As filed with the Securities and Exchange Commission on November 30, 2000
Securities Act File No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
PILGRIM GOLD FUND, INC.
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
(Address of Principal Executive Offices) (Zip Code)
(800) 992-0180
(Registrant's Area Code and Telephone Number)
James M. Hennessy
ING Pilgrim Investments, Inc.
7337 East 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
------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
--------------------------------------------------------------------------------
It is proposed that this filing will become effective on
December 30, 2000 pursuant to Rule 488 under the Securities Act of 1933.
--------------------------------------------------------------------------------
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
<PAGE>
Pilgrim Silver Fund, Inc.
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
(800) 992-0180
_____________, 2001
Dear Shareholder:
Your Board of Directors has called a Special Meeting of Shareholders of the
Pilgrim Silver Fund, a series of Pilgrim Silver Fund, Inc., ("Silver Fund")
(together with Pilgrim Gold Fund, the "Funds") scheduled to be held at _______
[a.m./p.m.], local time, on ___________, 2001 at 7337 East Doubletree Ranch
Road, Scottsdale, AZ 85258.
The Board of Directors has approved a reorganization of the Pilgrim Silver
Fund into the Pilgrim Gold Fund, a series of Pilgrim Gold Fund, Inc., ("Gold
Fund"), each of which is managed by ING Pilgrim Investments, Inc. ("ING Pilgrim
Investments") and is part of the Pilgrim funds (the "Reorganization"). If
shareholders approve the Reorganization, you would become a shareholder of Gold
Fund on the date that the Reorganization occurs. Silver Fund invests primarily
in silver and silver-related companies. Gold Fund invests primarily in gold and
gold-related companies, but may invest in silver, other precious metals, or
companies related to silver or precious metals. The Reorganization is expected
to result in operating expenses that are lower for shareholders.
You are being asked to vote to approve an Agreement and Plan of
Reorganization. The accompanying document describes the proposed transaction and
compares the policies and expenses of each of the Funds for your evaluation.
After careful consideration, the Board of Directors of Pilgrim Silver Fund,
Inc. unanimously approved this proposal and recommended shareholders vote "FOR"
the proposal.
A Proxy Statement/Prospectus that describes the Reorganization is enclosed.
We hope that you can attend the Special Meeting in person; however, we urge you
in any event to vote your shares by completing and returning the enclosed proxy
card in the envelope provided at your earliest convenience.
Your vote is important regardless of the number of shares you own. In order
to avoid the added cost of follow-up solicitations and possible adjournments,
please take a few minutes to read the Proxy Statement/Prospectus and cast your
vote. It is important that your vote be received no later than __________, 2001.
Silver Fund is using Shareholder Communications Corporation, a professional
proxy solicitation firm, to assist shareholders in the voting process. As the
date of the meeting approaches, if we have not already heard from you, you may
receive a telephone call from Shareholder Communications Corporation reminding
you to exercise your right to vote.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
Robert W. Stallings,
President
<PAGE>
Pilgrim Silver Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(800) 992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF PILGRIM SILVER FUND
SCHEDULED FOR ___________, 2001
To the Shareholders:
A Special Meeting of Shareholders of Pilgrim Silver Fund, a series of
Pilgrim Silver Fund, Inc., ("Special Meeting") is scheduled for _________, 2001
at _______ [a.m./p.m.], local time, at 7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258.
At the Special Meeting, you will be asked to consider and approve the
following:
1. an Agreement and Plan of Reorganization providing for the acquisition
of all of the assets and liabilities of the Pilgrim Silver Fund by the
Pilgrim Gold Fund, a series of Pilgrim Gold Fund, Inc.; and
2. to transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on ___________, 2001, are
entitled to notice of, and to vote at, the meeting. Your attention is called to
the accompanying Proxy Statement/Prospectus. Regardless of whether you plan to
attend the meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD so that a quorum will be present and a maximum number of shares may be
voted. If you are present at the meeting, you may change your vote, if desired,
at that time.
By Order of the Board of Directors
James M. Hennessy,
Secretary
______________, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION................................................................ 1
SUMMARY..................................................................... 2
Comparison of Portfolio Characteristics.................................. 4
Relative Performance..................................................... 5
Comparison of Investment Techniques and Risks of the Funds............... 5
COMPARISON OF FEES AND EXPENSES............................................. 7
Total Operating Expenses................................................. 7
Expense Table............................................................ 7
General Information...................................................... 9
ADDITIONAL INFORMATION ABOUT GOLD FUND...................................... 10
Investment Personnel..................................................... 10
Performance of Gold Fund................................................. 10
INFORMATION ABOUT THE REORGANIZATION........................................ 11
ADDITIONAL INFORMATION ABOUT THE FUNDS...................................... 13
GENERAL INFORMATION ABOUT THE PROXY STATEMENT............................... 14
Solicitation of Proxies.................................................. 14
Voting Rights............................................................ 15
Other Matters to Come Before the Meeting................................. 15
Shareholder Proposals.................................................... 15
Reports to Shareholders.................................................. 16
APPENDIX A.................................................................. A-1
APPENDIX B.................................................................. B-1
APPENDIX C.................................................................. C-1
APPENDIX D.................................................................. D-1
<PAGE>
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
_________________, 2001
PILGRIM SILVER FUND
Relating to the Reorganization into
PILGRIM GOLD FUND
(collectively, the "Funds," each a "Fund")
INTRODUCTION
This Proxy Statement/Prospectus provides you with information about a
proposed transaction. This transaction involves the transfer of all the assets
and liabilities of Pilgrim Silver Fund, formerly Lexington Silver Fund, a series
of Pilgrim Silver Fund, Inc., ("Silver Fund") to Pilgrim Gold Fund, formerly
Lexington Goldfund, a series of Pilgrim Gold Fund, Inc., ("Gold Fund") in
exchange for shares of Gold Fund (the "Reorganization"). Silver Fund would then
distribute to its shareholders their portion of the shares of Gold Fund it
receives in the Reorganization. The result would be a liquidation of Silver
Fund. You would receive shares of the Gold Fund having an aggregate value equal
to the aggregate value of the shares you held of Silver Fund, as of the close of
business on the business day of the Reorganization. You are being asked to vote
on the Agreement and Plan of Reorganization through which these transactions
would be accomplished. It is anticipated that the name of Gold Fund will be
changed at this time to Pilgrim Precious Metals Fund, subject to Board approval.
Because you, as a shareholder of Silver Fund, are being asked to approve a
transaction that will result in your holding of shares of Gold Fund, this Proxy
Statement also serves as a prospectus for Gold Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Gold Fund that you should know
before investing. For a more detailed discussion of the investment objectives,
policies, restrictions and risks of each of the Funds, see the Prospectus (the
"Pilgrim Prospectus") dated November 1, 2000, and the Statement of Additional
Information for the Funds dated July 31, 2000, which may be obtained, without
charge, by calling (800) 992-0180. Each of the Funds also provides periodic
reports to its shareholders which highlight certain important information about
the Funds, including investment results and financial information. The annual
report for Gold Fund dated December 31, 1999, and the semi-annual report dated
June 30, 2000, are incorporated herein by reference. You may receive a copy of
the most recent annual report for either of the Funds and a copy of any more
recent semi-annual report, without charge, by calling (800) 992-0180.
You may also obtain proxy materials, reports and other information filed by
Gold Fund from the Securities and Exchange Commission's ("SEC") Public Reference
Room (1-800-SEC-0330) or from the SEC's internet website at www.sec.gov.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, and the
Agreement and Plan of Reorganization, which is attached hereto as Appendix B.
THE PROPOSED REORGANIZATION. On November 2, 2000, the Board of Directors of
Silver Fund approved an Agreement and Plan of Reorganization (the
"Reorganization Agreement"). Subject to shareholder approval, the Reorganization
Agreement provides for:
* the transfer of all of the assets of Silver Fund to Gold Fund, in
exchange for shares of Gold Fund;
* the assumption by Gold Fund of all of the liabilities of Silver Fund;
* the distribution of Gold Fund shares to the shareholders of Silver
Fund; and
* the complete liquidation of Silver Fund.
The Reorganization is expected to be effective upon the opening of business
on ___________, 2001, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganization, each holder of Class A shares of
Silver Fund would become a Class A shareholder of Gold Fund. Each shareholder
would hold, immediately after the Closing, Class A shares of Gold Fund having an
aggregate value equal to the aggregate value of Class A shares of Silver Fund
held by that shareholder as of the close of business on the business day of the
Closing.
The Reorganization is one of many reorganizations that are proposed among
various funds. The Pilgrim fund complex has grown in recent years through the
addition of many funds. Management of the Pilgrim funds has proposed the
consolidation of a number of the Pilgrim funds that they believe have similar or
compatible investment policies. The proposed reorganizations are designed to
reduce the overlap in funds in the complex, thereby eliminating duplication of
costs and other inefficiencies arising from having similar portfolios within the
same fund group. ING Pilgrim Investments, Inc. ("ING Pilgrim Investments") also
believes that the reorganizations may benefit fund shareholders by resulting in
surviving funds with a greater asset base. This is expected to achieve economies
of scale for shareholders and may provide greater investment opportunities for
the surviving funds or the potential to take larger portfolio positions.
In considering whether to approve the Reorganization, you should note that:
* The Funds have compatible investment objectives;
* The proposed Reorganization is expected to result in a reduction of
total operating expenses for the shareholders of Silver Fund. For
example, the operating expenses, expressed as a percentage of net
asset value per share for Class A shares, are as follows:
* Expenses of Silver Fund(1) 2.12%
* Expenses of Gold Fund(1) 1.75%
* Projected Expenses of Gold Fund
after the Reorganization (PRO FORMA): 1.59%
* Silver Fund shareholders would no longer participate in a portfolio
composed primarily of silver and silver-related companies. Gold Fund
invests primarily in gold and gold-related companies; however, the
Gold Fund has the ability to invest up to 35% of its total assets in
silver, other precious metals, or other companies related to silver or
other precious metals. Further, the Gold Fund seeks to serve as a
hedge against a decline in the buying power of the U.S. dollar.
----------
(1) Based upon expenses incurred by each Fund for the 12 month period ended
June 30, 2000, adjusted for current expenses of contracts and distribution
(12b-1) plans which became effective when ING Pilgrim Investments became
adviser to the Funds on July 26, 2000.
2
<PAGE>
* Shareholders of the Silver Fund, with net assets of $18.6 million on
June 30, 2000, would become shareholders of a larger, more viable fund
whose net assets, when combined with those of Gold Fund, would have
been $ 71.8 million on June 30, 2000.
Approval of the Reorganization Agreement requires the affirmative vote of a
majority of the outstanding shares of Silver Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF PILGRIM SILVER FUND,
INC., ON BEHALF OF SILVER FUND, UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
SILVER FUND GOLD FUND
----------- ---------
<S> <C> <C>
INVESTMENT OBJECTIVE Seeks to maximize total return on its assets from Seeks to attain capital appreciation and hedge
long-term growth of capital and income principally against the loss of buying power of the U.S. dollar
through investment in a portfolio of securities of as may be obtained through investment in gold and
issuers that are engaged in the exploration, securities of companies engaged in mining or
mining, fabrication or distribution of silver processing gold throughout the world.
("silver-related companies") and silver bullion.
INVESTMENT STRATEGIES * Invests in common stocks of established * Normally invests at least 65% of the value of
silver-related companies that have the its total assets in gold bullion and the equity
potential for long-term growth of capital or securities of companies engaged in the
income, or both. exploration, mining, processing, fabrication or
distribution of gold ("gold-related companies").
* At least 80% of the Fund's assets will be
invested in established silver-related * May invest the remaining 35% of its total assets
companies that have been in business more than in other precious metals, including silver,
three years. These companies may be domiciled platinum and palladium, and in the equity
in the United States, Canada, Mexico, as well securities of companies engaged in the
as other silver producing countries throughout exploration, mining, processing, fabrication or
the world. distribution of other precious metals or
materials.
* May also invest in other types of securities
of silver-related companies, including * From time to time, invests in silver bullion or
convertible securities, preferred stocks, the common stock of companies engaged in the
bonds, notes and warrants. exploration, mining, processing, fabrication or
distribution of silver ("silver-related
* Has the ability to hold silver bullion. companies").
* When the return on debt securities appears * May also invest in other types of securities,
that it will equal or exceed the return on including convertible securities, preferred
common stocks, the Fund may substantially stocks, bonds, notes and warrants, of
increase its holdings in debt securities. gold-related companies, silver- related
companies, or companies related to other
precious metals.
* 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).
* Performance and ability to meet 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 investments
will be in the securities of foreign issuers.
