As filed with the Securities and Exchange Commission on December 19, 2000
Securities Act File No. 333-________
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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 GROWTH AND INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258
(Address of Principal Executive Offices) (Zip Code)
1-800-992-0180
(Registrant's Area Code and Telephone Number)
James M. Hennessy
ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz Steven R. Howard
Dechert Paul, Weiss, Rifkind, Wharton & Garrison
1775 Eye Street, N.W. 1285 Avenue of the Americas
Washington, DC 20006 New York, NY 10019
------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
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It is proposed that this filing will become effective on January 18, 2001
pursuant to Rule 488 under the Securities Act of 1933.
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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.
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<PAGE>
ING Growth & Income Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
_____________, 2000
Dear Shareholder:
Your Board of Trustees has called a Special Meeting of Shareholders of the
ING Growth & Income Fund scheduled to be held at _______ [a.m./p.m.], local
time, on February __, 2001 at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258.
The Board of Trustees of ING Funds Trust, on behalf of the ING Growth &
Income Fund (a series of ING Funds Trust), has approved a reorganization of ING
Growth & Income Fund, which is managed by ING Mutual Funds Management Co. LLC,
into Pilgrim Growth and Income Fund, which is managed by ING Pilgrim
Investments, Inc. and is part of the Pilgrim Funds (the "Reorganization"). If
approved by shareholders, you would become a shareholder of Pilgrim Growth and
Income Fund on the date that the Reorganization occurs. Pilgrim Growth and
Income Fund has investment objectives and policies that are similar in many
respects to those of ING Growth & Income Fund.
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 Trustees of ING Growth & Income
Fund (a series of ING Funds Trust) 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.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
Robert W. Stallings,
President
<PAGE>
ING Growth & Income Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ING GROWTH & INCOME FUND
SCHEDULED FOR ___________, 2001
To the Shareholders:
A Special Meeting of Shareholders of the ING Growth & Income Fund ("Special
Meeting") is scheduled for February __, 2001 at _______ [a.m./p.m.], local time,
at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258.
The purposes of the Special Meeting of ING Growth & Income Fund are as
follows:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets and liabilities of each class of ING
Growth & Income Fund by Pilgrim Growth and Income Fund in exchange for
shares of the corresponding Class of Pilgrim Growth and Income Fund
and the subsequent liquidation of ING Growth & Income Fund; and
2. To transact such other business as may properly come before the
Special Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on ________ __, 2000 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 Trustees
James M. Hennessy,
Secretary
December __, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION.............................................................. 1
SUMMARY................................................................... 2
Comparison of Investment Objectives And Strategies..................... 4
Comparison of Portfolio Characteristics................................ 4
Relative Performance................................................... 5
Comparison of Investment Techniques and Risks of the Funds............. 6
COMPARISON OF FEES AND EXPENSES........................................... 7
Annual Fund Operating Expenses......................................... 8
General Information.................................................... 9
Special Rules for Class A Shares of ING Growth & Income Fund........... 11
ADDITIONAL INFORMATION ABOUT PILGRIM GROWTH AND INCOMEFUND................ 11
Investment Personnel................................................... 11
Performance of Pilgrim Growth and Income Fund.......................... 11
INFORMATION ABOUT THE REORGANIZATION...................................... 13
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................... 16
GENERAL INFORMATION ABOUT THE PROXY STATEMENT............................. 17
Solicitation of Proxies................................................ 17
Voting Rights.......................................................... 17
Other Matters to Come Before the Meeting............................... 18
Shareholder Proposals.................................................. 18
Reports to Shareholders................................................ 18
APPENDIX A................................................................ A-1
APPENDIX B................................................................ B-1
APPENDIX C................................................................ C-1
APPENDIX D................................................................ D-1
APPENDIX E................................................................ E-1
i
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PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
FEBRUARY __, 2001
ING GROWTH & INCOME FUND
(a series of ING Funds Trust)
Relating to the Reorganization into
PILGRIM GROWTH AND INCOME FUND, INC.
(COLLECTIVELY, THE "FUNDS")
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 ING Growth & Income Fund to Pilgrim Growth and Income Fund,
Inc. ("Pilgrim Growth and Income Fund") in exchange for shares of Pilgrim Growth
and Income Fund (the "Reorganization"). ING Growth & Income Fund would then
distribute to its shareholders their portion of the shares of Pilgrim Growth and
Income Fund it receives in the Reorganization. The result would be a liquidation
of ING Growth & Income Fund. You would receive shares of Pilgrim Growth and
Income Fund having an aggregate value equal to the aggregate value of the shares
you held of ING Growth & Income Fund, as of the close of business on the
business day of the closing of the Reorganization. You are being asked to vote
on the Agreement and Plan of Reorganization through which these transactions
would be accomplished.
Because you, as a shareholder of ING Growth & Income Fund, are being asked
to approve a transaction that will result in your holding of shares of Pilgrim
Growth and Income Fund, this Proxy Statement also serves as a Prospectus for
Pilgrim Growth and Income Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Pilgrim Growth and Income Fund
that you should know. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of Pilgrim Growth and Income Fund,
see the Prospectus (the "Pilgrim Prospectus") dated November 1, 2000 and the
Statement of Additional Information ("SAI") for Pilgrim Funds dated August 11,
2000, which are incorporated herein by reference and which may be obtained,
without charge, by calling 1-800- 992-0180. For a more detailed discussion of
the investment objectives, policies, restrictions and risks of the ING Growth &
Income Fund, see the ING Funds' Prospectus (the "ING Prospectus") and SAI, each
dated November 6, 2000, which are incorporated herein by reference and which may
be obtained without charge by calling 1-800-992-0180. 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 Pilgrim Growth and Income 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 and
semi-annual report for either of the Funds, without charge, by calling
1-800-992-0180.
You can copy and review information about each Fund (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. You may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available on the EDGAR Database on the Commission's Internet site
at HTTP://WWW.SEC.GOV. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
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
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SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, the ING
Prospectus and the Agreement and Plan of Reorganization, which is attached
hereto as Appendix B.
THE PROPOSED REORGANIZATION. On November 16, 2000, the Board of Trustees of
ING Funds Trust, on behalf of ING Growth & Income Fund, approved an Agreement
and Plan of Reorganization with respect to ING Growth & Income Fund (the
"Reorganization Agreement"). Subject to shareholder approval, the Reorganization
Agreement provides for:
* the transfer of all of the assets of ING Growth & Income Fund to
Pilgrim Growth and Income Fund, in exchange for shares of Pilgrim
Growth and Income Fund;
* the assumption by Pilgrim Growth and Income Fund of all of the
liabilities of ING Growth & Income Fund;
* the distribution of Pilgrim Growth and Income Fund shares to the
shareholders of ING Growth & Income Fund; and
* the complete liquidation of ING Growth & Income Fund.
The Reorganization is expected to be effective upon the opening of business
on February 26, 2001, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganization, each shareholder of the following
Class of shares of ING Growth & Income Fund, would become a shareholder of the
following Class of shares of Pilgrim Growth and Income Fund.
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND
------------------------ ------------------------------
Class A Class A
Class B Class B
Class C Class C
Each shareholder would hold, immediately after the Closing, shares of each Class
of Pilgrim Growth and Income Fund having an aggregate value equal to the
aggregate value of the shares of the corresponding Class of ING Growth & Income
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 ING Funds and various Pilgrim Funds. These reorganizations are occurring
in connection with the integration of the ING Funds and Pilgrim Funds, as part
of which the distributor, administrator, and other service providers of the ING
Funds have been changed to those of the Pilgrim Funds. In September, 2000, ING
Groep N.V., the indirect parent company of ING Mutual Funds Management Co. LLC
("IMFC"), the investment adviser to the ING Funds, acquired ReliaStar Financial
Corp., the indirect parent company of ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments"), the investment adviser to the Pilgrim Funds. Management
of the ING Funds and the Pilgrim Funds have proposed the consolidation of a
number of the ING Funds and Pilgrim Funds that they believe have similar or
compatible investment policies. The proposed reorganizations are designed to
reduce the substantial overlap in funds offered by both the ING Funds and
Pilgrim Funds, thereby eliminating duplication of costs and other inefficiencies
arising from having similar portfolios within the same fund group. IMFC and ING
Pilgrim Investments also believe 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 integration of the ING Funds and the Pilgrim Funds is
2
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expected to provide further benefits to shareholders of the ING Funds because
shareholders will have the ability to exchange into Pilgrim Funds that offer the
same Class of shares. For information about a Pilgrim Fund, call the Pilgrim
Funds at 1-800-992-0180 to request a prospectus. You should read a fund's
prospectus before investing in the fund.
In considering whether to approve the Reorganization, you should note that:
* The Funds have investment objectives and policies that are
substantially similar in many respects;
* The selection criteria for investments for each of the Funds are
substantially similar;
* The proposed Reorganization is expected to result in a reduction in
total operating expenses for shareholders of the ING Growth & Income
Fund. For example, the operating expenses, expressed as a percentage
of net asset value per share of Class A shares, are as follows(1):
* Expenses of ING Growth & Income Fund - before expense
reimbursements by management (based on the year ended
June 30, 2000)(2): 1.77%
* Expenses of ING Growth & Income Fund - after expense
reimbursements by management (based on the year ended
June 30, 2000)(2): 1.32%
* Expenses of Pilgrim Growth and Income Fund (based on
the year ended June 30, 2000)(3): 1.28%
* Estimated expenses of Pilgrim Growth and Income Fund
after the reorganization (PRO FORMA): 1.22%
* The Funds have affiliated management. ING Pilgrim Investments, 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
investment manager to Pilgrim Growth and Income Fund. IMFC, also
located at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258,
is the investment manager to ING Growth & Income Fund. Both are
affiliated subsidiaries of the same holding company, ING Groep N.V.
Different investment personnel, however, manage the Funds. After the
Reorganization, ING Pilgrim Investments would continue to manage
Pilgrim Growth and Income Fund, which would include the assets from
ING Growth & Income Fund.
Approval of the Reorganization Agreement requires the vote of a majority of
the Shares present in person or by proxy of the ING Growth & Income Fund.
----------
(1) Net operating expenses for Class B and Class C shares of ING Growth &
Income Fund are higher than those of the Pilgrim Growth and Income Fund.
Net operating expenses for Class B and Class C shares of ING Growth &
Income Fund are 1.97% and 1.97%, respectively, compared to 2.03% and 2.03%,
respectively, for Pilgrim Growth and Income Fund.
(2) Based upon expenses incurred by the ING Growth & Income Fund for the 12
month period ended June 30, 2000, adjusted for current expenses of
contracts and 12b-1 plans which were in effect on November 6, 2000.
(3) Based upon the expenses incurred by Pilgrim Growth and Income Fund for the
12 month period ended June 30, 2000, adjusted for current expenses of
contracts and 12b-1 plans which became effective when ING Pilgrim
Investments became adviser to the Fund on July 26, 2000.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF ING FUNDS TRUST, ON
BEHALF OF ING GROWTH & INCOME FUND, UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
3
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COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<S> <C> <C>
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND
------------------------ ------------------------------
INVESTMENT OBJECTIVE Seeks high total return. Seeks long-term capital appreciation. Income
is a secondary objective.
INVESTMENT STRATEGIES * Normally invests at least 65% of its assets * Normally invests at least 65% of its assets
in equity securities. As a general matter, in common stocks of U.S. companies, which
the Fund expects these investments to be in may include dividend paying securities and
common stocks of large U.S. companies securities convertible into shares of common
with a market capitalization in excess of stock.
