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) 1.70
Gross expenses prior to expense
reimbursement(4) 1.91
Net investment income (loss) after
expense reimbursement(4)(5) 2.96
Portfolio turnover 173
</TABLE>
----------
(1) Commencement of offering of shares.
(2) Effective May 24, 1999, ING Pilgrim Investments Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Balanced Fund 73
<PAGE>
FINANCIAL
ING PILGRIM CONVERTIBLE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.27 21.92 19.12 16.59 15.68 12.86
Income from investment operations:
Net investment income (loss) $ 0.42 0.10 0.40 0.44 0.47 0.48
Net realized and unrealized gains
(loss) on investments $ 8.02 1.35 3.17 4.49 1.64 2.82
Total from investment operations $ 8.44 1.45 3.57 4.93 2.11 3.30
Less distributions from:
Net investment income $ 0.32 0.10 0.41 0.44 0.48 0.48
Net realized gains on investments $ 3.69 -- 0.36 1.96 0.72 --
Net asset value, end of period $ 27.70 23.27 21.92 19.12 16.59 15.68
Total Return(3): % 39.88 6.62 19.17 31.04 13.73 26.00
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 131,218 73,133 65,742 47,290 32,082 31,712
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.35 1.45 1.53 1.57 1.60 1.60
Gross expenses prior to expense
reimbursement(4) % 1.35 2.10 1.65 1.74 1.75 1.76
Net investment income (loss) after
expense reimbursement(4)(5) % 1.78 1.82 2.08 5.64 2.83 3.29
Portfolio turnover % 129 28 138 160 167 145
Class B
---------------------------------------------------------------------------------
Six months Three
ended Year months May 31,
Dec. 31, ended ended 1995(2) to
2000 June 30, June 30, Year ended March 31, March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 25.34 23.86 20.56 16.60 14.96 12.50
Income from investment operations:
Net investment income (loss) $ 0.29 0.07 0.29 0.32 0.31 0.24
Net realized and unrealized gains
(loss) on investments $ 8.77 1.47 3.47 4.65 1.64 2.46
Total from investment operations $ 9.06 1.54 3.76 4.97 1.95 2.70
Less distributions from:
Net investment income $ 0.19 0.06 0.27 0.32 0.31 0.24
Net realized gains on investments $ 4.01 -- 0.19 0.69 -- --
Net asset value, end of period $ 30.20 25.34 23.86 20.56 16.60 14.96
Total Return(3): % 39.21 6.47 18.52 30.51 13.01 21.72
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 139,704 68,091 58,736 36,725 12,740 2,125
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.00 2.10 2.30 2.33 3.19 7.08
Net investment income (loss) after
expense reimbursement(4)(5) % 1.13 1.17 1.44 5.04 2.29 2.59
Portfolio turnover % 129 28 138 160 167 145
Class C
---------------------------------------------------------------------------------
Six months Three
ended Year months
Dec. 31, ended ended
2000 June 30, June 30, Year ended March 31,
(unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.78 22.40 19.55 17.05 15.89 13.03
Income from investment operations:
Net investment income (loss) $ 0.28 0.07 0.28 0.34 0.37 0.40
Net realized and unrealized gains
(loss) on investments $ 8.22 1.37 3.25 4.60 1.66 2.86
Total from investment operations $ 8.50 1.44 3.53 4.94 2.03 3.26
Less distributions from:
Net investment income $ 0.19 0.06 0.25 0.34 0.37 0.40
Net realized gains on
investments $ 3.76 -- 0.43 2.10 0.50 --
Net asset value, end of period $ 28.33 23.78 22.40 19.55 17.05 15.89
Total Return(3): % 39.24 6.45 18.45 30.22 12.91 25.24
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 156,592 100,276 95,998 81,561 62,143 58,997
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.00 2.10 2.30 2.31 2.29 2.28
Net investment income (loss) after
expense reimbursement(4)(5) % 1.13 1.17 1.44 4.99 2.18 2.64
Portfolio turnover % 129 28 138 160 167 145
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-adviser and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
74 ING Pilgrim Convertible Fund
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/Semi-Annual reports,
the SAI or other Fund information, or to make shareholder inquiries:
THE ING PILGRIM FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim Growth Opportunities Fund 811-4431
ING Pilgrim Equity Trust 811-8817
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim SmallCap Opportunities Fund 811-4434
ING Pilgrim Advisory Funds, Inc. 811-9040
ING Pilgrim Growth and Income Fund, Inc. 811-0865
ING Pilgrim Investment Funds, Inc. 811-1939
ING Pilgrim Mutual Funds 811-7428
ING Pilgrim Bank and Thrift Fund, Inc. 811-4504
ING Funds Trust 811-8895
USEQPROSXXXXXX-XXXXXX
<PAGE>
March 1, 2001
Class I
INSTITUTIONAL CLASS SHARES
ING Pilgrim Research Enhanced Index
ING Pilgrim Growth Opportunities
ING Pilgrim MidCap Opportunities
ING Pilgrim SmallCap Opportunities
ING Money Market
This prospectus contains important information about investing in the ING
Pilgrim Funds. You should read it carefully before you invest, and keep it for
future reference. Please note that your investment: is not a bank deposit, is
not insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
--------------------------------------------------------------------------------
[GRAPHIC] OBJECTIVE
[GRAPHIC] INVESTMENT STRATEGY
[GRAPHIC] RISKS
[GRAPHIC] HOW THE FUND HAS PERFORMED
These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy, and risks.
You'll also find:
How the Fund has performed.
A chart that shows the Fund's financial performance for the past ten years (or
since inception, if shorter).
What you pay to invest. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
Funds At A Glance 2
ING Pilgrim Research Enhanced Index 4
ING Pilgrim Growth Opportunities 6
ING Pilgrim MidCap Opportunities 8
ING Pilgrim SmallCap Opportunities 10
ING Money Market 12
What You Pay to Invest 14
Shareholder Guide 15
Management of the Funds 19
Dividends, Distributions and Taxes 21
More Information About Risks 22
Financial Highlights 25
Where To Go For More Information Back cover
<PAGE>
Funds At A Glance
This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 4.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
---- --------------------
<S> <C> <C>
U.S. Equity Research Enhanced Index Fund Capital appreciation
Funds Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: J.P. Morgan
Investment Management Inc.
Growth Opportunities Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
MidCap Opportunities Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
SmallCap Opportunities Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: ING Investment Management LLC
Income Money Market Fund A high level of current income as is
Fund Adviser: ING Mutual Funds Management Co. LLC consistent with the preservation of capital and
Sub-Adviser: ING Investment Management LLC liquidity and the maintenance of a stable
$1.00 net asset value per share.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MAIN INVESTMENTS MAIN RISKS
---------------- ----------
<S> <C>
Equity securities of large U.S. companies that Price volatility and other risks that accompany an
make up the S&P 500 Index investment in equity securities.
Equity securities of large, medium, and small U.S. Price volatility and other risks that accompany an
companies believed to have growth potential investment in growth-oriented equity securities.
Equity securities of medium-sized U.S. companies Price volatility and other risks that accompany an
believed to have growth potential investment in equity securities of growth-oriented
and medium-sized companies. Particularly sensitive
to price swings during periods of economic
uncertainty.
Equity securities of small-sized U.S. companies Price volatility and other risks that accompany an
believed to have growth potential investment in equity securities of growth-oriented
and small-sized companies. Particularly sensitive
to price swings during periods of economic
uncertainty.
A diversified portfolio of high quality, U.S. The Fund's yield will vary. There can be no
dollar-denominated short-term debt securities assurance that the Fund will be able to maintain a
which are determined by the Sub-Adviser to present stable net asset value of $1.00 per share.
minimal credit risks.
</TABLE>
3
<PAGE>
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
J.P. Morgan Investment
ING PILGRIM RESEARCH ENHANCED INDEX FUND Management
--------------------------------------------------------------------------------
OBJECTIVE [GRAPHIC]
The Fund seeks capital appreciation.
INVESTMENT STRATEGY [GRAPHIC]
The Fund invests primarily in large companies that make up the S&P 500 Index.
Based on extensive research regarding projected company earnings and dividends,
a valuation model ranks companies in each industry group according to their
relative value. Using this valuation model, the portfolio managers select stocks
for the Fund. Within each industry, the Fund modestly overweights stocks that
are ranked as undervalued or fairly valued while modestly underweighting or not
holding stocks that appear overvalued. Industry by industry, the Fund's assets
are invested so that the Fund's industry sector allocations and market cap
weightings closely parallel those of the S&P 500 Index.
By owning a large number of stocks within the S&P 500 Index, with an emphasis on
those that appear undervalued or fairly valued, and by tracking the industry
weightings and other characteristics of that index, the Fund seeks returns that
modestly exceed those of the S&P 500 Index over the long term with virtually the
same level of volatility.
Under normal market conditions, the Fund invests at least 80% of its total
assets in common stocks included in the S&P 500 Index. It may also invest in
other common stocks not included in the S&P 500 Index. The Fund may also invest
in certain higher-risk investments, including derivatives (generally these
investments will be limited to options on the S&P 500 Index).
RISKS [GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The portfolio managers try to remain
fully invested in companies included in the S&P 500 Index, and generally do not
change this strategy even temporarily, which could make the Fund more
susceptible to poor market conditions.
Market Trends -- from time to time, the stock market may not favor the large
company securities that are ranked as undervalued or fairly valued in which the
Fund invests. Rather, the market could favor small company stocks, growth-
oriented stocks, or may not favor equities at all.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
4 ING Pilgrim Research Enhanced Index Fund
<PAGE>
ING PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED [GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.99
----------
(1) These figures are as of December 31, 2000.
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risk of investing in the Fund by
comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P
500
Class I Index(2)
--------- ---------
<S> <C> <C> <C>
One year, ended
December 31, 2000 %
Since inception(3)
</TABLE>
----------
(2) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large- capitalization U.S. companies.
(3) The class commenced operations on December 30, 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Research Enhanced Index Fund 5
<PAGE>
Adviser
ING PILGRIM GROWTH OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE [GRAPHIC]
This Fund seeks long-term growth of capital.
INVESTMENT STRATEGY [GRAPHIC]
The Fund invests primarily in common stock of U.S. companies that the portfolio
manager believes have above average prospects for growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap or small-cap
companies.
The portfolio managers use a "top down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top down approach is
combined with rigorous fundamental research (a bottom up approach) to guide
stock selection and portfolio structure.
RISKS [GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a Fund that emphasizes other styles,
such as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
6 ING Pilgrim Growth Opportunities Fund
<PAGE>
ING PILGRIM GROWTH OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED [GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.06 93.86
----------
(1) These figures are as of December 31, of each year.
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risk of investing in the Fund by
comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P
500
Class I Index(2)
--------- ---------
<S> <C> <C> <C>
One year, ended
December 31, 2000 %
Since Inception(3) %
</TABLE>
----------
(2) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large- capitalization U.S. companies.
(3) The class commenced operations on March 31, 1997.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth Opportunities Fund 7
<PAGE>
Adviser
ING PILGRIM MIDCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE [GRAPHIC]
This Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY [GRAPHIC]
The Fund normally invests at least 65% of its total assets in the common stocks
of mid-sized U.S. companies that the portfolio managers feel have above average
prospects for growth. For this Fund, mid-sized companies are companies with
market capitalizations that fall within the range of companies in the S&P MidCap
400 Index. As of December 31, 2000, the market capitalization of companies in
the S&P MidCap 400 Index ranged from $ million to $ billion. The market
capitalization range will change as the range of the companies included in the
S&P MidCap 400 Index changes.
The portfolio managers use a "top down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from the major social, economic and
technological trends that are likely to shape the future of business and
commerce over the next three to five years, and attempt to provide a framework
for identifying the industries and companies expected to benefit most. This
top-down approach is combined with rigorous fundamental research (a bottom-up
approach) to guide stock selection and portfolio structure.
The Fund may invest in initial public offerings.
RISKS [GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio managers feel have the potential for growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market diversification, and
may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of mid-size companies usually trade
in lower volume and may be less liquid than securities of larger, more
established companies. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
8 ING Pilgrim MidCap Opportunities Fund
<PAGE>
ING PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED [GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
103.19
----------
(1) These figures are as of December 31, of each year.
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risk of investing in the Fund by
comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's MidCap 400 Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
S&P
MidCap 400
Class I Index(2)
--------- -----------
<S> <C> <C> <C>
One year, ended
December 31, 2000 %
Since Inception(3) %
</TABLE>
----------
(2) The S&P MidCap 400 Index is an unmanaged index that measures the
performance of the mid-size company segment of the U.S. market.
(3) The class commenced operations on August 20, 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Opportunities Fund 9
<PAGE>
Adviser
ING PILGRIM SMALLCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE [GRAPHIC]
This Fund seeks capital appreciation.
INVESTMENT STRATEGY [GRAPHIC]
The Fund invests at least 65% of its total assets in the common stock of
smaller, lesser-known U.S. companies that the portfolio manager believes have
above average prospects for growth. For this Fund, smaller companies are those
with market capitalizations that fall within the range of companies in the
Russell 2000 Index, which is an index that measures the performance of small
companies. The market capitalization range will change as the range of the
companies included in the Russell 2000 changes. The market capitalization of
companies held by the Fund as of , 2000 ranged from $ billion to
$ billion.
The portfolio manager uses a "top down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio manager seeks to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.
The Fund may invest in initial public offerings.
The Fund was closed to new investors effective February 29, 2000. Investors who
were shareholders of the Fund on that day may continue to buy shares into
accounts existing on that day. The Fund may reopen in the future subject to the
discretion of the Board of Trustees.
RISKS [GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a Fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small
sized growth securities in which the Fund invests. Rather, the market could
favor value-oriented stocks or large company stocks, or may not favor equities
at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of smaller companies usually trade in
lower volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
10 ING Pilgrim SmallCap Opportunities Fund
<PAGE>
ING PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED [GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
----------
(1) These figures are as of December 31, 2000.
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Russell
2000
Class I Index(2)
--------- -----------
<S> <C> <C> <C>
One year, ended
December 31, 2000 %
Since inception(3) %
</TABLE>
----------
(2) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(3) Class I commenced operations on April 1, 1999.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Opportunities Fund 11
<PAGE>
Adviser
ING Mutual Funds Management Co. LLC
Sub-Adviser
ING MONEY MARKET FUND ING Investment Management LLC
--------------------------------------------------------------------------------
OBJECTIVE [GRAPHIC]
The 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.
INVESTMENT STRATEGY [GRAPHIC]
The Fund will operate as a diversified fund and invest in a portfolio of
high-quality, U.S. dollar denominated short-term debt obligations which are
determined by the Sub-Adviser to present minimal credit risks.
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.
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.
The Fund will invest in obligations permitted to be purchased under Rule 2a-7
including, but not limited to, (i) U.S. Government securities and obligations of
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 and
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
and 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
underlying indebtedness to vary, and provide for periodic adjustments in the
interest rate. The Fund may enter into repurchase agreements.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, four step investment process designed to ensure preservation of
capital and liquidity, as well as adherence to regulatory requirements. The four
steps are:
* First, a formal list of high-quality issuers is actively maintained;
* Second, securities of issuers on the approved list which meet maturity
guidelines and are rated "first tier" (that is, they are given the highest
short-term rating by at least two nationally recognized statistical rating
organizations, or by a single rating organization if a security is rated only by
that organization, or are determined to be of comparable quality by the
Sub-Adviser pursuant to guidelines approved by the Fund's Board of Trustees) are
selected for investment;
* Third, diversification is continuously monitored to ensure that regulatory
limits are not exceeded; and
* Finally, portfolio maturity decisions are made based upon expected cash flows,
income opportunities available in the market and expectations of future interest
rates.
RISKS [GRAPHIC]
The Fund is subject to the risks associated with investing in debt securities.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Changes in Interest Rates -- money market funds like the Fund are subject to
less interest rate risk than other income funds because they invest in debt
securities with a remaining maturity not greater than 397 days. Still, the value
of the Fund's investment may fall when interest rates rise.
Credit Risk -- money market funds like the Fund are subject to less credit risk
than other income funds because they invest in short-term debt securities of the
highest quality. Still, the Fund could lose money if the issuer of a debt
security is unable to meet its financial obligations or goes bankrupt.
U.S. Government Securities -- some U.S. Government agency securities may be
subject to varying degrees of credit risk, and all U.S. Government Securities
may be subject to price declines in the securities due to changing interest
rates. If an obligation, such as obligations issued by the Federal National
Mortgage Association, the Student Loan Marketing Association, the Federal Home
Loan Bank and the Federal Home Loan Mortgage Corporation, is supported only by
the credit of the agency or instrumentality issuing the obligation, the investor
must look principally to the agency issuing or guaranteeing the oligation for
ultimate repayment. Securities directly supported by the full faith and credit
of the United States have less credit risk.
Risk of Concentration in Banking Obligations -- the risks of concentrating in
investments in the banking industry include credit risk, interest rate risks,
and regulatory risk (the impact of state or federal legislation and
regulations).
12 ING Money Market Fund
<PAGE>
ING MONEY MARKET FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED [GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
----------
(1) These figures are as of December 31, 2000.
Best and worst quarterly performance during this period:
quarter : up %
quarter : down %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- iMoney Net, Inc. First Tier Retail Index.
The following performance table discloses the Fund's average annual return
Average Annual Total Returns
<TABLE>
<CAPTION>
iMoney Net, Inc.
First Tier
Class I Retail Index(2)
--------- -----------------
<S> <C> <C> <C>
One year ended December 31, 2000 %
Since inception(3) %
</TABLE>
The Fund's seven-day yield as of December 31, 2000 for the Class I shares was %.
The "seven-day yield" is an annualized figure -- the amount you would earn if
you kept your investment in the Fund and the Fund continued to earn the same net
interest income throughout the year.
The Fund's seven-day effective yield as of December 31, 2000 for the Class I
shares was %. The "seven-day effective yield" (also an annualized figure)
assumes that dividends are reinvested and compounded.
For the Fund's current seven-day yield and seven-day effective yield, call the
Fund at 1-800-992-0180.
----------
(2) The iMoney Net, Inc. First Tier Retail Index is a weekly report tracking
the performance,assets, average maturities and portfolio composition of
over 1,300 taxable and tax-free money market funds.
(3) The Class commenced operations on October 31, 1999.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Money Market Fund 13
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the fund. The tables that follow show the
fees and expenses for each of the ING Pilgrim Funds.
Fees You Pay Directly
<TABLE>
<CAPTION>
Class I
-------
<S> <C>
Maximum sales charge on your investment
(as a % of offering price) none
Maximum deferred sales charge
(as a % of purchase or sales price,
whichever is less) none
</TABLE>
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class I
<TABLE>
<CAPTION>
Distribution Total
and service Fund
Management (12b-1) Other operating
Fund fee fees expenses expenses
---- --- ---- -------- --------
<S> <C> <C> <C> <C>
Research Enhanced Index 0.70% -- -- --
Growth Opportunities 0.75 -- -- --
MidCap Opportunities 1.00 -- -- --
SmallCap Opportunities 0.75 -- -- --
Money Market 0.25 -- -- --
</TABLE>
----------
(1) These tables show the estimated operating expenses for each Fund as a ratio
of expenses to average daily net assets. These estimates are based on each
Fund's actual operating expenses for its most recent complete fiscal year.