INVESTMENT ADVISER ING Pilgrim Investments ING Pilgrim Investments
PORTFOLIO MANAGERS James A. Vail James A. Vail
</TABLE>
3
<PAGE>
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
SILVER FUND GOLD FUND
----------- ---------
<S> <C> <C>
Net Assets $18,651,289 $53,152,820
Number of Holdings 21 24
Portfolio Turnover Rate(1) 7.55% 16.86%
As a percentage of net assets:
Equity Securities 67.30% 87.90%
U.S. Securities 33.90% 16.10%
Foreign Securities 40.30% 71.80%
Gold and Gold-Related Companies(2) 0.00% 79.00%
Silver and Silver-Related Companies(2) 75.40% 0.00%
Preferred Securities 6.40% 0.00%
Short-Term Debt Instruments 18.70% 5.10%
Gold Bullion 0.00% 5.20%
Silver Bullion 7.00% 0.00%
Top 10 Holdings Cia Buenaventura - 7.34% Goldcorp, Inc. - . 7.29%
(as a % of net assets) Silver Bullion Allocated - 7.00% Gold Fields, Ltd. - 7.03%
Meridian Gold, Inc. - 6.99% Harmony Gold Mining Co - 6.68%
Freeport McMoran Copper - 6.37% Newmont Mining Corp. - 5.70%
Grupo Mexico - 6.10% Placer Dome, Inc. - 5.43%
Penoles - 5.59% Meridian Gold Inc. - 5.37%
Homestake Mining Co - 5.29% Agnico-Eagle Mines Ltd.- 5.37%
Apex Silver Mines Ltd. - 5.06% Impala Platinum Hldg - 5.31%
KGHM Polska - 4.09% Anglogold Ltd - 5.28%
Stillwater Mining - 3.74% Gold Bullion - 5.21%
Top 10 Countries USA - 33.40% Canada - 33.70%
(as a % of net assets) Mexico - 14.60% South Africa - 30.70%
Peru - 7.30% USA - 16.10%
Australia - 6.00% Australia - 7.40%
United Kingdom - 4.50%
Poland - 4.10%
Canada - 3.80%
</TABLE>
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(1) For the six month period ended June 30, 2000.
(2) As that term is defined in "Comparison of Investment Objectives and
Strategies."
4
<PAGE>
RELATIVE PERFORMANCE
The following table shows, for each calendar year since 1992 and January 1,
2000 through September 30, 2000, the average annual total returns for: (a) Class
A shares of Silver Fund and (b) Class A shares of Gold Fund. Performance of the
Funds in the table does not reflect the deduction of sales loads, and would be
lower if it did. Total returns are calculated assuming reinvestment of all
dividends and capital gain distributions, if any, at net asset value and
excluding the deduction of sales charges, if any.
CALENDAR YEAR/ SILVER GOLD
PERIOD ENDED FUND(1) FUND(1)(2)
------------ ------- ----------
12/31/92 -19.01% -20.51%
12/31/93 76.52% 86.96%
12/31/94 -8.37% -7.28%
12/31/95 12.37% -1.89%
12/31/96 2.38% 7.84%
12/31/97 -8.05% -42.98%
12/31/98 -29.64% -6.39%
12/31/99 8.70% 8.58%
1/1/00-9/30/00 -20.61% -22.47%
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(1) Prior to July 26, 2000, the Fund was advised by Lexington Management
Corporation, which was acquired by the parent to ING Pilgrim Investments on
July 26, 2000. ING Pilgrim Investments bcame the adviser on that same date.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(2) For more information about the performance of Gold Fund, see "Additional
Information about Pilgrim Gold Fund."
COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS
Although the Funds have somewhat different investment techniques, many of
the risks of investing in Gold Fund are similar to the risks of investing in
Silver Fund. A principal risk of an investment in either Fund is that you may
lose money on your investment. The net asset value of each Fund's shares may go
up or down, sometimes rapidly and unpredictably. Market conditions, financial
conditions of issuers represented in the portfolio, investment policies,
portfolio management, and other factors affect such fluctuations.
PRECIOUS METALS RISK. The Funds' focus on precious metals and precious
metal stocks exposes the investor to risks associated with those metals. The
market for gold, silver and other precious metals is concentrated in countries
that have the potential for instability. The supply and demand for gold, silver
and other precious metals 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. The market for gold and other
precious metals is widely unregulated. As a result, the price of gold, silver
and related precious metal stocks, and therefore the Funds, may fluctuate
significantly. Direct investments in precious metals have the following
characteristics: they earn no income; transaction and storage costs may be
higher; and they will realize gain only with an increase in the market price.
5
<PAGE>
EQUITY SECURITIES RISK. Both Gold Fund and Silver Fund invest in equity
securities and securities with equity characteristics, such as common stocks,
preferred stocks, convertible securities and warrants and other stock purchase
rights. Both Funds are subject to risks associated with investing primarily in
equity securities, including market risk, issuer risk including credit risk,
price volatility risks and market trend risks. 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. Credit risk is the risk that an issuer may
not be able to meet its financial obligations when due, including payments on
outstanding debt. While offering the potential for greater long-term growth than
most debt securities, equities generally have higher volatility.
FOREIGN SECURITIES RISK. Both Funds invest in foreign securities. Foreign
investments may be riskier than U.S. investments for many reasons. There are
certain risks in owning foreign securities, including: (i) fluctuations in
currency exchange rates; (ii) devaluation of currencies; (iii) political or
economic developments and the possible imposition of currency exchange blockages
or other foreign governmental laws or restrictions; (iv) reduced availability of
public information concerning issuers; (v) accounting, auditing and financial
reporting standards or other regulatory practices and requirements that are not
uniform when compared to those applicable to domestic companies; and (vi)
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. To the extent the Funds invest in emerging market countries, the
risks may be greater partly because emerging countries may be less politically
and economically stable than other countries. It also may be more difficult to
buy and sell securities in emerging market countries.
NON-DIVERSIFICATION RISK. The Funds are non-diversified investment
companies. There is additional risk associated with being non-diversified, since
a greater proportion of the Funds' total assets may be invested in a single
company.
CHANGE IN OBJECTIVE. The investment objectives of Silver Fund and Gold Fund
differ. Silver Fund has as part of its investment objective investment in silver
and silver-related companies. Gold Fund has as part of its investment objective,
investment in gold and gold-related companies. Therefore, if the Reorganization
is approved, Silver Fund shareholders would no longer invest in a portfolio that
invests primarily in silver and silver-related securities. However, the Gold
Fund has the ability to invest up to 35% of its total assets in silver, other
precious metals or companies related to silver and other precious metals, so
there is opportunity to retain some exposure to silver and silver-related
companies.
6
<PAGE>
COMPARISON OF FEES AND EXPENSES
The following discussion describes and compares the fees and expenses of
the Funds. For further information on the fees and expenses of Gold Fund, see
"Appendix C: Additional Information Regarding Gold Fund."
TOTAL OPERATING EXPENSES
The operating expenses of Gold Fund, expressed as a ratio of expenses to
average daily net assets ("expense ratio"), are lower than those of Silver Fund.
The operating expenses for Class A shares of Gold Fund and Silver Fund are 1.75%
and 2.12%, respectively, based upon expenses incurred by each Fund for the 12
month period ended June 30, 2000, adjusted for current expenses of contracts and
distribution (12b-1) plans which became effective when ING Pilgrim Investments
became advisor to the Funds on July 26, 2000.
EXPENSE LIMITATION ARRANGEMENTS. Expense limitation arrangements are in
place for both Funds. Under the terms of the expense limitation agreements, ING
Pilgrim Investments has agreed to limit the expenses of the Funds, excluding
interest, taxes, brokerage and extraordinary expenses, subject to possible
recoupment to ING Pilgrim Investments within three years. The current expense
limitation agreements for the Funds provide that they will remain in effect
until July 26, 2002. There is no assurance that the expense limitation
agreements will be continued after that date. The expense limitation agreements
cap the Funds' operating expenses at 2.75% of average daily net assets. Although
ING Pilgrim Investments has implemented expense limitation agreements for the
Funds, the Funds' actual expenses are lower than the expense limitations
contained in the agreements. This information and other information is shown in
the table below entitled "Annual Fund Operating Expenses."
It is expected that the expense ratio of Gold Fund after the
Reorganization will be 1.59% without taking into account any expense subsidies
from management.
MANAGEMENT FEE. Each Fund pays a management fee based on a percentage of
the Fund's average daily net assets, as follows:
ASSETS TO WHICH FEE APPLIES SILVER FUND
--------------------------- -----------
First $30 million 1.00%
Assets over $30 million 0.75%
ASSETS TO WHICH FEE APPLIES GOLD FUND
--------------------------- ---------
First $50 million 1.00%
Assets over $50 million 0.75%
DISTRIBUTION AND SERVICE FEES. Class A shares of both Funds have
distribution (12b-1) and service fees of 0.25%.
EXPENSE TABLE
The current expenses of each of the Funds and estimated PRO FORMA expenses
giving effect to the proposed Reorganization are shown in the following table.
Expenses for the Funds are annualized based upon the operating expenses incurred
by Class A shares of the Funds for the period ended June 30, 2000, adjusted for
current expenses of contracts and distribution (12b-1) plans which became
effective when ING Pilgrim Investments became advisor to the Funds on July 26,
2000. PRO FORMA fees show estimated fees of Gold Fund after giving effect to the
proposed Reorganization. PRO FORMA numbers are estimated in good faith and are
hypothetical, and reflect adjustments for anticipated contractual changes.
7
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(UNAUDITED)
(expenses that are deducted from Fund assets,
shown as a ratio of expenses to average daily net assets) (1)
<TABLE>
<CAPTION>
DISTRIBUTION
(12b-1) AND
SHAREHOLDER TOTAL FUND
MANAGEMENT SERVICING OTHER OPERATING FEE WAIVER NET FUND
FEES FEES(2) EXPENSES EXPENSES BY ADVISER(3) EXPENSES
---- ------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Silver Fund 1.00% 0.25% 0.87% 2.12% -- 2.12%
Gold Fund 0.95% 0.25% 0.55% 1.75% -- 1.75%
Gold Fund After the
Reorganization (PRO FORMA) 0.95% 0.25% 0.39% 1.59% -- 1.59%
</TABLE>
----------
(1) For both Funds the fiscal year end is December 31. Expenses of the Funds
and the PRO FORMA expenses are estimated based upon expenses incurred by
each Fund for the 12 month period ended June 30, 2000, adjusted for current
expenses of contracts and distribution (12b-1) plans which became effective
when ING Pilgrim Investments became advisor to the Funds on July 26, 2000.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into expense limitation agreements that
limit expenses (excluding interest, taxes, brokerage and extraordinary
expenses) for Gold Fund and Silver Fund to 2.75%, subject to possible later
recoupment. The current expense limitations will remain in effect until
July 26, 2002.
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of Silver Fund that will be transferred to Gold
Fund in connection with the Reorganization may be sold. Such sales may result in
increased transactional costs for Gold Fund, and the realization of taxable
gains or losses for Gold Fund.
EXAMPLES. The examples are intended to help you compare the cost of
investing in each of the Funds and in the combined Fund on a PRO FORMA basis.
The examples assume that you invest $10,000 in each Fund and in the Gold Fund
after the Reorganization for the time periods indicated. The examples also
assume that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. The 5% return is an assumption and is not
intended to portray past or future investment results. Based on the above
8
<PAGE>
assumptions, you would pay the following expenses whether or not you redeem your
shares at the end of each period shown; your actual costs may be higher or
lower.
<TABLE>
<CAPTION>
SILVER FUND* GOLD FUND* PRO FORMA: THE FUNDS COMBINED
------------------------------ --------------------------------- --------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $778 $1201 $1649 $2886 $743 $1094 $1469 $2519 $727 $1048 $1391 $2356
</TABLE>
----------
* Both Funds offer only Class A shares.
GENERAL INFORMATION
Class A shares of Gold Fund issued to a shareholder in connection with the
Reorganization will be subject to the same contingent deferred sales charge, if
any, applicable to the corresponding shares of Silver Fund held by that
shareholder immediately prior to the Reorganization.
In addition, the period that the shareholder held shares of Silver Fund
will be included in the holding period of Gold Fund shares for purposes of
calculating any contingent deferred sales charge. Gold Fund and Silver Fund are
each subject to the sales load structure described in the table below.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
CLASS A(1)
----------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 5.75%(2)
Maximum deferred sales charge (load) (as a
percentage of the lower of original purchase
price or redemption proceeds) None (3)
----------
(1) Shareholders that purchased shares of Silver Fund or Gold Fund at the time
the Funds were part of the Lexington family of funds are not subject to
sales charges for the life of their account.
(2) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" in Appendix C.
(3) A contingent deferred sales charge of no more than 1.00% 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. See "Class A Shares:
Initial Sales Charge Alternative" in Appendix C.
Gold Fund and Silver Fund do not have any redemption fees, exchange fees or
sales charges on reinvested dividends.
9
<PAGE>
ADDITIONAL INFORMATION ABOUT PILGRIM GOLD FUND
INVESTMENT PERSONNEL
The portfolios of Gold Fund and Silver Fund are managed by James A. Vail.
Mr. Vail serves as Vice President and Portfolio Manager of ING Pilgrim
Investments. He is a chartered Financial Analyst, is a member of the New York
Society of Security Analysts and has 25 years of investment experience. Prior to
joining ING Pilgrim Investments 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.