$10 billion. The Fund expects these
investments to earn income. * The Fund seeks to invest in large, ably
managed and well-financed companies. The
* The Sub-Adviser employs a highly-disciplined, investment approach is to identify high
three-step investment process that seeks to quality companies with good earnings and
identify growth at a reasonable price. price momentum which sell at attractive
valuations.
* First, the universe of companies is
screened using models developed by the * May invest up to 35% of total assets in
Sub-Adviser to rank possible investments; foreign securities and smaller
capitalization companies.
* Second, the Sub-Adviser researches the
companies identified by the screening
models. This research includes a review
of earnings, sales and growth, as well
as the impact of broad economic trends
found within the economy upon possible
investments;
* Third, in order to help manage the risk
of the portfolio, the characteristics of
the portfolio are evaluated against certain
market benchmarks.
INVESTMENT ADVISER ING Mutual Funds Management Co. LLC ING Pilgrim Investments, Inc.
SUB-ADVISER ING Investment Management LLC N/A
PORTFOLIO MANAGERS Martin Jansen, David Kushner and a Alan H. Wapnick
six member team
</TABLE>
As you can see from the chart above, the investment objectives and
strategies of the Funds are substantially similar.
4
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COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND
------------------------ ------------------------------
<S> <C> <C>
Net Assets $46,324,757 $251,330,954
Number of Holdings 80 51
Portfolio Turnover Rate(1) 42.0% 80%
As a percentage of net assets:
Equity Securities 98.11% 97.05%
Holdings in companies with market capitalization
less than $1 billion 0.00% 0.00%
Holdings in companies with market capitalization
between $1 billion to $10 billion 5.39% 20.21%
Holdings with market capitalization over
$10 billion 92.72% 76.84%
Foreign Securities 0.00% 0.00%
Short-Term Debt Instruments 1.94% 3.14%
Average market capitalization of companies
in portfolio: $84.0 billion $64.5 billion
Market capitalization range of companies
in portfolio: $1.5 - $524.4 billion $1.5 - $446.4 billion
Top 5 industries Medical-Drugs - 10.10% Electrical & Electronics - 18.56%
(as a % of net assets) Diversified Manufacturing - 6.70% Capital Equipment - 10.24%
Computers-Micro - 6.50% Financial Services - 9.42%
Electronic Health & Personal Care - 9.20%
Components-Semiconductors - 6.40% Telecommunications - 8.23%
Networking Products - 6.00%
Top 10 equity holdings General Electric Co. - 4.60% Corning, Inc. - 3.76%
(as a % of net assets) Intel Corp. - 4.04% EMC Corp. - 3.36%
Cisco Systems, Inc. - 3.83% Medtronic, Inc. - 3.05%
Microsoft Corp. - 3.45% Enron Corp. - 2.83%
Pfizer, Inc. - 2.64% Cisco Systems, Inc. - 2.81%
Wal-Mart Stores, Inc. - 2.50% Network Appliance, Inc. - 2.77%
Exxon Mobil Corp. - 2.49% Marsh & Mclennan Co., Inc. - 2.72%
Merck & Co., Inc. - 2.37% Oracle Corp. - 2.69%
Wells Fargo & Co. - 2.21% Sun Microsystems, Inc. - 2.57%
Oracle Corp. - 2.19% Viacom, Inc. Class "B" - 2.53%
</TABLE>
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(1) For the year ended June 30, 2000.
5
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RELATIVE PERFORMANCE
The following table shows, for the periods shown, the average annual total
return for: (a) Class A Shares of ING Growth & Income Fund; (b) Class A shares
of Pilgrim Growth and Income Fund; and (c) the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"). Performance of the Funds in the table does
not reflect the deduction of sales loads, and would be lower if it did. The
index has an inherent performance advantage over the Funds 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. Total return is calculated assuming
reinvestment of all dividends and capital gain distributions at net asset value
and excluding the deduction of sales charges. Each Fund's past performance is
not an indication of its future performance.
CALENDAR YEAR ING GROWTH & PILGRIM GROWTH AND S&P 500
ENDED/PERIOD INCOME FUND(1) INCOME FUND(2) INDEX(3)
------------ -------------- -------------- --------
12/31/99 5.09% 15.54% 21.04%
1/1/00-9/30/00 -2.47% 7.85% -1.39%
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(1) The ING Growth & Income Fund commenced operations on December 15, 1998.
(2) Prior to July 26, 2000, Lexington Management Corporation ("Lexington")
served as adviser to Pilgrim Growth and Income Fund. Lexington was acquired
by the parent of ING Pilgrim Investments on July 26, 2000. Alan H. Wapnick
has been primarily responsible for managing the Fund since January 1994 and
continued to manage after the July 26th transaction. For more information
about the performance of Pilgrim Growth and Income Fund, see "Additional
Information about Pilgrim Growth and Income Fund."
(3) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS
Because the Funds have investment objectives and policies that are
substantially similar in many respects, many of the risks of investing in
Pilgrim Growth and Income Fund are similar to the risk of investing in ING
Growth & Income Fund. A principal risk of an investment in each of the Funds is
that you may lose money on your investment. 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 the volatility of each Fund's
shares.
EQUITY SECURITIES. Both Pilgrim Growth and Income Fund and ING Growth &
Income Fund invest in equity securities and securities with equity
characteristics, such as common stocks, preferred stocks, warrants and other
stock purchase rights. Normally, Pilgrim Growth and Income Fund invests 65% of
its assets in equity securities of larger U.S. companies. ING Growth & Income
Fund normally invests at least 65% of its assets in equity securities of large
U.S. companies, which are considered companies with a market capitalization in
excess of $10 billion. Pilgrim Growth and Income Fund may also invest up to 35%
of its assets in smaller capitalization companies.
Both Pilgrim Growth and Income Fund and ING Growth & Income Fund are
subject to risks associated with investing primarily in equity securities,
including market risks, issuer risk including credit risks, 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
6
<PAGE>
debt. Market trend risk is the risk that the market may not favor the large
company securities in which the Fund invests. The market could instead favor
smaller company stocks, or not favor equities at all. While equities may offer
the potential for greater long-term growth than most debt securities, they
generally have higher volatility. Pilgrim Growth and Income Fund invests
primarily in equity securities of larger companies, which have more stable
prices than smaller companies. Pilgrim Growth and Income Fund also may invest in
small and medium-sized companies. Investment in smaller capitalization companies
may involve greater risk than is customarily associated with securities of
larger, more established companies. Smaller companies may experience relatively
high growth rates and higher failure rates than do larger companies. The trading
volume of securities of smaller companies is normally less than that of larger
companies and, therefore, may disproportionately affect their market price,
tending to make them rise more in response to buying demand and fall more in
response to selling pressure than is the case with larger companies. The
securities of the smaller companies may trade in lower volumes and may be less
liquid than securities of larger, more established companies. The Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
FOREIGN SECURITIES. Pilgrim Growth and Income Fund may invest up to 35% of
its total assets in foreign securities. ING Growth & Income Fund may also invest
in foreign securities. 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.
INTEREST RATE RISK. The ING Growth & Income Fund invests in securities that
produce income and therefore the value of its investments may rise or fall in
response to fluctuations in interest rates. Generally, when interest rates
increase, the value of income producing securities may decrease, and when
interest rates decrease, the value of income producing securities may increase.
TEMPORARY DEFENSIVE STRATEGIES. For both Funds, when the adviser or
sub-adviser to the Fund anticipates unusual market or other conditions, the Fund
may temporarily depart from its principal investment strategies as a defensive
measure. To the extent a Fund is engaged in temporary defensive investments, it
will not be pursuing its investment objective.
7
<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 Pilgrim Growth
and Income Fund, see "Appendix C: Additional Information Regarding Pilgrim
Growth and Income Fund."
TOTAL OPERATING EXPENSES. The operating expenses of Class A shares of
Pilgrim Growth and Income Fund, expressed as a ratio of expenses to average
daily net assets ("expense ratio"), are lower than those of ING Growth & Income
Fund, even after giving effect to the expense limitation agreement for ING
Growth & Income Fund described below. For the period ended June 30, 2000, the
net expenses of Class A shares of Pilgrim Growth and Income Fund were 1.28% as
compared to Class A shares of ING Growth & Income Fund which were 1.32%. Net
expenses for Class B and Class C shares of ING Growth & Income Fund are lower
than those of Pilgrim Growth and Income Fund. For the 12-month period ended June
30, 2000, the net expenses of Class B and Class C shares of ING Growth & Income
Fund were 1.97% and 1.97%, respectively, as compared to Class B, and Class C
shares of Pilgrim Growth and Income Fund which were 2.03% and 2.03%,
respectively. Without the expense limitation agreement, the differences would
have been greater.
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 ING GROWTH & PILGRIM GROWTH
FEE APPLIES INCOME FUND AND INCOME FUND
----------- ----------- ---------------
First $100 million 0.75% 0.75%
Next $50 million 0.75% 0.60%
Next $100 million 0.75% 0.50%
Assets over $250 million 0.75% 0.40%
DISTRIBUTION AND SERVICE FEES. The distribution (12b-1) and service fees of
ING Growth & Income Fund are, in the aggregate, the same as those of Pilgrim
Growth and Income Fund, except that Class A shares of ING Growth & Income Fund
have distribution and service fees of 0.35% and Class A shares of Pilgrim Growth
and Income Fund have distribution and service fees of 0.25%.
EXPENSE LIMITATION ARRANGEMENTS. Expense limitation contracts are in place
for ING Growth & Income Fund. Under the terms of the expense limitation
contract, IMFC has agreed to limit the expenses of the Fund, excluding interest
and taxes, brokerage and extraordinary expenses. The current expense limitation
agreement for the Fund provides that it will remain in effect until February 28,
2001. There can be no assurances that the expense limitation contract will be
continued after that date. The expense limitations for Class A, Class B and
Class C Shares of ING Growth & Income Fund are 1.32%, 1.97% and 1.97%,
respectively.
Absent this expense limitation arrangement, the expense ratio for each
Class of ING Growth & Income Fund was higher than the expense ratio for the same
Class of Pilgrim Growth and Income Fund. For the year ended June 30, 2000, for
example, the expense ratio for Class A shares of ING Growth & Income Fund was
1.32% compared to 1.28% for Pilgrim Growth and Income Fund. This information and
similar information for the other Classes is shown in the table below entitled
"Annual Fund Operating Expenses."
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. The operating expenses for the Pilgrim Growth and Income Fund
are based upon expenses incurred by the Fund for the 12 month period ended June
30, 2000, adjusted for current expenses of contracts and distribution plans
which became effective when ING Pilgrim Investments became adviser to the Fund
on July 26, 2000. Expenses of ING Growth & Income Fund are based upon expenses
incurred for the 12-month period ended June 30, 2000, as adjusted for current
expenses of contracts and 12b-1 plans which were in effect on November 6, 2000.
PRO FORMA fees show estimated fees of Pilgrim Growth and Income Fund after
giving effect to the proposed Reorganization as adjusted to reflect changes in
contractual charges. PRO FORMA numbers are estimated in good faith and are
hypothetical.