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
Class I
<TABLE>
<CAPTION>
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Research Enhanced Index -- -- -- --
Growth Opportunities -- -- -- --
MidCap Opportunities -- -- -- --
SmallCap Opportunities -- -- -- --
Money Market -- -- -- --
</TABLE>
14 What You Pay to Invest
<PAGE>
SHAREHOLDER
HOW TO PURCHASE SHARES GUIDE
--------------------------------------------------------------------------------
* The minimum initial investment for Class I Shares is $1,000,000. Class I
Shares are only available to (i) certain defined benefit plans, insurance
companies and foundations investing for their own account; (ii) retirement
plans affiliated with ING Group; and (iii) ING Group and its affiliates for
purposes of corporate cash management.
* The minimum amount of each Class I investment after your first one is
$100,000.
* We record most shares on our books electronically. We will issue a
certificate if you ask us in writing, however most of our shareholders
prefer not to have their shares in certificate form because certified
shares can't be sold or exchanged by telephone.
* We have the right to refuse a request to buy shares.
Make your investment using the table on the right.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. The ING Pilgrim Funds reserve the right to waive minimum
investment amounts. The Funds reserve the right to liquidate sufficient shares
to recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $10,000.
Initial Additional
Method Investment Investment
------ ---------- ----------
By Contacting An investment Visit or consult an
Your professional with an investment
Investment authorized firm professional.
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Fill out the Account
investment Additions form
professional. Make included on the bottom
your check payable to of your account
the ING Pilgrim Funds statement along with
and mail it, along with your check payable to
a completed the Fund and mail
Application. Please them to the address on
indicate your the account statement.
investment professional Remember to write
on the New Account your account number
Application on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the Fund
in the care of:
State Street Bank and
Trust Company
ABA #101003621
Kansas City, MO
credit to:____________
(the Fund)
A/C #751-8315; for
further credit
to:___________________
Shareholder
A/C #_________________
(A/C # you received over
the telephone)
Shareholder Name:
______________________
(Your Name Here)
After wiring funds you
must complete the
Account Application and
send it to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO
64121-6368
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 15
<PAGE>
SHAREHOLDER
GUIDE HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
You may redeem shares using the table on the right:
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $250,000.
* Minimum withdrawal amount is $1,000.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a Fund could elect to make payment in securities
for redemptions in excess of $250,000 or 1% of its net assets during any 90-day
period for any one shareholder. An investor may incur brokerage costs in
converting such securities to cash.
Method Procedures
------ ----------
By Contacting Your You may redeem by contacting your
Investment Professional investment professional. Investment
professionals may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes
any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check:
You may have redemption proceeds (up to a maximum of
$100,000) mailed to an address which has been on
record with ING Pilgrim Funds for at least 30 days.
Receiving Proceeds By Wire:
You may have redemption proceeds (subject to a minimum
of $5,000) wired to your pre-designated bank account.
You will not be able to receive redemption proceeds by
wire unless you check the box on the Account
Application which signifies that you wish to receive
redemption proceeds by wire and attach a voided check.
Under normal circumstances, proceeds will be
transmitted to your bank on the business day following
receipt of your instructions, provided redemptions may
be made. In the event that share certificates have
been issued, you may not request a wire redemption
by telephone.
16 Shareholder Guide
<PAGE>
SHAREHOLDER
TRANSACTION POLICIES GUIDE
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of Class I of each Fund
is calculated by taking the value of the Fund's assets attributable to Class I,
subtracting the Fund's liabilities attributable to Class I, and dividing by the
number of shares of Class I that are outstanding. Because foreign securities may
trade on days when the Funds do not price shares, the net asset value of a Fund
that invests in foreign securities may change on days when shareholders will not
be able to purchase or redeem the Fund's shares.
In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees. Valuing
securities at fair value involves greater reliance on judgment than securities
that have readily available market quotations.
The Money Market Fund uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share,
although there may be circumstances under which this goal cannot be acheived.
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 or the market value of the security. Although the
Board of Trustees has established procedures designed to stabilize to the extent
reasonably possible, the share price of the Fund, there can be no assurance that
the Fund's net asset value can be maintained at $1.00 per share.
Price of Shares
When you buy shares, you pay the NAV. When you sell shares, you receive the NAV.
Exchange orders are effected at NAV.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued
unless you request them in writing.
Telephone Orders
The Funds and their transfer agent will not be responsible for the authenticity
of phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Funds and their transfer agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Funds and
their transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other ING
Pilgrim Fund.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 17
<PAGE>
SHAREHOLDER
GUIDE TRANSACTION POLICIES
--------------------------------------------------------------------------------
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes. There is no specific limit on exchange frequency;
however, the Funds are intended for long-term investment and not as a short-term
trading vehicle. The adviser may prohibit excessive exchanges (more than four
per year). The adviser also may, on 60 days' prior notice, restrict the
frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at NAV, the shares of any
shareholder whose account (except for IRAs) has a value of less than $10,000,
other than as a result of a decline in the NAV per share.
18 Shareholder Guide
<PAGE>
MANAGEMENT
ADVISER OF THE FUNDS
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds (except Money Market
Fund). ING Pilgrim has overall responsibility for management of the Funds
(except Money Market Fund). ING Mutual Funds Management Co. LLC ("IMFC") serves
as the investment adviser to Money Market Fund. ING Pilgrim and IMFC provide or
oversee all investment advisory and portfolio management services for each Fund,
and assist in managing and supervising all aspects of the general day-to-day
business activities and operations of the Funds, including custodial, transfer
agency, dividend disbursing, accounting, auditing, compliance and related
services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar") (NYSE:RLR). Through its subsidiaries, ReliaStar offers individuals
and institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products, and personal finance education.
On July 26, 2000, Reliastar was acquired by ING Group (NYSE: ING). ING Group is
a global financial institution active in the field fo insurance, banking, and
asset management in more than 65 countries, with almost 100,000 employees.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to the Funds (other than Money Market Fund). On April 30,
2000, Pilgrim Advisors, an indirectly wholly-owned subsidiary of ReliaStar,
merged with ING Pilgrim Investments. Pilgrim Advisors and ING Pilgrim
Investments were sister companies and shared certain resources and investment
personnel.
Organized in , , IMFC is registered as an investment adviser. IMFC is a
wholly-owned indirect subsidiary of ING Group.
As of December 31, 2000, ING Pilgrim managed over $ billion in assets.
As of December 31, 2000, IMFC managed over $ billion in assets.
ING Pilgrim's and IMFC's principal address is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.
ING Pilgrim and IMFC receive a monthly fee for their services based on the
average daily net assets of each of the Funds.
The following table shows the aggregate annual advisory fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
<TABLE>
<CAPTION>
Fund Advisory Fee
---- ------------
<S> <C>
Research Enhanced Index 0.70%
Growth Opportunities 0.95
MidCap Opportunities 1.00
SmallCap Opportunities 1.00
Money Market 0.25
</TABLE>
ING Pilgrim Directly Manages the Portfolios of the
Following Funds:
Growth Opportunities Fund and MidCap
Opportunities Fund.
The following individuals share responsibility for the day-to-day management of
the Growth Opportunities Fund and MidCap Opportunities Fund.
Mary Lisanti, Executive Vice President and Chief Investment Officer -- Domestic
Equities of ING Pilgrim, has served as a Senior Portfolio Manager of MidCap
Opportunities Fund since the Fund was formed in August 1998 and Growth
Opportunities Fund since August 1998. Prior to joining ING Pilgrim in October
1999, Ms. Lisanti was Executive Vice President and Chief Investment Officer --
Domestic Equities with Northstar Investment Management Corp., which subsequently
merged into ING Pilgrim. From 1996 to 1998, Ms. Lisanti was a Portfolio Manager
at Strong Capital Management. From 1993 to 1996, Ms. Lisanti was a Managing
Director and Head of Small- and Mid-Capitalization Equity Strategies at Bankers
Trust Corp.
Jeffrey Bernstein, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of MidCap Opportunities Fund since the Fund was formed in
August 1998 and Growth Opportunities Fund since August 1998, Prior to joining
ING Pilgrim in October 1999, Mr. Bernstein was a portfolio manager at Northstar
Investment Management Corp., which subsequently merged into ING Pilgrim. Prior
to May 1998, Mr. Bernstein was a Portfolio Manager at Strong Capital Management.
From 1995 to 1997, Mr. Bernstein was a Portfolio Manager at Berkeley Capital.
SmallCap Opportunities Fund
Mary Lisanti, whose background is described above, has served as manager of the
SmallCap Opportunities Fund since July 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Management of the Funds 19
<PAGE>
MANAGEMENT
OF THE FUNDS SUB-ADVISERS
--------------------------------------------------------------------------------
For the following Funds, ING Pilgrim or IMFC has engaged a Sub-Adviser to
provide the day-to-day management of the Fund's portfolio. Each Sub-Adviser is
among the most respected institutional investment advisers in the world, and has
been selected primarily on the basis of its successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles.
Research Enhanced Index Fund
J.P. Morgan Investment Management Inc.
A registered investment adviser, J.P. Morgan Investment Management Inc. (J.P.
Morgan) serves as Sub-Adviser to the Research Enhanced Index Fund. The firm was
formed in 1984. The firm evolved from the Trust and Investment Division of
Morgan Guaranty Trust Company which acquired its first tax-exempt client in 1913
and its first pension account in 1940. J.P. Morgan currently manages
approximately $349 billion for institutions and pension funds. The company is a
wholly owned subsidiary of J.P. Morgan & Co. J.P. Morgan's principal address is
522 Fifth Avenue, New York, New York 10036.
Nanette Buziak, Timothy Devlin and Bernard Kroll share the responsibility for
the day-to-day management of the ING Pilgrim Research Enhanced Index Fund.
Ms. Buziak has co-managed the ING Pilgrim Research Enhanced Index Fund since
April 1999. At J.P. Morgan, she serves as a Portfolio Manager and Member of the
Structured Equity Group.
Ms. Buziak has over 8 years of investment management experience. Before joining
J.P. Morgan in 1997, Ms. Buziak was an index arbitrage trader and convertible
bond portfolio manager at First Marathon America, Inc.
Mr. Devlin has co-managed the ING Pilgrim Research Enhanced Index Fund since the
Fund was formed in December 1998. At J.P. Morgan, he serves as a Portfolio
Manager and Member of the Structured Equity Group.
Mr. Devlin has over 12 years of investment management experience. Before joining
J.P. Morgan in 1996, Mr. Devlin was a Portfolio Manager for nine years at
Mitchell Hutchins Asset Management, Inc. where he managed quantitatively-driven
portfolios for institutional and retail investors.
Mr. Kroll has co-managed the ING Pilgrim Research Enhanced Index Fund since
March 2000. At J.P. Morgan, he serves as a Portfolio Manager and Member of the
Structured Equity Group.
Mr. Kroll has over 20 years of investment management experience. Before joining
J.P. Morgan in 1996, Mr. Kroll was an equity derivatives specialist at Goldman
Sachs & Co. Earlier, he managed his own software development firm and options
broker-dealer, and managed several derivatives businesses at Kidder, Peabody &
Co.
Money Market Fund
ING Investment Management LLC
ING Investment Management LLC ("IIM") serves as Sub-Adviser to the ING Money
Market Fund. IIM is located at 5780 Powers Ferry Road, N.W., Suite 300, Atlanta,
GA 30327. IIM is engaged in the business of providing investment advice to
portfolios which, as of December 31, 2000, were valued at $ billion. IIM also
advises other registered investment companies.
Ms. Jennifer J. Thompson, CFA leads a team of three investment professionals in
managing the ING Money Market Fund. Ms. Thompson has been employed by IIM as an
investment professional since 1998 and has seven years of investment experience.
20 Management of the Funds
<PAGE>
DIVIDENDS,
DISTRIBUTIONS
DIVIDENDS/TAXES AND TAXES
--------------------------------------------------------------------------------
Dividends
The Funds (other than Money Market Fund) distribute most or all of their net
earnings and net capital gains to shareholders annually in the form of
dividends. The Money Market Fund declares dividends daily and pays dividends
monthly. The Fund distributes net capital gains, if any, annually.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class I Shares of a Fund invested in another Pilgrim Fund which offers
the Class.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive. A particular distribution generally will be taxable as either ordinary
income or long-term capital gains. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a Fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.
Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital gains
distributions.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Dividends, Distributions and Taxes 21
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information
(SAI).
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the adviser or sub-adviser
can decide whether to use them or not. The Funds named below invest in these
securities or use these techniques as part of the Fund's principal investment
strategy. However, the adviser or sub-adviser of a Fund may also use these
investment techniques or make investments in securities that are not a part of
the Fund's principal investment strategy.
PRINCIPAL RISKS
Inability to Sell Securities (All Funds except Research Enhanced Index and Money
Market Fund). Some securities usually trade in lower volume and may be less
liquid than securities of large established companies. These less liquid
securities could include securities of small and mid-size U.S. companies,
high-yield securities, convertible securities, unrated debt and convertible
securities, securities that originate from small offerings, and foreign
securities, particularly those from companies in emerging markets. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.
U.S. Government Securities (Money Market Fund). Some U.S. Government agency
securities may be subject to varying degrees of credit risk particularly those
not backed by the full faith and credit of the United States Government. All
U.S. Government securities may be subject to price declines in the securities
due to changing interest rates.
Convertible Securities (MidCap Opportunities and SmallCap Opportunities Funds).
The price of a convertible security will normally fluctuate in some proportion
to changes in the price of the underlying equity security, and as such is
subject to risks relating to the activities of the issuer and general market and
economic conditions. The income component of convertible securities causes
fluctuations based upon changes in interest rates and the credit quality of the
issuer. Convertible securities are often lower rated securities. A Fund may be
required to redeem or convert a convertible security before the holder would
otherwise choose.
Other Investment Companies (Money Market Fund). The Fund, except as limited in
the Statement of Additional Information, may invest up to 10% of its assets in
other investment companies. When the Fund invests in other investment companies,
you indirectly pay a proportionate share of the expenses of that other
investment company (including management fees, administration fees, and
custodial fees) in addition to the expenses of the Fund.
Restricted and Illiquid Securities (All Funds). Each Fund may invest in
restricted and illiquid securities, except as limited in the Statement of
Additional Information. If a security is illiquid, the Fund might be unable to
sell the security at a time when the adviser might wish to sell, and the
security could have the effect of decreasing the overall level of the Fund's
liquidity. Further, the lack of an established secondary market may make it more
difficult to value illiquid securities, which could vary from the amount the
Fund could realize upon disposition. Restricted securities, i.e., securities
subject to legal or contractual restrictions on resale, may be illiquid.
However, some restricted securities may be treated as liquid, although they may
be less liquid than registered securities traded on established secondary
markets.
Mortgage-Related Securities (ING Money Market Fund).Like other fixed income
securities, when interest rates rise, the value of a mortgage-backed security
generally will decline; however, when interest rates are declining, the value of
mortgage-backed securities with prepayment features may not increase as much as
other fixed income securities. The rate of prepayments on underlying mortgages
will affect the price and volatility of a mortgage-related security, and may
have the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of the purchase. Unanticipated
rates of prepayment on underlying mortgages can be expected to increase the
volatility of such securities. In addition, the value of these securities may
fluctuate in response to the market's perception of the creditworthiness of the
issuers of mortgage-related securities owned by a Fund. Additionally, although
mortgages and mortgage-related securities are generally supported by some form
of government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.
Asset-Backed Securities (ING Money Market Fund).Asset-backed securities involve
certain risks that are not posed by mortgage-related securities, resulting
mainly from the fact that asset-backed securities often do not contain the
benefit of a complete security interest in the related collateral. The risks
associated with asset-backed securities may be reduced by the addition of credit
enhancements such as a bank letter of credit or a third-party guarantee.
22 More Information About Risks
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
Derivatives (Research Enhanced Index Fund). Generally, derivatives can be
characterized as financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset or assets. Some derivatives
are sophisticated instruments that typically involve a small investment of cash
relative to the magnitude of risks assumed. These may include swap agreements,
options, forwards and futures. Derivative securities are subject to market risk,
which could be significant for those that have a leveraging effect. Derivatives
are also subject to credit risks related to the counterparty's ability to
perform, and any deterioration in the counterparty's creditworthiness could
adversely affect the instrument. A risk of using derivatives is that the adviser
or sub-adviser might imperfectly judge the market's direction. For instance, if
a derivative is used as a hedge to offset investment risk in another security,
the hedge might not correlate to the market's movements and may have unexpected
or undesired results, such as a loss or a reduction in gains.
Temporary Defensive Strategies (All Funds except Money Market Fund). When the
adviser or sub-adviser to a Fund anticipates unusual market or other conditions,
the Fund may temporarily depart from its principal investment strategies as a
defensive measure. To the extent that a Fund invests defensively, it likely will
not achieve capital appreciation.
Portfolio Turnover (All Funds except Research Enhanced Index Fund). Each Fund is
generally expected to engage in frequent and active trading of portfolio
securities to achieve its investment objective. A high portfolio turnover rate
involves greater expenses to a Fund, including brokerage commissions and other
transaction costs, and is likely to generate more taxable short-term gains for
shareholders, which may have an adverse effect on the performance of the Fund.
OTHER RISKS
Investments in Foreign Securities. There are certain risks in owning foreign
securities, including those resulting from: fluctuations in currency exchange
rates; devaluation of currencies; political or economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions; reduced availability of public information concerning
issuers; accounting, auditing and financial reporting standards or other
regulatory practices and requirements that are not uniform when compared to
those applicable to domestic companies; settlement and clearance procedures in
some countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of the Funds, including the withholding of
dividends.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Corporate Debt Securities. Corporate debt securities are subject to the risk of
the issuer's inability to meet principal and interest payments on the obligation
and may also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit-worthiness of the issuer and
general market liquidity. When interest rates decline, the value of the Funds'
debt securities can be expected to rise, and when interest rates rise, the value
of those securities can be expected to decline. Debt securities with longer
maturities tend to be more sensitive to interest rate movements than those with
shorter maturities.
Lending Portfolio Securities. In order to generate additional income, each Fund
may lend portfolio securities in an amount up to 331|M/3% of total Fund assets
to broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
default or fail financially.
Borrowing. Each Fund may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
More Information About Risks 23
<PAGE>
MORE INFORMATION
ABOUT RISKS
--------------------------------------------------------------------------------
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar securities at an agreed upon price and date.
Whether such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, net asset value will decline
faster than otherwise would be the case. Reverse repurchase agreements and
dollar rolls, as leveraging techniques, may increase a Fund's yield; however,
such transactions also increase a Fund's risk to capital and may result in a
shareholder's loss of principal.
Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a
Fund of a security which has been borrowed from a third party on the expectation
that the market price will drop. If the price of the security rises, the Fund
may have to cover its short position at a higher price than the short sale
price, resulting in a loss.