PERFORMANCE OF GOLD FUND
The bar chart and table that follow provide an indication of the risks of
investing in Gold Fund by showing (on a calendar year basis) changes in Gold
Fund's annual total return from year to year and by showing (on a calendar year
basis) how Gold Fund's average annual returns for one year, five years, and ten
years, compared to two broad measures of market performance, the Standard &
Poor's 500 Stock Price Index ("S&P 500 Index") and Gold Bullion. The information
in the bar chart is based on the performance of the Class A shares of Gold Fund,
although the bar chart does not reflect the deduction of the sales load on Class
A shares. If the bar chart included the sales load, returns would be less than
those shown. The Gold Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
CALENDAR YEAR-BY-YEAR RETURNS(1)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-20.65% -6.14% -20.51% 86.96% -7.28% -1.89% 7.84% -42.98% -6.39% 8.58%
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was 34.36% for the quarter ended June 30, 1993, and the Fund's worst
quarterly performance was -29.07% for the quarter ended December 31, 1997.
The Fund's year-to-date return as of September 30, 2000, was -22.47%.
The table below shows what the average annual total returns of Gold Fund
would equal if you averaged out actual performance over various lengths of time,
compared to the S&P 500 Index. The S&P 500 Index has an inherent performance
advantage over Gold Fund since it has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. Gold Fund's performance reflected in the table assumes the deduction
of the maximum sales charge in all cases. Total returns include reinvestment of
dividends and capital gains distribution, if any. The S&P 500 Index is
unmanaged.
10
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Gold Fund - Class A (1) 2.34% -5.45% -15.01%
Gold Bullion (2) 0.85% -5.41% -3.14%
S&P 500 Index (3) 21.04% 28.56% 18.21%
----------
(1) Reflects deduction of sales charge of 5.75%.
(2) Gold Bullion is a commodity traded on the New York Mercantile Exchange.
(3) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
The table below shows the performance of Gold Fund if sales charges are not
reflected.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Gold Fund - Class A 8.58% -9.32% -4.53%
----------
(1) The Fund commenced operations on December 3, 1975.
NAME CHANGE
It is anticipated that the name of Gold Fund will change to Pilgrim
Precious Metals Fund at or around the time of the Reorganization, subject to
approval by Gold Fund, Inc.'s Board of Directors.
For a discussion by the adviser regarding the performance of Gold Fund for
the year ended December 31, 1999, see Appendix A to the Proxy
Statement/Prospectus. Additional information about Gold Fund is included in
Appendix C to this Proxy Statement/Prospectus.
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT. The Reorganization Agreement provides for the
transfer of all of the assets and liabilities of Silver Fund to Gold Fund in
exchange for Class A shares of Gold Fund. Silver Fund will distribute Class A
shares of Gold Fund received in the exchange to the shareholders of Silver Fund,
and then Silver Fund will be liquidated.
After the Reorganization, each shareholder of Silver Fund will own Class A
shares in Gold Fund having an aggregate value equal to the aggregate value of
Class A shares in Silver Fund held by that shareholder as of the close of
business on the business day of the Closing. Class A shareholders of Silver Fund
will receive Class A shares of Gold Fund. In the interest of economy and
convenience, shares of Gold Fund generally will not be represented by physical
certificates unless requested in writing.
Until the Closing, shareholders of Silver Fund will continue to be able to
redeem their shares. Redemption requests received after the Closing will be
treated as requests received by Gold Fund for the redemption of its shares
received by the shareholder in the Reorganization.
The obligations of the Funds under the Reorganization Agreement are subject
to various conditions, including approval by the shareholders of Silver Fund.
The Reorganization Agreement also requires that each of the Funds take, or cause
to be taken, all action, and do or cause to be done, all things reasonably
11
<PAGE>
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Reorganization Agreement. The Reorganization Agreement may
be terminated by mutual agreement of the parties or on certain other grounds.
Please refer to Appendix B to review the terms and conditions of the
Reorganization Agreement.
REASONS FOR THE REORGANIZATION. The Reorganization is one of many
reorganizations that are proposed among various Pilgrim funds. The Pilgrim fund
complex has grown in recent years through the addition of many funds. Management
of the Pilgrim funds has proposed the consolidation of a number of the Pilgrim
funds that it believes have similar or compatible investment policies. The
proposed reorganizations are designed to reduce the overlap in funds in the
complex, thereby eliminating duplication of costs and other inefficiencies
arising from having similar portfolios within the same fund group. ING Pilgrim
Investments also believes that the reorganizations may benefit fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions.
The proposed Reorganization was presented to the Board of Directors of
Pilgrim Silver Fund, Inc., on behalf of Silver Fund, for consideration and
approval at a meeting held on November 2, 2000. For the reasons discussed below,
the Directors, including all of the Directors who are not "interested persons"
(as defined in the Investment Company Act of 1940) of Silver Fund, determined
that the interests of the shareholders of Silver Fund will not be diluted as a
result of the proposed Reorganization, and that the proposed Reorganization is
in the best interests of Silver Fund and its shareholders.
The Reorganization will allow Silver Fund's shareholders to continue to
participate in a professionally managed portfolio which seeks to achieve an
objective of appreciation or growth of capital and that invests primarily in
precious-metals related investments. As shareholders of Gold Fund, these
shareholders will continue to be able to exchange into other mutual funds in the
group of Pilgrim funds and ING funds that offer the same Class of shares in
which such shareholder is currently invested. A list of the Pilgrim funds and
ING funds and Classes available after the Reorganization is contained in
Appendix D.
BOARD CONSIDERATIONS. The Board of Directors of Pilgrim Silver Fund, Inc.,
on behalf of Silver Fund, in recommending the proposed transaction, considered a
number of factors, including the following:
(1) the plans of management to reduce overlapping funds in the Pilgrim
fund complex;
(2) expense ratios and information regarding fees and expenses of Silver
Fund and Gold Fund;
(3) estimates that show that combining the Funds is expected to result in
a lower expense ratio because of economies of scale expected to result
from an increase in the asset size of Gold Fund;
(4) whether the Reorganization would dilute the interests of Silver Fund's
current shareholders;
(5) the relative investment performance and risks of Gold Fund as compared
to Silver Fund;
(6) the ability of Gold Fund to continue the Silver Fund's investment
technique of investing in silver and silver-related companies; and
(7) the tax-free nature of the Reorganization to Silver Fund and its
shareholders.
12
<PAGE>
The Board of Directors also considered the future potential benefits to ING
Pilgrim Investments in that its costs to administer both Funds may be reduced if
the Reorganization is approved.
THE DIRECTORS OF SILVER FUND, INC. RECOMMEND THAT SHAREHOLDERS APPROVE THE
REORGANIZATION WITH GOLD FUND.
TAX CONSIDERATIONS. The Reorganization is intended to qualify for Federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended. Accordingly, pursuant to this
treatment, neither Silver Fund nor its shareholders nor Gold Fund is expected to
recognize any gain or loss for federal income tax purposes from the transactions
contemplated by the Reorganization Agreement. As a condition to the Closing of
the Reorganization, the Funds will receive an opinion from the law firm of
Dechert to the effect that the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes. That opinion will be based in
part upon certain assumptions and upon certain representations made by the
Funds.
Immediately prior to the Reorganization, Silver Fund will pay a dividend or
dividends which, together with all previous dividends, will have the effect of
distributing to its shareholders all of Silver Fund's investment company taxable
income for taxable years ending on or prior to the Reorganization (computed
without regard to any deduction for dividends paid) and all of its net capital
gain, if any, realized in taxable years ending on or prior to the Reorganization
(after reduction for any available capital loss carryforward). Such dividends
will be included in the taxable income of Silver Fund's shareholders.
As of December 31, 1999, Silver Fund had accumulated capital loss
carryforwards in the amount of approximately $9,501,120. As of December 31,
1999, Gold Fund had accumulated capital loss carryforwards of approximately
$54,259,277. After the Reorganization, the losses of Gold Fund will generally be
available to Gold Fund to offset its capital gains, although the amount of these
losses may be limited due to previous reorganizations. Also, after the
Reorganization, the losses of Silver Fund will be available to Gold Fund to
offset its capital gains, although a portion of the amount of these losses which
may offset Gold Fund's capital gains in any given year will be limited. As a
result of this limitation, it is possible that Gold Fund may not be able to use
such losses as rapidly as it might have had the Reorganization not occurred, and
part of these losses may not be useable at all. The ability of Gold Fund to
absorb losses in the future depends upon a variety of factors that cannot be
known in advance, including the existence of capital gains against which these
losses may be offset. In addition, the benefits of any of Gold Fund's capital
loss carryforwards and those of Silver Fund currently are available only to
pre-Reorganization shareholders of those Funds. After the Reorganization,
however, these benefits will inure to the benefit of all post-Reorganization
shareholders of Gold Fund.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, Adviser to the
Funds, will bear half the cost of the Reorganization. The Funds will bear the
other half of the expenses relating to the proposed Reorganization, including,
but not limited to, the costs of solicitation of voting instructions and any
necessary filings with the Securities and Exchange Commission. Of the
Reorganization expenses allocated to the Funds, each Fund will bear a ratable
portion based on its relative net asset value immediately before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORM OF ORGANIZATION. Gold Fund is a series of Pilgrim Gold Fund, Inc.,
which is a corporation organized under the laws of Maryland. Silver Fund is a
series of Pilgrim Silver Fund, Inc., which is a corporation organized under the
laws of Maryland. Pilgrim Gold Fund, Inc. and Pilgrim Silver Fund, Inc. are both
governed by a Board of Directors. Each Board has eleven directors; the members
of both Boards are identical.
13
<PAGE>
DISTRIBUTOR. ING Pilgrim Securities, Inc. (the "Distributor"), whose
address is 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258, is the
principal distributor for both Funds.
DIVIDENDS AND OTHER DISTRIBUTIONS. Gold Fund and Silver Fund pay dividends
from net investment income and net capital gains, if any, on an annual basis.
Dividends and distributions of each of the Funds are automatically reinvested in
additional shares of the respective class of the particular Fund, unless the
shareholder elects to receive distributions in cash.
If the Reorganization Agreement is approved by Silver Fund's shareholders,
then as soon as practicable before the Closing, Silver Fund will pay its
shareholders a cash distribution of substantially all undistributed net
investment income and undistributed realized net capital gains.
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of each of the Funds as of June 30, 2000, and on a PRO FORMA
basis as of June 30, 2000, giving effect to the Reorganization:
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
SILVER FUND
Class A $18,651,289 $2.46 7,567,285
GOLD FUND
Class A $53,152,820 $2.74 19,402,979
GOLD FUND AFTER THE
REORGANIZATION (PRO FORMA)
Class A $71,804,109 $2.74 26,205,879
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about _______, 2001.
Shareholders of Silver Fund whose shares are held by nominees, such as brokers,
can vote their proxies by contacting their respective nominee. In addition to
the solicitation of proxies by mail, employees of ING Pilgrim Investments and
its affiliates, without additional compensation, may solicit proxies in person
or by telephone, telegraph, facsimile, or oral communication. Pilgrim Silver
Fund, Inc., on behalf of Silver Fund, has retained Shareholder Communications
Corporation, a professional proxy solicitation firm, to assist with any
necessary solicitation of proxies. Shareholders of Silver Fund may receive a
telephone call from the professional proxy solicitation firm asking the
shareholder to vote.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with Silver Fund, a written revocation or duly executed proxy
bearing a later date. In addition, any shareholder who attends the meeting in
person may vote by ballot at the meeting, thereby canceling any proxy previously
given. The persons named in the accompanying proxy will vote as directed by the
proxy, but in the absence of voting directions in any proxy that is signed and
returned, they intend to vote "FOR" the Reorganization proposal and may vote in
their discretion with respect to other matters not now known to the Board of
Directors of Pilgrim Silver Fund, Inc. that may be presented at the meeting.
14
<PAGE>
VOTING RIGHTS
Shareholders of Silver Fund are entitled to one vote for each share held as
to any matter on which they are entitled to vote and each fractional share shall
be entitled to a proportionate fractional vote. Shares have no preemptive or
subscription rights.
Shareholders of Silver Fund at the close of business on _________, 2000
(the "Record Date"), will be entitled to be present and give voting instructions
for Silver Fund at the meeting with respect to their shares owned as of that
Record Date. As of the Record Date, ______ shares of Silver Fund were
outstanding and entitled to vote.
Approval of the Reorganization requires the affirmative vote of a majority
of the aggregate number of votes entitled to be cast thereon by shareholders of
Silver Fund.