8
<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
ING Growth & Income Fund 0.75% 0.35%(5) 0.67% 1.77% -0.45% 1.32%
Pilgrim Growth and Income Fund 0.62% 0.25% 0.41% 1.28% -- 1.28%
Pilgrim Growth and Income Fund
after Reorganization (PRO FORMA) 0.59% 0.25% 0.38% 1.22% -- 1.22%
CLASS B(4)
ING Growth & Income Fund 0.75% 1.00% 0.67% 2.42% -0.45% 1.97%
Pilgrim Growth and Income Fund 0.62% 1.00% 0.41% 2.03% -- 2.03%
Pilgrim Growth and Income Fund
after Reorganization (PRO FORMA) 0.59% 1.00% 0.38% 1.97% -- 1.97%
CLASS C (4)
ING Growth & Income Fund 0.75% 1.00% 0.67% 2.42% -0.45% 1.97%
Pilgrim Growth and Income Fund 0.62% 1.00% 0.41% 2.03% -- 2.03%
Pilgrim Growth and Income Fund
after Reorganization (PRO FORMA) 0.59% 1.00% 0.38% 1.97% -- 1.97%
</TABLE>
----------
(1) The fiscal year end for Pilgrim Growth and Income Fund is December 31. The
fiscal year end for ING Growth & Income Fund is October 31. Expenses of the
Pilgrim Growth and Income Fund are based upon expenses incurred by the Fund
for the 12 month period ended June 30, 2000, adjusted for current expenses
of contracts and 12b-1 plans which became effective when ING Pilgrim
Investments became the adviser to the Fund on July 26, 2000. Expenses of
the ING Growth & Income Fund are based upon expenses incurred by the Fund
for the 12 month period ended June 30, 2000, adjusted for current expenses
of contracts and 12b-1 plans which were in effect on November 6, 2000. PRO
FORMA expenses are adjusted for anticipated contractual changes.
(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) Although ING Pilgrim Investments has implemented an expense limitation
agreement for the Pilgrim Growth and Income Fund, the Fund's actual
expenses are lower than the expense limitation contained in the agreement.
There can be no assurance that the expense limitation agreement will be
continued after the dates provided. This information and similar
information for the other classes is shown in the table below entitled
"Annual Fund Operating Expenses."
IMFC has entered into an expense limitation contract that limits expenses
(excluding interest, taxes, brokerage and extraordinary expenses) for ING
Growth & Income Fund to 1.32%, 1.97%, and 1.97% for Class A, Class B and
Class C shares, respectively. IMFC has agreed that the expense limitations
shown in the table will apply to ING Growth & Income Fund until at least
February 28, 2001. There is no assurance that the expense limitation
contract will be continued after that date.
(4) Because Class B and Class C shares of the Pilgrim Growth and Income Fund
were not offered during the period ended June 30, 2000, expenses for
Class B and Class C have been estimated based on Class A expenses.
(5) Prior to November 6, 2000, the Class A distribution fee was 0.50% and the
shareholder servicing fee was 0.25% of net assets.
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of ING Growth & Income Fund that are transferred
to Pilgrim Growth and Income Fund in connection with the Reorganization may be
sold. Such sales may result in increased transaction costs for Pilgrim Growth
and Income Fund, and the realization of taxable gains or losses for Pilgrim
Growth and Income Fund.
9
<PAGE>
EXAMPLES. The examples are intended to help you compare the cost of investing in
each of the Funds. The examples assume that you invest $10,000 in each Fund for
the time periods indicated and then redeem all of your shares at the end of
those periods. 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 assumptions, you would pay the following expenses if
you redeem your shares at the end of each period shown. Your actual costs may be
higher or lower.
<TABLE>
<CAPTION>
PRO FORMA:
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND 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 $745 $1,100 $1,479 $2,539 $698 $958 $1,237 $2,031 $692 $940 $1,207 $1,967
Class B 745 1,055 1,491 *2,596 706 937 1,293 *2,166 700 918 1,262 *2,102
Class C 345 755 1,291 2,756 306 637 1,093 2,358 300 618 1,062 2,296
</TABLE>
----------
* The ten year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the eighth year following the date
of purchase.
** Estimated.
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
PRO FORMA:
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND 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 $745 $1,100 $1,479 $2,539 $698 $958 $1,237 $2,031 $692 $940 $1,207 $1,967
Class B 245 755 1,291 *2,596 206 637 1,093 *2,166 200 618 1,062 *2,102
Class C 245 755 1,291 2,756 206 637 1,093 2,358 200 618 1,062 2,296
</TABLE>
----------
* The ten year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the eighth year following the date
of purchase.
** Estimated.
GENERAL INFORMATION
All shares of Pilgrim Growth and Income 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 ING
Growth & Income Fund held by that shareholder immediately prior to the
Reorganization.
In addition, the period that the shareholder held shares of ING Growth &
Income Fund will be included in the holding period of Pilgrim Growth and Income
Fund shares for purposes of calculating any contingent deferred sales charge.
Similarly, Class B shares of Pilgrim Growth and Income Fund issued to a
shareholder in connection with the Reorganization will convert to Class A shares
eight years after the date that the Class B shares of ING Growth & Income Fund
were purchased by the shareholder. Pilgrim Growth and Income Fund and ING Growth
& Income Fund are each subject to the sales load structure described in the
table below.
10
<PAGE>
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 5.75%(1) None None
Maximum deferred sales charge (load) (as a percentage
of the lower of original purchase price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
</TABLE>
----------
(1) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" in Appendix C.
(2) 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.
(3) Imposed upon redemptions within 6 years of purchase. The fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in Appendix C and "Shareholder Guide -- Sales Charge
Calculation" in the Pilgrim Prospectus.
(4) Imposed upon redemptions within 1 year from purchase.
Neither Pilgrim Growth and Income Fund nor ING Growth & Income Fund have
any redemption fees, exchange fees or sales charges on reinvested dividends.
SPECIAL RULES FOR CLASS A SHARES OF ING GROWTH & INCOME FUND
Prior to November 6, 2000, the contingent deferred sales charge on
purchases of Class A shares of ING Growth & Income Fund in excess of $1 million
was different than the contingent deferred sales charge on similar purchases of
Pilgrim Growth and Income Fund. Shareholders of ING Growth & Income Fund that
purchased Class A shares subject to a contingent deferred sales charge prior to
November 6, 2000 will continue to be subject to the contingent deferred sales
charge in place when those shares were purchased. The contingent deferred sales
charge on such purchases before and after November 6, 2000 were as follows:
<TABLE>
<CAPTION>
TIME PERIOD DURING
CDSC WHICH CDSC APPLIES
------------------------- ----------------------------
11/06/00 BEFORE 11/06/00 BEFORE
AND AFTER 11/06/00 AND AFTER 11/06/00
--------- -------- --------- --------
<S> <C> <C> <C> <C>
CDSC on Purchases of:
$1,000,000 to $2,499,999 1.00% 1.00% 24 Months 12 Months
$2,500,000 to $4,999,999 0.50% 1.00% 12 Months 12 Months
$5,000,000 and over 0.25% 1.00% 12 Months 12 Months
</TABLE>
ADDITIONAL INFORMATION ABOUT PILGRIM GROWTH AND INCOME FUND
INVESTMENT PERSONNEL
Pilgrim Growth and Income Fund is managed by Alan H. Wapnick. Mr. Wapnick
is Senior Vice President and Senior Portfolio Manager of Pilgrim Growth and
Income Fund and has been managing the Fund's portfolio since January, 1994. He
joined Lexington Management Corporation ("LMC") (which was acquired by ING
Pilgrim's parent company in July, 2000) in 1986. Prior to joining LMC, Mr.
Wapnick was an equity analyst with Merrill Lynch, J.W. Seligman, Dean Witter and
most recently Union Carbide Corporation.
11
<PAGE>
PERFORMANCE OF PILGRIM GROWTH AND INCOME FUND
The bar chart and table that follow provide an indication of the risks of
investing in Pilgrim Growth and Income Fund by showing (on a calendar year
basis) changes in Pilgrim Growth and Income Fund's annual total return from year
to year and by showing (on a calendar year basis) how Pilgrim Growth and Income
Fund's average annual returns for one year, five years, ten years and since
inception compare to those of the S&P 500 Index. The information in the bar
chart is based on the performance of the Class A shares of Pilgrim Growth and
Income 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 Fund's past performance is not necessarily an
indication of how the Fund will perform in the future. Total returns include
reinvestment of dividends and capital gains distributions, if any. All indices
are unmanaged.
CALENDAR YEAR-BY-YEAR RETURNS %(1) (2)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-10.27% 24.87% 12.36% 13.22% -3.11% 22.57% 26.46% 30.36% 21.42% 15.54%
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was up 21.95% for the quarter ended December 31, 1998, and the Fund's worst
quarterly performance was down 14.87% for the quarter ended September 30,
1990. The Fund's year-to-date return as of September 30, 2000 was up 7.85%.
(2) Prior to July 26, 2000, Lexington served as investment adviser to the
Pilgrim Growth and Income Fund. Lexington was acquired by the parent of ING
Pilgrim Investments on July 26, 2000. Alan H. Wapnick has been primarily
responsible for managing the Fund since January 1994, and continued to
manage after the July 26th transaction. Effective July 31, 2000, the Fund's
outstanding shares were classified as "Class A" shares.
The table below shows what the average annual total returns of Pilgrim
Growth and Income 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 Pilgrim Growth and Income 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. Pilgrim Growth and
Income Fund's performance reflected in the table assumes the deduction of the
maximum sales charge in all cases.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999(1)
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(4)
------ ------- -------- ------------
<S> <C> <C> <C> <C>
Pilgrim Growth and Income Fund - Class A (2) 8.79% 21.69% 13.81% 4.44%
S&P 500 Index (3) 21.04% 28.56% 18.21% 12.28%
</TABLE>
----------
(1) This table shows performance of the Class A shares of the Fund. Class B and
Class C shares were not offered during the period ended December 31, 1999.
(2) Reflects deduction of sales charge of 5.75%.
(3) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(4) Pilgrim Growth and Income Fund commenced operations on February 11, 1959 as
the Lexington Growth and Income Fund prior to being acquired by Pilgrim on
July 26, 2000.
12
<PAGE>
The table below shows the performance of Pilgrim Growth and Income Fund if
sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999(1)
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(2)
------ ------- -------- ------------
<S> <C> <C> <C> <C>
Pilgrim Growth and Income Fund - Class A 15.54% 23.17% 14.62% 4.59%
</TABLE>
----------
(1) This table shows performance of the Class A shares of the Fund. Class B and
Class C shares were not offered during the period ended December 31, 1999.
(2) Pilgrim Growth and Income Fund commenced operations on February 11, 1959 as
the Lexington Growth and Income Fund prior to being acquired by Pilgrim on
July 26, 2000.
For a discussion by the adviser regarding the performance of Pilgrim Growth
and Income Fund for the year ended December 31, 1999, see Appendix A to this
Proxy Statement/Prospectus. Additional information about Pilgrim Growth and
Income 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 ING Growth & Income Fund to
Pilgrim Growth and Income Fund in exchange for shares of Pilgrim Growth and
Income Fund. ING Growth & Income Fund will distribute the shares of Pilgrim
Growth and Income Fund received in the exchange to the shareholders of ING
Growth & Income Fund and then ING Growth & Income Fund will be liquidated.
After the Reorganization, each shareholder of ING Growth & Income Fund will
own shares in Pilgrim Growth and Income Fund having an aggregate value equal to
the aggregate value of each respective Class of shares in ING Growth & Income
Fund held by that shareholder as of the close of business on the business day of
the Closing. Shareholders of the following Classes of shares of ING Growth &
Income Fund will receive shares of the corresponding Class of Pilgrim Growth and
Income Fund.
ING GROWTH & INCOME FUND PILGRIM GROWTH AND INCOME FUND
------------------------ ------------------------------
Class A Class A
Class B Class B
Class C Class C
In the interest of economy and convenience, shares of Pilgrim Growth and Income
Fund generally will not be represented by physical certificates, unless you
request one in writing.