Percentage and Rating Limitations. Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
24 More Information About Risks
<PAGE>
Financial
Highlights
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). A report of
each Fund's independent accountant, along with the Fund's financial statements,
is included in the Fund's annual report, which is available upon request.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
25
<PAGE>
Financial
ING PILGRIM RESEARCH ENHANCED INDEX FUND Highlights
--------------------------------------------------------------------------------
For the year ended October 31, 2000, the information in the table below has been
audited by KPMG LLP, independent auditors. For all other periods, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class I(1)
Year ended October 31,
-------------------------
2000 1999
------ ------
<S> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 10.00
Net investment income $ 0.06
Net realized and unrealized gain on investments $ 1.11
Total from investment operations $ 1.17
Net asset value at the end of the period $ 11.17
Total investment return(2) % 11.70
Ratios and supplemental data:
Net assets at the end of the period ($000s) $ 27,927
Ratio of net expenses to average net assets after reimbursement % 0.98 (3)
Ratio of expenses to average net assets prior to expense reimbursement % 1.23 (3)
Ratio of net investment income to average net assets % 0.62 (3)
Portfolio turnover rate % 26
</TABLE>
----------
(1) Class I commenced operations on December 30, 1998.
(2) Assumes dividends have been reinvested.
(3) Annualized.
26 ING Pilgrim Research Enhanced Index Fund
<PAGE>
Financial
Highlights ING PILGRIM GROWTH OPPORTUNITIES FUND
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below has
been audited by KPMG LLP, independent auditors. For all periods ending prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class I
Year ended December 31,
-------------------------------------------------
2000 1999 1998 1997(1)
------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 26.28 21.36 17.90
Net investment income (loss) $ (0.17) (0.05) 0.01
Net realized and unrealized gain on investments $ 20.49 5.18 4.30
Total from investment operations $ 20.32 5.13 4.31
Dividends from net realized gain $ (12.84) (0.21) (0.85)
Total distributions $ (12.84) (0.21) (0.85)
Net asset value at the end of the period $ 33.76 26.28 21.36
Total investment return(2) % 93.86 24.06 24.29
Ratios and supplemental data:
Net assets at the end of the period ($000s) $ 132,953 83,233 113,529
Ratio of expenses to average net assets after reinbursement % 1.00 1.00 1.02 (3)
Ratio of expenses to average net assets prior to expense reimbursement % 1.00 1.00 1.02 (3)
Ratio of net investment income (loss) to average net assets % (0.61) (0.13) 0.08 (3)
Portfolio turnover rate % 286 98 32
</TABLE>
----------
(1) Class I commenced operations on March 31, 1997.
(2) Assumes dividends have been reinvested.
(3) Annualized
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth Opportunities Fund 27
<PAGE>
Financial
ING PILGRIM MIDCAP OPPORTUNITIES FUND Highlights
--------------------------------------------------------------------------------
For the year ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors. For all periods ending prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class I
Year ended December 31,
----------------------------------
2000 1999 1998(1)
------ ------ --------
<S> <C> <C> <C> <C>
Operating performance
Net asset value at the beginning of the period $ 12.99 10.00
Net investment loss $ (0.15) (0.02)
Net realized and unrealized gain on investments $ 12.09 3.01
Total from investment operations $ 11.94 2.99
Distributions from net realized gain $ (3.59) --
Net asset value at the end of the period $ 21.34 12.99
Total investment return(2): % 103.19 29.90
Ratios and supplemental data
Net assets at the end of the period ($000s) $ 67,954 33,441
Ratio of net expenses to average net assets after reimbursement % 1.41 1.50 (3)
Ratio of expenses to average net assets prior to expense reimbursement: % 1.41 2.01 (3)
Ratio of net investment loss to average net assets: % (1.04) (0.70)(3)
Portfolio turnover rate % 201 61
</TABLE>
----------
(1) Class I commenced operations on August 20, 1998.
(2) Assumes dividends have been reinvested.
(3) Annualized.
28 ING Pilgrim MidCap Opportunities Fund
<PAGE>
Financial
Highlights ING PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in table below has been
audited by KPMG LLP, independent auditors. For all periods ending prior to
December 31, 2000, the financial information was audited by other independent
auditors.
<TABLE>
<CAPTION>
Class I
Year ended December 31,
-----------------------
2000 1999(1)
------ ---------
<S> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 31.78
Net investment loss $ (0.08)
Net realized and unrealized gain on investments $ 35.40
Total from investment operations $ 35.32
Distributions from net realized gain $ (7.56)
Net asset value at the end of the period $ 59.54
Total investment return(2) % 126.05
Ratios and supplemental data:
Net assets at the end of the period ($000s) $ --
Ratio of expenses to average net assets after reimbursement % 0.47 (3)
Ratio of expenses to average net assets prior to expense reimbursement % 0.47 (3)
Ratio of net investment loss to average net assets % (0.35) (3)
Portfolio turnover rate % 223
</TABLE>
----------
(1) Class I commenced operations on April 1, 1999.
(2) Assumes dividends have been reinvested.
(3) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Opportunities Fund 29
<PAGE>
Financial
ING MONEY MARKET FUND Highlights
--------------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class I (1)
Year ended October 31,
---------------------
2000 1999
------ ------
<S> <C> <C> <C>
Operating performance:
Net asset value per share, beginning of period $ 1.00
From investment operations:
Net investment income(2) $ 0.00*
Net realized and unrealized gain $ --
Total from investment operations $ 0.00*
Distributions paid from investment income $ (0.00)*
Ratios and supplemental data:
Net assets value per share, end of period $ 1.00
Net assets, end of period (in thousands) $ 1,906
Total investment return at net asset value (3)(4) % 0.28
Ratio to average net assets(5):
Net expenses % 0.31
Gross expenses % 0.59
Net investment income % 5.29
</TABLE>
----------
(1) Class I commenced offering on October 13, 1999.
(2) Per share amount is based on average number of shares outstanding during
the period.
(3) Total return assumes reinvestment of all dividends and capital gain
distributions, if any. Total returns would be lower if the Fund's expenses
were not waived or reimbursed.
(4) Not annualized.
(5) Annualized.
* Amount represents less than $0.01.
30 ING Money Market Fund
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/Semi-Annual reports,
the SAI or other Fund information, or to make shareholder inquiries:
THE ING PILGRIM FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim Growth Opportunities Fund 811-4431
ING Pilgrim Equity Trust 811-8817
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim SmallCap Opportunities Fund 811-4434
ING Funds Trust 811-8895
IPROSxxxxxx-xxxxxx
<PAGE>
GRAPHICS DESCRIPTION APPENDIX
The cover of the prospectuses has an image of the earth set behind the type
similar to a watermark that crosses over on both the front and back cover pages.
There are four icon sized graphics used throughout the prospectus as follows:
1. In the sections describing the Objective of the Funds, the graphic icon is
that of a dart in the bullseye of a target.
2. In the sections describing the Investment Strategy of the Funds, the
graphic icon is that of a compass pointing due north.
3. In the sections describing the Risks of the Funds, the graphic icon is that
of an old fashioned scale tilting heavy on the left side.
4. In the sections describing the Performance history of the Funds, the
graphic icon is that of a stack of US currency bills.
5. On the bottom footer of every odd numbered page (right hand page), the
graphic icon is that of a telephone by the 800 number of the fund to call
for information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ING Pilgrim Funds Trust
7337 East Double Tree Ranch Road
Scottsdale, AZ 85258
General and Account Information: 1-800-992-0180
March 1, 2001
--------------------------------------------------------------------------------
ING MUTUAL FUNDS MANAGEMENT CO. LLC, Investment Manager
("IMFC" or the "Manager")
ING PILGRIM SECURITIES, INC., Distributor and Principal Underwriter
("IPS" or the "Distributor")
This Statement of Additional Information ("SAI") describes the shares of 21
funds (each, a "Fund" or, collectively, the "Funds") managed by IMFC. Each Fund
is a portfolio of ING Pilgrim Funds Trust (the "Trust"), an open-end management
investment company. The Funds are:
<TABLE>
<CAPTION>
Stock Funds Bond Funds
----------- ----------
<S> <C>
ING Pilgrim Large Cap Growth Fund ING Pilgrim Intermediate Bond Fund
ING Pilgrim Growth & Income Fund ING Pilgrim High Yield Bond Fund
ING Pilgrim Mid Cap Growth Fund ING Pilgrim International Bond Fund
ING Pilgrim Small Cap Growth Fund ING Pilgrim National Tax-Exempt Bond Fund
ING Pilgrim Global Brand Names Fund
ING Pilgrim International Equity Fund Money Market Funds
ING Pilgrim Emerging Markets Equity Fund ------------------
ING Pilgrim European Equity Fund ING Money Market Fund
ING Pilgrim Tax Efficient Equity Fund ING Pilgrim National Tax-Exempt Money Market Fund*
ING Pilgrim Focus Fund
ING Pilgrim Global Information Technology Fund
ING Pilgrim Global Communications Fund
ING Pilgrim Global Real Estate Fund*
ING Pilgrim Internet Fund
ING Pilgrim Internet Fund II*
</TABLE>
* Fund not currently offered
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the current Prospectus for the Funds, dated March 1,
2001, as amended or supplemented from time to time. 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 telephone
number printed above.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
----
ORGANIZATION.................................................................1
MANAGEMENT...................................................................2
EXPENSE LIMITATION AGREEMENT................................................13
INVESTMENT POLICIES AND RISKS...............................................13
INVESTMENT RESTRICTIONS.....................................................38
PORTFOLIO TRANSACTIONS......................................................40
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..............................42
PURCHASE AND REDEMPTION PLANS...............................................51
DETERMINATION OF NET ASSET VALUE............................................52
BROKER DEALER COMPENSATION..................................................55
TAXATION....................................................................56
OTHER INFORMATION...........................................................61
FINANCIAL STATEMENTS........................................................67
APPENDIX....................................................................68
ii
<PAGE>
ORGANIZATION
The Trust is a Delaware business trust established under a Trust Instrument
dated July 30, 1998 and currently consists of twenty-seven separately managed
portfolios, all but six of which are discussed in this SAI. Each portfolio is
comprised of three different classes of shares -- Class A shares, Class B shares
and Class C shares. Currently, Class I shares are only offered by ING Pilgrim
International Equity Fund, ING Pilgrim Large Cap Growth Fund, and ING Money
Market Fund. Class X shares are no longer offered.
On ______________, the name of the Trust was changed to ING Pilgrim Funds
Trust. The names of each of the following Funds were changed as follows:
<TABLE>
<CAPTION>
Old Name New Name
-------- --------
<S> <C>
ING Large Cap Growth Fund ING Pilgrim Large Cap Growth Fund
ING Growth & Income Fund ING Pilgrim Growth & Income Fund
ING Mid Cap Growth Fund ING Pilgrim Mid Cap Growth Fund
ING Small Cap Growth Fund ING Pilgrim Small Cap Growth Fund
ING Global Brand Names Fund ING Pilgrim Global Brand Names Fund
ING International Equity Fund ING Pilgrim International Equity Fund
ING Emerging Markets Equity Fund ING Pilgrim Emerging Markets Equity Fund
ING Tax Efficient Equity Fund ING Pilgrim Tax Efficient Equity Fund
ING Focus Fund ING Pilgrim Focus Fund
ING Global Information Technology Fund ING Pilgrim Global Information Technology Fund
ING Global Communications Fund ING Pilgrim Global Communications Fund
ING Global Real Estate Fund ING Pilgrim Global Real Estate Fund
ING Internet Fund ING Pilgrim Internet Fund
ING Internet Fund II ING Pilgrim Internet Fund II
ING Intermediate Bond Fund ING Pilgrim Intermediate Bond Fund
ING High Yield Bond Fund ING Pilgrim High Yield Bond Fund
ING International Bond Fund ING Pilgrim International Bond Fund
ING National Tax-Exempt Bond Fund ING Pilgrim National Tax-Exempt Bond Fund
ING National Tax-Exempt Money Market Fund ING Pilgrim Tax-Exempt Money Market Fund
</TABLE>
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Focus Fund that, if approved by shareholders of ING Pilgrim Focus Fund,
will result in the reorganization of ING Pilgrim Focus Fund into the ING Pilgrim
LargeCap Growth Fund series of ING Pilgrim Mutual Funds. It is expected that
shareholder approval of the Agreement and Plan of Reorganization will be sought
in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Large Cap Growth Fund that, if approved by shareholders of ING Pilgrim
Large Cap Growth Fund , will result in the reorganization of ING Pilgrim Large
Cap Growth Fund into the ING Pilgrim LargeCap Growth Fund series of ING Pilgrim
Mutual Funds. It is expected that shareholder approval of the Agreement and Plan
of Reorganization will be sought in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Growth & Income Fund that, if approved by shareholders of ING Pilgrim
Growth & Income Fund, will result in the reorganization of ING Pilgrim Growth &
Income Fund into the ING Pilgrim Growth and Income Fund, Inc. It is expected
that shareholder approval of the Agreement and Plan of Reorganization will be
sought in the near future.
1
<PAGE>
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Mid Cap Growth Fund that, if approved by shareholders of ING Pilgrim Mid
Cap Growth Fund, will result in the reorganization of ING Pilgrim Mid Cap Growth
Fund into the ING Pilgrim MidCap Opportunities Fund series of ING Pilgrim Equity
Trust. It is expected that shareholder approval of the Agreement and Plan of
Reorganization will be sought in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Small Cap Growth Fund that, if approved by shareholders of ING Pilgrim
Small Cap Growth Fund, will result in the reorganization of ING Pilgrim Small
Cap Growth Fund into the ING Pilgrim SmallCap Opportunities Fund. It is expected
that shareholder approval of the Agreement and Plan of Reorganization will be
sought in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Emerging Markets Equity Fund that, if approved by shareholders of ING
Pilgrim Emerging Markets Equity Fund, will result in the reorganization of ING
Pilgrim Emerging Markets Equity Fund into the ING Pilgrim Emerging Countries
Fund series of ING Pilgrim Mutual Funds. It is expected that shareholder
approval of the Agreement and Plan of Reorganization will be sought in the near
future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim Global Brand Names Fund that, if approved by shareholders of ING Pilgrim
Global Brand Names Fund, will result in the reorganization of ING Pilgrim Global
Brand Names Fund into the ING Pilgrim Worldwide Growth Fund series of ING
Pilgrim Mutual Funds. It is expected that shareholder approval of the Agreement
and Plan of Reorganization will be sought in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim International Equity Fund that, if approved by shareholders of ING
Pilgrim International Equity Fund, will result in the reorganization of ING
Pilgrim International Equity Fund into the ING Pilgrim International Fund, Inc.
It is expected that shareholder approval of the Agreement and Plan of
Reorganization will be sought in the near future.
The Trustees have approved an Agreement and Plan of Reorganization for ING
Pilgrim International Bond Fund that, if approved by shareholders of ING Pilgrim
International Bond Fund, will result in the reorganization of ING Pilgrim
International Bond Fund into the ING Pilgrim Strategic Income Fund series of ING
Pilgrim Mutual Funds. It is expected that shareholder approval of the Agreement
and Plan of Reorganization will be sought in the near future.
MANAGEMENT
TRUSTEES AND OFFICERS
The business and affairs of the Funds are managed under the direction of
the Board of Trustees. 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 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258. Trustees deemed to be "interested persons" of the Funds
for purposes of the 1940 Act are indicated by an asterisk.
2
<PAGE>
Robert W. Stallings, Chief Executive Officer and President - Age 51.
Chairman, Chief Executive Officer and President of ING Pilgrim Group, Inc. ("ING
Pilgrim Group") (since December 1994); Chairman (since December 1994), President
and Chief Investment Officer (since August 2000) ING Pilgrim Investments, Inc.;
Chairman, ING Pilgrim Securities, Inc. ("ING Pilgrim Securities") (since
December 1994); President and Chief Executive Officer of Pilgrim Funding, Inc.
(since November 1999); and Chairman, President and Chief Executive Officer of
Pilgrim Capital Corporation (since August 1991). Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of each of the Funds
managed by the Investment Manager.
Joseph N. Hankin, Trustee - Age 60, Four Merion Drive, Purchase, NY
10577-1302. President, Westchester Community College (since 1971); Adjunct
Professor of Columbia University Teachers College (since 1976). Dr. Hankin is
also a Trustee of the First Choice Funds and Stagecoach Funds.
Jack D. Rehm, Trustee - Age 67, 3131 Fleur Drive, Des Moines, IA 50321.
Chairman of the Board (Retired) of Meredith Corp. (1992-1997); President and
Chief Executive Officer of Meredith Corp. (1989-1996). Mr. Rehm is also a
Director of Meredith Corp., International Multifoods Corp. and Star Tek, Inc.
Blaine E. Rieke, Trustee - Age 66, 6111 North Berkeley Blvd., Milwaukee, WI
53217. General Partner of Huntington Partners (1997-present); Chairman and Chief
Executive Officer of Firstar Trust Company (1973-1996). Mr. Rieke is also a
Director of Morgan Chase Trust Company.
Richard A. Wedemeyer, Trustee - Age 63, 78 Summit Road, Riverside, CT
06878. 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). Mr. Wedemeyer is also a
Trustee of the First Choice Funds.
James M. Hennessy, Senior Executive Vice President, Chief Operating Officer
and Secretary - Age 51. Senior Executive Vice President and Chief Operating
Officer (since June 2000) and Secretary (since April 1995), Pilgrim Capital
(formerly Express America Holdings Corporation), ING Pilgrim Group, ING Pilgrim
Securities and ING Pilgrim Investments; Senior Executive Vice President and
Secretary of each of the other ING Pilgrim Funds. Formerly Executive Vice
President , Pilgrim Capital Corporation and its affiliates (May 1998 - June
2000) and Senior Vice President, Pilgrim Capital and its affiliates (April 1995
- April 1998).
Stanley D. Vyner, Executive Vice President - Age 50. Executive Vice
President of most of the other ING Pilgrim Funds (since July 1996). Formerly
President and Chief Executive Officer (August 1996 - August 2000), ING Pilgrim
Investments; Chief Executive Officer (November 1993 - December 1995) HSBC Asset
Management (Americas), Inc.
Mary Lisanti, Executive Vice President - Age 44. Executive Vice President
of most of the ING Pilgrim Funds (since May 1998). Formerly Portfolio Manager,
Strong Capital Management; Managing Director and Head of Small- and
Mid-Capitalization Equity Strategies at Bankers Trust Corp. (1993 - 1996).
Michael J. Roland, Senior Vice-President - Age 42. Senior Vice President
and Chief Financial Officer, ING Pilgrim Group, ING Pilgrim Investments and ING
Pilgrim Securities (since June 1998); Senior Vice President and Principal
Financial Officer of each of the other ING Pilgrim Funds. He served in same
capacity from January, 1995 - April, 1997. Formerly, Chief Financial Officer of
Endeaver Group (April 1997 to June 1998).
3
<PAGE>
Robert S. Naka, Senior Vice President and Assistant Secretary - Age 37.
Senior Vice President, ING Pilgrim Investments (since November 1999) and ING
Pilgrim Group, Inc. (since August 1999). Senior Vice President and Assistant
Secretary of each of the other ING Pilgrim Funds. Formerly Vice President, ING
Pilgrim Investments (April 1997 - October 1999), ING Pilgrim Group, Inc.
(February 1997 - August 1999). Formerly Assistant Vice President, ING Pilgrim
Group, Inc. (August 1995 - February 1997). Formerly Operations Manager, ING
Pilgrim Group, Inc. (April 1992 - April 1995).