The holders of one-third of the outstanding shares present in person or
represented by proxy shall constitute a quorum. In the absence of a quorum, a
majority of outstanding shares entitled to vote present in person or by proxy
may adjourn the meeting from time to time until a quorum is present.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the meeting for purposes of determining a quorum. However, abstentions and
broker non-votes will not be deemed represented at the meeting for purposes of
calculating the vote on any matter. As a result, an abstention or broker
non-vote will have the same effect as a vote against the Reorganization. Silver
Fund expects that, before the meeting, broker-dealer firms holding shares of the
Fund in "street name" for their customers will request voting instructions from
their customers and beneficial owners. If these instructions are not received by
the date specified in the broker-dealer firms' proxy solicitation materials,
Silver Fund understands that the broker-dealers that are members of the New York
Stock Exchange may vote on the items to be considered at the meeting on behalf
of their customers and beneficial owners under the rules of the New York Stock
Exchange.
To the knowledge of Pilgrim Silver Fund, Inc., as of November 1, 2000, no
current Director owns 1% or more of the outstanding shares of Silver Fund, and
the officers and Directors own, as a group, less than 1% of the shares of Silver
Fund.
As of November 1, 2000, no person owned beneficially or of record 5% or
more of the outstanding shares of Class A of Silver Fund or Gold Fund.
OTHER MATTERS TO COME BEFORE THE MEETING
Silver Fund does not know of any matters to be presented at the meeting
other than those described in this Proxy Statement/Prospectus. If other business
should properly come before the meeting, the proxyholders will vote thereon in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
Silver Fund is not required to hold regular annual meetings and, in order
to minimize its costs, does not intend to hold meetings of shareholders unless
so required by applicable law, regulation, regulatory policy or if otherwise
deemed advisable by Silver Fund's management. Therefore it is not practicable to
specify a date by which shareholder proposals must be received in order to be
incorporated in an upcoming proxy statement for an annual meeting.
15
<PAGE>
REPORTS TO SHAREHOLDERS
ING Pilgrim Investments will furnish, without charge, a copy of the most
recent Annual Report regarding Silver Fund and the most recent Semi-Annual
Report succeeding the Annual Report, if any, on request. Requests for such
reports should be directed to Pilgrim at 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258, Suite 1200, Phoenix, Arizona 85004, or at (800) 992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
James M. Hennessy,
Secretary
________, 2000
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
16
<PAGE>
APPENDIX A
Set forth is an excerpt from the Annual Report, dated December 31, 1999, of
Pilgrim Gold Fund, then called Lexington Goldfund (the "Fund" or "Goldfund"),
regarding performance of Goldfund.
LEXINGTON GOLDFUND
PORTFOLIO MANAGER'S REPORT
The Lexington Goldfund decreased by 8.61% during the fourth quarter and
increased by 8.58%* for the full year of 1999. According to Lipper, Inc. the
average gold fund decreased by 10.35% for the fourth quarter and increased by
3.63% for the full year of 1999.
1999 was a tumultuous year for the gold industry. Prices swung violently as
the IMF and Bank of England announced plans to sell gold to help developing
countries, and trim excess holdings, respectively. Gold began the year at $295
per ounce, fell to $252.50 before rising to $325 per ounce in October, and
finally ending the year at $280 per ounce.
The price rise to $325 was the result of the European Central Banks
declaring they would limit gold sales and leasing in the future. The price move
was short-lived as hedging policies at several gold producers threatened
corporate solvency, and liquidity had to be produced to shore up corporate
balance sheets. The gold price slumped to $290 and ended the year in a narrow
range. Within this environment, the Fund maintained its strategy of
concentrating its exposure on the highest quality, most liquid gold producers.
For the intermediate period ahead, the past will probably be prologue.
Liquidity is quite available providing producers and speculators the ability to
short gold with no catalysts for higher gold prices appearing in the near term.
We expect gold will trade in a narrow range for the early part of 2000.
Fundamentally, an expanding global economy is expected to continue to produce a
growing physical demand for gold and over the course this year we expect prices
to of trend modestly higher.
We appreciate the support of our shareholders and would be happy to respond
to any questions or comments you may have. Please feel free to call us at
1-800-526-0056 or visit our website at www.lexingtonfunds.com.
Sincerely,
/s/ James A. Vail /s/ Robert M. DeMichele
James A. Vail Robert M. DeMichele
Portfolio Manager President
February, 2000 February, 2000
Comparison of change in value of a $10,000 Investment in GoldFund, the
unmanaged Standard & Poor's 500 Stock Price Index and Gold Bullion (London P.M.
Fix, (U.S. Dollars))
A-1
<PAGE>
S&P 500
DATE GOLDFUND STOCK PRICE INDEX GOLD BULLION
---- -------- ----------------- ------------
12/31/89 $10,000 $10,000 $10,000
12/31/90 $ 7,935 $ 9,690 $ 9,853
12/31/91 $ 7,448 $12,636 $ 8,861
12/31/92 $ 5,920 $13,597 $ 8,351
12/31/93 $11,069 $14,965 $ 9,828
12/31/94 $10,263 $15,161 $ 9,596
12/31/95 $10,069 $20,851 $ 9,690
12/31/96 $10,858 $25,641 $ 9,246
12/31/97 $ 6,191 $34,197 $ 7,266
12/31/98 $ 5,796 $44,019 $ 7,206
12/31/99 $ 6,293 $53,280 $ 7,267
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDING 12/31/99
S&P 500
DATE GOLDFUND STOCK PRICE INDEX GOLD BULLION
---- -------- ----------------- ------------
1 yr 8.58% 21.04% 0.85%
5 yr -9.32% 28.56% -5.41%
10 yr -4.53% 18.21% -3.14%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund with a similar investment in the unmanaged Standard &
Poor's 500 Stock Index (S&P 500) and a direct investment in gold bullion.
Results for the Fund and the S&P 500 include the reinvestment of all dividend
and capital gain distributions. The price of gold is subject to substantial
price fluctuations over short periods of time and may be affected by
unpredictable international monetary and political policies. Investment return
and principal value of an investment will fluctuate so that an investor's shares
when redeemed may be worth more or less than at their original cost. Total
return represents past performance and it is not predictive of future results.
*8.58%, (9.32)% and (4.53)% are the one, five and ten year average annual
standard total returns, respectively, for the period ended December 31, 1999.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The price of gold is subject to substantial price fluctuations over short
periods of time and may be affected by unpredictable international monetary and
political policies. Total return represents past performance and is not
predictive of future results. There is no guarantee that the Fund can achieve
its objective.
LEXINGTON GOLDFUND, INC.
PORTFOLIO SUMMARY AS OF DECEMBER 31, 1999
ASSET ALLOCATION
Common Stocks 91.5%
Cash & Cash Equivalents 4.7%
Gold Bullion 3.8%
TOP COUNTRY HOLDINGS
South Africa 32.3%
Canada 27.9%
United States 19.8%
Australia 11.5%
A-2
<PAGE>
APPENDIX B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2001, by and between Pilgrim Gold Fund, Inc., a
Maryland corporation (the "Gold Company") with its principal place of business
at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf of its
sole series (the "Acquiring Fund"), and Pilgrim Silver Fund, Inc., a Maryland
corporation (the "Silver Company") with its principal place of business at 7337
E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf of its sole
series, the Pilgrim Silver Fund (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A shares of
common stock ($0.001 par value per share) of the Acquiring Fund (the "Acquiring
Fund Shares"), the assumption by the Acquiring Fund of all liabilities of the
Acquired Fund, and the distribution of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in complete liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type or a series thereof and the Acquired
Fund owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Directors of Gold Company have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Directors of Silver Company, have determined that the exchange
of all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the requisite approval of the Acquired Fund shareholders
and the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A Acquiring
Fund Shares determined by dividing the value of the Acquired Fund's net assets
with respect to each class, computed in the manner and as of the time and date
set forth in paragraph 2.1, by the net asset value of one Acquiring Fund Share
of the same class, computed in the manner and as of the time and date set forth
in paragraph 2.2; and (ii) to assume all liabilities of the Acquired Fund as set
B-1
<PAGE>
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests and dividends or interests
receivable, that are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing date
provided for in paragraph 3.1 (the "Closing Date") (collectively, "Assets").
1.3. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
also assume all of the liabilities of the Acquired Fund, whether accrued or
contingent, known or unknown, existing at the Valuation Date (collectively,
"Liabilities"). On or as soon as practicable prior to the Closing Date, the
Acquired Fund will declare and pay to its shareholders of record one or more
dividends and/or other distributions so that it will have distributed
substantially all (and in no event less than 98%) of its investment company
taxable income (computed without regard to any deduction for dividends paid) and
realized net capital gain, if any, for the current taxable year through the
Closing Date.
1.4. Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Fund will distribute to the Acquired Fund's shareholders of
record with respect to Class A shares, determined as of immediately after the
close of business on the Closing Date (the "Acquired Fund Shareholders"), on a
pro rata basis within that class, the Acquiring Fund Shares of the same class
received by the Acquired Fund pursuant to paragraph 1.1, and will completely
liquidate. Such distribution and liquidation will be accomplished, with respect
to each class of the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A Acquiring Fund Shares to be so credited to Class A Acquired Fund
Shareholders shall be equal to the aggregate net asset value of the Class A
Acquired Fund shares owned by such shareholders on the Closing Date. All issued
and outstanding shares of the Acquired Fund will simultaneously be canceled on
the books of the Acquired Fund, although share certificates representing
interests in Class A shares of the Acquired Fund will represent a number of the
same class of Acquiring Fund Shares after the Closing Date, as determined in
accordance with Section 2.3. The Acquiring Fund shall not issue certificates
representing the Class A Acquiring Fund Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6. Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1. The value of the Assets shall be the value computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures in the
then-current prospectus and statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Directors.
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2.2. The net asset value of a Class A Acquiring Fund Share shall be the net
asset value per share computed with respect to that class as of the Valuation
Date, using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus and statement and additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Directors.
2.3. The number of the Class A Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's assets
shall be determined with respect to each such class by dividing the value of the
net assets with respect to the Class A shares of the Acquired Fund, as the case
may be, determined using the same valuation procedures referred to in paragraph
2.1, by the net asset value of an Acquiring Fund Share, determined in accordance
with paragraph 2.2.
2.4. All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by the
Acquiring Fund's record keeping agent and by each Fund's respective independent
auditors.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time.
The Closing shall be held at the offices of the Acquiring Fund or at such other
time and/or place as the parties may agree.
3.2. The Acquired Fund shall direct Brown Brothers, Harriman & Co. as
custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets shall have been
delivered in proper form to the Acquiring Fund within two business days prior to
or on the Closing Date, and (ii) all necessary taxes in connection with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented by the Custodian to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date, and shall be transferred and delivered by the Acquired Fund as of
the Closing Date for the account of the Acquiring Fund duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof. The
Custodian shall deliver as of the Closing Date by book entry, in accordance with
the customary practices of such depository, as defined in Rule 17f-4 under the
Investment Company Act of 1940, as amended (the "1940 Act"), in which the
Acquired Fund's Assets are deposited and the Custodian, the Acquired Fund's
Assets deposited with such depositories. The cash to be transferred by the
Acquired Fund shall be delivered by wire transfer of federal funds on the
Closing Date.
3.3. The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the Acquiring Fund, or provide evidence satisfactory to
the Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the Closing each
party shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
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3.4. In the event that on the Valuation Date (a) the New York Stock
Exchange or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund, respectively, shall be closed to trading or
trading thereupon shall be restricted, or (b) trading or the reporting of
trading on such Exchange or elsewhere shall be disrupted so that, in the
judgment of the Board of Directors of the Acquired Fund or the Board of
Directors of the Acquiring Fund, accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund, respectively, is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. Except has been disclosed to the Acquiring Fund in a written
instrument executed by an officer of Silver Company, Silver Company, on behalf
of the Acquired Fund, represents and warrants to the Gold Company as follows:
(a) The Acquired Fund is a series of Silver Company, which is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland with power under Silver Company's Articles of Incorporation to
own all of its properties and assets and to carry on its business as it is now
being conducted;
(b) The Acquired Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and the registration of
shares of the Acquired Fund under the Securities Act of 1933, as amended ("1933
Act"), is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title to the Assets and full right, power, and authority to sell, assign,
transfer and deliver such Assets hereunder free of any liens or other
encumbrances, and upon delivery and payment for such Assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material violation
of Silver Company's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Silver
Company, on behalf of the Acquired Fund, is a party or by which it is bound, or
(ii) the acceleration of any obligation, or the imposition of any penalty, under
any agreement, indenture, instrument, contract, lease, judgment or decree to
which Silver Company, on behalf of the Acquired Fund, is a party or by which it
is bound;
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(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts including options, futures,
and forward contracts) will terminate without liability to the Acquired Fund on
or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by Gold
Company, on behalf of the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquired Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its business.
Silver Company, on behalf of the Acquired Fund, knows of no facts which might
form the basis for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Portfolio of Investments of the Acquired Fund at
December 31, 1999, have been audited by KPMG LLP, independent auditors, and are
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) present fairly, in all material respects, the financial
condition of the Acquired Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquired Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(j) Since December 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
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<PAGE>
requirements of the 1933 Act and state securities laws. All of the issued and
outstanding shares of the Acquired Fund will, at the time of Closing, be held by
the persons and in the amounts set forth in the records of the Transfer Agent,
on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund
does not have outstanding any options, warrants or other rights to subscribe for
or purchase any of the shares of the Acquired Fund, nor is there outstanding any
security convertible into any of the Acquired Fund shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Directors of Silver Company, on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.6, insofar as
it relates to the Acquired Fund, will, on the effective date of the Registration
Statement and on the Closing Date (i) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading provided, however,
that the representations and warranties in this subparagraph (p) shall not apply
to statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished by the Acquiring Fund for use therein, and (ii) comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder.