Until the Closing, shareholders of ING Growth & Income Fund will continue
to be able to redeem their shares. Redemption requests received after the
Closing will be treated as requests received by Pilgrim Growth and Income 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 of the shareholders of ING Growth &
Income 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 necessary, proper or advisable to consummate and make effective the
13
<PAGE>
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 ING Funds and various Pilgrim
Funds. These reorganizations are occurring in connection with the integration of
the ING Funds and Pilgrim Funds, as part of which the distributor,
administrator, and other service providers of the ING Funds have been changed to
those of the Pilgrim Funds. In September, 2000, ING Groep N.V., the indirect
parent company of IMFC, the investment adviser to the ING Funds, acquired
ReliaStar Financial Corp., the indirect parent company of ING Pilgrim
Investments, the investment adviser to the Pilgrim Funds. Management of the ING
Funds and the Pilgrim Funds have proposed the consolidation of a number of the
ING Funds and Pilgrim Funds that they believe have similar or compatible
investment policies. The proposed reorganizations are designed to reduce the
substantial overlap in funds offered by both the ING Funds and Pilgrim Funds,
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios within the same fund group. IMFC and ING Pilgrim
Investments also believe 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 integration of the ING Funds and the Pilgrim Funds is expected to
provide further benefits to shareholders of the ING Funds because shareholders
will have the ability to exchange into Pilgrim Funds that offer the same Class
of shares. For information about a Pilgrim Fund, call the Pilgrim Funds at
1-800-992-0180 to request a prospectus. You should read a fund's prospectus
before investing in the fund.
The proposed Reorganization was presented to the Board of Trustees of ING
Funds Trust, on behalf of ING Growth & Income Fund, for consideration at a
meeting held on October 25, 2000 and for approval at a meeting held on November
16, 2000. For the reasons discussed below, the Trustees, including all of the
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of ING Funds Trust, determined that the interests of the
shareholders of ING Growth & Income Fund will not be diluted as a result of the
proposed Reorganization, and that the proposed Reorganization is in the best
interests of ING Growth & Income Fund and its shareholders.
The Reorganization will allow ING Growth & Income Fund's shareholders to
continue to participate in a professionally-managed portfolio which seeks to
achieve an objective of appreciation or growth of capital. As shareholders of
Pilgrim Growth and Income Fund, these shareholders will be able to exchange into
other mutual funds in the group of Pilgrim Funds that offer the same Class of
shares in which such shareholder is currently invested. A list of the Pilgrim
Funds and Classes available after the Reorganization is contained in Appendix D.
BOARD CONSIDERATIONS. The Board of Trustees of ING Funds Trust, on behalf
of ING Growth & Income Fund, in recommending the proposed transaction,
considered a number of factors, including the following:
(1) the plans of management to integrate the ING Funds and the Pilgrim
Funds;
(2) expense ratios and information regarding fees and expenses of ING
Growth & Income Fund and Pilgrim Growth and Income Fund, including the
expense limitation contract offered by IMFC for ING Growth & Income
Fund;
(3) estimates that show that combining the Funds is expected to result in
lower expense ratios in the absence of management subsidies, because
of economies of scale expected to result from an increase in the asset
size of the reorganized Fund;
(4) the Reorganization would not dilute the interests of ING Growth &
Income Fund's current shareholders;
14
<PAGE>
(5) the relative investment performance and risks of Pilgrim Growth and
Income Fund as compared to ING Growth & Income Fund;
(6) the similarity of Pilgrim Growth and Income Fund's investment
objectives, policies and restrictions with those of ING Growth &
Income Fund;
(7) the investment resources of ING Pilgrim Investments, and the
distribution capabilities of ING Pilgrim Securities, Inc., distributor
of the Pilgrim Growth and Income Fund;
(8) the quality and caliber of services that have been enjoyed by
shareholders of the Pilgrim Growth and Income Fund;
(9) alternatives to combining the Funds; and
(10) the tax-free nature of the Reorganization to ING Growth & Income Fund
and its shareholders.
THE TRUSTEES OF ING FUNDS TRUST, ON BEHALF OF ING GROWTH & INCOME FUND,
RECOMMEND THAT SHAREHOLDERS APPROVE THE REORGANIZATION WITH PILGRIM GROWTH AND
INCOME 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 ING Growth & Income Fund nor its shareholders nor Pilgrim
Growth and Income 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 ING Funds Trust and Pilgrim Growth and Income
Fund, Inc.
Immediately prior to the Reorganization, ING Growth & Income Fund will pay
a dividend or dividends which, together with all previous dividends, will have
the effect of distributing to its shareholders all of ING Growth & Income 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 ING
Growth & Income Fund's shareholders.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, adviser to Pilgrim
Growth and Income Fund, 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. Pilgrim Growth and Income Fund, Inc. is a corporation
organized under the laws of the State of Maryland. ING Growth & Income Fund is a
series of ING Funds Trust, which is a Delaware business trust. ING Funds Trust
and Pilgrim Growth and Income Fund, Inc. are governed by a Board of Trustees and
a Board of Directors, respectively. ING Funds Trust's Board of Trustees consists
of four Trustees and Pilgrim Growth and Income Fund, Inc.'s Board of Directors
consists of eleven directors.
DISTRIBUTOR. ING Pilgrim Securities, Inc. (the "Distributor"), whose
address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
principal distributor for both Funds.
15
<PAGE>
The Pilgrim Growth and Income Fund also offers Class Q shares, which have
different sales charges and other expenses that may affect their performance.
You can obtain more information about this Class by calling 1-800-992-0180.
DIVIDENDS AND OTHER DISTRIBUTIONS. Pilgrim Growth and Income Fund pays
dividends from net investment income on a semi-annual basis. Pilgrim Growth and
Income Fund distributes capital gains, if any, on an annual basis. ING Growth &
Income Fund pays dividends from net investment income, if any, on a quarterly
basis 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 ING Growth & Income Fund's
shareholders, then as soon as practicable before the Closing, ING Growth &
Income 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:
<TABLE>
<CAPTION>
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
<S> <C> <C> <C>
ING GROWTH & INCOME FUND
Class A $ 40,156,748 $ 12.01 3,344,818
Class B $ 2,103,872 $ 11.89 176,985
Class C $ 1,985,494 $ 11.91 166,745
Class X (1) $ 2,078,643 $ 11.89 174,854
PILGRIM GROWTH AND INCOME FUND(2)
Class A $251,330,954 $ 22.77 11,039,951
PRO FORMA - PILGRIM GROWTH AND INCOME FUND
INCLUDING ING GROWTH & INCOME FUND
Class A $291,487,702 $ 22.77 12,803,532
Class B $ 4,182,515 $ 22.77 183,685
Class C $ 1,985,494 $ 22.77 87,198
</TABLE>
(1) Class X shares merged into Class B on November 16, 2000.
(2) Class B and Class C shares of Pilgrim Growth and Income Fund were not
offered as of June 30, 2000.
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 December __, 2000.
Shareholders of ING Growth & Income 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 Funds Trust
and its affiliates, without additional compensation, may solicit proxies in
person or by telephone, telegraph, facsimile, or oral communication.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with ING Growth & Income Fund, a written revocation or duly
executed proxy bearing a later date. In addition, any shareholder who attends
the Special Meeting in person may vote by ballot at the Special Meeting, thereby
canceling any proxy previously given. The persons named in the accompanying
proxy card will vote as directed by the proxy card, but in the absence of voting
directions on any proxy card that is signed and returned, they intend to vote
16
<PAGE>
"FOR" the Reorganization proposal and may vote in their discretion with respect
to other matters not now known to the Board of Trustees of ING Funds Trust that
may be presented at the Special Meeting.
VOTING RIGHTS
Shareholders of ING Growth & Income 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 ING Growth & Income Fund at the close of business on
December __, 2000 (the "Record Date") will be entitled to be present and give
voting instructions for ING Growth & Income Fund at the Special Meeting with
respect to their shares owned as of that Record Date. As of the Record Date,
______ shares of ING Growth & Income Fund were outstanding and entitled to vote.
Approval of the Reorganization Agreement requires the vote of a majority of
the Shares present in person or by proxy of the ING Growth & Income 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 Special Meeting for purposes of determining a quorum. However, abstentions
and broker non-votes will not be deemed represented at the Special 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.
The ING Growth & Income Fund expects that, before the Special 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, the ING Growth & Income 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 Special Meeting on behalf
of their customers and beneficial owners under the rules of the New York Stock
Exchange.
As of December 1, 2000, ING America Insurance Holdings, Inc. ("ING") owns
66.44% of the outstanding voting shares of ING Growth & Income Fund, and
therefore controls the Fund. ING intends to vote its shares in favor of the
Reorganization, in which case the Reorganization will be approved.
To the knowledge of ING Funds Trust, as of November 1, 2000, no current
Trustee owns 1% or more of the outstanding shares of ING Growth & Income Fund,
and the officers and Trustees own, as a group, less than 1% of the shares of ING
Growth & Income Fund.
Appendix E hereto lists the persons that, as of December 1, 2000, owned
beneficially or of record 5% or more of the outstanding shares of any Class of
ING Growth & Income Fund or Pilgrim Growth and Income Fund.
17
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OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
ING Funds Trust does not know of any matters to be presented at the Special
Meeting other than those described in this Proxy Statement/Prospectus. If other
business should properly come before the Special Meeting, the proxyholders will
vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
ING Funds Trust 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 ING Funds Trust'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.
REPORTS TO SHAREHOLDERS
ING Funds Trust will furnish, without charge, a copy of the most recent
Annual Report regarding ING Growth & Income Fund and the most recent Semi-Annual
Report succeeding the Annual Report, if any, on request. Requests for such
reports should be directed to ING Funds Trust at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258 or at 1-800-992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE SPECIAL 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
December __, 2000
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
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APPENDIX A
PILGRIM GROWTH AND INCOME FUND, INC.
Set forth below is an excerpt from Pilgrim Growth and Income Fund, Inc.'s
(formerly Lexington Growth and Income Fund, Inc.) Annual Report, dated December
31, 1999, regarding the Fund's performance.
The Fund appreciated 15.54%* for the year ended December 31, 1999. This
compares to a 22.45% return for the average multi-cap core fund monitored by
Lipper, Inc. during this period. While we are disappointed with the below
average return of the Fund, the first in the past four years, we are encouraged
by the improved performance in the final quarter of the year, when the Fund's
18.44%* return exceeded the average for the Lipper group which was 17.95%.
Stocks turned in another record performance in 1999, with the unmanaged
Standard & Poor's 500 Index returning 21.04%, a record breaking fifth
consecutive year of 20% plus returns. Most notable in that performance was how
narrow it was. Only thirty of the 500 stocks in that Index contributed all the
year's return, with nearly half the stocks actually down for the year. This
enthusiasm for only a few stocks has raised their valuation to lofty levels,
with a concomitant increase in risk. At the same time this has created
opportunities in many of the other stocks that have been ignored by investors.
In selecting stocks for the Fund, we focus on three key characteristics:
strong earnings and price momentum, well managed companies with solid market
positions, and attractive relative valuation. This last factor has caused us the
most difficulty this past year and resulted in a subpar performance. Our
adherence to a valuation discipline has caused us to miss some successful stocks
as well as keep under control the portfolio's exposure to several richly valued
stocks as their price soared. While penalizing returns in the near term we
believe this attention to controlling risk will enhance long term returns.
Looking forward, the environment for stocks continues quite favorable.
World economic growth is accelerating and is now being shared by virtually all
regions. The U.S. economy has defied the Federal Reserve's attempts to use
higher interest rates to slow the rate of growth. Despite three interest rate
hikes, GDP growth is still running at 4-5%, well above the Fed's target and
apparent comfort zone. We believe the Federal Reserve will be forced to raise
rates more aggressively in 2000 and that will put pressure on stocks,
particularly those that are so richly valued. However, strong worldwide growth
improves the outlook for corporate earnings thus supporting stock values.