Robyn L. Ichilov, Vice President - Age 33. Vice President, ING Pilgrim
Investments (since August 1997), Accounting Manager (since November 1995). Vice
President and Treasurer of most of the other ING Pilgrim Funds. Formerly
Assistant Vice President and Accounting Supervisor for PaineWebber (June 1993 -
April 1995).
Charles Eng, Assistant Treasurer - Age 36. Fund Accounting Manager, ING
Mutual Funds Management Co. LLC (1998-present); Assistant Treasurer, Chase
Manhattan Bank (1997-1998); Assistant Manager, BISYS Fund Services (1996-1997);
Associate Director, Furman Selz LLC (1992-1996).
Amy Lau, Assistant Treasurer - Age 34. 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 IPS receive from the Funds
an annual retainer of $10,000 and a fee of $1,667 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 IPS do not receive compensation from the Funds.
The table below illustrates the compensation paid to each Trustee for the
Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Benefits Accrued As Estimated from Fund and Fund
Aggregate Part of Annual Benefits Complex Paid to
Name of Person, Position Compensation from Fund Fund Expenses Upon Retirement Trustees
------------------------ ---------------------- ------------- --------------- --------
<S> <C> <C> <C> <C>
John J. Pileggi $_____ $ 0 $ 0 $_____
Joseph N. Hankin $_____ $ 0 $ 0 $_____
Jack D. Rehm $_____ $ 0 $ 0 $_____
Blaine E. Rieke $_____ $ 0 $ 0 $_____
Richard A. Wedemeyer $_____ $ 0 $ 0 $_____
</TABLE>
4
<PAGE>
INVESTMENT MANAGER
ING Mutual Funds Management Co. LLC, 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258, serves as the Manager of the Funds. IMFC is a wholly-owned
subsidiary of ING America Insurance Holdings, Inc., which in turn is a
wholly-owned subsidiary of ING Group N.V. ("ING Group"). Under the Management
Agreement, IMFC has overall responsibility, subject to the supervision of the
Board of Trustees, for engaging Sub-Advisers and for monitoring and evaluating
the management of the assets of each Fund by the Sub-Adviser. The Manager is
also responsible for monitoring and evaluating the Sub-Advisers on a periodic
basis, and will consider their performance records with respect to the
investment objectives and policies of each Fund. The Sub-Advisers are affiliated
with the Manager and the Distributor by reason of common ownership. 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.
Each Fund pays an advisory fee to the Manager as a percentage of such
Fund's average daily net assets, as set forth in the prospectus. The fees
payable to the Manager were discounted 75% for each Fund's first year of
operations and are being discounted 50% for each Fund's second year of
operations. Net of these discounts, the Manager was entitled to the following
advisory fees for the fiscal years ended October 31, 1999 and October 31, 2000:
FUND 2000 1999
-------- -------- --------
ING Pilgrim Large Cap Growth Fund $ 63,995
ING Pilgrim Growth & Income Fund $ 53,229
ING Pilgrim Mid Cap Growth Fund $ 60,623
ING Pilgrim Small Cap Growth Fund $ 61,553
ING Pilgrim Global Brand Names Fund $ 86,645
ING Pilgrim International Equity Fund $ 78,877
ING Pilgrim Emerging Markets Equity Fund
ING Pilgrim European Equity Fund $ 71,435
ING Pilgrim Tax-Efficient Equity Fund $ 77,690
ING Pilgrim Focus Fund $ 72,298
ING Pilgrim Global Communications Fund
ING Pilgrim Global Information Technology Fund $108,222
ING Pilgrim Internet Fund $ 26,872
ING Pilgrim Global Real Estate Fund
ING Pilgrim National Tax-Exempt Bond Fund
ING Pilgrim National Tax-Exempt Money Market Fund
ING Pilgrim Intermediate Bond Fund $ 35,026
ING Pilgrim High Yield Bond Fund $ 43,108
ING Pilgrim International Bond Fund $ 54,895
ING Money Market Fund $ 42,238
5
<PAGE>
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 Manager shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds in
connection with its performance of services pursuant to the Management
Agreement, except loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its obligations
under the Agreement.
An affiliate of the Manager has made 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 Pilgrim Group. Such restrictions may adversely
affect the Funds.
SUB-ADVISERS
ING Investment Management LLC ("IIM") serves as Sub-Adviser to the ING
Pilgrim Growth & Income Fund, the ING Pilgrim Intermediate Bond Fund, the ING
Pilgrim High Yield Bond Fund, and the ING Money Market Fund. Located at 5780
Powers Ferry Road, N.W., Atlanta, Georgia, IIM is engaged primarily in the
business of providing investment advice to affiliated insurance companies.
Furman Selz Capital Management LLC ("FSCM") serves as Sub-Adviser to the
ING Pilgrim Mid Cap Growth Fund, the ING Pilgrim Small Cap Growth Fund, the ING
Pilgrim National Tax-Exempt Bond Fund and the ING Pilgrim National Tax-Exempt
Money Market Fund. Located at 230 Park Avenue, New York, New York 10169, FSCM is
engaged in the business of providing investment advice to institutional and
individual clients.
Baring International Investment Limited ("BIIL") serves as Co-Sub-Adviser
to the ING Pilgrim International Equity Fund, the ING Pilgrim Emerging Markets
Equity Fund and the ING Pilgrim International Bond Fund. Located at 155
Bishopsgate, London, England, 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").
Baring Asset Management, Inc. ("BAM") serves as Sub-Adviser to the ING
Pilgrim Large Cap Growth Fund and acts as Co-Sub-Adviser to the ING Pilgrim
International Equity Fund, the ING Pilgrim Emerging Markets Equity Fund and the
ING Pilgrim International Bond Fund. Located at 125 High Street, Boston,
Massachusetts 02110, BAM is a wholly-owned subsidiary of BAMHL.
6
<PAGE>
Baring Asset Management (Asia) Limited ("BAML") acts as Co-Sub-Adviser to
the ING Pilgrim International Equity Fund, the ING Pilgrim Emerging Markets
Equity Fund and the ING Pilgrim International Bond Fund. BAML is located at 19/F
Edinburgh Tower, The Landmark, 15 Queens Road, Central, Hong Kong. BAML is a
wholly-owned subsidiary of BAMHL.
ING Investment Management Advisors B.V. ("IIMA"), serves as Sub-Adviser to
the ING Pilgrim Global Brand Names Fund, the ING Pilgrim European Equity Fund,
the ING Pilgrim Global Information Technology Fund, the ING Pilgrim Internet
Fund, the ING Pilgrim Internet Fund II, and the ING Pilgrim Global
Communications Fund and as Co-Sub-Adviser to the ING Pilgrim 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 Pilgrim
Tax Efficient Equity Fund. Located at 333 South Grand Avenue, Los Angeles,
California, 90071, Delta is a division of Furman Selz Capital Management.
CRA Real Estate Securities, L.P. ("CRA") serves as Co-Sub-Adviser to the
ING Pilgrim Global Real Estate Fund. Located at 259 Radnor-Chester Road, Radnor,
PA 19087, CRA is in the business of providing investment advice to institutional
and individual clients.
For the fiscal years ended October 31, 1999 and October 31, 2000, the Funds
paid the Sub-advisory fees described below:
FUND 2000 1999
-------- -------- --------
ING Pilgrim Large Cap Growth Fund
ING Pilgrim Global Brand Names Fund
ING Pilgrim International Equity Fund
ING Pilgrim European Equity Fund
ING Pilgrim Tax-Efficient Equity Fund
ING Pilgrim Global Information Technology Fund
ING Pilgrim Internet Fund
ING Pilgrim Internet Fund II
ING Pilgrim Intermediate Bond Fund
ING Pilgrim High Yield Bond Fund
ING Pilgrim National Tax-Exempt Bond Fund
ING Pilgrim Emerging Markets Equity Fund
ING Pilgrim Global Communications Fund
ING Pilgrim Global Real Estate Fund
ING Pilgrim International Bond Fund
DISTRIBUTION OF FUND SHARES
ING Pilgrim Securities, Inc. ("IPS"), located at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258, serves as distributor and principal underwriter
of the Funds. As distributor, IPS is obligated to sell shares of each Fund on a
best efforts basis only against purchase orders for the shares. Shares of each
Fund are offered to the public on a continuous basis. IPS is affiliated with the
Manager and the Sub-Advisers by reason of common ownership.
The aggregate amount of underwriting commissions collected on the sale of
shares of the Funds during the fiscal year ended October 31, 2000 was $_______
of which _____ was retained by ______, and during the fiscal year ended October
31, 1999 was $280,362.64, of which $280,362.64 was retained by ING Funds
Distributor, Inc., the former distributor of the Funds.
7
<PAGE>
ADMINISTRATION
ING Pilgrim Group, Inc. serves as Administrator for each of the Funds
(except the ING Money Market Fund), pursuant to an Administrative Services
Agreement with the Trust. Each Fund pays the Administrator an annual fee of
0.10% of the Fund's average daily net assets. Subject to the supervision of the
Board of Trustees, the Administrator provides the overall business management
and administrative services necessary to the proper conduct of the Funds'
business, except for those services performed by the Investment Manager under
the Investment Advisory Agreements, the custodian for the Funds under the
Custodian Agreements, the transfer agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring the Investment Manager for compliance with requirements under
applicable law and with the investment policies and restrictions of the Funds.
The Administrator is an affiliate of the Investment Manager. The Administrative
Services Agreement became effective November 1, 2000.
ACCOUNT SERVICES
ING Fund Services Co. LLC ("ING Fund Services") has entered into a Fund
Services Agreement with the Trust, on behalf of the ING Money Market Fund,
pursuant to which ING Fund Services will perform or engage third parties to
perform account services and other services. ING Fund Services is an affiliate
of the Manager and the Distributor by reason of common ownership. Under the Fund
Services Agreement, the ING Money Market Fund may pay ING Fund Services annually
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 shareholder 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. residents and non-resident accounts where applicable; (vii) preparation and
filing of U.S. Treasury Department Forms 1099 and other appropriate forms
required by applicable statutes, rules and regulations; and (viii) providing
such other similar services directly to shareholder accounts.
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, except the ING Money Market Fund, pays the
Distributor an annual fee of 0.10% of average net assets attributable to that
Fund's Class A shares and 0.75% of average net assets attributable to that
Fund's Class B and Class C. The ING Money Market Fund pays the Distributor an
annual fee of 0.50% of average net assets attributable to that Fund's Class A
shares and 0.75% of average net assets attributable to that Fund's Class B and
Class C. The Funds ceased offering Class X shares on November 1, 2000. Prior to
November 1, 2000, each Fund paid the Distributor an annual fee of 0.50% of
average net assets attributable to that Fund's Class A shares and 0.75% of
average net assets attributable to that Fund's Class B and Class C.
8
<PAGE>
For the fiscal year ended October 31, 2000, the Funds paid the distribution
fees described below:
Name of Fund Class A Class B Class C Class X
------------ ------- ------- ------- -------
ING Pilgrim Large Cap Growth Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Growth & Income Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Mid Cap Growth Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Small Cap Growth Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Global Brand Names Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim International Equity Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Emerging Markets Equity Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim European Equity Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Tax Efficient Equity Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Focus Fund $_______ $_______ $_______ $_______
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
9
<PAGE>
Name of Fund Class A Class B Class C Class X
------------ ------- ------- ------- -------
ING Pilgrim Global Information
Technology Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Global Communications Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Global Real Estate Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Internet Fund $_______ $_______ $_______ $_______
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Internet Fund II
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim Intermediate Bond Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim High Yield Bond Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim International Bond Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim National Tax-Exempt Bond Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
10
<PAGE>
Name of Fund Class A Class B Class C Class X
------------ ------- ------- ------- -------
ING Money Market Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
ING Pilgrim National Tax-Exempt
Money Market Fund
Salaries/Overides $_______ $_______ $_______ $_______
Commissions Paid $_______ $_______ $_______ $_______
Marketing, RMM, & Convention Expense $_______ $_______ $_______ $_______
Total $_______ $_______ $_______ $_______
The higher distribution fee attributable to Class B and Class 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 load and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution fee
for all classes may be used by the Distributor for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor: (a) to compensate broker-dealers, including the Distributor and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, (b) to pay for interest and other
borrowing costs incurred by the distributor; and (c) to pay other advertising
and promotional expenses in connection with the distribution of Fund shares.
These advertising and promotional expenses include, by way of example but not by
way of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses.
Agreements implementing the Plan of Distribution (the "Implementation
Agreements"), including agreements with dealers wherein such dealers agree for a
fee to act as agents for the sale of the Funds' shares, are in writing and have
been approved by the Board of Trustees. All payments made pursuant to the Plan
of Distribution are made in accordance with written agreements.
The continuance of the Plan of Distribution and the Implementation
Agreements must be specifically approved at least annually by a vote of the
Trust's Board of Trustees and by a vote of the Trustees who are not interested
persons of the Trust and have no direct or indirect financial interest in the
Plan or any Implementation Agreement (the "Independent Trustees") at a meeting
called for the purpose of voting on such continuance. The Plan of Distribution
may be terminated at any time by a vote of the majority of the Independent
Trustees or by a vote of the holders of a majority of the outstanding shares of
a Fund or the applicable class of a Fund. In the event the Plan of Distribution
is terminated in accordance with its terms, the affected Fund (or class) will
not be required to make any payments for distribution expenses incurred after
the termination date, although the Board of Trustees may allow the Funds to pay
distribution expenses to the Distributor which were incurred before the Plan was
11
<PAGE>
terminated. Each Implementation Agreement terminates automatically in the event
of its assignment and may be terminated at any time by a vote of the majority of
the Independent Trustees or by a vote of the holders of a majority of the
outstanding shares of a Fund (or the applicable class) on not more than 60 days'
written notice to any other party to the Implementation Agreement. The Plan of
Distribution may not be amended to increase materially the amount to be spent
for distribution without shareholder approval. All material amendments to the
Plan of Distribution must be approved by a vote of the Trust's Board of Trustees
and by a vote of the Independent Trustees.
In approving the Plan of Distribution, the Trustees determined, in the
exercise of their business judgment and in light of their fiduciary duties as
Trustees, that there is a reasonable likelihood that the Plan will benefit the
Funds and their shareholders. The Board of Trustees believes that expenditure of
the Funds' assets for distribution expenses under the Plan of Distribution
should assist in the growth of the Funds which will benefit the Funds and their
shareholders through increased economies of scale, greater investment
flexibility, greater portfolio diversification and less chance of disruption of
planned investment strategies. The Plan of Distribution will be renewed only if
the Trustees make a similar determination for each subsequent year of the Plan.
There can be no assurance that the benefits anticipated from the expenditure of
the Funds' assets for distribution will be realized. While the Plan of
Distribution is in effect, all amounts spent by the Funds pursuant to the Plan
and the purposes for which such expenditures were made must be reported
quarterly to the Board of Trustees for its review. Distribution expenses
attributable to the sale of more than one class of shares of a Fund will be
allocated at least annually to each class of shares based upon the ratio in
which the sales of each class of shares bears to the sales of all of the shares
of such Fund. In addition, the selection and nomination of those Trustees who
are not interested persons of the Trust are committed to the discretion of the
Independent Trustees during such period.
SHAREHOLDER SERVICING PLAN
Each 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 average daily net assets
of its Class A, Class B, and Class C shares to various banks, trust companies,
broker-dealers or other financial organizations including the Manager and its
affiliates (collectively, "Service Organizations") that provide certain
administrative and support services to their customers who own shares of the
Funds. These services may include, but are not limited to, (a) answering routine
customer inquiries regarding the Funds; (b) assisting customers in changing
dividend options, account designations and addresses, and in enrolling into any
of the several investment plans offered by the Funds; (c) assisting in
processing purchase and redemption transactions, including arranging wire
transfers, transmitting and receiving funds, and verifying customer signatures;
and (d) providing such other similar services directly to their customers to the
extent permitted under applicable statutes, rules and regulations.
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.
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EXPENSE LIMITATION AGREEMENTS
The Investment Manager entered into expense limitation agreements with the
following Funds, pursuant to which the Investment Manager has agreed to waive or
limit its fees. In connection with these agreements and certain U.S. tax
requirements, the Investment Manager will assume other expenses so that the
total annual ordinary operating expenses of the Funds (which excludes interest,
taxes, brokerage commissions, extraordinary expenses such as litigation, other
expenses not incurred in the ordinary course of each Fund's business, and
expenses of any counsel or other persons or services retained by the Company's
directors who are not "interested persons" (as defined in the 1940 Act) of the
Investment Manager) do not exceed:
<TABLE>
<CAPTION>
Name of Fund Class A Class B Class C Class I
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
ING Pilgrim Large Cap Growth Fund 1.29% 1.94% 1.94% 0.74%
ING Pilgrim Growth & Income Fund 1.32% 1.97% 1.97% N/A
ING Pilgrim Mid Cap Growth Fund 1.50% 2.15% 2.15% N/A
ING Pilgrim Small Cap Growth Fund 1.43% 2.08% 2.08% N/A
ING Pilgrim Global Brand Names Fund 1.53% 2.18% 2.18% N/A
ING Pilgrim International Equity Fund 1.59% 2.24% 2.24% 1.04%
ING Pilgrim Emerging Markets Equity Fund 1.70% 2.35% 2.35% N/A
ING Pilgrim European Equity Fund 1.62% 2.27% 2.27% N/A
ING Pilgrim Tax Efficient Equity Fund 1.30% 1.95% 1.95% N/A
ING Pilgrim Focus Fund 1.40% 2.05% 2.05% N/A
ING Pilgrim Global Information Technology Fund 1.59% 2.24% 2.24% N/A
ING Pilgrim Global Communications Fund 1.53% 2.18% 2.18% N/A
ING Pilgrim Global Real Estate Fund 1.53% 2.18% 2.18% N/A
ING Pilgrim Internet Fund 1.59% 2.24% 2.24% N/A
ING Pilgrim Internet Fund II 1.59% 2.24% 2.24% N/A
ING Pilgrim Intermediate Bond Fund 0.99% 1.74% 1.74% N/A
ING Pilgrim High Yield Bond Fund 1.04% 1.79% 1.79% N/A
ING Pilgrim International Bond Fund 1.51% 2.16% 2.16% N/A
ING Pilgrim National Tax Exempt Bond Fund 0.96% 1.71% 1.71% N/A
ING Money Market Fund 0.77% 1.41% 1.41% 0.31%
ING Pilgrim National Tax-Exempt Money Market Fund 0.70% 1.45% 1.45% N/A
</TABLE>
INVESTMENT POLICIES AND RISKS
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.
COMMON STOCKS (All Funds, except Money Market 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, except Money Market 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 or debt. 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
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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.
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 except ING National Tax-Exempt Money
Market Fund). 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.
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.
WHEN-ISSUED, DELAYED-DELIVERY SECURITIES AND FORWARD COMMITMENTS (All
Funds). The Funds may purchase securities on a when-issued or 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. The securities so purchased are subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. While the Funds normally enter into these transactions
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<PAGE>
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.
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.
COMMERCIAL PAPER (All Funds except ING National Tax-Exempt 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 ING 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."
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 Investment Company Act of 1940 (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 (10% of the value of the net assets in the case of money
market 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.