4.2. Except as has been disclosed to the Acquired Fund in a written
instrument executed by an officer of Gold Company, Gold Company, on behalf of
the Acquiring Fund, represents and warrants to Silver Company as follows:
(a) The Acquiring Fund is duly organized as a series of Gold Company, which
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland, with power under the Gold Company's Articles of
Incorporation to own all of its properties and assets and to carry on its
business as it is now being conducted;
(b) Gold Company is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act and the registration of
shares of the Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
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<PAGE>
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result in (i) a material
violation of Gold Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
Gold Company, on behalf of the Acquiring Fund, is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment
or decree to which Gold Company, on behalf of the Acquiring Fund, is a party or
by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by Silver
Company, on behalf of the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquiring Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its business.
Gold Company, on behalf of the Acquiring Fund, knows of no facts which might
form the basis for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Portfolio of Investments of the Acquiring Fund at
December 31, 1999, have been audited by KPMG LLP, independent auditors, and are
in accordance with GAAP consistently applied, and such statements (copies of
which have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since December 31, 1999, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund. For purposes of this subparagraph (i), a
decline in net asset value per share of the Acquiring Fund due to declines in
market values of securities in the Acquiring Fund's portfolio, the discharge of
Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a material adverse
change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
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<PAGE>
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. The Acquiring Fund does
not have outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Directors of Gold Company, on behalf of the Acquiring Fund,
and this Agreement will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(n) The Class A Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will on the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable;
(o) The information to be furnished by Gold Company for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include the
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declaration and payment of customary dividends and distributions, and any other
distribution that may be advisable.
5.2. The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3. The Acquired Fund covenants that the Class A Acquiring Fund Shares to
be issued hereunder are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms of this Agreement.
5.4. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
5.5. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(p), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
5.7. As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A Acquiring Fund Shares received at the Closing.
5.8. The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9. Silver Company, on behalf of the Acquired Fund, covenants that Silver
Company will, from time to time, as and when reasonably requested by the
Acquiring Fund, execute and deliver or cause to be executed and delivered all
such assignments and other instruments, and will take or cause to be taken such
further action as Gold Company, on behalf of the Acquiring Fund, may reasonably
deem necessary or desirable in order to vest in and confirm (a) Silver
Company's, on behalf of the Acquired Fund's, title to and possession of the
Acquiring Fund Shares to be delivered hereunder, and (b) Gold Company's, on
behalf of the Acquiring Fund's, title to and possession of all the assets and
otherwise to carry out the intent and purpose of this Agreement.
5.10. The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of Silver Company, on behalf of the Acquired Fund, to
consummate the transactions provided for herein shall be subject, at Silver
Company's election, to the performance by Gold Company, on behalf of the
Acquiring Fund, of all the obligations to be performed by it hereunder on or
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<PAGE>
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of Gold Company, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
6.2. Gold Company shall have delivered to the Silver Fund a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to Silver Company and
dated as of the Closing Date, to the effect that the representations and
warranties of Gold Company, on behalf of the Acquiring Fund, made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement and as to such
other matters as Silver Company shall reasonably request;
6.3. Gold Company, on behalf of the Acquiring Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by Gold Company, on behalf of the
Acquiring Fund, on or before the Closing Date; and
6.4. The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of Gold Company, on behalf of the Acquiring Fund, to
complete the transactions provided for herein shall be subject, at Gold
Company's election to the performance by Silver Company, on behalf of the
Acquired Fund, of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of Silver Company, on behalf of the
Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
7.2. Silver Company shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's assets and liabilities, as of the Closing Date, certified
by the Treasurer of Silver Company;
7.3. Silver Company shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to Gold Company and dated as of the Closing Date, to the effect
that the representations and warranties of Silver Company, on behalf of the
Acquired Fund, made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as Gold Company shall reasonably
request;
7.4. Silver Company, on behalf of the Acquired Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by Silver Company, on behalf of the
Acquired Fund, on or before the Closing Date;
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7.5. The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1; and
7.6. The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net realized capital
gains, if any, for the period from the close of its last fiscal year to 4:00
p.m. Eastern time on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to the extent not
otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been satisfied on or
before the Closing Date with respect to Silver Company, on behalf of the
Acquired Fund, or Gold Company, on behalf of the Acquiring Fund, the other party
to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of Silver Company's Articles of
Incorporation, By-Laws, applicable Maryland law and the 1940 Act, and certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither
Gold Company nor Silver Company may waive the conditions set forth in this
paragraph 8.1;
8.2. On the Closing Date no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
Gold Company or Silver Company to permit consummation, in all material respects,
of the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund, provided that either party hereto may for itself waive any of
such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5. The parties shall have received the opinion of Dechert addressed to
Silver Company and Gold Company substantially to the effect that, based upon
certain facts, assumptions, and representations, the transaction contemplated by
this Agreement shall constitute a tax-free reorganization for Federal income tax
purposes. The delivery of such opinion is conditioned upon receipt by Dechert of
representations it shall request of Gold Company and Silver Company.
Notwithstanding anything herein to the contrary, neither Gold Company nor Silver
Company may waive the condition set forth in this paragraph 8.5.
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9. BROKERAGE FEES AND EXPENSES
9.1. Gold Company, on behalf of the Acquiring Fund, and Silver Company, on
behalf of the Acquired Fund, represent and warrant to each other that there are
no brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2. The expenses relating to the proposed Reorganization will be shared
are (1) half of such costs are borne by the investment adviser to the Acquiring
Funds, and (2) half are borne by the Acquired Fund and Acquiring Fund and will
be paid by the Acquired Fund and Acquiring Fund pro rata based upon the relative
net assets of the Acquiring Fund and Acquiring Fund as of the close of business
on the record date for determining the shareholders of the Acquired Fund
entitled to vote on the Reorganization. The costs of the Reorganization shall
include, but not be limited to, costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Registration Statement,
printing and distributing the Acquiring Fund's prospectus and the Acquired
Fund's proxy materials, legal fees, accounting fees, securities registration
fees, and expenses of holding shareholders' meetings. Notwithstanding any of the
foregoing, expenses will in any event be paid by the party directly incurring
such expenses if and to the extent that the payment by another person of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. Gold Company and Silver Company agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by resolution of the Board of Directors of the Acquired Fund or
the Board of Directors of the Acquiring Fund at any time prior to the Closing
Date, if circumstances should develop that, in the opinion of the Board, make
proceeding with the Agreement inadvisable.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of Gold Company
and Silver Company; provided, however, that following the meeting of the
shareholders of the Acquired Fund called by the Acquired Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Class A Acquiring Fund
Shares to be issued to the Acquired Fund Shareholders under this Agreement to
the detriment of such shareholders without their further approval.
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13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to Gold
Company or to Silver Company, 7337 E. Doubletree Ranch Road, Scottsdale, Arizona
85258, attn: James M. Hennessy, in each case with a copy to Dechert, 1775 Eye
Street, N.W., Washington, D.C. 20006, attn: Jeffrey S. Puretz.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland without regard to its principles of conflicts
of laws.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: PILGRIM GOLD FUND, INC., on behalf of
its sole series
---------------------------------- By:
SECRETARY -------------------------------------
Its:
------------------------------------
Attest: PILGRIM SILVER FUND, INC., on behalf of
its sole series, PILGRIM SILVER FUND
---------------------------------- By:
SECRETARY -------------------------------------
Its:
------------------------------------
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APPENDIX C
ADDITIONAL INFORMATION REGARDING PILGRIM GOLD FUND
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to Class A shares of the Pilgrim
Gold Fund (the "Fund"). As described below and elsewhere in this Proxy
Statement/Prospectus, the contingent deferred sales load structure and
conversion characteristics of the Fund shares that will be issued to you in the
reorganization of Pilgrim Silver Fund ("Silver Fund") into the Fund (the
"Reorganization") will be the same as those that apply to Silver Fund shares
held by you immediately prior to the Reorganization, and the period that you
held shares of Silver Fund will be included in the holding period of the Fund
for purposes of calculating contingent deferred sales charges and determining
conversion rights. Purchases of the shares of the Fund after the Reorganization
will be subject to the sales load structure and conversion rights discussed
below.
The sales charges and fees for each Class of shares of the Fund involved in
the Reorganization are shown in the chart below.
CLASS A
-------
Maximum Initial Sales Charge on Purchases 5.75%(1)
Contingent Deferred Sales Charge ("CDSC") None(2)
Annual Distribution (12b-1) and Service Fees (3) 0.25%
Maximum Purchase Unlimited
----------
(1) Reduced for purchases of $50,000 and over.
(2) For investments of $1 million or more, a CDSC of no more than 1% may be
assessed on redemptions of shares. See "Class A Shares: Initial Sales
Charge Alternative" in this Appendix C.
(3) Annual asset-based distribution charge.
CLASS A SHARES: INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the
Fund are sold at the net asset value ("NAV") per share in effect plus a sales
charge as described in the following table. For waivers or reductions of the
Class A shares sales charges, see "Special Purchases without a Sales Charge" and
"Reduced Sales Charges" below.
AS A % OF THE AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV
--------------- -------------- ------
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%
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There is no initial sales charge on purchases of $1,000,000 or more.
However, the shares will be subject to a CDSC if they are redeemed within one or
two years of purchase, depending on the amount of the purchase, as follows:
PERIOD DURING
YOUR INVESTMENT CDSC WHICH CDSC APPLIES
--------------- ---- ------------------
$1,000,000 - $2,499,999 1.00% 2 years
$2,500,000 - $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
Class A shares of the Fund issued in connection with the Reorganization
with respect to Class A shares of Silver Fund that were subject to a CDSC at the
time of the Reorganization, will be subject to a CDSC of up to 1% for a period
of 12 months from the date of purchase of the original shares of Silver Fund.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced
sales charge on a purchase of Class A shares of the Fund or other open-end funds
in the Pilgrim funds or ING funds which offer Class A shares, or shares with
front-end sales charges ("Participating Funds") by completing the Letter of
Intent section of an Application to purchase Fund shares. Executing the Letter
of Intent expresses an intention to invest during the next 13 months a specified
amount, which, if made at one time, would qualify for a reduced sales charge. An
amount equal to the Letter of Intent amount multiplied by the maximum sales
charge imposed on purchases of the Fund and Class will be restricted within your
account to cover additional sales charges that may be due if your actual total
investment fails to qualify for the reduced sales charges. See the Statement of
Additional Information for the Fund for details on the Letter of Intent option
or contact the Shareholder Servicing Agent at (800) 992-0180 for more
information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
funds or ING funds (excluding Pilgrim Money Market Fund) ("Rights of
Accumulation"). The reduced sales charges apply to quantity purchases made at
one time or on a cumulative basis over any period of time. See the Statement of
Additional Information for the Fund for details or contact the Shareholder
Servicing Agent at (800) 992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim funds and ING 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
the Fund which imposes a CDSC.
SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at (800) 992-0180, or see
the Statement of Additional Information for the Fund.
WAIVERS OF CDSC. The CDSC will be waived in the following cases. In
determining whether a CDSC is applicable, it will be assumed that shares held in
the shareholder's account that are not subject to such charge are redeemed
first.
1) The CDSC will be waived in the case of redemption following the death
or permanent disability of a shareholder if made within one year of
death or initial determination of permanent disability. The waiver is
available only for those shares held at the time of death or initial
determination of permanent disability.
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2) The CDSC also will be waived in the case of mandatory distributions
from a tax-deferred retirement plan or an IRA.
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at (800) 992-0180.
RULE 12b-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 applicable to each Class of shares of
the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the ING Pilgrim
Securities, Inc. ("Distributor") may receive from the Fund an annual fee in
connection with the offering, sale and shareholder servicing of the Fund's Class
A shares.
DISTRIBUTION AND SERVICING FEES. As compensation for services rendered and
expenses borne by the Distributor in connection with the distribution of shares
of the Fund and in connection with services rendered to shareholders of the
Fund, the Fund pays the Distributor servicing fees of 0.25% (calculated as a
percentage of the Fund's average daily net assets attributable to Class A).
Fees paid under the Rule 12b-1 Plan may be used to cover the expenses of
the Distributor from the sale of Class A shares of the Fund, including payments
to Authorized Dealers, and for shareholder servicing. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
OTHER EXPENSES. In addition to the management fee and other fees described
previously, the Fund pays other expenses, such as legal, audit, transfer agency
and custodian fees, proxy solicitation costs, and the compensation of Directors
who are not affiliated with ING Pilgrim Investments, Inc. ("ING Pilgrim
Investments"). Most Fund expenses are allocated proportionately among all of the
outstanding shares of that Fund. However, the Rule 12b-1 Plan fees for each
Class of shares are charged proportionately only to the outstanding shares of
that Class.