Putting these two divergent forces together suggests to us an environment
leading to a more modest potential return for stocks than the recent past, but
the opportunity for more stocks to participate.
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Risks to this scenario, in our view, come from two opposite directions. One
would be that the Federal Reserve and other Central Banks do not act to slow
world growth resulting in economic boom conditions and runaway inflation. On the
other side is the prospect of the Central Banks acting too aggressively to slow
growth leading to a recession. We prefer to believe the middle ground will be
achieved, with higher than normal growth coexisting with lower than normal
inflation, the result of the deflationary implications of the expanding
application of technology to a variety of businesses.
Reflecting this outlook, we have been adding to the portfolio's exposure in
the basic materials and capital goods sectors where earnings growth should
benefit from the resurgent world economy and valuations are most attractive. The
funds to do this with have come from paring back positions in some of the most
expensive stocks in the portfolio, most notably some of the technology holdings
that have been big winners and eliminating some poorly performing issues. We are
confident this will restore above average performance to your Fund.
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.
Comparison of change in value of a $10,000 investment in the Fund
and the unmanaged Standard & Poor's 500 Stock Price Index
[LINE GRAPH]
Standard & Poor's
Growth and 500 Stock
Date Income Fund Price Index
---- ----------- -----------
12/31/89 $10,000 $10,000
12/31/90 $8,973 $9,690
12/31/91 $11,205 $12,636
12/31/92 $12,590 $13,597
12/31/93 $14,254 $14,965
12/31/94 $13,811 $15,161
12/31/95 $16,928 $20,851
12/31/96 $21,406 $25,641
12/31/97 $27,904 $34,197
12/31/98 $33,880 $44,019
12/31/99 $39,145 $53,280
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Average Annual Standard Total Returns
for the Period Ending 12/31/99
Annualized Growth Standard & Poor's 500
Returns and Income Fund Stock Price Index
------- --------------- -----------------
1 YR 15.54% 21.04%
5 YR 23.17% 28.56%
10 YR 14.62% 18.21%
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 Price Index.
Results for the Fund and the Standard and Poor's Stock Index
include the reinvestment of all dividend and capital gain
distributions. 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.
*15.54%, 23.17% and 14.62% 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 at their
original cost. Total return represents past performance and is not predictive of
future results. There is no guarantee the Fund can achieve its objective.
Portfolio Summary as of December 31, 1999
[PIE CHART]
Asset Allocation
Common Stocks 100.0%
[BAR GRAPH]
Top Sector Holdings
Electrical & Electronics 20.7%
Telecommunications 13.8%
Financial Services 12.1%
Energy Sources 9.8%
Consumer Nondurable Goods 6.7%
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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 Growth and Income
Fund, Inc., a Maryland corporation (the "Corporation") with its principal place
of business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on
behalf of its sole series, Pilgrim Growth & Income Fund (the "Acquiring Fund"),
and ING Funds Trust, a Delaware business trust (the "ING Trust") with its
principal place of business at 1475 Dunwoody Drive, West Chester, Pennsylvania
19380, on behalf of its series, ING Growth & Income 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, Class B, and
Class C voting 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 the Corporation 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 Trustees of the ING Trust 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, Class B,
and Class C 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 forth in paragraph 1.3. Such transactions shall
take place at the closing provided for in paragraph 3.1 (the "Closing").
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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 each class of its 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, Class B, and Class C Acquiring Fund Shares to be so credited to Class
A, Class B, and Class C Acquired Fund Shareholders shall, with respect to each
class, be equal to the aggregate net asset value of the Acquired Fund shares of
that same class 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, Class B, and Class C 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, Class B, and Class C 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 instead
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.
2.2 The net asset value of a Class A, Class B, and Class C 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 of additional information
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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, Class B, and Class C 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, Class B, and Class C
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
Acquiring Fund's record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree. 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 State Street Bank and Trust Company, 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 for examination by the Acquired Fund
Custodian to the custodian for the Acquiring Fund 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 each securities 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, Class B, and Class C 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.
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 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 Trustees
of the Acquired Fund or the Board of Directors of the Acquiring Fund, accurate
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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 as has been disclosed to the Acquiring Fund in a written
instrument executed by an officer of the ING Trust, the ING Trust on behalf of
the Acquired Fund represents and warrants to the Corporation as follows:
(a) The Acquired Fund is duly organized as a series of the ING Trust, which
is a business trust duly organized, validly existing and in good standing under
the laws of the State of Delaware, with power under ING Trust's Declaration of
Trust to own all of its properties and assets and to carry on its business as it
is now being conducted;
(b) ING Trust 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 the ING Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the ING
Trust 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
the ING Trust on behalf of the Acquired Fund is a party or by which it is bound;
(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 the
Corporation on behalf of the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
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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. ING
Trust 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 Schedule of Investments of the Acquired Fund at
October 31, 1999 have been audited by Ernst & Young LLP, independent
accountants, 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 October 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 by the ING Trust 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.
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 Trustees of the ING Trust on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
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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 the Corporation, the Corporation on behalf
of the Acquiring Fund represents and warrants to the ING Trust as follows:
(a) The Acquiring Fund is duly organized as a series of the Corporation,
which is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland, with power under the Corporation'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 Corporation 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
the shares of the Acquired 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;
(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;
B-6
<PAGE>
(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 the Corporation's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Corporation 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 the Corporation 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 the ING
Trust 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 the Acquiring Fund's knowledge, threatened against the Acquiring
Fund or any of the Acquiring Fund's properties or assets that, if adversely
determined, would materially and adversely affect the Acquiring Fund's financial
condition or the conduct of its business. The Corporation 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 affect the Acquiring Fund's business or the Acquiring Fund's 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 KMPG 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
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 that
includes 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
B-7
<PAGE>
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 the Corporation 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, Class B, and Class C 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 the Corporation 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;
(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; and
(q) Either the Acquiring Fund or ING Pilgrim Investments, Inc. shall
purchase and maintain a Directors and Officers errors and omissions insurance
policy ("D&O/E&O Policy") for the benefit of Joseph Hankin and Jack Rehm
containing substantially the same form and amount of coverage as each had under
a D&O/E&O Policy of the Acquired Fund, such D&O/E&O Policy to be effective as of
the Closing Date and continuing until the sixth (6th) anniversary of the Closing
Date.
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 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, Class B, and Class C
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.
B-8
<PAGE>
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, Class B, and Class C 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 ING Trust on behalf of the Acquired Fund covenants that ING Trust 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
the Corporation on behalf of the Acquiring Fund may reasonably deem necessary or
desirable in order to vest in and confirm (a) the ING Trust's, on behalf of the
Acquired Fund's, title to and possession of the Acquiring Fund Shares to be
delivered hereby, and (b) the Corporation'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 the ING Trust on behalf of the Acquired Fund to
consummate the transactions provided for herein shall be subject, at ING Trust's
election, to the performance by the Corporation on behalf of the Acquiring Fund
of all the obligations to be performed by it hereunder on or before the Closing
Date, and, in addition thereto, the following further conditions:
6.1 All representations and warranties of the Corporation 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 The Corporation shall have delivered to ING Trust a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to ING Trust and dated as
of the Closing Date, to the effect that the representations and warranties of
the Corporation 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 the
ING Trust shall reasonably request;
B-9
<PAGE>
6.3 The Corporation 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 the Corporation 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 the Corporation on behalf of the Acquiring Fund to
complete the transactions provided for herein shall be subject, at the
Corporation's election to the performance by the ING Trust 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 the ING Trust 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 The ING Trust 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 the ING Trust;
7.3 The ING Trust 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 the
Corporation and dated as of the Closing Date, to the effect that the
representations and warranties of the ING Trust 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 the Corporation shall reasonably
request;
7.4 The ING Trust 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 the ING Trust on behalf of the
Acquired Fund, on or before the Closing Date;
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 the ING Trust on behalf of the Acquired
Fund or the Corporation 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:
B-10
<PAGE>
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 the ING Trust's Declaration
of Trust, By-Laws, applicable Delaware 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 ING
Trust nor the Corporation 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
the Corporation or the ING Trust 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 the
ING Trust and the Corporation 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 the Corporation and the ING Trust.
Notwithstanding anything herein to the contrary, neither the Corporation nor the
ING Trust may waive the condition set forth in this paragraph 8.5.
9. INDEMNIFICATION
9.1 The Corporation, out of the Acquiring Fund's Assets, agrees to
indemnify and hold harmless the ING Trust and each of the ING Trust's Trustees
and officers from and against any and all losses, claims, damages, liabilities
or expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally the ING
Trust or any of its Trustees or officers may become subject, insofar as any such
loss, claim, damage, liability or expense (or actions with respect thereto)
arises out or or is based on any breach by the Corporation of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
9.2 The ING Trust, out of the Acquired Fund's Assets, agrees to indemnify
and hold harmless the Corporation and each of its Directors and officers from
and against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, the payment of reasonable legal fees and
reasonable costs of investigation) to which jointly and severally the
Corporation or any of its Directors or officers may become subject, insofar as
any such loss, claim, damage, liability or expense (or actions with respect
thereto) arises out or or is based on any breach by the ING Trust of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
B-11
<PAGE>
10. BROKERAGE FEES AND EXPENSES
10.1 The Corporation on behalf of the Acquiring Fund and ING Trust 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.
10.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquired
and Acquiring Funds, and (2) half are borne by the Acquired and Acquiring Funds
and will be paid by the Acquired Fund and Acquiring Fund pro rata based upon the
relative net assets of the Acquired 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.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The Corporation and the ING Trust 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.
11.2 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 and the obligations of each of the
Acquired Fund and Acquiring Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by either party by (i) mutual agreement of the parties, or (ii)
by either party if the Closing shall not have occurred on or before ___________
__, 200_, unless such date is extended by mutual agreement of the parties, or
(iii) by either party if the other party shall have materially breached its
obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Directors/Trustees or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
B-12
<PAGE>
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of the ING Trust
and the Corporation; 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, Class B, and
Class C Acquiring Fund Shares to be issued to the Acquired Fund Shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
14. 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 the ING
Trust, 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, attn: Louis
S. Citron, in each case with a copy to Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, New York 10169, attn: Steven R. Howard;
and to the Corporation, 7337 East 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.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 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.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 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.
15.4 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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<PAGE>
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.
PILGRIM GROWTH AND INCOME FUND, INC.
on behalf of its Pilgrim Growth and
Income Fund Series
Attest:
_______________________________ By: _______________________________
SECRETARY Its: _______________________________
ING FUNDS TRUST on behalf of its
ING GROWTH & INCOME FUND series
Attest:
_______________________________ By: _______________________________
SECRETARY Its: _______________________________
B-14
<PAGE>
APPENDIX C
ADDITIONAL INFORMATION REGARDING PILGRIM GROWTH AND INCOME FUND
(THE "FUND")
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to three separate Classes of the
Pilgrim Growth and Income Fund(*): Class A, Class B, and Class C, each of which
represents an identical interest in the Fund's investment portfolio, but are
offered with different sales charges and distribution (Rule 12b-1) and service
fee arrangements. 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 will be the same as those that apply to ING Growth & Income Fund
shares held by you immediately prior to the Reorganization, and the period that
you held shares of ING Growth & Income 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 are shown
and contrasted in the chart below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge on Purchases 5.75%(1) None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00%(4)
Annual Service and Distribution (12b-1) Fees (5) 0.25% 1.00% 1.00%
Maximum Purchase Unlimited $250,000 Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A
</TABLE>
----------
(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) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in this Appendix C.
(4) Imposed upon redemptions within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund issued to shareholders of ING Growth & Income
Fund in the Reorganization will convert to Class A shares in the eighth
year from the original date of purchase of the Class B shares of ING Growth
& Income Fund.