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<PAGE>
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.
CORPORATE DEBT SECURITIES (All Funds). 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 ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), 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 Pilgrim National
Tax-Exempt Bond Fund, ING National Tax-Exempt 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 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
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<PAGE>
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 Pilgrim National Tax-Exempt Bond
Fund, ING National Tax-Exempt 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. 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 Pilgrim National Tax-Exempt Bond
Fund, ING National Tax-Exempt 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.
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<PAGE>
FHLMC SECURITIES (All Funds except ING Pilgrim National Tax-Exempt Bond
Fund and ING National Tax-Exempt 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.
FHLMC CERTIFICATES (All Funds except ING Pilgrim National Tax-Exempt Bond
Fund and ING National Tax-Exempt 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.
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NON-AGENCY MORTGAGE-BACKED SECURITIES (All Funds except ING Pilgrim
National Tax-Exempt Bond Fund and ING National Tax-Exempt Money Market Fund).
Certain non-agency private entities also issue mortgage-backed securities. Other
than lacking the guarantee by the full faith and credit of 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 Pilgrim
International Bond Fund, ING Pilgrim National Tax-Exempt Bond Fund and ING
National Tax-Exempt Money Market 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 Pilgrim National
Tax-Exempt Bond Fund and ING National Tax-Exempt 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 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
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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 (All Funds except the Money Market Funds). The Funds
may invest in real estate investment trusts ("REITs") and other real estate
industry operating companies ("REOCs"). For purposes of a Fund's investments, a
REOC is a company that derives at least 50% of its gross revenues or net profits
from either (1) the ownership, development, construction, financing, management
or sale of commercial, industrial or residential real estate, or (2) products or
services related to the real estate industry, such as building supplies or
mortgage servicing. Investing in REITs involves certain unique risks in addition
to those risks associated with investing in the real estate industry in general.
Although the Funds will not invest directly in real estate, the fund may invest
in equity securities of issuers primarily engaged in or related to the real
estate industry. Therefore, an investment in REITs is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying the REITs' investments are
concentrated geographically, by property type or in certain other respects, the
REITs may be subject to certain of the foregoing risks to a greater extent.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the U.S. Internal Revenue Code
and failing to maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in 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.
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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.
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.
ASSET-BACKED SECURITIES (All Funds except ING Pilgrim National Tax-Exempt
Bond Fund and ING National Tax-Exempt 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 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, ING Pilgrim National Tax-Exempt Bond
Fund and the Money Market Funds). As described in the Prospectus, changes in
foreign exchange rates will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.
Since 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
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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.
The Funds also are authorized to use a proxy currency to hedge a foreign
exchange risk. This is done by using a forward foreign exchange contract in a
currency other than the currency of the asset subject to hedging. By engaging in
cross-hedging transactions, a Fund assumes the risk of imperfect correlation
between the subject currencies. This practice may present risks different from,
or in addition to, the risks associated with investments in foreign currencies
made to lock in the U.S. dollar price of a security.
Emerging Country and Emerging Securities Markets (ING Pilgrim Emerging
Markets Equity Fund, ING Pilgrim International Equity Fund, ING Pilgrim High
Yield Bond Fund, ING Pilgrim Intermediate Bond Fund and ING Pilgrim
International Bond Fund). Trading volume on emerging country stock exchanges is
substantially less than that on the New York Stock Exchange. Further, securities
of some emerging country or emerging market companies are less liquid and more
volatile than securities of comparable U.S. companies. Similarly, volume and
liquidity in most emerging country bond markets is substantially less than in
the U.S. and, consequently, volatility of price can be greater than in the U.S.
Fixed commissions on emerging country stock or emerging market exchanges are
generally higher than negotiated commissions on U.S. exchanges, although the
Fund endeavors to achieve the most favorable net results on its portfolio
transactions and may be able to purchase the securities in which the Fund may
invest on other stock exchanges where commissions are negotiable. Foreign stock
exchanges, brokers and listed companies are generally subject to less government
supervision and regulation than in the United States. The customary settlement
time for foreign securities may be longer than the five-day customary settlement
time for United States securities.
Companies in emerging countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about an emerging country
company than about a U.S. company. Further, there is generally less governmental
supervision and regulation of foreign stock exchanges, brokers and listed
companies than in the U.S.
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DEPOSITORY RECEIPTS (All Stock Funds, ING Pilgrim High Yield Bond Fund, ING
Pilgrim Intermediate Bond Fund and ING Pilgrim International Bond Fund).
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 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.
CONVERTIBLE SECURITIES (All Funds except ING Pilgrim National Tax-Exempt
Bond Fund and the Money Market Funds). Convertible securities may be converted
at either a stated price or stated rate into underlying shares of common stock
and, therefore, are deemed to be equity securities for purposes of the Funds'
management policies. Convertible securities have characteristics similar to both
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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.
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. 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). The Funds may invest in
Guaranteed Investment Contracts ("GICs") issued by insurance companies. Pursuant
to such contracts, the Fund makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company then credits to the
Fund on a monthly basis guaranteed interest which is based on an index. The GICs
provide that this guaranteed interest will not be less than a certain minimum
rate. The insurance company may assess periodic charges against a GIC for
expense and service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. In addition, because the Funds may not receive
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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 ING Money Market Funds) 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 (All Stock Funds and ING Pilgrim High Yield Bond 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 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 involves risks, including loss of the
Fund's entire investment in the Private Fund.
OPTIONS ON SECURITIES (All Funds except ING Pilgrim National Tax-Exempt
Bond Fund and the Money Market Funds). Each Fund may purchase put and call
options. In addition, 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 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 benchmark. 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.
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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 Pilgrim National Tax-Exempt
Bond Fund and the Money Market Funds). As indicated in the prospectus, each Fund
may deal in over-the-counter traded options ("OTC options"). OTC options differ
from exchange-traded options in several respects. They are transacted directly
with dealers and not with a clearing corporation, and there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise, in which event a Fund may experience material losses. However, in
writing options the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities, and a wider range of expiration
dates and exercise prices, than are exchange-traded options. Since there is no
exchange, pricing is normally done by reference to information from market
makers, which information is carefully monitored by the investment manager and
verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options, there
can be no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The 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
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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 Pilgrim National Tax-Exempt Bond
Fund and the Money Market Funds). Each Fund also may purchase and write call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Fund owns or intends to
purchase, and not for speculation. Through the writing or purchase of index
options, a Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike security options, all settlements are in cash
and gain or loss depends upon price movements in the market generally (or in a
particular industry or segment of the market), rather than upon price movements
in individual securities. Price movements in securities that the Fund owns or
intends to purchase will probably not correlate perfectly with movements in the
level of an index since the prices of such securities may be affected by
somewhat different factors and, therefore, the Fund bears the risk that a loss
on an index option would not be completely offset by movements in the price of
such securities.
When a Fund writes an option on a securities index, it will segregate and
mark-to-market eligible securities to the extent required by applicable
regulation. In addition, where the Fund writes a call option on a securities
index at a time when the contract value exceeds the exercise price, the Fund
will segregate and mark-to-market, until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.
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 therefore.
FOREIGN CURRENCY OPTIONS (All Funds except ING Pilgrim National Tax-Exempt
Bond Fund and the Money Market Funds). Each Fund may engage in foreign currency
options transactions. A foreign currency option provides the option buyer with
the right to buy or sell a stated amount of foreign currency at the exercise
price at a specified date or during the option period. A call option gives its
owner the right, but not the obligation, to buy the currency, while a put option
gives its owner the right, but not the obligation, to sell the currency. The
option seller (writer) is obligated to fulfill the terms of the option sold if
it is exercised. However, either seller or buyer may close its position during
the option period in the secondary market for such options any time prior to
expiration.
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A call rises in value if the underlying currency appreciates. Conversely, a
put rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if a Fund were
holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund has
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the currency had depreciated in value between the date
of purchase and the settlement date, the Fund would not have to exercise its
call but could acquire in the spot market the amount of foreign currency needed
for settlement.
DOLLAR ROLL TRANSACTIONS (All Funds except ING Pilgrim National Tax-Exempt
Bond Fund and the Money Market Funds). In connection with their ability to
purchase securities on a when-issued or forward commitment basis, the Funds may
enter into "dollar rolls" in which the Funds sell securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Funds give up the right to receive principal and
interest paid on the securities sold. However, the Funds would benefit to the
extent of any difference between the price received for the securities sold and
the lower forward price for the future purchase plus any fee income received.
Unless such benefits exceed the income and capital appreciation that would have
been realized on the securities sold as part of the dollar roll, the use of this
technique will diminish the investment performance of the Funds compared with
what such performance would have been without the use of dollar rolls. The Funds
will hold and maintain in a segregated account until the settlement date liquid
assets in an amount equal to the value of the when-issued or forward 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.
SWAP AGREEMENTS (All Funds except the Money Market Funds). To manage its
exposure to different types of investments, the Funds may enter into interest
rate, total return, currency and mortgage (or other asset) swap agreements and
may purchase and sell interest rate "caps," "floors" and "collars." In a typical
interest rate swap agreement, one party agrees to make regular payments equal to
a floating interest rate on a specified amount (the "notional principal amount")
in return for payments to a fixed interest rate on the same amount for a
specified period. Total return swap agreements are similar to interest rate swap
agreements, except the numerical amount is tied to a market-linked return. If a
swap agreement provides for payment in different currencies, the parties may
also agree to exchange the notional principal amount. Mortgage swap agreements
are similar to interest rate swap agreements, except that the notional principal
amount is tied to a reference pool of mortgages. In a cap or floor, one party
agrees, usually in return for a fee, to make payments under particular
circumstances. For example, the purchaser of an interest rate cap has the right
to receive payments to the extent a specified interest rate exceeds an agreed
upon level; the purchaser of an interest rate floor has the right to receive
payments to the extent a specified interest rate falls below an agreed upon
level. A collar entitles the purchaser to receive payments to the extent a
specified interest rate falls outside an agreed upon range.
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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.
FOREIGN CURRENCY FUTURES TRANSACTIONS (All Funds except ING Pilgrim
National Tax-Exempt Bond Fund and the Money Market 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 (All
Funds except ING Pilgrim National Tax-Exempt Bond Fund and the Money Market
Funds). 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 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 Pilgrim National
Tax-Exempt Bond Fund and the Money Market Funds). The Funds may purchase and
sell interest rate futures contracts ("futures contracts") as a hedge against
changes in interest rates. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future date. Future
contracts are traded on designated "contracts markets" which, through their
clearing corporations, guarantee 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
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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 Pilgrim International Equity Fund, ING Pilgrim Emerging
Markets Equity Fund, ING Pilgrim Intermediate Bond Fund and ING Pilgrim High
Yield Bond 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 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,
consisting of 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.
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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 the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The repurchase price exceeds the
sale price, reflecting an agreed-upon interest rate effective for the period the
buyer owns the security subject to repurchase. The agreed-upon rate is unrelated
to the interest rate on that security. Each Fund's Sub-Adviser will monitor the
value of the underlying security at the time the transaction is entered into and
at all times during the term of the repurchase agreement to ensure that the
value of the security always equals or exceeds the repurchase price. In the
event of default by the seller under the repurchase agreement, the Funds may
have problems in exercising their rights to the underlying securities and may
incur costs and experience time delays in connection with the disposition of
such securities.
BORROWING. (All Funds). A 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). 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 Pilgrim Emerging Markets Equity Fund, ING
Pilgrim High Yield Bond Fund, ING Pilgrim Intermediate Bond Fund and ING Pilgrim
International 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 below Baa by Moody's or below BBB by 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
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ability of the issuers to repay principal and interest. The market for
lower-rated securities may be less active, causing market price volatility and
limited liquidity in the secondary market. This may limit the Funds' ability to
sell such securities at their market value. In addition, the market for these
securities may be adversely affected by legislative and regulatory developments.
Credit quality in the junk bond market can change suddenly and unexpectedly, and
even recently issued credit ratings may not fully reflect the actual risks
imposed by a particular security.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. Lower rated bonds are
very sensitive to adverse economic changes and corporate developments. During an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet projected business goals, and to obtain additional financing. If the issuer
of a bond defaulted on its obligations to pay interest or principal or entered
into bankruptcy proceedings, the Fund may incur losses or expenses in seeking
recovery of amounts owed to it. In addition, periods of economic 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. 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.
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In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on the issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
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
one 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 adopted by and under the supervision of the Board of
Trustees, the Sub-Adviser will monitor the liquidity of restricted securities in
a Fund's portfolio. In reaching liquidity decisions, the Sub-Adviser will
consider, among other things, the following factors: (1) the frequency of trades
and quotes for the security over the course of six months or as determined in
the discretion of the Sub-Adviser; (2) the number of dealers wishing to purchase
or sell the security and the number of other potential purchasers over the
course of six months or as determined in the discretion of the Sub-Adviser; (3)
dealer undertakings to make a market in the security; (4) the nature of the
security and the marketplace in which it trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer); and (5) other factors, if any, which the Sub-Adviser deems
relevant.
Rule 144A securities 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. Investments in Rule
144A securities and Section 4(2) commercial paper could have the effect of
increasing Fund illiquidity.
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ADDITIONAL RISK CONSIDERATIONS
The following pages discuss additional risk considerations associated with
certain of the types of securities in which the Funds may invest and certain of
the investment practices that the Funds may use. Unless indicated otherwise, the
following descriptions apply to all 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, each
diversified Fund (i.e., all funds except the ING Pilgrim Global Brand Names
Fund, ING Pilgrim Focus Fund, ING Pilgrim Global Real Estate Fund, ING Pilgrim
Internet Fund, ING Pilgrim Internet Fund II, and ING Pilgrim International Bond
Fund) is managed within certain limitations that restrict the amount of the
Fund's investment in any single issuer. The Money Market Funds will attempt to
maintain a stable $1.00 net asset value per share.
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 Funds will not invest in real estate
directly, the ING Pilgrim Global Real Estate Fund may be subject to risks
similar to those associated with the direct ownership of real estate (in
addition to securities markets risks) because of its policy of concentration in
the securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash flow dependency,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, liability to third parties for damages
resulting from environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values and in the appeal of
properties to tenants and changes in interest rates.
In addition to these risks, Equity REITs may be affected by changes in the
value of the underlying property owned by the trusts, while Mortgage REITs may
be affected by the quality of any credit they extend. Further, Equity REITs and
Mortgage REITs are dependent upon management skills and generally may not be
diversified. Equity REITs and Mortgage REITs are also subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. In addition, Equity
REITs and Mortgage REITs could possibly fail to qualify for tax-free
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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 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.
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.
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
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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 diverges 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.
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 involves 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 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 (ING Pilgrim Global Brand Names Fund,
ING Pilgrim Focus Fund, ING Pilgrim Global Real Estate Fund, ING Pilgrim
Internet Fund, ING Pilgrim Internet Fund II and ING Pilgrim International Bond
Fund). 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 (ING Pilgrim Global Information Technology Fund, ING Pilgrim
Global Communications Fund, ING Pilgrim Internet Fund, ING Pilgrim Internet Fund
II and ING Pilgrim Global Real Estate Fund). The Funds "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.
PORTFOLIO TURNOVER. 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 Pilgrim Large Cap Growth
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Fund 100%; ING Pilgrim Growth & Income Fund 100%; ING Pilgrim Mid Cap Growth
Fund 100%; ING Pilgrim Small Cap Growth Fund 100%; ING Pilgrim Global Brand
Names Fund 100%; ING Pilgrim International Equity Fund 200%; ING Pilgrim
European Equity Fund 100%; ING Pilgrim Tax Efficient Equity Fund 50%; ING
Pilgrim Focus Fund 100%; ING Pilgrim Global Information Technology Fund 100%;
ING Pilgrim Global Communications Fund 100%; ING Pilgrim Internet Fund 250%; ING
Pilgrim Internet Fund II 250%; ING Pilgrim Emerging Markets Equity Fund 200%;
ING Pilgrim Global Real Estate Fund 100%; ING Pilgrim Intermediate Bond Fund
300%; ING Pilgrim High Yield Bond Fund 350%; ING Pilgrim International Bond Fund
150%; and ING Pilgrim National Tax-Exempt Bond Fund 150%. 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.
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 a Fund's outstanding voting shares.
Investment restriction number 9 is not a fundamental policy and may be changed
by vote of a majority of the members of the Board of Trustees 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
this 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 Pilgrim
Global Information Technology Fund, ING Pilgrim Global Communications Fund, ING
Pilgrim Internet Fund, ING Pilgrim Internet Fund II and ING Pilgrim Global Real
Estate Fund will concentrate their investments as described in the Prospectus.
(9) Invest more than 15%, 10% in the case of the ING 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 Pilgrim Global Brand Names Fund,
ING Pilgrim Focus Fund, ING Pilgrim Global Real Estate Fund, ING Pilgrim
Internet Fund, ING Pilgrim Internet Fund II and ING Pilgrim International Bond
Fund are diversified funds. As such, each will not, with respect to 75% (100%
with respect to the ING 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 ING 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.
Each Stock Fund, except ING Pilgrim Mid Cap Growth, ING Pilgrim
International Equity, ING Pilgrim Emerging Markets Equity and ING Pilgrim Focus
Funds, will only purchase fixed income securities that are rated investment
grade, i.e., rated at least BBB by S&P or Baa 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 Pilgrim Mid Cap Growth Fund and the ING
Pilgrim 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 Pilgrim 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 Pilgrim Emerging Markets Equity
Fund may invest in fixed income securities that are rated below investment
grade. Money market securities, certificates of deposit, banker's acceptance and
commercial paper purchased by the Stock 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 Stock Fund's Sub-Adviser.
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.
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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 sale of securities except in limited situations
permitted by SEC regulations, unless an exemptive order allowing such
transactions is obtained from the SEC.
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The aggregate amount of brokerage commissions paid by the Funds during the
fiscal years ended October 31, 1999 and October 31, 2000 were:
FUND 2000 1999
---- -------- --------
ING Pilgrim Large Cap Growth Fund $_______ $ 70,079
ING Pilgrim Growth & Income Fund $_______ $ 60,568
ING Pilgrim Mid Cap Growth Fund $_______ $ 53,931
ING Pilgrim Small Cap Growth Fund $_______ $ 77,325
ING Pilgrim Global Brand Names Fund $_______ $ 67,743
ING Pilgrim International Equity Fund $_______ $112,855
ING Pilgrim European Equity Fund $_______ $ 91,450
ING Pilgrim Emerging Markets Equity Fund $_______ $_______
ING Pilgrim Tax-Efficient Equity Fund $_______ $ 53,629
ING Pilgrim Focus Fund $_______ $111,967
ING Pilgrim Global Information Technology Fund $_______ $ 49,574
ING Pilgrim Global Communications Fund $_______ $_______
ING Pilgrim Global Real Estate Fund $_______ $_______
ING Pilgrim Internet Fund $_______ $ 3,208
ING Pilgrim Internet Fund II $_______ $_______
ING Pilgrim Intermediate Bond Fund $_______ $ 0
ING Pilgrim High Yield Fund $_______ $ 0
ING Pilgrim International Bond Fund $_______ $ 0
ING Pilgrim National Tax-Exempt Bond Fund $_______ $_______
ING Money Market Fund $_______ $_______
ING Pilgrim National Tax-Exempt Money Market Fund $_______ $ 0
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
"1934 Act"), the Sub-Adviser may cause the Funds to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 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.