PURCHASING SHARES. The Fund reserves the right to liquidate sufficient
shares to recover annual Transfer Agent fees should the investor fail to
maintain his/her account value at a minimum of $1,000.00 ($250.00 for IRAs). The
minimum initial investment in the Fund is $1,000 ($250 for IRAs), and the
minimum for additional investment in the Fund is $100. The minimum initial
investment for a pre-authorized retirement plan is $100, plus monthly
investments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
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.
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. New York City time) on each day that it is
open for business. The NAV of each Class represents that Class' pro rata share
of that Fund's net assets as adjusted for any class specific expenses (such as
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fees under a Rule 12b-1 plan), and divided by that Class' outstanding shares. In
general, the value of the Fund's assets is based on actual or estimated market
value, with special provisions for assets not having readily available market
quotations, for short-term debt securities, and for situations where market
quotations are deemed unreliable. The NAV per share of each Class of the Fund
will fluctuate in response to changes in market conditions and other factors.
Portfolio securities for which market quotations are readily available are
stated at market value. 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. Valuing securities at
fair value involves greater reliance on judgment than valuing securities that
have readily available market quotations.
PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized
investment plan to purchase shares with automatic bank account debiting. For
further information on pre-authorized investment plans, contact the Shareholder
Servicing Agent at (800) 992-0180.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are 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 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the NAV
next 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 "Purchase of 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 shares of the Fund 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 Fund will not be
issued unless you request them in writing.
TELEPHONE ORDERS. The Fund and its 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 Fund and its 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 Fund and its Transfer Agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Telephone redemptions may be executed on all accounts other than retirement
accounts.
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EXCHANGE PRIVILEGES AND RESTRICTIONS
An exchange privilege is available. Exchange requests may be made in
writing to the Transfer Agent or by calling the Shareholder Servicing Agent at
(800) 992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
than four per year). ING Pilgrim Investments reserves the right, upon 60 days'
prior notice, to restrict the frequency of, otherwise modify, or impose charges
of up to $5.00 upon exchanges. The total value of shares being exchanged must at
least equal the minimum investment requirement of the Fund into which they are
being exchanged.
The Fund may change or cancel its exchange policies at any time upon 60
days' written notice to shareholders.
Class A shares of the Fund generally may be exchanged for shares of Class A
of any other open-end Pilgrim fund or ING fund without payment of any additional
sales charge. In most instances, if you exchange and subsequently redeem your
shares, any applicable CDSC will be based on the full period of the share
ownership. Shareholders exercising the exchange privilege with any other
open-end Pilgrim fund or ING fund should carefully review the Prospectus of that
Fund. Exchanges of shares are sales and may result in a gain or loss for federal
and state income tax purposes. You will automatically be assigned the telephone
exchange privilege unless you mark the box on the Account Application that
signifies you do not wish to have this privilege. The exchange privilege is only
available in states where shares of the Fund being acquired may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent at (800) 992-0180 unless you mark the box on the
Account Application that indicates that you do not wish to have the telephone
exchange privilege.
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 or ING 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 Fund reserves 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.
HOW TO REDEEM SHARES
Shares of the Fund will be redeemed at the NAV (less any applicable CDSC
and/or federal income tax withholding) next determined after receipt of a
redemption request in good form on any day the New York Stock Exchange is open
for business.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to have monthly, quarterly,
semi-annual or annual payments in any fixed amount of $100 or more made to
yourself, or to anyone else you properly designate, as long as the account has a
current value of at least $10,000. For additional information, contact the
Shareholder Servicing Agent at (800) 992-0180, or see the Fund's Statement of
Additional Information.
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PAYMENTS. Payment to shareholders for shares redeemed or repurchased
ordinarily will be made within three days after receipt by the Transfer Agent of
a written request in good order. The Fund may delay the mailing of a redemption
check until the check used to purchase the shares being redeemed has cleared,
which may take up to 15 days or more. To reduce such delay, all purchases should
be made by bank wire or federal funds. The Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
Rules of the Securities and Exchange Commission.. The Fund intends to pay in
cash for all shares redeemed, but under abnormal conditions that make payment in
cash harmful to the Fund, the Fund may make payment wholly or partly in
securities at their then current market value equal to the redemption price. In
such case, the 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.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund. ING
Pilgrim Investments provides the Fund with office space, equipment and personnel
necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of Directors of the Fund upon 60 days' written notice.
Organized in December 1994, ING Pilgrim Investments is registered as an
investment adviser with the Securities and Exchange Commission. As of September
30, 2000, ING Pilgrim Investments managed over $20.7 billion in assets. ING
Pilgrim Investments bears its expenses of providing the services described
above. Investment management fees are computed and accrued daily and paid
monthly.
PARENT COMPANY AND DISTRIBUTOR. ING Pilgrim Investments and the Distributor
are indirect wholly owned subsidiaries of ING Groep N.V. (NYSE: ING) ("ING
Group"). 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.
SHAREHOLDER SERVICING AGENT. ING Pilgrim Group, Inc. serves as Shareholder
Servicing Agent for the Fund. The Shareholder Servicing Agent is responsible for
responding to written and telephonic inquiries from shareholders. The Fund pays
the Shareholder Servicing Agent a monthly fee on a per-contact basis, based upon
incoming and outgoing telephonic and written correspondence.
PORTFOLIO TRANSACTIONS. ING Pilgrim Investments will place orders to
execute securities transactions that are designed to implement the Fund's
investment objectives and policies. ING Pilgrim Investments will use its
reasonable efforts to place all purchase and sale transactions with brokers,
dealers and banks ("brokers") that provide "best execution" of these orders. In
placing purchase and sale transactions, ING Pilgrim Investments may consider
brokerage and research services provided by a broker to ING Pilgrim Investments
or its affiliates, and the Fund may pay a commission for effecting a securities
transaction that is in excess of the amount another broker would have charged if
ING Pilgrim Investments determines in good faith that the amount of commission
is reasonable in relation to the value of the brokerage and research services
provided by the broker. In addition, ING Pilgrim Investments may place
securities transactions with brokers that provide certain services to the Fund.
ING Pilgrim Investments also may consider a broker's sale of Fund shares if ING
Pilgrim Investments is satisfied that the Fund would receive best execution of
the transaction from that broker.
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DIVIDENDS, DISTRIBUTIONS & TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund generally distributes most or all of
its net earnings in the form of dividends. The Fund pays dividends and capital
gains, if any, annually. Dividends and distributions will be determined on a
Class basis.
Any dividends and distributions paid by the Fund will be automatically
reinvested in additional shares of the respective Class of that fund, unless you
elect to receive distributions in cash. When a dividend or distribution is paid,
the NAV per share is reduced by the amount of the payment. You may, upon written
request or by completing the appropriate section of the Account Application in
the Pilgrim Prospectus, elect to have all dividends and other distributions paid
on a Class A account in the Fund invested into a Pilgrim fund or ING fund which
offers Class A shares.
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's 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
the Fund.
The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, 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 the 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 the 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, the 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.
This is a brief summary of some of the tax laws that affect your investment
in the Fund. Please see the Fund's Statement of Additional Information and your
tax adviser for further information.
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<PAGE>
FINANCIAL
PILGRIM GOLD FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except for the six months ended June 30,
2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Six
months
ended
June 30,
2000 Year ended December 31,
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 3.29 3.03 3.24 5.97 6.24 6.37
Net investment income (loss) $ (0.01) (0.01) -- -- 0.02 --
Net realized and unrealized gain (loss) from
investment operations $ (0.54) 0.27 (0.21) (2.52) 0.50 (0.12)
Total income (loss) from investment operations $ (0.55) 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 $ 2.74 3.29 3.03 3.24 5.97 6.24
Total Return(1) % (16.72) 8.58 (6.39) (42.98) 7.84 (1.89)
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 53,153 72,516 50,841 53,707 109,287 135,779
Ratio of expenses to average net assets(2) % 2.26 1.94 1.74 1.65 1.60 1.70
Ratio of net investment income (loss) to
average net assets(2) % (0.41) (0.02) 0.08 0.17 (0.32) 0.07
Portfolio Turnover Rate % 16.86 78.55 28.93 38.32 31.04 40.41
</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.
C-8
<PAGE>
APPENDIX D
The following is a list of the ING Funds, which are managed by an affiliate of
ING Pilgrim Investments, and the Pilgrim Funds, and the classes of shares of
each Fund that are expected to be offered at or shortly after the
Reorganization:
FUND CLASSES OFFERED
---- ---------------
ING FUNDS
U.S. EQUITY
Internet Fund A, B and C
Tax Efficient Equity Fund A, B and C
GLOBAL/INTERNATIONAL EQUITY
European Equity Fund A, B and C
Global Communications Fund A, B and C
Global Information Technology Fund A, B and C
FIXED INCOME
High Yield Bond Fund A, B and C
Intermediate Bond Fund A, B and C
Money Market Fund A, B, C and I
National Tax-Exempt Bond Fund A, B and C
PILGRIM FUNDS
U.S. EQUITY
Balanced Fund A, B, C, Q and T
Bank and Thrift Fund A and B
Convertible Fund A, B, C and Q
Corporate Leaders Trust Fund A
Growth and Income Fund A, B, C and Q
Growth + Value Fund A, B, C and Q
Growth Opportunities Fund A, B, C, Q, I and T
LargeCap Growth Fund A, B, C and Q
MagnaCap Fund A, B, C, Q and M
MidCap Growth Fund A, B, C and Q
MidCap Opportunities Fund A, B, C, Q and I
Research Enhanced Index Fund A, B, C, Q and I
SmallCap Growth Fund A, B, C and Q
SmallCap Opportunities Fund A, B, C, Q, I and T
GLOBAL/INTERNATIONAL EQUITY
Asia-Pacific Equity Fund A, B and M
Emerging Countries Fund A, B, C and Q
Gold Fund (to be renamed Precious Metals Fund) A
International Fund A, B, C and Q
International Core Growth Fund A, B, C and Q
International SmallCap Growth Fund A, B, C and Q
International Value Fund A, B, C and Q
Troika Dialog Russia Fund A
Worldwide Growth Fund A, B, C and Q
FIXED INCOME
GNMA Income Fund A, B, C, Q, M and T
High Yield Fund A, B, C, Q and M
High Yield Fund II A, B, C, Q and T
Lexington Money Market Trust A
Pilgrim Money Market Fund A, B and C
Strategic Income Fund A, B, C and Q
D-1
<PAGE>
PART B
PILGRIM GOLD FUND, INC.
--------------------------------------------------------------------------------
Statement of Additional Information
________, 2000
--------------------------------------------------------------------------------
Acquisition of the Assets and By and in Exchange for Shares
Liabilities of Silver Fund of Gold Fund
(a series of Pilgrim Silver Fund, Inc.) (a series of Pilgrim Gold Fund, Inc.)
7337 East Doubletree Ranch Road 7337 East Doubletree Ranch Road
Scottsdale, AZ 85258 Scottsdale, AZ 85258
This Statement of Additional Information is available to the Shareholders of
Silver Fund in connection with a proposed transaction whereby all of the assets
and liabilities of Silver Fund, a series of Pilgrim Silver Fund, Inc. will be
transferred to Gold Fund, a series of Pilgrim Gold Fund, Inc., in exchange for
shares of Gold Fund.
This Statement of Additional Information of the Pilgrim Gold Fund, Inc. consists
of this cover page and the following documents, each of which was filed
electronically with the Securities and Exchange Commission and is incorporated
by reference herein:
1. The Statement of Additional Information for Pilgrim Gold Fund and Pilgrim
Silver Fund dated July 31, 2000, as filed on July 26, 2000.
2. The Financial Statements of Silver Fund are included in the Annual Report
of Pilgrim Silver Fund, Inc. dated December 31, 1999, as filed on February
28, 2000.
3. The Financial Statements of Silver Fund are included in the Semi-Annual
Report of Pilgrim Silver Fund, Inc. dated June 30, 2000, as filed on August
31, 2000.
4. The Financial Statements of Gold Fund are included in the Annual Report of
Pilgrim Gold Fund, Inc. dated December 31, 1999, as filed on February 28,
2000.
5. The Financial Statements of Gold Fund are included in the Semi-Annual
Report of Pilgrim Gold Fund, Inc. dated June 30, 2000, as filed on August
31, 2000.
This Statement of Additional Information is not a Prospectus. A Proxy
Statement/Prospectus dated ________ ___, 2000, relating to the Reorganization of
Silver Fund may be obtained, without charge, by writing to Pilgrim at 7337 East
Doubletree Ranch Road, Scottsdale, AZ 85258, or calling (800) 992-0180. This
Statement of Additional Information should be read in conjunction with the Proxy
Statement/Prospectus.