The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Orders for Class B
shares in excess of $250,000 will be accepted as orders for Class A shares or
declined.
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
----------
(*) Only the share Classes affected by the Reorganization are discussed in the
Shareholder Guide although other share Classes are available.
C-1
<PAGE>
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%
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 ING Growth & Income Fund that were subject to
a CDSC at the time of the Reorganization, will be subject to a CDSC of up to 1%
for up to 12 months from the date of purchase of the original shares of ING
Growth & Income 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 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 1-800-992-0180 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 (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 1-800-992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim Funds 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.
C-2
<PAGE>
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 1-800-992-0180, or see
the Statement of Additional Information for the Fund.
CLASS B SHARES: DEFERRED SALES CHARGE ALTERNATIVE. Class B shares are
offered at their NAV per share without any initial sales charge. Class B shares
that are redeemed within six years of purchase, however, will be subject to a
CDSC as described in the table that follows. Class B shares of the Fund are
subject to a distribution fee at an annual rate of 1.00% of the average daily
net assets of the Class, which is higher than the distribution fees of Class A
shares. The higher distribution fees mean a higher expense ratio, so Class B
shares pay correspondingly lower dividends and may have a lower NAV than Class A
shares. Orders for Class B shares in excess of $250,000 will be accepted as
orders for Class A shares or declined. The amount of the CDSC is based on the
lesser of the NAV of the Class B shares at the time of purchase or redemption.
There is no CDSC on Class B shares acquired through the reinvestment of
dividends and capital gains distributions. The CDSCs are as follows:
YEAR OF REDEMPTION AFTER PURCHASE CDSC
--------------------------------- ----
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
After Sixth Year None
Class B shares will automatically convert into Class A shares approximately
eight years after purchase. Class B shares of the Fund issued in connection with
the Reorganization with respect to Class B shares of ING Growth & Income Fund
will convert to Class A shares eight years after the purchase of the original
shares of ING Growth & Income Fund. For additional information on the CDSC and
the conversion of Class B, see the Fund's Statement of Additional Information.
CLASS C SHARES. Class C shares are offered at their NAV per share without
an initial sales charge. Class C shares may be subject to a CDSC of 1% if
redeemed within one year of purchase. The amount of the CDSC is based on the
lesser of the NAV of the Class C shares at the time of purchase or redemption.
There is no CDSC on Class C shares acquired through the reinvestment of
dividends and capital gains distributions.
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.
2) The CDSC also may be waived for Class B shares redeemed pursuant to a
Systematic Withdrawal Plan (as described in the Fund's Prospectus), up to a
maximum of 12% per year of a shareholder's account value based on the value of
the account at the time the plan is established and annually thereafter,
provided all dividends and distributions are reinvested and the total
redemptions do not exceed 12% annually.
3) The CDSC also will be waived in the case of mandatory distributions from
a tax-deferred retirement plan or an IRA.
C-3
<PAGE>
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at 1-800-992-0180.
REINSTATEMENT PRIVILEGE. Class B and Class C shareholders who have redeemed
their shares in any open-end Pilgrim Fund may reinvest some or all of the
proceeds in the same share Class within 90 days without a sales charge.
Reinstated Class B and Class C shares will retain their original cost and
purchase date for purposes of the CDSC. This privilege can be used only once per
calendar year. See the Statement of Additional Information for the Fund for
details or contact the Shareholder Servicing Agent at 1-800-992-0180 for more
information.
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 Distributor may
receive from the Fund an annual fee in connection with the offering, sale and
shareholder servicing of the Fund's Class A, Class B, and Class C 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 and distribution fees up to
the annual rates set forth below (calculated as a percentage of the Fund's
average daily net assets attributable to that Class):
SERVICING FEE DISTRIBUTION FEE
------------- ----------------
Class A 0.25% None
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Fees paid under the Rule 12b-1 Plan may be used to cover the expenses of
the Distributor from the sale of Class A, Class B, or Class C 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. 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 IRA's).
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.
C-4
<PAGE>
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. Eastern 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 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, and short-term debt securities, and 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. For information on
valuing foreign securities, see the Fund's Statement of Additional Information.
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 1-800-992-0180.
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 1-800-992-0180. 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 next
NAV determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth above under "Purchasing 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
C-5
<PAGE>
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.
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
1-800-992-0180. 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.
Shares of one Class of the Fund generally, may be exchanged for shares of
that same Class 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 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. 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
C-6
<PAGE>
current value of at least $10,000. For additional information, contact the
Shareholder Servicing Agent at 1-800-992-0180, or see the Fund's Statement of
Additional Information.
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. 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. 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. The
agreement also requires ING Pilgrim Investments to assist in managing and
supervising all aspects of the general day-to-day business activities and
operations of the Fund, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services. 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
C-7
<PAGE>
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.
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 semi-annually
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, B or C account in the Fund invested into a Pilgrim Fund which
offers Class A, B or C shares. Both accounts must be of the same Class.
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 on 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.
C-8
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the table below, except for the six months ended June 30,
2000, has been audited by KPMG LLP, independent auditors. Financial highlights
are not included for Class B or Class C shares because those classes were not
offered as of June 30, 2000.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------
Six
months
ended Year Ended December 31,
June 30, 2000 ---------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 22.38 21.91 20.27 18.56 15.71 14.36
Net investment income (loss) $ -- 0.05 -- 0.05 0.07 0.22
Net realized and unrealized gain (loss) from
investment operations $ 0.39 3.33 4.30 5.46 4.08 3.00
Total income (loss) from investment operations $ 0.39 3.38 4.30 5.51 4.15 3.22
Less distributions:
Distributions from net investment income $ -- 0.05 -- 0.07 0.13 0.22
Distributions from net realized gains $ -- 2.86 2.66 3.73 1.17 1.65
Total distributions $ -- 2.91 2.66 3.80 1.30 1.87
Net asset value, end of period $ 22.77 22.38 21.91 20.27 18.56 15.71
Total return(1) % 1.74 15.54 21.42 30.36 26.46 22.57
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 251,331 254,532 245,790 228,037 200,309 138,901
Ratio of expenses to average net assets(2) % 1.02 0.95 1.16 1.17 1.13 1.09
Ratio of net investment income (loss) to average
net assets(2) % (0.04) 0.21 0.06 0.21 0.43 1.38
Portfolio Turnover Rate % 39.84 86.31 63.20 88.15 101.12 159.94
</TABLE>
(1) Total returns is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(2) Annualized for periods less than one year.
C-9
<PAGE>
APPENDIX D
The following is a list of the ING Funds and 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>
APPENDIX E
As of December 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of Pilgrim
Growth and Income Fund:
<TABLE>
<CAPTION>
% OF CLASS BEFORE % OF FUND BEFORE % OF FUND AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C>
First Clearing Corp FBO Class B Record Holder 6.56% 0.02%
Janice B Bungert, Acct #1323-0197
1336 E Alice Ave
Phoenix, AZ 85020
Edward D Jones Cust FBO Class B Record Holder 6.44% 0.02%
Herman M Dishongh IRA
Acct #772-92398-1-9
PO Box 2500
Maryland Heights, MO 63043
First Clearing Corp FBO Class B Record Holder 9.74% 0.03%
Jose C Dominguez MD PSP
Acct #4589-4930
4600 North Habana Ave, Ste 20
Tampa, FL 33614
NFSC FBO Class B Record Holder 9.61% 0.03%
David Harris Family Trust
Acct #C6B-028223
5001 Collins Avenue, Apt 14A
Miami Beach, FL 33140
NFSC FBO Class B Record Holder 10.81% 0.03%
Perry D Cohn
Acct #C6B-033200
2 Claridge Dr, Apt 3NE
Verona, NJ 07044
NFSC FBO Class B Record Holder 8.64% 0.02%
Annette S Cohn
Acct #C6B-033456
2 Claridge Dr, Apt 3NE
Verona, NJ 07044
NFSC FBO Class B Record Holder 8.65% 0.02%
Robert L Bergen
Acct #C6B-043621
27 Marie Major Dr
Alpine, NJ 07620
NFSC FBO Class B Record Holder 5.39% 0.01%
Ave Koznesoff
Acct #C6B-043710
500 Three Islands Blvd, Apt 202
Hallandale, FL 33009
NFSC FBO Class B Record Holder 7.31% 0.02%
Marilyn Gaba Revocable Trust
Acct #C6B-522597
15461 Pembridge Dr, Apt 107H
Delray Beach, FL 33484
NFSC FBO Class B Record Holder 9.75% 0.03%
Stanley Lefkowitz IRA
Acct #C6B-209201
1401 Kensington Woods Dr
Lutz, FL 33549
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
% OF CLASS BEFORE % OF FUND BEFORE % OF FUND AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C>
Wexford Clearing Srvs Corp FBO Class C Record Holder 18.60% 0.02%
Tucker Anthony Inc FBO
Morton I Riefberg IRA
5 Pond Ridge Rd
Danbury, CT 06811
First Clearing Corp Cust FBO Class C Record Holder 15.22% 0.01%
Robert W Edwards IRA
20 Summit Avenue
Chelmsford, MA 01824
John W Voorhis Sr Rev Trust Class C Record Holder 13.04% 0.01%
20406 Skylark Dr
Sun City West, AZ 85375
William & Shirley Burton Class C Record Holder 8.82% 0.008%
10290 Jewell Rd
Gaines, MI 48436
NFSC FBO Class C Record Holder 29.44% 0.03%
Hegeman Harris Co Inc
Arnold Kagan VP
4001 North Ocean Blvd, Penthouse 4B
Boca Raton, FL 33431
June Wilson Myers, Tod Michael Class C Record Holder 7.99% 0.007%
Batche, Mark Batche & Steven Batche
635 Madrid Blvd
Punta Gorda, FL 33950
</TABLE>
As of December 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of ING
Growth & Income Fund:
<TABLE>
<CAPTION>
% OF CLASS BEFORE % OF FUND BEFORE % OF FUND AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C>
ING America Insurance Holdings Inc Class A Record Holder 78.17% 66.44%
Investment Accounts
Attn: David S Pendergrass
5780 Powers Ferry Rd NW
Atlanta, GA 30327
State Street Bank & Trust Cust FBO Class C Record Holder 7.56% 0.33%
John M Murphy IRA
871 Shawmut Ct NW
Grand Rapids, MI 49504
State Street Bank & Trust Cust FBO Class C Record Holder 7.97% 0.35%
Robert R Wysocki IRA
741 Sligh Blvd NE
Grand Rapids, MI 49505
Dr Jonathon S Jahr & Class C Record Holder 9.94% 0.44%
Dr JamieLynn M Hanam-Jahr JTWROS
4036 Crondall Dr
Sacramento, CA 95864
</TABLE>
E-2
<PAGE>
PART B
PILGRIM GROWTH AND INCOME FUND, INC.
Statement of Additional Information
________ ___, 2000
Acquisition of the Assets and Liabilities
of ING Growth & Income Fund By and in Exchange for Shares of
(a series of ING Funds Trust) Pilgrim Growth and Income Fund, Inc.
1475 Dunwoody Drive 7337 East Doubletree Ranch Road
West Chester, Pennsylvania 19380 Scottsdale, Arizona 85258
This Statement of Additional Information is available to the Shareholders of ING
Growth & Income Fund in connection with a proposed transaction whereby all of
the assets and liabilities of ING Growth & Income Fund, a series of ING Funds
Trust, will be transferred to Pilgrim Growth and Income Fund, Inc., in exchange
for shares of Pilgrim Growth and Income Fund, Inc.
This Statement of Additional Information of Pilgrim Growth and Income 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 Growth and Income Fund,
Inc., dated July 31, 2000, as filed on July 26, 2000, and ING Funds Trust
dated November 6, 2000, as filed on November 13, 2000.