The Sub-Adviser may allocate purchase and sales orders for portfolio
securities to broker-dealers that are affiliated with the Manager or the
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.
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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. Portfolio turnover rate
is, in general, the percentage computed by taking the lesser of purchases or
sales of portfolio securities (excluding securities with a maturity date of one
year or less at the time of acquisition) for the period and dividing it by the
monthly average of the market value of such securities during the period. For
purposes of this calculation, portfolio securities exclude all securities having
a maturity when purchased of one year or less.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Orders for the purchase of shares will be executed at the net asset value
per share plus any applicable initial sales loads (the "public offering price")
next determined after an order has been received. The minimum initial investment
in a Fund is $1,000 ($250 for an investment by an IRA or any qualified
retirement plan). Any subsequent investments must be at least $100, including an
IRA or qualified retirement plan investment. All initial investments should be
accompanied by a completed Account Application. An Account Application
accompanies the prospectus. A separate application is required for an IRA or
qualified retirement 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 described in the prospectus.
DESCRIPTION OF CLASS A SHARES
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 load. No initial
sales load is applied to Class A shares of the Money Market Funds, or to Class A
shares of any Fund that you purchase through the reinvestment of dividends or
distributions. The sales loads and broker-dealer concessions, which vary with
the size of the purchase, are set forth in the prospectus.
LETTERS OF INTENT AND RIGHTS OF ACCUMULATION. An investor may immediately
qualify for a reduced sales charge on a purchase of Class A shares by completing
the Letter of Intent section of the Shareholder Application in the Prospectus
(the "Letter of Intent" or "Letter"). By completing the Letter, the investor
expresses an intention to invest during the next 13 months a specified amount
which if made at one time would qualify for the reduced sales charge. At any
time within 90 days after the first investment which the investor wants to
qualify for the reduced sales charge, a signed Shareholder Application, with the
Letter of Intent section completed, may be filed with the Funds. After the
Letter of Intent is filed, each additional investment made will be entitled to
the sales charge applicable to the level of investment indicated on the Letter
of Intent as described above. Sales charge reductions based upon purchases in
more than one investment in the ING Funds and the Pilgrim Funds will be
effective only after notification to the Distributor that the investment
qualifies for a discount. The shareholder's holdings in the ING Funds and the
Pilgrim Funds (excluding the Money Market Funds) acquired within 90 days before
the Letter of Intent is filed will be counted towards completion of the Letter
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of Intent but will not be entitled to a retroactive downward adjustment of sales
charge until the Letter of Intent is fulfilled. Any redemptions made by the
shareholder during the 13-month period will be subtracted from the amount of the
purchases for purposes of determining whether the terms of the Letter of Intent
have been completed. If the Letter of Intent is not completed within the
13-month period, there will be an upward adjustment of the sales charge as
specified below, depending upon the amount actually purchased (less redemption)
during the period.
An investor acknowledges and agrees to the following provisions by
completing the Letter of Intent section of the Shareholder Application in the
Prospectus. A minimum initial investment equal to 25% of the intended total
investment is required. An amount equal to the maximum sales charge or 5.75% of
the total intended purchase will be held in escrow at Pilgrim Funds, in the form
of shares, in the investor's name to assure that the full applicable sales
charge will be paid if the intended purchase is not completed. The shares in
escrow will be included in the total shares owned as reflected on the monthly
statement; income and capital gain distributions on the escrow shares will be
paid directly by the investor. The escrow shares will not be available for
redemption by the investor until the Letter of Intent has been completed, or the
higher sales charge paid. If the total purchases, less redemption, equal the
amount specified under the Letter, the shares in escrow will be released. If the
total purchases, less redemptions, exceed the amount specified under the Letter
and is an amount which would qualify for a further quantity discount, a
retroactive price adjustment will be made by the Distributor and the dealer with
whom purchases were made pursuant to the Letter of Intent (to reflect such
further quantity discount) on purchases made within 90 days before, and on those
made after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the applicable offering price.
If the total purchases, less redemptions, are less than the amount specified
under the Letter, the investor will remit to the Distributor an amount equal to
the difference in dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total of
such purchases had been made at a single account in the name of the investor or
to the investor's order. If within 10 days after written request such difference
in sales charge is not paid, the redemption of an appropriate number of shares
in escrow to realize such difference will be made. If the proceeds from a total
redemption are inadequate, the investor will be liable to the Distributor for
the difference. In the event of a total redemption of the account prior to
fulfillment of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the Investor. By completing the Letter of Intent section of the Shareholder
Application, an investor grants to the Distributor a security interest in the
shares in escrow and agrees to irrevocably appoint the Distributor as his
attorney-in-fact with full power of substitution to surrender for redemption any
or all shares for the purpose of paying any additional sales charge due and
authorizes the Transfer Agent or Sub-Transfer Agent to receive and redeem shares
and pay the proceeds as directed by the Distributor. The investor or the
securities dealer must inform the Transfer Agent or the Distributor that this
Letter is in effect each time a purchase is made.
If at any time prior to or after completion of the Letter of Intent the
investor wishes to cancel the Letter of Intent, the investor must notify the
Distributor in writing. If, prior to the completion of the Letter of Intent, the
investor requests the Distributor to liquidate all shares held by the investor,
the Letter of Intent will be terminated automatically. Under either of these
situations, the total purchased may be less than the amount specified in the
Letter of Intent. If so, the Distributor will redeem at NAV to remit to the
Distributor and the appropriate authorized dealer an amount equal to the
difference between the dollar amount of the sales charge actually paid and the
amount of the sales charge that would have been paid on the total purchases if
made at one time.
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The value of shares of the ING Funds plus shares of the Pilgrim Funds
(excluding the Money Market Funds) can be combined with a current purchase to
determine the reduced sales charge and applicable offering price of the current
purchase. The reduced sales charge applies to quantity purchases made at one
time or on a cumulative basis over any period of time by (i) an investor, (ii)
the investor's spouse and children under the age of majority, (iii) the
investor's custodian accounts for the benefit of a child under the Uniform Gift
to Minors Act, (iv) a trustee or other fiduciary of a single trust estate or a
single fiduciary account (including a pension, profit-sharing and/or other
employee benefit plans qualified under Section 401 of the Internal Revenue
Code), by trust companies' registered investment advisors, banks and bank trust
departments for accounts over which they exercise exclusive investment
discretionary authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity.
The reduced sales charge also apply on a non-cumulative basis, to purchases
made at one time by the customers of a single dealer, in excess of $1 million.
The Letter of Intent option may be modified or discontinued at any time.
Shares of the ING Funds and the Pilgrim Funds (excluding the Money Market
Funds) purchased and owned of record or beneficially by a corporation, including
employees of a single employer (or affiliates thereof) including shares held by
its employees, under one or more retirement plans, can be combined with a
current purchase to determine the reduced sales charge and applicable offering
price of the current purchase, provided such transactions are not prohibited by
one or more provisions of the Employee Retirement Income Security Act or the
Internal Revenue Code. Individuals and employees should consult with their tax
advisors concerning the tax rules applicable to retirement plans before
investing.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the ING Funds and the Pilgrim Funds which
impose a CDSC may be combined with Class A shares for a reduced sales charge but
will not affect any CDSC which may be imposed upon the redemption of shares of a
Fund which imposes a CDSC.
Special Purchases At Net Asset Value. Class A shares of the Funds may be
purchased at net asset value, without a sales charge, by persons who have
redeemed their Class A shares of a Fund (or shares of Pilgrim Funds in
accordance with the terms of such privileges established for such Funds) within
the previous 90 days. The amount that may be so reinvested in the Fund is
limited to an amount up to, but not exceeding, the redemption proceeds (or to
the nearest full share if fractional shares are not purchased). In order to
exercise this privilege, a written order for the purchase of shares must be
received by the Transfer Agent, or be postmarked, within 90 days after the date
of redemption. This privilege may only be used once per calendar year. Payment
must accompany the request and the purchase will be made at the then current net
asset value of the Fund. Such purchases may also be handled by a securities
dealer who may charge a shareholder for this service. If the shareholder has
realized a gain on the redemption, the transaction is taxable and any
reinvestment will not alter any applicable Federal capital gains tax. If there
has been a loss on the redemption and a subsequent reinvestment pursuant to this
privilege, some or all of the loss may not be allowed as a tax deduction
depending upon the amount reinvested, although such disallowance is added to the
tax basis of the shares acquired upon the reinvestment.
Class A shares of the Funds may also be purchased at net asset value by any
person who can document that Fund shares were purchased with proceeds from the
redemption (within the previous 90 days) of shares from any unaffiliated mutual
fund on which a sales charge was paid or which were subject at any time to a
CDSC, and the Distributor has determined in its discretion that the unaffiliated
fund invests primarily in the same types of securities as the ING Fund
purchased.
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Additionally, Class A shares of the Funds may also be purchased at net
asset value by any charitable organization or any state, county, or city, or any
instrumentality, department, authority or agency thereof that has determined
that a Fund is a legally permissible investment and that is prohibited by
applicable investment law from paying a sales charge or commission in connection
with the purchase of shares of any registered management investment company ("an
eligible governmental authority"). If an investment by an eligible governmental
authority at net asset value is made though a dealer who has executed a selling
group agreement with respect to the ING Funds or the Pilgrim Funds, the
Distributor may pay the selling firm 0.25% of the Offering Price.
The officers, directors/trustees and bona fide full-time employees of each
Fund and the officers, directors and full-time employees of the Investment
Manager, any Sub-Advisers, the Distributor, any service provider to the Funds or
affiliated corporations thereof or any trust, pension, profit-sharing or other
benefit plan for such persons, broker-dealers, for their own accounts or for
members of their families (defined as current spouse, children, parents,
grandparents, uncles, aunts, siblings, nephews, nieces, step-relations,
relations at-law, and cousins) employees of such broker-dealers (including their
immediate families) and discretionary advisory accounts of the Investment
Manager or any Sub-Adviser, may purchase Class A shares of a Fund at net asset
value without a sales charge. Such purchaser may be required to sign a letter
stating that the purchase is for his own investment purposes only and that the
securities will not be resold except to the Fund. The Funds may, under certain
circumstances, allow registered investment advisers to make investments on
behalf of their clients at net asset value without any commission or concession.
Class A shares may also be purchased at net asset value by certain fee
based registered investment advisers, trust companies and bank trust departments
under certain circumstances making investments on behalf of their clients and by
shareholders who have authorized the automatic transfer of dividends from the
same class of another ING Fund or Pilgrim Fund.
Class A shares may also be purchased without a sales charge by (i)
shareholders who have authorized the automatic transfer of dividends from the
same class of another ING Fund or Pilgrim Fund; (ii) registered investment
advisors, trust companies and bank trust departments investing in Class A shares
on their own behalf or on behalf of their clients, provided that the aggregate
amount invested in any one or more ING Fund or Pilgrim Funds, during the 13
month period starting with the first investment, equals at least $1 million;
(iii) broker-dealers, who have signed selling group agreements with the
Distributor, and registered representatives and employees of such
broker-dealers, for their own accounts or for members of their families (defined
as current spouse, children, parents, grandparents, uncles, aunts, siblings,
nephews, nieces, step relations, relations-at-law and cousins); (iv)
broker-dealers using third party administrators for qualified retirement plans
who have entered into an agreement with the ING Funds, the Pilgrim Funds or an
affiliate, subject to certain operational and minimum size requirements
specified from time-to-time by the Funds; (v) accounts as to which a banker or
broker-dealer charges an account management fee ("wrap accounts"); and (vi) any
registered investment company for which ING Mutual Funds Management Co. or
Pilgrim Investments serves as Investment Manager.
The Funds may terminate or amend the terms of these sales charge waivers at
any time.
CONTINGENT DEFERRED SALES LOAD. The redemption proceeds of Class A shares
initially purchased prior to November 6, 2000 that were not at the time of
purchase assessed an initial sales load 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 if such shares are redeemed
within twelve months after their purchase date (the "CDSC Period"). The
redemption proceeds of Class A shares initially purchased after November 6, 2000
that were not at the time of purchase assessed an initial sales load because the
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investor purchased $1,000,000 or more of such shares (including shares acquired
under Right of Accumulation and LOI), will be assessed a CDSC if such shares are
redeemed within twenty-four months after their purchase date. 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). The Class A CDSC does not apply to the ING
Money Market Funds.
WAIVER OF CLASS A CDSC. The CDSC will be waived for certain redemptions of
shares upon (i) the death or permanent disability of a shareholder, or (ii) in
connection with mandatory distributions from an Individual Retirement Account
("IRA") or other qualified retirement plan. The CDSC will be waived in the case
of a redemption of shares following the death or permanent disability of a
shareholder if the redemption is made within one year of death or initial
determination of permanent disability. The waiver is available for total or
partial redemptions of shares owned by an individual or an individual in joint
tenancy (with rights of survivorship), but only for redemptions of shares held
at the time of death or initial determination of permanent disability. The CDSC
will also be waived in the case of a total or partial redemption of shares in
connection with any mandatory distribution from a tax-deferred retirement plan
or an IRA. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from services, except
that a CDSC may be waived in certain circumstances involving redemptions in
connection with a distribution from a qualified employer retirement plan in
connection with termination of employment or termination of the employer's plan
and the transfer to another employer's plan or to an IRA. The shareholder must
notify the Fund either directly or through the Distributor at the time of
redemption that the shareholder is entitled to a waiver of the CDSC. The waiver
will then be granted subject to confirmation of the shareholder's entitlement.
The CDSC, which may be imposed on Class A shares purchased in excess of $1
million, will also be waived for registered investment advisors, trust companies
and bank trust departments investing on their own behalf or on behalf of their
clients. These waivers may be changed at any time.
DESCRIPTION OF CLASS B SHARES
Effective November 1, 1999, the Funds adopted a new CDSC schedule as set
forth in the prospectus. Class B shares purchased before November 1, 1999 are
subject to the following CDSC schedule:
Redemption During Class B CDSC
--------------------- ------------
1st year after purchase 5%
2nd year after purchase 4%
3rd year after purchase 3%
4th year after purchase 2%
5th year after purchase 2%
After 5 years --
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.
The Distributor will pay out of its own assets a commission of 4.00% of the
amount invested for purchases of Class B shares subject to a CDSC.
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WAIVER OF CLASS B CDSC. The CDSC will be waived for certain redemptions of
shares upon (i) the death or permanent disability of a shareholder, or (ii) in
connection with mandatory distributions from an Individual Retirement Account
("IRA") or other qualified retirement plan. The CDSC will be waived in the case
of a redemption of shares following the death or permanent disability of a
shareholder if the redemption is made within one year of death or initial
determination of permanent disability. The waiver is available for total or
partial redemptions of shares owned by an individual or an individual in joint
tenancy (with rights of survivorship), but only for redemptions of shares held
at the time of death or initial determination of permanent disability. The CDSC
will also be waived in the case of a total or partial redemption of shares in
connection with any mandatory distribution from a tax-deferred retirement plan
or an IRA. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from services, except
that a CDSC may be waived in certain circumstances involving redemptions in
connection with a distribution from a qualified employer retirement plan in
connection with termination of employment or termination of the employer's plan
and the transfer to another employer's plan or to an IRA. The shareholder must
notify the Fund either directly or through the Distributor at the time of
redemption that the shareholder is entitled to a waiver of the CDSC. The waiver
will then be granted subject to confirmation of the shareholder's entitlement.
The CDSC, which may be imposed on Class A shares purchased in excess of $1
million, will also be waived for registered investment advisors, trust companies
and bank trust departments investing on their own behalf or on behalf of their
clients. These waivers may be changed at any time.
CONVERSION TO CLASS A Shares. A shareholder's Class B shares will
automatically convert to Class A shares in a Fund on the first business day of
the month in which the eighth anniversary of the issuance of the Class B shares
occurs, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The
conversion of Class B shares into Class A shares is subject to the continuing
availability of an opinion of counsel or an Internal Revenue Service ruling, if
the Investment Manager deems it advisable to obtain such advice, to the effect
that (1) such conversion will not constitute taxable events for federal tax
purposes; and (2) the payment of different dividends on Class A and Class B
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code. The Class B shares so
converted will no longer be subject to the higher expenses borne by Class B
shares. The conversion will be effected at the relative net asset values per
share of the two Classes.
DESCRIPTION OF CLASS C SHARES
For Class C shares subject to a CDSC, the Distributor may pay out of its
own assets a commission of 1.00% of the amount invested in each Fund.
WAIVER OF CLASS C CDSC. The CDSC will be waived for certain redemptions of
shares upon (i) the death or permanent disability of a shareholder, or (ii) in
connection with mandatory distributions from an Individual Retirement Account
("IRA") or other qualified retirement plan. The CDSC will be waived in the case
of a redemption of shares following the death or permanent disability of a
shareholder if the redemption is made within one year of death or initial
determination of permanent disability. The waiver is available for total or
partial redemptions of shares owned by an individual or an individual in joint
tenancy (with rights of survivorship), but only for redemptions of shares held
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at the time of death or initial determination of permanent disability. The CDSC
will also be waived in the case of a total or partial redemption of shares in
connection with any mandatory distribution from a tax-deferred retirement plan
or an IRA. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from services, except
that a CDSC may be waived in certain circumstances involving redemptions in
connection with a distribution from a qualified employer retirement plan in
connection with termination of employment or termination of the employer's plan
and the transfer to another employer's plan or to an IRA. The shareholder must
notify the Fund either directly or through the Distributor at the time of
redemption that the shareholder is entitled to a waiver of CDSC. The waiver will
then be granted subject to confirmation of the shareholder's entitlement. The
CDSC, which may be imposed on Class A shares purchased in excess of $1 million,
will also be waived for registered investment advisors, trust companies and bank
trust departments investing on their own behalf or on behalf of their clients.
These waivers may be changed at any time.
DESCRIPTION OF CLASS I SHARES
The Trust is only offering Class I shares for ING Pilgrim Large Cap Growth
Fund, ING Pilgrim International Equity Fund, and ING Money Market Fund Fund.
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
Due to the relatively high cost of handling small investments, each Fund
reserves the right, upon 30 days written notice, to redeem, at net asset value
(less any applicable deferred sales charge), the shares of any shareholder whose
account has a value of less than $1,000 in the Fund, other than as a result of a
decline in the net asset value per share. Before the Fund redeems such shares
and sends the proceeds to the shareholder, it will notify the shareholder that
the value of the shares in the account is less than the minimum amount and will
allow the shareholder 30 days to make an additional investment in an amount that
will increase the value of the account to at least $1,000 before the redemption
is processed. This policy will not be implemented where a Fund has previously
waived the minimum investment requirements.
REINSTATEMENT PRIVILEGE
If you sell Class B or Class C shares of an ING Fund or a Pilgrim Fund, you
may reinvest some or all of the proceeds in the same share class within 90 days
without a sales charge. Reinstated Class B and Class C shares will retain their
original cost and purchase date for purposes of the CDSC. The amount of any CDSC
also will be reinstated. To exercise this privilege, the written order for the
purchase of shares must be received by the Transfer Agent or be postmarked
within 90 days after the date of redemption. This privilege can be used only
once per calendar year. If a loss is incurred on the redemption and the
reinstatement privilege is used, some or all of the loss may not be allowed as a
tax deduction.