1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and pro forma financial
statements for the combined Fund, assuming the reorganization is consummated, as
of June 30, 2000. The first table presents Statements of Assets and Liabilities
(unaudited) for each Fund and pro forma figures for the combined Fund. The
second table presents Statements of Operations (unaudited) for each Fund and pro
forma figures for the combined Fund. The third table presents Portfolio of
Investments (unaudited) for each Fund and pro forma figures for the combined
Fund. The tables are followed by the Notes to the Pro Forma Financial Statements
(unaudited).
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
GOLD FUND SILVER FUND ADJUSTMENTS COMBINED
------------ -------------- ----------- -------------
<S> <C> <C> <C>
ASSETS:
Investments at value* $ 52,172,411 $ 18,542,073 $ 70,714,484
Cash 184,689 186,647 371,336
Due from affiliate -- 41,062 41,062
Receivable for investment securities sold 995,975 -- 995,975
Receivable for fund shares sold 11,412 8,000 19,412
Dividends and interest receivable 142,356 6,009 148,365
------------ -------------- --------- -------------
Total Assets 53,506,843 18,783,791 -- 72,290,634
------------ -------------- --------- -------------
LIABILITIES:
Due to affiliate 43,106 -- 43,106
Payable for investment securities purchased 71,433 -- 71,433
Payable for fund shares redeemed 33,133 2,486 35,619
Accrued expenses 206,351 130,016 336,367
------------ -------------- --------- -------------
Total Liabilities 354,023 132,502 -- 486,525
------------ -------------- --------- -------------
NET ASSETS $ 53,152,820 $ 18,651,289 $ -- $ 71,804,109
============ ============== ========= =============
NET ASSETS CONSIST OF:
Capital stock - $.01 par value per share $ 19,403 $ 7,567 $ 26,970
Additional paid-in capital 127,912,981 38,743,946 166,656,927
Undistributed net investment income (loss) (105,392) 1,372 (104,020)
Accumulated net realized loss on investments and foreign (63,342,499) (10,856,333) (74,198,832)
Unrealized depreciation of investments and foreign
currency translations of other assets and liabilities (11,331,673) (9,245,263) (20,576,936)
------------ -------------- --------- -------------
NET ASSETS $ 53,152,820 $ 18,651,289 $ -- $ 71,804,109
============ ============== ========= =============
CLASS A:
Net Assets $ 53,152,820 $ 18,651,289 $ 71,804,109
Shares authorized ($0.01 par value) 500,000,000 1,000,000,000 $ 500,000,000
Shares outstanding 19,402,979 7,567,285 (764,385)(A) 26,205,879
Net asset value and redemption price per share $ 2.74 $ 2.46 $ 2.74
*Cost of Securities $ 63,493,692 $ 27,787,336 $ 91,281,028
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Silver Fund.
(Calculation: Net Assets / NAV per share)
See Accompanying Notes to Unaudited Proforma Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
GOLD FUND SILVER FUND ADJUSTMENTS COMBINED
------------ ----------- ------------ -----------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED 30-JUN ENDED 30-JUN ENDED 30-JUN ENDED 30-JUN
2000 2000 2000 2000
------------ ----------- ------------ -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends $ 1,117,517 $ 418,682 $ 1,536,199
Interest 192,224 209,529 401,753
------------ ----------- ------------ -----------
1,309,741 628,211 1,937,952
Less: foreign tax expense 31,829 7,417 39,246
------------ ----------- ------------ -----------
Total investment income 1,277,912 620,794 1,898,706
------------ ----------- ------------ -----------
EXPENSES:
Investment advisory fees 611,327 239,120 (61,030)(A) 789,417
Transfer agent and shareholder servicing expenses 209,234 89,794 299,028
Directors' fees and expenses 105,753 105,014 (105,014)(B) 105,753
Distribution expenses 60,170 -- 160,486 (A) 220,656
Administrative fees -- -- 88,262 (A) 88,262
Professional fees 76,030 36,652 (36,652)(B) 76,030
Printing and mailing expenses 47,667 17,416 65,083
Accounting expenses 40,759 17,498 (58,257)(C) --
Custodian expenses 46,092 28,818 74,910
Registration fees 29,132 17,007 46,139
Computer processing fees 18,987 9,165 (28,152)(C) --
Other expenses 68,805 18,629 87,434
------------ ----------- ------------ -----------
Total expenses 1,313,956 579,113 (40,357) 1,852,712
Less: expenses recovered under contract with
investment advisor -- 56,822 (56,822)(C) --
------------ ----------- ------------ -----------
Net expenses 1,313,956 522,291 16,465 1,852,712
------------ ----------- ------------ -----------
Net investment income (loss) (36,044) 98,503 (16,465) 45,994
------------ ----------- ------------ -----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized gain from:
Investments (18,457,065) (1,750,398) (20,207,463)
Foreign currency translations (22,188) (1,761) (23,949)
Net change in unrealized appreciation (depreciation) of:
Investments 13,791,555 (1,969,560) 11,821,995
Foreign currency translations (8,679) -- (8,679)
------------ ----------- ------------ -----------
Net loss from investments (4,696,377) (3,721,719) (8,418,096)
------------ ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (4,732,421) $(3,623,216) $ (16,465) $(8,372,102)
============ =========== ============ ===========
</TABLE>
(A) Reflects adjustment in expenses due to effects of current investment
advisory, administrative and 12b-1 plan contract rate.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
(C) Reflects adjustment to concur with Pilgrim expense structure.
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLD FUND SILVER FUND PRO FORMA
Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
COMMON STOCKS: 82.6%
AUSTRALIA: 7.0%
1,600,000 1,600,000 Aurora Gold, Ltd.
1,000,000 1,000,000 Delta Gold, Ltd.
1,020,000 1,020,000 MIM Holdings, Ltd.
777,172 777,172 @ Newcrest Mining, Ltd.
2,002,539 2,002,539 Normandy Mining, Ltd.
802,857 802,857 Pasminco, Ltd.
CANADA: 25.9%
443,000 443,000 Agnico-Eagle Mines, Ltd.
65,000 65,000 Barrick Gold Corporation
300,000 300,000 @ Claude Resources, Inc.
400,000 400,000 @ #Claude Resources, Inc.
200,000 200,000 @ #Claude Resources, Inc. (Warrants)
201,500 201,500 Franco Nevada Mining Corporation, Ltd.
541,400 541,400 @ Goldcorp, Inc. "A"
416,100 416,100 @ IAMGOLD Corporation
1,050,000 1,050,000 @ Kinross Gold Corporation
470,000 470,000 @ Meridian Gold, Inc.
285,500 285,500 Placer Dome, Inc.
50,000 50,000 @ Silver Standard Resources, Inc.
300,000 300,000 @ Silver Standard Resources, Inc.
350,000 350,000 @ Tiomin Resources, Inc.
75,000 75,000 Western Copper Holdings, Ltd.
MEXICO: 3.8%
290,056 290,056 @ Corporation Industrial San Luid SA
404,016 404,016 Grupo Mexico SA de C.V.
645,000 645,000 Industrias Penoles SA
PERU: 1.9%
157,009 157,009 Compania De Minas Buenaventura SA "B"
POLAND: 1.1%
51,000 51,000 @ KGHM Polska Miedz SA (GDR)
SOUTH AFRICA: 22.7%
61,749 61,749 Anglo American Platinum Corporation, Ltd.
68,749 68,749 Anglogold, Ltd.
68,500 68,500 De Beers Consolidated Mines, Ltd. (ADR)
952,900 952,900 Gold Fields, Ltd.
641,656 641,656 Harmony Gold Mining, Ltd.
74,460 74,460 Impala Platinum Holdings, Ltd.
UNITED KINGDOM: 1.2%
375,000 375,000 @ Ivernia West plc
9,000 9,000 Rio Tinto plc (ADR)
UNITED STATES: 19.0%
95,000 95,000 @ Apex Silver Mines, Ltd.
250,600 250,600 @ Coeur d'Alene Mines Corporation
177,600 177,600 @ Freeport McMoran Copper & Gold "A"
439,400 439,400 @ Hecla Mining Company
368,570 143,500 512,070 Homestake Mining Company
213,000 213,000 @ Meridian Gold, Inc.
140,170 140,170 Newmont Mining Corporation
50,000 25,000 75,000 @ Stillwater Mining Company
TOTAL COMMON STOCKS
(cost: $57,153,719, $20,753,357, $77,907,076)
PREFERRED STOCK: 1.7%
UNITED STATES: 1.7%
99,000 99,000 Freeport McMoran Copper & Gold (cost $2,081,958)
GOLD BULLION: 3.8%
@ 9,513 fine ounces (cost $3,640,945)
SILVER BULLION: 1.8%
@ 259,613 fine ounces (cost $1,453,281)
SHORT-TERM INVESTMENT: 8.6%
U.S. GOVERNMENT AGENCY OBLIGATION: 8.6%
2,700,000 2,700,000 Federal Home Loan Bank, 6.48%, due 07/03/00 (cost $2,699,028)
3,500,000 3,500,000 Federal Home Loan Bank, 6.48%, due 07/03/00 (cost $3,498,740)
TOTAL INVESTMENTS: 98.5%
(cost: $63,493,692, $27,787,336, $91,281,028)
OTHER ASSETS IN EXCESS OF LIABILITIES: 1.5%
TOTAL NET ASSETS: 100.0%
(equivalent to $2.74 per share on 19,402,979 shares outstanding)
(equivalent to $2.46 per share on 7,567,285 shares outstanding)
(equivalent to $2.74 per share on 26,205,879 shares outstanding)
GOLD FUND SILVER FUND PRO FORMA
Value Value Value
------------ ------------ ------------
COMMON STOCKS: 82.6%
AUSTRALIA: 7.0%
Aurora Gold, Ltd. $ 134,494 $ 134,494
Delta Gold, Ltd. $ 745,121 745,121
MIM Holdings, Ltd. 551,186 551,186
Newcrest Mining, Ltd. 2,099,833 2,099,833
Normandy Mining, Ltd. 1,082,128 1,082,128
Pasminco, Ltd. 429,026 429,026
------------ ------------ ------------
3,927,082 1,114,706 5,041,788
------------ ------------ ------------
CANADA: 25.9%
Agnico-Eagle Mines, Ltd. 2,851,812 2,851,812
Barrick Gold Corporation 1,182,188 1,182,188
Claude Resources, Inc. 123,509 123,509
Claude Resources, Inc. 164,679 164,679
Claude Resources, Inc. (Warrants) - -
Franco Nevada Mining Corporation, Ltd. 2,325,518 2,325,518
Goldcorp, Inc. "A" 3,873,224 3,873,224
IAMGOLD Corporation 856,537 856,537
Kinross Gold Corporation 935,431 935,431
Meridian Gold, Inc. 2,854,887 2,854,887
Placer Dome, Inc. 2,730,094 2,730,094
Silver Standard Resources, Inc. 64,844 64,844
Silver Standard Resources, Inc. 404,948 404,948
Tiomin Resources, Inc. 162,992 162,992
Western Copper Holdings, Ltd. 75,928 75,928
------------ ------------ ------------
17,897,879 708,712 18,606,591
------------ ------------ ------------
MEXICO: 3.8%
Corporation Industrial San Luid SA 545,152 545,152
Grupo Mexico SA de C.V. 1,136,953 1,136,953
Industrias Penoles SA 1,041,888 1,041,888
------------ ------------ ------------
2,723,993 2,723,993
------------ ------------ ------------
PERU: 1.9%
Compania De Minas Buenaventura SA "B" 1,368,128 1,368,128
------------ ------------ ------------
POLAND: 1.1%
KGHM Polska Miedz SA (GDR) 762,450 762,450
------------ ------------ ------------
SOUTH AFRICA: 22.7%
Anglo American Platinum Corporation, Ltd. 1,779,669 1,779,669
Anglogold, Ltd. 2,808,865 2,808,865
De Beers Consolidated Mines, Ltd. (ADR) 1,663,266 1,663,266
Gold Fields, Ltd. 3,738,641 3,738,641
Harmony Gold Mining, Ltd. 3,549,101 3,549,101
Impala Platinum Holdings, Ltd. 2,769,829 2,769,829
------------ ------------ ------------
16,309,371 16,309,371
------------ ------------ ------------
UNITED KINGDOM: 1.2%
Ivernia West plc 246,955 246,955
Rio Tinto plc (ADR) 587,250 587,250
------------ ------------ ------------
834,205 834,205
------------ ------------ ------------
UNITED STATES: 19.0%
Apex Silver Mines, Ltd. 944,062 944,062
Coeur d'Alene Mines Corporation 610,837 610,837
Freeport McMoran Copper & Gold "A" 1,620,600 1,620,600
Hecla Mining Company 494,325 494,325
Homestake Mining Company 2,533,919 986,563 3,520,482
Meridian Gold, Inc. 1,304,625 1,304,625
Newmont Mining Corporation 3,031,176 3,031,176
Stillwater Mining Company 1,393,750 696,875 2,090,625
------------ ------------ ------------
8,579,445 5,037,287 13,616,732
------------ ------------ ------------
TOTAL COMMON STOCKS
(cost: $57,153,719, $20,753,357, $77,907,076) 46,713,777 12,549,481 59,263,258
------------ ------------ ------------
PREFERRED STOCK: 1.7%
UNITED STATES: 1.7%
Freeport McMoran Copper & Gold (cost $2,081,958) 1,188,000 1,188,000
------------ ------------ ------------
GOLD BULLION: 3.8%
9,513 fine ounces (cost $3,640,945) 2,759,606 2,759,606
------------ ------------ ------------
SILVER BULLION: 1.8%
259,613 fine ounces (cost $1,453,281) 1,305,852 1,305,852
------------ ------------ ------------
SHORT -TERM INVESTMENT: 8.6%
U.S. GOVERNMENT AGENCY OBLIGATION: 8.6%
Federal Home Loan Bank, 6.48%, due 07/03/00 (cost $2,699,028) 2,699,028 2,699,028
Federal Home Loan Bank, 6.48%, due 07/03/00 (cost $3,498,740) 3,498,740 3,498,740
------------ ------------ ------------
2,699,028 3,498,740 6,197,768
------------ ------------ ------------
TOTAL INVESTMENTS: 98.5%
(cost: $63,493,692, $27,787,336, $91,281,028) 98.50% 52,172,411 18,542,073 70,714,484
OTHER ASSETS IN EXCESS OF LIABILITIES: 1.5% 1.50% 980,409 109,216 1,089,625
------- ------------ ------------ ------------
TOTAL NET ASSETS: 100.0%
(equivalent to $2.74 per share on 19,402,979 shares outstanding)
(equivalent to $2.46 per share on 7,567,285 shares outstanding)
(equivalent to $2.74 per share on 26,205,879 shares outstanding) 100.00% $ 53,152,820 $ 18,651,289 $ 71,804,109
======= ============ ============ ============
</TABLE>
----------
@ Non-income producing security
# Restriced Security
ADR American Depository Receipt
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Combination:
On November 2, 2000, the Boards of Pilgrim Gold Fund ("Gold Fund") and
Pilgrim Silver Fund ("Silver Fund"), approved an Agreement and Plan of
Reorganization (the "Plan") whereby, subject to approval by the shareholders of
Silver Fund, Gold Fund will acquire all the assets of Silver Fund subject to the
liabilities of such Fund, in exchange for a number of shares equal to the pro
rata net assets of shares of the Gold Fund (the "Merger").