2. The Financial Statements of Pilgrim Growth and Income Fund, Inc. (formerly
the Lexington Growth and Income Fund) are included in the Annual Report of
Lexington Growth and Income Fund, Inc. dated December 31, 1999, as filed on
February 28, 2000.
3. The Financial Statements of Pilgrim Growth and Income Fund, Inc. are
included in the Semi-Annual Report of Pilgrim Growth and Income Fund, Inc.
dated June 30, 2000, as filed on August 31, 2000.
4. The Financial Statements of ING Growth & Income Fund are included in the
Annual Report of ING Funds Trust dated October 31, 1999, as filed on
December 29, 1999.
5. The Financial Statement of ING Growth & Income Fund are included in the
Semi-Annual Report of ING Funds Trust dated April 30, 2000, as filed on
July 7, 2000.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated ________ ___, 2000 relating to the reorganization of
ING Growth & Income Fund may be obtained, without charge, by writing to ING
Funds Trust 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258 or
calling 1-800-992-0180. 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>
PILGRIM ING
GROWTH AND GROWTH & PRO FORMA PRO FORMA
INCOME FUND INCOME FUND ADJUSTMENTS COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value* $ 243,914,924 $ 45,450,465 $ 289,365,389
Short-term securities 7,897,156 897,000 8,794,156
Cash 81,746 5,298 87,044
Receivable for investment securities sold -- 128,011 128,011
Receivable for fund shares sold 105,438 11,479 116,917
Dividends and interest receivable 59,421 40,418 99,839
Other assets -- 19,825 19,825
Prepaid expenses -- 14,735 14,735
------------- ------------- ------------- -------------
Total Assets 252,058,685 46,567,231 -- 298,625,916
------------- ------------- ------------- -------------
LIABILITIES:
Due to affiliate 256,298 -- 256,298
Payable for investment securities purchased -- 170,504 170,504
Payable for fund shares redeemed 159,380 3 159,383
Accrued expenses 312,053 71,967 384,020
------------- ------------- ------------- -------------
Total Liabilities 727,731 242,474 -- 970,205
------------- ------------- ------------- -------------
NET ASSETS $ 251,330,954 $ 46,324,757 $ -- $ 297,655,711
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 166,724,419 $ 40,421,334 $ 207,145,753
Accumulated net investment loss (28,964) (58,083) (87,047)
Accumulated net realized gain (loss) on investments 21,853,727 (40,862) 21,812,865
Unrealized appreciation of investments 62,781,772 6,002,368 68,784,140
------------- ------------- ------------- -------------
NET ASSETS $ 251,330,954 $ 46,324,757 $ -- $ 297,655,711
============= ============= ============= =============
CLASS A:
Net Assets $ 251,330,954 $ 40,156,748 $ 291,487,702
Shares outstanding 11,039,951 3,344,818 (1,581,237)(A) 12,803,532
Net asset value and redemption price per share $ 22.77 $ 12.01 $ 22.77
Maximum offering price per share $ 24.16 $ 12.74 $ 24.16
CLASS B:
Net Assets N/A $ 2,103,872 $ 2,078,643 (B) $ 4,182,515
Shares outstanding N/A 176,985 6,700 (B) 183,685
Net asset value and redemption price per share N/A $ 11.89 $ 22.77
Maximum offering price per share N/A $ 11.89 $ 22.77
CLASS C:
Net Assets N/A $ 1,985,494 $ 1,985,494
Shares outstanding N/A 166,745 (79,547)(A) 87,198
Net asset value and redemption price per share N/A $ 11.91 $ 22.77
Maximum offering price per share N/A $ 11.91 $ 22.77
CLASS X:
Net Assets N/A $ 2,078,643 $ (2,078,643)(B) N/A
Shares outstanding N/A 174,854 (174,854)(B) N/A
Net asset value and redemption price per share N/A $ 11.89 N/A
Maximum offering price per share N/A $ 11.89 N/A
* Cost of Securities $ 181,133,152 $ 39,448,097 $ 220,581,249
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(B) Reflects the merging of Class X into Class B.
See Accompanying Notes to Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PILGRIM ING
GROWTH AND GROWTH & PRO FORMA PRO FORMA
INCOME FUND INCOME FUND ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
30-JUN 30-JUN 30-JUN 30-JUN
2000 2000 2000 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,053,742 $ 475,861 $ 2,529,603
Interest 386,840 50,206 437,046
------------ ------------ ------------ ------------
2,440,582 526,067 2,966,649
Less: foreign tax expense 12,870 -- 12,870
------------ ------------ ------------ ------------
Total investment income 2,427,712 526,067 2,953,779
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees 1,521,967 305,364 (136,150)(A) 1,691,181
Distribution expenses
Class A 54,418 273,763 (265,642)(A) 62,539
Class B 14,027 16,052 (D) 30,079
Class C 12,020 12,020
Class X 16,052 (16,052)(D) --
Transfer agent expenses 233,424 153,002 386,426
Directors' fees 103,815 432 (93,434)(B) 10,813
Professional fees 45,123 27,222 (13,611)(B) 58,734
Shareholder reporting 41,902 16,093 57,995
Accounting expenses 173,030 50,079 (25,040)(B) 198,069
Custodian expenses 29,711 17,373 47,084
Registration fees 17,042 46,891 (23,446)(B) 40,487
Computer processing fees 24,686 -- (24,686)(C) --
Other expenses 52,499 11,435 63,934
------------ ------------ ------------ ------------
Total expenses 2,297,617 943,753 (582,009) 2,659,361
Less: expenses waived and reimbursed
by manager and distributor -- 383,507 (383,507)(A) --
------------ ------------ ------------ ------------
Net expenses 2,297,617 560,246 (198,502) 2,659,361
------------ ------------ ------------ ------------
Net investment income (loss) 130,095 (34,179) 198,502 294,418
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from:
Investments 25,126,441 (254,032) 24,872,409
Net change in unrealized appreciation of:
Investments 233,148 2,181,762 2,414,910
------------ ------------ ------------ ------------
Net gain from investments 25,359,589 1,927,730 -- 27,287,319
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 25,489,684 $ 1,893,551 $ 198,502 $ 27,581,737
============ ============ ============ ============
</TABLE>
(A) Reflects adjustment in expenses due to effects of proposed contract rate.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
(C) Reflects adjustment to concur with Pilgrim expense structure.
(D) Reflects merging of Class X into Class B.
See Accompanying Notes to Financial Statements
3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
GROWTH AND GROWTH & GROWTH AND GROWTH &
INCOME INCOME PRO FORMA INCOME INCOME PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
--------- -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK: 97.11%
AUTO TRUCKS & PARTS: 1.32%
79,000 8,800 87,800 Ford Motor Company $ 3,397,000 $ 378,400 $ 3,775,400
10,344 1,152 11,496 @ Visteon Corporation 125,417 13,970 139,387
------------ ------------ ------------
3,522,417 392,370 3,914,787
------------ ------------ ------------
BANKING: 5.11%
93,000 93,000 BankAmerica Corporation 3,999,000 3,999,000
11,400 11,400 Chase Manhattan Corp 525,113 525,113
11,100 11,100 Mellon Financial Corp 404,456 404,456
230,000 230,000 @ The Kroger Company 5,074,375 5,074,375
108,200 26,400 134,600 Wells Fargo Company 4,192,750 1,023,000 5,215,750
------------ ------------ ------------
13,266,125 1,952,569 15,218,694
------------ ------------ ------------
CAPITAL EQUIPMENT: 6.89%
72,300 72,300 Ingersoll-Rand Company 2,910,075 2,910,075
54,000 54,000 Millipore Corporation 4,070,250 4,070,250
12,050 12,050 Oracle Corporation 1,012,953 1,012,953
94,400 94,400 Parker-Hannifin Corporation 3,233,200 3,233,200
97,000 97,000 @ Sealed Air Corporation 5,080,375 5,080,375
180,000 180,000 @ Varco International 4,185,000 4,185,000
------------ ------------ ------------
19,478,900 1,012,953 20,491,853
------------ ------------ ------------
CHEMICALS: 1.30%
107,700 9,000 116,700 Dow Chemical Company 3,251,194 271,688 3,522,882
7,500 7,500 PPG Industries, Inc. 332,344 332,344
------------ ------------ ------------
3,251,194 604,032 3,855,226
------------ ------------ ------------
COMPUTERS: 4.49%
9,600 9,600 Compaq Computer Corp. 245,400 245,400
12,500 12,500 Dell Computer Corp. 616,406 616,406
4,550 4,550 Hewlett-Packard Co 568,181 568,181
35,500 7,775 43,275 International Business Machines Corporation 3,889,469 851,848 4,741,317
66,900 20,000 86,900 @ Microsoft Corporation 5,349,909 1,600,000 6,949,909
2,250 2,250 Veritas Software Corp. 254,285 254,285
------------ ------------ ------------
9,239,378 4,136,120 13,375,498
------------ ------------ ------------
CONSUMER DURABLE GOODS: 3.12%
109,800 12,500 122,300 @ EMC Corporation 8,447,737 827,078 9,274,815
------------ ------------ ------------
CONSUMER NONDURABLE GOODS: 6.41%
69,500 5,100 74,600 Anheuser-Busch Companies, Inc 5,190,781 380,906 5,571,687
61,700 61,700 Colgate-Palmolive Company 3,694,287 3,694,287
50,700 50,700 Johnson and Johnson 5,165,062 5,165,062
120,000 120,000 @ The Walt Disney Company 4,657,500 4,657,500
------------ ------------ ------------
18,707,630 380,906 19,088,536
------------ ------------ ------------
ELECTRICAL & ELECTRONICS: 16.91%
8,400 8,400 AES Corp. 383,250 383,250
1,830 1,830 Agilent Technologies Inc. 134,963 134,963
66,000 66,000 @ Analog Devices, Inc. 5,016,000 5,016,000
111,300 27,900 139,200 @ Cisco Systems, Inc. 7,071,028 1,773,394 8,844,422
1 1 Energizer Holdings Inc 18 18
328,100 328,100 @ J.D. Edwards & Company 4,931,753 4,931,753
143,400 143,400 Motorola, Inc 4,167,562 4,167,562
86,500 86,500 @ Network Appliance, Inc. 6,960,547 6,960,547
80,600 80,600 Oracle Corporation 6,772,919 6,772,919
126,000 7,450 133,450 @ Solectron Corporation 5,276,250 311,969 5,588,219
71,000 7,925 78,925 @ Sun Microsystems, Inc. 6,458,781 720,680 7,179,461
12,000 12,000 TXU Corporation 354,000 354,000
------------ ------------ ------------
46,654,840 3,678,274 50,333,114
------------ ------------ ------------
ENERGY SOURCES: 6.02%
110,400 110,400 Enron Corporation 7,120,800 7,120,800
199,900 199,900 @ R&B Falcon Corporation 4,710,144 4,710,144
81,700 81,700 Schlumberger, Ltd 6,096,862 6,096,862
------------ ------------ ------------
17,927,806 -- 17,927,806
------------ ------------ ------------
FERROUS METALS: 1.49%
143,000 143,000 Alcan Aluminium, Ltd 4,433,000 4,433,000
------------ ------------ ------------
FINANCIAL SERVICES: 8.55%
10,700 10,700 AXA Financial Inc. 363,800 363,800
78,500 16,000 94,500 Citigroup, Inc 4,729,625 964,000 5,693,625
5,700 5,700 Fannie Mae 297,469 297,469
91,200 91,200 Federal National Mortgage Association 4,759,500 4,759,500
97,800 97,800 Golden West Financial Corporation 3,991,462 3,991,462
17,600 17,600 MBNA Corp. 477,400 477,400
68,000 6,000 74,000 Morgan Stanley Dean Witter and Company 5,661,000 499,500 6,160,500
50,000 50,000 The Progress Corporation 3,700,000 3,700,000
------------ ------------ ------------
22,841,587 2,602,169 25,443,756
------------ ------------ ------------
FOOD, BEVERAGE & TOBACCO: 0.65%
5,400 5,400 Bestfoods 373,950 373,950
19,500 19,500 Pepsico Inc. 866,531 866,531
14,500 14,500 Philip Morris Companies Inc. 385,156 385,156
15,000 15,000 Ralston Purina Group 299,062 299,062
------------ ------------ ------------
-- 1,924,699 1,924,699
------------ ------------ ------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
GROWTH AND GROWTH & GROWTH AND GROWTH &