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REDEMPTION INFORMATION
Payment to shareholders for shares redeemed will be made within seven days
after receipt by the Funds' Transfer Agent of the written request in proper
form, except that a Fund may suspend the right of redemption or postpone the
date of payment during any period when (a) trading on the New York Stock
Exchange is restricted as determined by the SEC or such exchange is closed for
other than weekends and holidays; (b) an emergency exists as determined by the
SEC making disposal of portfolio series or valuation of net assets of the Fund
not reasonably practicable; or (c) for such other period as the SEC may permit
for the protection of the Funds' shareholders. At various times, a Fund may be
requested to redeem shares for which it has not yet received good payment.
Accordingly, the Fund may delay the mailing of a redemption check until such
time as it has assured itself that good payment has been collected for the
purchase of such shares, which may take up to 15 days or longer.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the portfolio securities
at the time of redemption or repurchase.
Certain purchases of Class A shares and most Class B and Class C shares may
be subject to a CDSC. Shareholders will be charged a CDSC if certain of those
shares are redeemed within the applicable time period as stated in the
prospectus.
No CDSC is imposed on any shares subject to a CDSC to the extent that those
shares (i) are no longer subject to the applicable holding period, (ii) resulted
from reinvestment of distributions on CDSC shares, or (iii) were exchanged for
shares of another ING Fund or a Pilgrim Fund, provided that the shares acquired
in such exchange and subsequent exchanges will continue to remain subject to the
CDSC, if applicable, until the applicable holding period expires.
REDEMPTION IN KIND
The Funds intend to pay in cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, a Fund may make payment wholly or
partly in securities at their then current market value equal to the redemption
price. In such case, an investor may incur brokerage costs in converting such
securities to cash. However, the Funds have elected to be governed by the
provisions of Rule 18f-1 under the 1940 Act, which contains a formula for
determining the minimum amount of cash to be paid as part of any redemption. In
the event the Funds must liquidate portfolio securities to meet redemptions,
they reserves the right to reduce the redemption price by an amount equivalent
to the pro-rated cost of such liquidation not to exceed one percent of the net
asset value of such shares.
TELEPHONE REDEMPTION AND EXCHANGE PRIVILEGES
As discussed in the Prospectus, the telephone redemption and exchange
privileges are available for all shareholder accounts; however, retirement
accounts may not utilize the telephone redemption privilege. The telephone
privileges may be modified or terminated at any time. The privileges are subject
to the conditions and provisions set forth below and in the Prospectus.
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(1) Telephone redemption and/or exchange instructions received in good
order before the pricing of a Fund on any day on which the New York Stock
Exchange is open for business (a `Business Day'), but not later than 4:00 p.m.
eastern time, will be processed at that day's closing net asset value. For each
exchange, the shareholder's account may be charged an exchange fee. There is no
fee for telephone redemptions; however, redemptions of Class A and Class B
shares may be subject to a contingent deferred sales charge (See "How to Redeem
Shares" in the Prospectus).
(2) Telephone redemption and/or exchange instructions should be made by
dialing 1-800-992-0180.
(3) The Funds will not permit exchanges in violation of any of the terms
and conditions set forth in the Funds' Prospectus or herein.
(4) Telephone redemption requests must meet the following conditions to be
accepted by the Funds:
(a) Proceeds of the redemption may be directly deposited into a
predetermined bank account, or mailed to the current address on the
registration. This address cannot reflect any change within the previous
thirty (30) days.
(b) Certain account information will need to be provided for
verification purposes before the redemption will be executed.
(c) Only one telephone redemption (where proceeds are being mailed to
the address of record) can be processed within a 30 day period.
(d) The maximum amount which can be liquidated and sent to the address
of record at any one time is $100,000.
(e) The minimum amount which can be liquidated and sent to a
predetermined bank account is $5,000.
(5) If the exchange involves the establishment of a new account, the dollar
amount being exchanged must at least equal the minimum investment requirement of
the Fund being acquired.
(6) Any new account established through the exchange privilege will have
the same account information and options except as stated in the Prospectus.
(7) If a portion of the shares to be exchanged are held in escrow in
connection with a Letter of Intent, the smallest number of full shares of the
Fund to be purchased on the exchange having the same aggregate net asset value
as the shares being exchanged shall be substituted in the escrow account. Shares
held in escrow may not be redeemed until the Letter of Intent has expired and/or
the appropriate adjustments have been made to the account.
(8) Shares may not be exchanged and/or redeemed unless an exchange and/or
redemption privilege is offered pursuant to the Fund's then-current prospectus.
(9) Proceeds of a redemption may be delayed up to 15 days or longer until
the check used to purchase the shares being redeemed has been paid by the bank
upon which it was drawn.
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PURCHASE AND REDEMPTION PLANS
The Trust offers various purchase and redemption plans that make investing
and 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 1-800-992-0180 for the appropriate authorization form. These
purchase and redemption plans are currently not available for investors that
invest through IRAs or any qualified retirement plans.
PRE-AUTHORIZED INVESTMENT PROGRAM. As discussed in the Prospectus, the
Funds provide a Pre-Authorized Investment Program for the convenience of
investors who wish to purchase shares of the Funds on a regular basis. Such a
Program may be started with an initial investment ($1,000 minimum) and
subsequent voluntary purchases ($100 minimum) with no obligation to continue.
The Program may be terminated without penalty at any time by the investor or the
Funds. The minimum investment requirements may be waived by the Funds for
purchases made pursuant to (i) employer-administered payroll deduction plans,
(ii) profit-sharing, pension, or individual or any employee retirement plans, or
(iii) purchases made in connection with plans providing for periodic investments
in Fund shares.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to make periodic withdrawals from
your account in any fixed amount in excess of $100 to yourself, or to anyone
else you properly designate, as long as the account has a current value of at
least $10,000. To establish a systematic cash withdrawal, complete the
Systematic Withdrawal Plan section of the Account Application. To have funds
deposited to your bank account, follow the instructions on the Account
Application. You may elect to have monthly, quarterly, semi-annual or annual
payments. Redemptions are normally processed on the fifth day prior to the end
of the month, quarter or year. Checks are then mailed or proceeds are forwarded
to your bank account on or about the first of the following month. You may
change the amount, frequency and payee, or terminate the plan by giving written
notice to the Transfer Agent. A Systematic Withdrawal Plan may be modified at
any time by the Funds or terminated upon written notice by the relevant Fund.
During the withdrawal period, you may purchase additional shares for
deposit to your account, subject to any applicable sales charge, if the
additional purchases are equal to at least one year's scheduled withdrawals, or
$1,200, whichever is greater. There are no separate charges to you under this
Plan, although a CDSC may apply if you purchased Class A, B or C shares.
Shareholders who elect to have a systematic cash withdrawal must have all
dividends and capital gains reinvested. As shares of the Fund are redeemed under
the Plan, you may realize a capital gain or loss for income tax purposes.
RETIREMENT PLANS. For self-employed individuals and corporate investors
that wish to purchase shares of a Fund, there is available through the Fund a
Prototype Plan and Custody Agreement. The Custody Agreement provides that State
Street Bank & Trust Company, Kansas City, Missouri, will act as Custodian under
the Plan, and will furnish custodial services for an annual maintenance fee of
$12.00 for each participant, with no other charges. (This fee is in addition to
the normal Custodian charges paid by the Funds.) The annual contract maintenance
fee may be waived from time to time. For further details, including the right to
appoint a successor Custodian, see the Plan and Custody Agreements as provided
by the Funds. Employers who wish to use shares of a Fund under a custodianship
with another bank or trust company must make individual arrangements with such
institution.
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Investors having earned income are eligible to purchase shares of a Fund
under an IRA pursuant to Section 408(a) of the Internal Revenue Code. An
individual who creates an IRA may contribute annually certain dollar amounts of
earned income, and an additional amount if there is a non-working spouse. Simple
IRA plans that employers may establish on behalf of their employees are also
available. Roth IRA plans that enable employed and self-employed individuals to
make non-deductible contributions, and, under certain circumstances, effect
tax-free withdrawals, are also available. Copies of a model Custodial Account
Agreement are available from the Distributor. State Street Bank & Trust Company,
Kansas City, Missouri, will act as the Custodian under this model Agreement, for
which it will charge the investor an annual fee of $12.00 for maintaining the
Account (such fee is in addition to the normal custodial charges paid by the
Funds). Full details on the IRA are contained in an IRS required disclosure
statement, and the Custodian will not open an IRA until seven (7) days after the
investor has received such statement from the Funds. An IRA using shares of a
Fund may also be used by employers who have adopted a Simplified Employee
Pension Plan.
Purchases of Fund shares by Section 403(b) and other retirement plans are
also available. Section 403(b) plans are arrangements by a public school
organization or a charitable, educational, or scientific organization that is
described in Section 501(c)(3) of the Internal Revenue Code under which
employees are permitted to take advantage of the federal income tax deferral
benefits provided for in Section 403(b) of the Code. It is advisable for an
investor considering the funding of any retirement plan to consult with an
attorney or to obtain advice from a competent retirement plan consultant.
For investors purchasing shares of the Funds under a tax-qualified individual
retirement or pension plan or under a group plan through a person designated for
the collection and remittance of monies to be invested in shares of the Funds on
a periodic basis, the Funds may, in lieu of furnishing confirmations following
each purchase of Fund shares, send statements no less frequently than quarterly
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
and the rules thereunder. Such quarterly statements, which would be sent to the
investor or to the person designated by the group for distribution to its
members, will be made within five business days after the end of each quarterly
period and shall reflect all transactions in the investor's account during the
preceding quarter.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares will be determined on any day
that the New York Stock Exchange (the "NYSE") is open and, in the case of the
Money Market Funds, the Federal Reserve Bank are also open ("Business day"). The
NYSE is closed on the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
In addition, the Federal Reserve Bank is closed on Columbus Day and Veteran's
Day.
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The net asset value per share of each Fund is normally determined daily as
of the close of trading on the NYSE (generally 4:00 p.m. Eastern time) on each
business day of the Funds. In the event the NYSE closes early (i.e. before 4:00
p.m. Eastern Time) on a particular day, the net asset value of a Fund share is
determined as of the close of the NYSE on such day. For purposes of determining
net asset value per share, futures and options contracts closing prices which
are available 15 minutes after the close of trading of the NYSE will generally
be used. Net asset value per share is determined by dividing the value of the
Fund's securities, cash and other assets (including interest accrued but not
collected), less all its liabilities (including accrued expenses and dividends
payable), by the total number of shares outstanding. Determination of the Fund's
net asset value per share is made in accordance with generally accepted
accounting principles.
Short-term investments that have a maturity of more than 60 days are valued
at prices based on market quotations for securities of similar type, yield and
maturity. Short-term investments that have a maturity of 60 days or less are
valued at amortized cost, which approximates fair value as determined by the
Board of Trustees of the Trust. Amortized cost involves valuing an instrument at
its original cost to the portfolio and thereafter assuming a constant
amortization to maturity of any discount or premium regardless of the effect of
fluctuating interest rates on the market value of the instrument.
Each equity security held by the Funds is valued at its last sales price on
the exchange where the security is principally traded or, lacking any sales on a
particular day, the security is valued at the closing bid price on that day.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a last
sales price, at the closing bid price on that day. Debt securities are valued on
the basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees of the Trust.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such foreign
securities used in computing the net asset value of each Fund's shares are
determined at such times as trading is completed. Foreign currency exchange
rates are also generally determined prior the close of the NYSE. Occasionally,
events affecting the values of such foreign securities and such foreign
securities exchange rates may occur after the time at which such values are
determined and prior to the close of the NYSE that will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
As indicated under "Pricing of Shares" in the prospectus, the ING Money
Market Funds use the amortized cost method to determine the value of their
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
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the value, as determined by amortized cost, is higher or lower than the price
which a 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 ING 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 S&P 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 ING 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 ING 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 Funds 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 ING Money Market Funds, as computed for the purpose of sales
and redemptions, at $1.00. Such procedures include review of a 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 Fund calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Trustees. If
such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider
what action, if any, will be initiated. In the event the Board of Trustees
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, the Board of
Trustees will take such corrective action as it regards as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
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BROKER-DEALER COMPENSATION
The Distributor may pay to Authorized Dealers out of its own assets
commissions on shares sold in Classes A, B and C, at net asset value, which at
the time of investment would have been subject to the imposition of a contingent
deferred sales charge ("CDSC") if redeemed. There is no sales charge on
purchases of $1,000,000 or more of Class A shares. However, such purchases may
be subject to a CDSC, as disclosed in the Prospectus. The Distributor will pay
Authorized Dealers of record commissions at the rates shown in the table below
for purchases of Class A shares that are subject to a CDSC.
Dealer Commission as a
Amount of Transaction Percentage of Amount Invested
--------------------- -----------------------------
$1,000,000 to $2,499,000 1.00%
$2,500,000 to $4,999,999 0.50%
$5,000,000 and over 0.25%
The Distributor will pay out of its own assets a commission of 4% of the
amount invested for purchases of Class B shares subject to a CDSC. For purchases
of Class C shares subject to a CDSC, the Distributor may pay out of its own
assets a commission of 1% of the amount invested of each Fund.
The Distributor may, from time to time, at its discretion, allow a selling
dealer to retain 100% of a sales charge, and such dealer may therefore be deemed
an "underwriter" under the Securities Act of 1933, as amended. the Distributor,
at its expense, may also provide additional promotional incentives to dealers.
The incentives may include payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to locations within or outside of the United
States, merchandise or other items. For more information on incentives, see
"Management -- Rule 12b-1 Distribution Plan" in this Statement of Additional
Information.
The Distributor may pay individual representatives of affiliated companies
up to an additional 1.00% of the net asset value of Class A, Class B, Class C
and/or Class I shares of the Funds sold by such persons. The affiliated
companies, as such term is defined under the 1940 Act, are IFG Network
Securities, Inc., Locust Street Securities, Inc., Multi-Financial Securities
Corporation, Vestax Securities Corp., Southland Life Insurance Company, Security
Life of Denver Insurance Company, Equitable Life Insurance Company of Iowa,
Compulife Investor Services, Inc., ING Barings Furman Selz LLC, ING Barings LLC,
Washington Square Securities, Prime Vest Financial Services, Granite Investment
Services, Split Rock Financial, Inc., BancWest Investment Services and Financial
Northeastern Securities, Inc. Representatives of the affiliated companies also
may receive up to .20% of the net asset value of Class A, Class B and Class C
shares of the Funds sold by them.
In connection with 401(k) Plans that invest $1 million or more in Class A
shares of ING Pilgrim Funds, ING Pilgrim Securities will pay dealer compensation
of 1% of the purchase price of the shares to the dealer from its own resources
at the time of the initial rollover investment.
For the period from November 1, 2000 through the close of business on
October 31, 2002, the Distributor has committed to continue the trails on Fund
shares sold prior to November 1, 2000 in accordance with the applicable annual
fee rate based on the average daily net asset value of the shares held by a
broker's investors, described below:
Equity Funds Fixed Income Funds Money Market Funds
------------ ------------------ ------------------
Class A 0.40% 0.35% 0.35%
Class B* 0.40% 0.40% 0.40%
Class C* 1.00% 1.00% 1.00%
* Beginning in month 13.
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TAXATION
Each Fund intends to qualify and elect annually to be treated as a
regulated investment company 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.
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 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.
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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.
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.
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.
A Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any unutilized capital loss remaining
is lost as a deduction. For the fiscal year ending October 31, 2000, the ING
Pilgrim Tax Efficient Equity Fund had capital loss carryforwards equal to
$______, the ING Pilgrim Small Cap Growth Fund had capital loss carryforwards
equal to $______, the ING Pilgrim Mid Cap Growth Fund had capital loss
carryforwards equal to $______, the ING Pilgrim Large Cap Growth Fund had
capital loss carryforwards equal to $______, the ING Pilgrim Intermediate Bond
Fund had capital loss carryforwards equal to $______, and the ING Pilgrim
International Bond Fund had capital loss carryforwards equal to $______.
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.
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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.
Some Funds may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC under the Code if at least one-half of
its assets constitutes investment-type assets or 75% or more of its gross income
is investment-type income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not 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.
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
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closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term depending upon the holding period of the
security. With respect to a put or call option that is purchased by a Fund, if
the option is sold any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option, in the case of a call option, is
added to the basis of the purchased security and in the case of a put option,
reduces the amount realized on the underlying security in determining gain or
loss.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of a taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss. Investors should consult their own tax
advisors in this regard.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to stockholders.
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.
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
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<PAGE>
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "section 988" gains or losses, may increase, decrease, or
eliminate the amount of a Fund's investment company taxable income to be
distributed to its shareholders as ordinary income. Investors should consult
their own tax advisors in this regard.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, the Fund will
be eligible and intends to elect to "pass-through" to its shareholders the
amount of such foreign taxes paid by the Fund. Pursuant to this election, a
shareholder would be required to include in gross income (in addition to taxable
dividends actually received) his pro rata share of the foreign taxes paid by a
Fund and would be entitled either to deduct his pro rata share of foreign taxes
in computing his taxable income or to use it as a foreign tax credit against his
U.S. federal income tax liability, subject to limitations. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions,
but such a shareholder may be eligible to claim the foreign tax credit (see
below). Each shareholder will be notified within 60 days after the close of a
Fund's taxable year whether the foreign taxes paid by a Fund will "pass-through"
for that year and, if so, such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country, and (b) the portion of
the dividend which represents income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income.
The Funds are required to report to the Internal Revenue Service ("IRS")
all distributions except in the case of certain exempt shareholders. All such
distributions generally are subject to withholding of federal income tax at a
rate of 31% ("backup withholding") in the case of non-exempt shareholders if (1)
the shareholder fails to furnish the Funds with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Funds or a shareholder that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions, whether reinvested in
additional shares or taken in cash, will be reduced by the amounts required to
be withheld. Backup withholding is not an additional tax. Any amount withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
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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 PILGRIM 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.
OTHER INFORMATION
CAPITALIZATION
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, conversion 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.
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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.
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.
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PERFORMANCE INFORMATION
The Funds may, from time to time, include their yields and average annual
total returns in advertisements or reports to shareholders or prospective
investors.
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.
Current yields for each of the ING 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.
The table below illustrates the current and effective yields of the ING Money
Market Fund for the seven days ended October 31, 2000:
Current Yield Effective Yield
------------- ---------------
ING Money Market Fund
Class A Shares _.__% _.__%
Class B Shares _.__% _.__%
Class C Shares _.__% _.__%
Class I Shares _.__% _.__%
Quotations of yield for the Funds which are not 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.
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The table below illustrates the yields of the ING Pilgrim Intermediate Bond
Fund, the ING Pilgrim High Yield Bond Fund and the ING Pilgrim International
Bond Fund for the 30-day period ended October 31, 2000:
Effective Yield
---------------
ING Pilgrim Intermediate Bond Fund
Class A Shares _.__%
Class B Shares _.__%
Class C Shares _.__%
ING Pilgrim High Yield Bond Fund
Class A Shares _.__%
Class B Shares _.__%
Class C Shares _.__%
ING Pilgrim International Bond Fund
Class A Shares _.__%
Class B Shares _.__%
Class C Shares _.__%
Class I Shares _.__%
Quotations of the tax-equivalent yield for the ING National Tax-Exempt
Money Market Fund and the ING Pilgrim 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 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.