The Merger will be accounted for as a tax free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be representative of
what the actual combined unaudited financial statements would have been had the
reorganization occurred at June 30, 2000. The unaudited pro forma portfolio of
investments, and unaudited statement of assets and liabilities reflect the
financial position of Gold Fund and Silver Fund at June 30, 2000. The unaudited
pro forma statement of operations reflects the results of operations of Gold
Fund and Silver Fund for the year ended June 30, 2000. These statements have
been derived from the Funds' respective books and records utilized in
calculating daily net asset value at the dates indicated above for Gold Fund and
Silver Fund under generally accepted accounting principles. The historical cost
of investment securities will be carried forward to the surviving entity and
results of operations of Gold Fund for pre-combination periods will not be
restated.
The unaudited pro forma portfolio of investments, and unaudited statements
of assets and liabilities and operations should be read in conjunction with the
historical financial statements of the Funds incorporated by reference in the
Statements of Additional Information.
Note 2 - Security Valuation:
Investments in equity securities traded on a national securities exchange
or included on the NASDAQ National Market System are valued at the last reported
sale price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market, Gold Bullion and
Silver Bullion, are valued at the mean between the last reported bid and ask
prices. U.S. Government obligations are valued by using market quotations or
independent pricing services which use prices provided by market-makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. All investments quoted in foreign
currencies will be valued daily in U.S. Dollars on the basis of the foreign
currency exchange rates prevailing at the time such valuation is determined by
each Fund's Custodian. Securities for which market quotations are not readily
available are valued at their respective fair values as determined in good faith
and in accordance with policies set by the Board of Directors. Investments in
securities maturing in less than 60 days are valued at cost, which, when
combined with accrued interest, approximates market value.
Note 3 - Foreign Currency Transactions:
The books and records of the funds are maintained in U.S. dollars. Any foreign
currency amounts are translated into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from the changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gains or losses from the investments. Reported net realized foreign
5
<PAGE>
exchange gains or losses arise from sales and maturities of short-term
securities, sales of foreign currencies, currency gains or losses realized
between the trade and settlement on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with investing in U.S. companies and the U.S.
Government. These risks include but are not limited to re-evaluation of
currencies and future adverse political and economic developments which could
cause securities and their markets to be less liquid and prices more volatile
than those of the U.S. Government.
Note 4 - Capital Shares:
The unaudited pro forma net asset value per share assumes additional shares
of common stock issued in connection with the proposed acquisition of Silver
Fund by Gold Fund as of June 30, 2000. The number of additional shares issued
was calculated by dividing the net asset value of Class A of Silver Fund by the
respective Class A net asset value per share of Gold Fund .
Note 5 - Unaudited Pro Forma Adjustments:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on June 30, 2000. Silver Fund
expenses were adjusted assuming Gold Fund's fee structure was in effect for the
year ended June 30, 2000.
Note 6 - Merger Costs:
Merger costs are estimated at approximately $125,000 and are not included
in the unaudited pro forma statement of operations since these costs are not
reccurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger.
Note 7 - Federal Income Taxes:
It is the policy of the Funds, to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Fund intends not to be subject to any federal excise tax.
The Board of Directors intends to offset any net capital gains with any
available capital loss carryforward until each carryforward has been fully
utilized or expires. The amount of capital loss carryforward which may offset
Gold Fund's capital gains in any given year may be limited as a result of
previous reorganizations. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or expires.
6
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article Seventh of the Articles of Incorporation provides to the fullest
extent that limitations on the liability of directors and officers are permitted
by the Maryland General Corporation Law, no director or officer of the
corporation shall have any liability to the corporation or its stockholders for
damages. This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the corporation whether or not such
person is a director or officer at the time of any proceeding in which liability
is asserted. The corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
the law. The Board of Directors may, through a by-law, resolution or agreement,
make further provisions for indemnification of directors, officers, employees
and agents to the fullest extent permitted by Maryland General Corporation Law.
No provision of the Articles of Incorporation shall be effective to require
a waiver of compliance with any provision of the Securities Act of 1933, or of
the Investment Company Act of 1940, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or to protect or purport to
protect any director or officer of the corporation against any liability to the
corporation or its stockholders 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 his office.
Section 7 of Registrant's Administration Agreement provides for the
indemnification of Registrant's Administrator against all liabilities incurred
by it in performing its obligations under the agreement, except with respect to
matters involving its disabling conduct.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised 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.
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ITEM 16. EXHIBITS
(1) (A) Form of Amended and Restated Articles of Incorporation - Filed as
an exhibit to Post-Effective Amendment No. 25 to the Registrant's Form
N-1A Registration Statement on July 26, 2000 and incorporated herein
by reference
(B) Form of Articles Supplementary Designating Class A - Filed as an
exhibit to Post-Effective Amendment No. 25 to the Registrant's Form
N-1A Registration Statement on July 26, 2000 and incorporated herein
by reference
(2) Form of Amended and Restated Bylaws - Filed as an exhibit to
Post-Effective Amendment No. 25 to the Registrant's Form N-1A
Registration Statement on July 26, 2000 and incorporated herein by
reference
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between Pilgrim Gold
Fund, Inc., on behalf of Pilgrim Gold Fund, and Pilgrim Silver Fund,
Inc. on behalf of Pilgrim Silver Fund
(5) See Exhibits 1 and 2
(6) Form of Investment Management Agreement between Registrant and Pilgrim
Investments, Inc.
(7) Form of Underwriting Agreement between Registrant and Pilgrim
Securities, Inc.
(8) Not Applicable
(9) Form of Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. - Filed as an exhibit to Post-Effective Amendment No.
25 to the Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference
(10) (A) Form of Service and Distribution Plan for Class A Shares - Filed
as an exhibit to Post-Effective Amendment No. 25 to the Registrant's
Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference
(B) Form of Multiple Class Plan pursuant to Rule 18f-3 - Filed as an
exhibit to Post-Effective Amendment No. 25 to the Registrant's
(11) Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference
(11) Form of Opinion and Consent of Dechert
(12) Form of Opinion and Consent of Dechert supporting tax matters and
consequences
(13) (A) Form of Administration Agreement between Registrant and ING
Pilgrim Group, Inc. - Filed as an exhibit to Post-Effective Amendment
No. 25 to the Registrant's Form N-1A Registration Statement on July
26, 2000 and incorporated herein by reference
(B) Form of Expense Limitation Agreement between Registrant and ING
Pilgrim Investments, Inc. - Filed as an exhibit to Post-Effective
Amendment No. 25 to the Registrant's Form N-1A Registration Statement
on July 26, 2000 and incorporated herein by reference
(14) Consent Independent Auditors
(15) Not Applicable
(16) Filed herewith
(17) Not Applicable
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ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act 17 [CFR
230.145(c)], the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Scottsdale and State of Arizona on the 30th day of November, 2000.
PILGRIM GOLD FUND, INC.
By: /s/ James M. Hennessy
-------------------------------------------
James M. Hennessy
Senior Executive Vice President & Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ John G. Turner Director and Chairman November 30, 2000
----------------------------
John G. Turner*
/s/ Robert W. Stallings Director and President November 30, 2000
---------------------------- (Chief Executive Officer)
Robert W. Stallings*
/s/ Michael J. Roland Senior Vice President and November 30, 2000
---------------------------- Principal Financial Officer
Michael J. Roland*
/s/ Al Burton Director November 30, 2000
----------------------------
Al Burton*
/s/ Paul S. Doherty Director November 30, 2000
----------------------------
Paul S. Doherty*
/s/ Robert B. Goode Director November 30, 2000
----------------------------
Robert B. Goode*
/s/ Alan L. Gosule Director November 30, 2000
----------------------------
Alan L. Gosule*
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/s/ Walter H. May Director November 30, 2000
----------------------------
Walter H. May*
/s/ Jock Patton Director November 30, 2000
----------------------------
Jock Patton*
/s/ David W.C. Putnam Director November 30, 2000
----------------------------
David W.C. Putnam*
/s/ John R. Smith Director November 30, 2000
----------------------------
John R. Smith*
/s/ David W. Wallace Director November 30, 2000
----------------------------
David W. Wallace
* By: /s/ James M. Hennessy
------------------------
James M. Hennessy
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Robert W. Stallings, James M. Hennessy, Jeffrey S. Puretz and Karen L.
Anderberg, and each of them his true and lawful attorney-in-fact as agent with
full power of substitution and resubstitution of him in his name, place, and
stead, to sign any and all registration statements on Form N-14 applicable to
Pilgrim Gold Fund, Inc. and any amendment or supplement thereto, and to file the
same with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: November 10, 2000
/s/ John G. Turner /s/ Alan L. Gosule
------------------------------- -------------------------------
John G. Turner Alan L. Gosule
/s/ Robert W. Stallings /s/ Walter H. May
------------------------------- -------------------------------
Robert W. Stallings Walter H. May
/s/ Al Burton /s/ Jock Patton
------------------------------- -------------------------------
Al Burton Jock Patton
/s/ Paul S. Doherty /s/ David W.C. Putnam
------------------------------- -------------------------------
Paul S. Doherty David W.C. Putnam
/s/ Robert B. Goode, Jr. /s/ John R. Smith
------------------------------- -------------------------------
Robert B. Goode, Jr. John R. Smith
/s/ David W. Wallace
-------------------------------
David W. Wallace
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Robert W. Stallings, James M. Hennessy, Jeffrey S. Puretz and Karen L.
Anderberg, and each of them his true and lawful attorney-in-fact as agent with
full power of substitution and resubstitution of him in his name, place, and
stead, to sign any and all registration statements on Form N-14 applicable to
Pilgrim Gold Fund, Inc. and any amendment or supplement thereto, and to file the
same with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: November 14, 2000 /s/ Michael J. Roland
----------------------------------
Michael J. Roland
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EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between Pilgrim Gold Fund,
Inc., on behalf of Pilgrim Gold Fund, and Pilgrim Silver Fund, Inc., on
behalf of Pilgrim Silver Fund
(6) Form of Investment Management Agreement between Registrant and Pilgrim
Investments, Inc.
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc.
(11) Form of Opinion and Consent of Dechert
(12) Form of Opinion and Consent of Dechert supporting tax matters and
consequences
(14) Consent of Independent Auditors
<PAGE>
PILGRIM SILVER FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Robert W. Stallings and James M. Hennessy or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the Silver Fund (the "Fund") which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Fund to be held at the offices of
the Fund at 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258, on ________
___, 2000 at ______ a.m., local time, and at any adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "X" in the appropriate box below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Silver Fund by Gold Fund in exchange for
shares of common stock of Gold Fund and the assumption by Gold Fund of all of
the liabilities of Silver Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
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Signature Date
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Signature (if held jointly) Date