The Funds may also calculate performance using any other historical measure
of performance (not subject to any prescribed method of computation) if the
measurement reflects all elements of return. If used, such performance
measurements will disclose the length of and the last day in the base period
used in calculating the quotation, a description of the method by which the
performance data is calculated, and the income tax rate used in the calculation,
if applicable.
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.
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The Funds may from time to time include in advertisements, sales
literature, communications to shareholders and other materials, comparisons of
its total return to the return of other mutual funds with similar investment
objectives, broadly-based market indices, other investment alternatives,
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the funds may be compared to data prepared by Lipper Analytical
Services, Inc., Morningstar, Inc., the S&P 500 Index, the Dow Jones Industrial
Average, the Russell 2000 or, in the case of the ING Money Market Funds, IBC
Financial Data, Inc. Lipper Analytical Services, Inc. maintains statistical
performance databases, as reported by a diverse universe of
independently-managed mutual funds. Morningstar, Inc. is a mutual fund
performance rating service that rates mutual funds on the basis of risk-adjusted
performance. Evaluations of fund performance made by independent sources may
also be used in advertisements concerning the Funds, including reprints of, or
selections from editorials or articles about the Funds or the Funds' managers.
The Funds may also publish rankings or ratings of the managers. Materials
may include a list of representative clients of the Funds' investment advisers
and may contain information regarding the background, expertise, etc. of the
Funds' investment advisers or portfolio managers. The distributor may provide
information that discusses the managers' philosophy, investment strategy,
investment process, security selection criteria and screening methodologies.
In addition, the Funds may also include in materials discussions and/or
illustrations of the potential investment goals of a prospective investor,
investment management strategies, techniques, policies or investment suitability
of a Fund, economic and political conditions, the relationship between sectors
of the economy and the economy as a whole, various securities markets, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury securities, and
hypothetical investment returns based on certain assumptions. From time to time,
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of a Fund) as well as the views of
the advisers as to current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment strategies and
related matters believed to be of relevance to a Fund. Material may also contain
fund holdings, sector allocations, asset allocations, credit ratings, and
regional allocations. Material may refer to various fund identifiers such as the
CUSIP numbers or NASDAQ symbols.
PRINCIPAL HOLDERS OF FUND SHARES
As of _____________, 200_, ING America Insurance Holdings, Inc. owned of
record more that 25% of the shares of each Fund, except ING Pilgrim Global
Information Technology Fund, ING Pilgrim Internet Fund and ING Money Market
Fund, and thus may be deemed to control the Funds. ING America Insurance
Holdings, Inc. is a corporation organized under the laws of the state of
Delaware. Generally, a shareholder holding more than 50% of a Fund's shares
would be able to cast the deciding vote on any proposal submitted to
shareholders.
To the best knowledge of the Trust, the names and addresses of the holders
of 5% or more of the outstanding shares of each class of the Funds' equity
securities as of _____________, 200_, and the percentage of the outstanding
shares held by such holders are set forth in the table below.
Name and Percent Owned Percent Owned
ING Pilgrim FUND Address of Owner of Record Beneficially
---------------- ---------------- --------- ------------
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To the knowledge of management, as of ___________, 200_, the officers and
Trustees of the Trust owned collectively, less than 1% of the shares of each
Fund.
CODE OF ETHICS
The Manager and the Sub-Advisers have each adopted a Code of Ethics which
prohibits its affiliated personnel from engaging in personal investment
activities which compete with or attempt to take advantage of a Fund's planned
portfolio transactions. The Manager and the Sub-Advisers maintain careful
monitoring of compliance with their Codes of Ethics.
TRANSFER AGENT AND FUND ACCOUNTANT
DST Systems, Inc. ("DST") has been retained to act as the Funds' transfer
agent and State Street Bank and Trust Company ("State Street") has been retained
to act as the Funds' fund accounting agent. DST is located at 330 W. 9th Street,
Kansas City, Missouri 64105, and State Street is located at 225 Franklin Street,
Boston, MA 02110. For their services as transfer agent and fund accounting
agent, DST and State Street, respectively, receive a fee from the Funds.
CUSTODIAN
Brown Brothers Harriman & Co. ("Brown Brothers"), 40 Water Street, Boston,
MA 02109 acts as custodian of the assets of the ING Pilgrim International Equity
Fund, the ING Pilgrim International Bond Fund, the ING Pilgrim Emerging Markets
Equity Fund, the ING Pilgrim European Equity Fund, the ING Pilgrim Global Brand
Names Fund, the ING Pilgrim Global Information Technology Fund, the ING Pilgrim
Global Communications Fund and the ING Pilgrim Global Real Estate Fund. State
Street Bank and Trust Company ("State Street"), 801 Pennsylvania Street, Kansas
City, MO 64105, acts as custodian of the assets of each of the other Funds.
Pursuant to the Custodian Agreements, Brown Brothers and State Street are
responsible for holding each Fund's cash and portfolio securities. Brown
Brothers and State Street may enter into sub-custodian agreements with certain
qualified banks.
LEGAL COUNSEL
____________________________ serves as counsel to the Trust. __________'s
address is ___________________________________.
INDEPENDENT AUDITORS
________________ serves as the independent auditors for the Funds.
____________ provides audit services, tax return preparation and assistance and
consultation in connection with review of SEC filings. ____________'s address
________________________.
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FINANCIAL STATEMENTS
The Annual Report, including the audited financial statements and the notes
thereto, for the ING Pilgrim Large Cap Growth Fund, ING Pilgrim Growth & Income
Fund, ING Pilgrim Mid Cap Growth Fund, ING Pilgrim Small Cap Growth Fund, ING
Pilgrim Global Brand Names Fund, ING Pilgrim International Equity Fund, ING
Pilgrim European Equity Fund, ING Pilgrim Tax Efficient Equity Fund, ING Pilgrim
Focus Fund, ING Pilgrim Global Information Technology Fund, ING Pilgrim Internet
Fund, ING Pilgrim Intermediate Bond Fund, ING Pilgrim High Yield Bond Fund, ING
Pilgrim International Bond Fund and ING Money Market Fund appearing in the most
current Annual Report to Shareholders of the Trust are incorporated by reference
herein. The Semi-Annual Reports, including the unaudited financial statements
and the notes thereto, for ING Pilgrim Large Cap Growth Fund, ING Pilgrim Growth
& Income Fund, ING Pilgrim Mid Cap Growth Fund, ING Pilgrim Small Cap Growth
Fund, ING Pilgrim Global Brand Names Fund, ING Pilgrim International Equity
Fund, ING Pilgrim European Equity Fund, ING Pilgrim Tax Efficient Equity Fund,
ING Pilgrim Focus Fund, ING Pilgrim Global Information Technology Fund, ING
Pilgrim Internet Fund, ING Pilgrim Global Communications Fund, ING Pilgrim
Intermediate Bond Fund, ING Pilgrim High Yield Bond Fund, ING Pilgrim
International Bond Fund, ING Pilgrim National Tax-Exempt Bond Fund and ING Money
Market Fund appearing in the most current Semi-Annual Reports of the Trust are
incorporated by reference herein. The financial statements included in the
Annual Report have been audited by the Trust's independent auditors,
___________, whose report thereon dated ___________________, is also
incorporated by reference. Such financial statements have been incorporated
herein in reliance upon such reports given upon their authority as experts in
accounting and auditing. Additional copies of the Annual Report and/or
Semi-Annual Reports may be obtained at no charge by telephoning the Trust at
1-800-992-0180.
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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.
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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.
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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."
ING Pilgrim-SAI (03/01)
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Declaration of Trust (1)
(b) By-Laws of Registrant (1)
(c) The rights of holders of the securities being registered are set
out in Articles II, VII, IX and X of the Declaration of Trust
referenced in Exhibit (a) above and in Articles IV, VI and XIII
of the By-Laws referenced in Exhibit (b) above.
(d)(1) Management Agreement between Registrant and ING Mutual Funds
Management Co. LLC (the "Manager") (8)
(2) Sub-Advisory Agreement between the Manager and Baring Asset
Management, Inc. (8)
(3) Sub-Advisory Agreement between the Manager and Baring
International Investment Limited (8)
(4) Sub-Advisory Agreement between the Manager and Baring Asset
Management (Asia) Limited (8)
(5) Sub-Advisory Agreement between the Manager and ING Investment
Management Advisors B.V. (8)
(6) Sub-Advisory Agreement between the Manager and ING Investment
Management LLC (8)
(7) Sub-Advisory Agreement between the Manager and Furman Selz
Capital Management LLC (8)
(8) Sub-Advisory Agreement between the Manager and Furman Selz
Capital Management LLC on behalf of Delta Asset Management (8)
(9) Sub-Advisory Agreement between the Manager and CRA Real Estate
Securities, L.P. (8)
(10) First Amendment to Sub-Advisory Agreement between the Manager
and ING Investment Management Advisors B.V. (8)
(e)(1) Form of Underwriting between Registrant and ING Pilgrim
Securities, Inc. (8)
(2) Form of Financial Institution Selling Group Agreement (8)
(3) Form of Selling Group Agreement. (8)
(f) None
(g)(1) Form of Custodian Agreement between Registrant and State
Street Bank and Trust Company, with respect to the Registrants
U.S. Funds (8)
(2) Form of Custodian Agreement between Registrant and Brown
Brothers Harriman & Co., with respect to the Registrants
Global and International Funds (8)
(3) Form of Amendment to the Custodian Agreement between
Registrant and Brown Brothers Harriman & Co. (8)
(4) Form of Appendix A to Custodian Agreement between Registrant
and Brown Brothers Harriman & Co. (8)
(5) Form of Appendix B to Custodian Agreement between Registrant
and Brown Brothers Harriman & Co. (8)
(6) Form of Appendix C to Custodian Agreement between Registrant
and Brown Brothers Harriman & Co. (8)
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(h)(1) Form of Service Agreement (8)
(2) Fund Services Agreement between Registrant and ING Fund
Services Co. LLC (2)
(3) Form of Recordkeeping Agreement with State Street Bank and
Trust Company (8)
(4) Amended and Restated Shareholder Servicing Plan (8)
(5) Form of Administration Agreement (8)
(i) Opinion and Consent of counsel - to be filed by amendment
(j) Consent of independent auditors - to be filed by amendment
(k)(1) Annual Report containing the audited financial statements for the
period ended October 31, 1999(5)
(2) Semi-Annual Reports containing the unaudited financial statements
for the period ended April 30, 2000 (6)
(l) Purchase Agreement (2)
(m)(1) Rule l2b-l Distribution Plan and Agreement with respect to Class
A Shares (8)
(2) Rule l2b-l Distribution Plan and Agreement with respect to Class
B, Class C and Class X Shares (8)
(n) Amended and Restated Rule 18f-3 Plan (8)
(p)(1) Code of Ethics of ING Funds Trust (4)
(2) Code of Ethics of ING Mutual Funds Management Co. LLC (8)
(3) Code of Ethics of Baring Asset Management, Inc.(8)
(4) Code of Ethics of Baring International Investment Limited (8)
(5) Code of Ethics of Baring Asset Management (Asia) Limited (8)
(6) Code of Ethics of Clarion CRA Securities, L.P. (8)
(7) Code of Ethics of ING Furman Selz Asset Management (8)
(8) Code of Ethics of ING Investment Management LLC (8)
(9) Code of Ethics of ING Investment Management Advisors B.V. (8)
----------
(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 as an exhibit to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed electronically on April 15, 1999,
accession number 0000893220-99-000467.
(3) Filed as an exhibit to Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed electronically on November 30,
1999, accession number 0000893220-99-001327.
(4) Filed as an exhibit to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A filed electronically on February 28,
2000, accession number 0000893220-00-000227.
(5) Previously filed in Registrant's N-30D on December 29, 1999, accession
number 0000893220-99-001408.
(6) Previously filed in Registrant's N-30D's on July 7, 2000, accession numbers
0001066602-00-000017, 0001066602-00-000018 and 0001066602-00-000019.
(7) Filed as an exhibit to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A filed electronically on September 7,
2000, accession number 0000893220-00-001054.
(8) Filed as an exhibit to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A filed electronically on November 6,
2000, accession number 0000893220-00-001228.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None.
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ITEM 25. INDEMNIFICATION.
Article X of the Registrant's Declaration of Trust provides the following:
Section 10.1 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
Section 10.2 Indemnification.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every Person who is, or has been a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party
or otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office
or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); or
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(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification therein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 10.2 may be paid by the Trust or Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to indemnification
under this Section 10.2.
Article IX of the Registrant's By-Laws provides the following:
The Trust may purchase and maintain insurance on behalf of any Covered
Person or employee of the Trust, including any Covered Person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that protects
or purports to protect any Trustee or officer of the Trust against any liability
to the Trust or its Shareholder to which he would otherwise be subject by reason
or willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
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Reference is made to Article IX of Registrants By-Laws and paragraph 1.11
of the Distribution Agreement.
The Registrant is covered under 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 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.
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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
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 1475 Dunwoody Drive, West Chester, PA 19380. The directors and
executive officers of the Manager and such executive officers' positions during
the past two years are as follows:
Alexander H. Rinnooy-Kan, Director of the Manager. Member of Executive
Board of ING Groep N.V. since September 1996.
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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. Chairman, Executive
Committee of ING Americas and ING Asia Pacific, January 2000 to present and
Chairman of the Executive Committee of ING Financial Services International,
February 1999 to present. General Manager of ING Financial Services
International North America and President and Chief Executive Officer - US
Retail Financial Services, October 1997 to February 1999.
Donald E. Brostrom, Executive Vice President and Chief Operating 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 with 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
September 1998.
Alan Lordi, Senior Vice President of the Manager. Vice President and
Portfolio Manager of Sefton Capital Management from January 1997 to July 1999.
Peter J. DeMarco, Senior Vice President of the Manager. Executive Vice
President, Reich & Tang Funds October 1995 to November 1999.
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.
Ralph G. Norton, III, Vice President of the Manger. 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.
Stuart H. Quillman, Vice President of Marketing of the Manager. Manager,
Corporate Communications at Pilgrim, Baxter & Associates, October 1997 to
October 1998.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) ING Pilgrim Securities, Inc. also acts as the principal underwriter for
Pilgrim Equity Trust, Pilgrim Investment Funds, Inc., Pilgrim Advisor Funds,
Inc., Pilgrim Government Securities Fund, Inc., Pilgrim Bank and Thrift Fund,
Inc., Pilgrim Prime Rate Trust, Pilgrim Mutual Funds, Pilgrim Small Cap
Opportunities Fund, Pilgrim Growth Opportunities Fund, Pilgrim Mayflower Trust,
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Pilgrim Global Corporate Leaders Fund, Inc., Pilgrim Global technology Fund,
Pilgrim GNMA Income Fund, Pilgrim Gold Fund, Pilgrim Growth & Income Fund,
Pilgrim International Fund, Pilgrim Silver Fund, Pilgrim Small Cap Asia Growth
Fund, Pilgrim Troika Dialog Russia Fund, Pilgrim Worldwide Emerging Markets
Fund, Pilgrim Global Income Fund and Lexington Money Market Trust.
(b) Information as to the directors and officers of the Distributor,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the directors and officers of
the Distributor in the last two years, is included in its application for
registration as a broker-dealer on Form BD (File No. 8-48020) filed under the
Securities and Exchange Act of 1934 and is incorporated herein by reference
thereto.
(c) Not applicable.
ITEM 28. 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:
(1) ING Funds Trust, 1475 Dunwoody Drive, West Chester, PA 19380 records
relating to the Trust)
(2) ING Mutual Funds Management Co. LLC, 1475 Dunwoody Drive, West Chester,
PA 19380 (records of the investment manager) and 600 Fifth Avenue, New York, NY
10020 (records of the investment manager relate to its UIT business)
(3) ING Pilgrim Group, Inc., 7337 East Doubletree Ranch Road, Scottsdale,
AZ 85258-2034 (records of the administrator)
(4) ING Pilgrim Securities, Inc., 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258-2034 (records of the principal underwriter)
(5) Baring Asset Management, Inc., 125 High Street, Boston, MA 02110
(records relating to its functions as investment sub-adviser)
(6) Baring International Investment Limited, 155 Bishopsgate, London,
England EC2M 3XY (records relating to its functions as investment
co-sub-adviser)
(7) Baring International Investment (Asia) Limited, 19/F Edinburgh Tower,
The Landmark, 15 Queens Road, Central, Hong Kong (records relating to its
functions as investment co-sub-adviser)
(8) ING Investment Management Advisors B.V., Schenkkade 65, 2595 AS, The
Hague, The Netherlands (records relating to its functions as investment
sub-adviser)
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(9) ING Investment Management LLC, 5780 Powers Ferry Road, N.W., Suite 300,
Atlanta, GA 30327 (records relating to its functions as investment sub-adviser)
(10) Furman Selz Capital Management, LLC, 230 Park Avenue, New York, NY
10169 (records relating to its functions as investment sub-adviser)
(11) Delta Asset Management, 333 South Grand Avenue, Los Angeles, CA 90071
(records relating to its functions as investment sub-adviser)
(12) CRA Real Estate Securities L.P., 259 Radnor-Chester Road, Radnor, PA
90071 (records relating to its functions as investment sub-adviser)
(13) State Street Bank Trust Company, 801 Pennsylvania Street, Kansas City,
MO 64105 (records related to its functions as custodian for the U.S. funds)
(14) Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109
(records relating to its functions as custodian for global and international
funds)
(15) DST Systems, Inc., P.O. Box 219368, Kansas City, MO 64121-9368
(records relating to its functions as transfer agent)
(16) State Street Bank Trust Company, 225 Franklin Street, Boston, MA 02110
(records relating to its function as fund accounting agent)
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant has duly caused this
Post-Effective Amendment No. 8 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City Scottsdale,
and the state of Arizona on the 22nd day of December, 2000.
ING FUNDS TRUST
By: /s/ Robert W. Stallings
-------------------------------------
Robert W. Stallings
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Robert W. Stallings President and Chief December 22, 2000
----------------------------- Executive Officer
Robert W. Stallings
/s/ Michael J. Roland Treasurer December 22, 2000
-----------------------------
Michael J. Roland
/s/ Joseph N. Hankin Trustee December 22, 2000
-----------------------------
Joseph N. Hankin*
/s/ Jack D. Rehm Trustee December 22, 2000
-----------------------------
Jack D. Rehm*
/s/ Blaine E. Reike Trustee December 22, 2000
-----------------------------
Blaine E. Reike*
/s/ Richard A. Wedemeyer Trustee December 22, 2000
-----------------------------
Richard A. Wedemeyer*
* By: /s/ Robert W. Stallings
----------------------------
Robert W. Stallings
Attorney-in-Fact**
----------
** Powers of Attorney for the Trustees were filed as part of Post-Effective
Amendment No. 6 to the Registrant's Registration Statement as filed on
November 6, 2000 and are incorporated herein by reference.
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