INCOME INCOME PRO FORMA INCOME INCOME PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
--------- -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HEALTH & PERSONAL CARE: 5.87%
109,500 109,500 Abbott Laboratories 4,879,594 4,879,594
65,200 65,200 @ Amgen, Inc. 4,582,338 4,582,338
154,000 154,000 Medtronic, Inc 7,671,125 7,671,125
6,000 6,000 Procter & Gamble Co 343,500 343,500
------------ ------------ ------------
17,133,057 343,500 17,476,557
------------ ------------ ------------
HEALTHCARE - PRODUCTS & SERVICES: 0.25%
6,500 6,500 Baxter International Inc. 457,031 457,031
10,500 10,500 Tenet Healthcare Corporation 283,500 283,500
------------ ------------ ------------
-- 740,531 740,531
------------ ------------ ------------
INSURANCE: 0.43%
4,500 4,500 American International Group 528,750 528,750
16,000 16,000 John Hancock Financial Svcs 379,000 379,000
6,700 6,700 Hartford Financial Services 374,781 374,781
------------ ------------ ------------
-- 1,282,531 1,282,531
------------ ------------ ------------
MANUFACTURING - MISCELLANEOUS: 1.05%
40,200 40,200 General Electric Company 2,130,600 2,130,600
12,300 12,300 Honeywell International Inc 414,356 414,356
12,100 12,100 Tyco International Ltd 573,237 573,237
------------ ------------ ------------
-- 3,118,193 3,118,193
------------ ------------ ------------
MATERIALS: 1.37%
94,900 94,900 Martin Marietta Materials, Inc 3,837,519 3,837,519
4,200 4,200 Southdown, Inc. 242,550 242,550
------------ ------------ ------------
3,837,519 242,550 4,080,069
------------ ------------ ------------
MERCHANDISING: 4.37%
14,000 14,000 CVS Corp. 560,000 560,000
7,700 7,700 Circuit City Stores-Circuit 255,544 255,544
149,400 9,100 158,500 @ Costco Companies, Inc. 4,934,869 300,300 5,235,169
105,050 11,150 116,200 The Home Depot, Inc 5,245,934 556,803 5,802,737
20,100 20,100 Wal-Mart Stores Inc. 1,158,262 1,158,262
------------ ------------ ------------
10,180,803 2,830,909 13,011,712
------------ ------------ ------------
OIL & GAS - PRODUCERS & SERVICES: 0.74%
1,000 1,000 Burlington Resources Inc. 38,250 38,250
6,800 6,800 Chevron Corporation 576,725 576,725
14,700 14,700 Exxon Mobil Corp. 1,153,950 1,153,950
9,000 9,000 Halliburton Co 424,688 424,688
------------ ------------ ------------
-- 2,193,613 2,193,613
------------ ------------ ------------
SEMICONDUCTORS: 1.00%
5,450 5,450 Applied Materials Inc. 493,906 493,906
14,000 14,000 Intel Corp 1,871,625 1,871,625
8,950 8,950 Texas Instruments Inc. 614,753 614,753
------------ ------------ ------------
-- 2,980,284 2,980,284
------------ ------------ ------------
SERVICES: 4.87%
11,000 11,000 America Online Inc. 580,250 580,250
173,600 173,600 @ AT & T Corporation--Liberty Media Group "A" 4,209,800 4,209,800
4,600 4,600 Gannett Co. Inc. 275,138 275,138
23,400 23,400 @ Internet Capital Group, Inc. 864,338 864,338
4,400 4,400 McGraw-Hill Companies Inc. 237,600 237,600
10,000 10,000 Time Warner Inc 760,000 760,000
93,310 13,020 106,330 @ Viacom, Inc. Class "B" 6,362,576 887,801 7,250,377
2,600 2,600 Yahoo Inc 322,075 322,075
------------ ------------ ------------
11,436,714 3,062,864 14,499,578
------------ ------------ ------------
PHARMACEUTICALS: 1.57%
10,500 10,500 American Home Products Corp. 616,875 616,875
8,300 8,300 Bristol-Myers Squibb Co. 483,475 483,475
8,000 8,000 Eli Lilly & Co. 799,000 799,000
6,000 6,000 Medimmune Inc. 444,000 444,000
14,300 14,300 Merck & Co., Inc. 1,095,737 1,095,737
25,475 25,475 Pfizer Inc 1,222,800 1,222,800
------------ ------------ ------------
-- 4,661,887 4,661,887
------------ ------------ ------------
PIPELINES: 0.17%
9,700 9,700 EL Paso Energy Corporation 494,094 494,094
------------ ------------ ------------
TELECOMMUNICATIONS: 11.66%
9,900 9,900 AT&T Corp. 313,088 313,088
6,000 6,000 AT&T Wireless Group 167,250 167,250
12,400 12,400 Bellsouth Corporation 528,550 528,550
1,800 1,800 CIENA Corporation 300,038 300,038
114,000 114,000 @ Comcast Corporation 4,620,563 4,620,563
35,000 1,900 36,900 Corning, Inc 9,445,625 512,763 9,958,388
12,000 12,000 Global Crossing Ltd 315,750 315,750
14,250 14,250 Lucent Technologies Inc. 844,313 844,313
65,350 65,350 Marsh & McLennan Companies, Inc 6,824,991 6,824,991
18,600 18,600 Motorola Inc. 540,562 540,562
85,200 85,200 @ Nextel Communications, Inc. 5,210,513 5,210,513
3,800 3,800 Qualcomm Inc. 228,000 228,000
20,900 20,900 SBC Communications Inc 903,925 903,925
64,400 14,000 78,400 Sprint Corporation 3,284,400 714,000 3,998,400
------------ ------------ ------------
29,386,092 5,368,239 34,754,331
------------ ------------ ------------
TRANSPORTATION: 0.10%
13,100 13,100 Burlington Northern Santa Fe Corp. 300,481 300,481
------------ ------------ ------------
UTILITIES: 1.40%
91,400 91,400 @ The AES Corporation 4,170,125 4,170,125
------------ ------------ ------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
GROWTH AND GROWTH & GROWTH AND GROWTH &
INCOME INCOME PRO FORMA INCOME INCOME PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
--------- -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL COMMON STOCKS (COST: $181,133,152,
$39,187,604, $220,320,756) 243,914,924 45,130,846 289,045,770
------------ ------------ ------------
UNIT INVESTMENT TRUST: 0.11%
2,200 2,200 Standard and Poor's 500 Depository Receipts 319,619 319,619
------------ ------------ ------------
TOTAL UNIT INVESTMENT TRUST: -- 319,619 319,619
(COST: $0, $260,493, $260,493)
------------ ------------ ------------
TOTAL LONG-TERM INVESTMENTS (COST: $181,133,152,
$39,448,097, $220,581,249) 243,914,924 45,450,465 289,365,389
------------ ------------ ------------
Principal Amount SHORT-TERM INVESTMENT: 2.95%
-------------------------------- GOVERNMENT AGENCY OBLIGATION: 2.65%
$7,900,000 $7,900,000 Federal Home Loan Bank, 6.48%, due 07/03/00 7,897,156 7,897,156
REPURCHASE AGREEMENT: 0.30%
$897,000 897,000 State Street Repurchase Agreement, 6.43%,
due 07/03/00 897,000 897,000
------------ ------------ ------------
TOTAL SHORT-TERM INVESTMENTS
(COST: $7,897,156, $897,000, $8,794,156) 7,897,156 897,000 8,794,156
------------ ------------ ------------
TOTAL INVESTMENTS (COST: $189,030,308,
$40,345,097, $229,375,405) 100.17% 251,812,080 46,347,465 298,159,545
LIABILITIES IN EXCESS OF OTHER ASSETS: -0.17% (481,126) (22,708) (503,834)
------ ------------ ------------ ------------
TOTAL NET ASSETS 100.00% $251,330,954 $ 46,324,757 $297,655,711
====== ============ ============ ============
</TABLE>
@ Non-income producing security.
See Accompanying Notes to Financial Statements
6
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Combination:
On November 2, 2000, the Board of Pilgrim Growth & Income Fund and on
November 16, 2000 the Board of ING Growth & Income Fund, approved an Agreement
and Plan of Reorganization (the "Plan") whereby, subject to approval by the
shareholders of ING Growth & Income Fund, Pilgrim Growth & Income Fund will
acquire all the assets of ING Growth & Income 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 Pilgrim Growth and Income 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 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 Pilgrim Growth and Income Fund and ING Growth & Income
Fund at June 30, 2000. The unaudited pro forma statement of operations reflects
the results of operations of Pilgrim Growth and Income Fund and ING Growth &
Income 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 Pilgrim Growth and Income Fund and
ING Growth & Income 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 Pilgrim Growth and Income Fund for
pre-combination periods will not be restated.
The unaudited pro forma portfolio of investments, and 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 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 - 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 ING Growth
& Income Fund by Pilgrim Growth & Income Fund as of June 30, 2000. The number of
additional shares issued was calculated by dividing the net asset value of each
Class of ING Growth & Income Fund by the respective Class net asset value per
share of Pilgrim Growth & Income Fund.
7
<PAGE>
Note 4 - 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. ING Growth &
Income Fund expenses were adjusted assuming Pilgrim Growth and Income Fund's fee
structure was in effect for the year ended June 30, 2000.
Note 5 - 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 6 - 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 Fund intends to offset any net capital gains with any available
capital loss carryforward until each carryforward has been fully utilized or
expires. In addition, no capital gain distribution shall be made until the
capital loss carryforward has been fully utilized or expires.
8
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article Sixth of the Articles of Incorporation provides the following:
(1) 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.
(2) 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.
(3) No provision of the Article Sixth of the Amended and Restated Articles
of Incorporation shall be effective (i) 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 (ii) 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.
Article Eighth of the Amended and Restated Bylaws provides the following:
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall
indemnify its directors to the fullest extent that indemnification of directors
is permitted by the law. The corporation shall indemnify its officers to the
same extent as its directors and to such further extent as is consistent with
law. The corporation shall indemnify its directors and officers who while
serving as directors or officers also serve at the request of the corporation as
a director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the same extent as its directors and, in the case of officers,
to such further extent as is consistent with law. The indemnification and other
rights provided by this Article shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. This Article shall not protect any such
person against any liability to the corporation or any stockholder thereof to
which such person 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 ("disabling conduct").
2. ADVANCES. Any current or former director or officer of the corporation
seeking indemnification within the scope of this Article shall be entitled to
advances from the corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking indemnification in
the manner and to the fullest extent permissible under the General Corporation
Law. The person seeking indemnification shall provide to the corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the corporation has been met and a written
1
<PAGE>
undertaking to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
corporation for his undertaking; (b) the corporation is insured against losses
arising by reason of the advance; or (c) a majority of a quorum of directors of
the corporation who are neither "interested persons" as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended, nor parties to the
proceeding ("disinterested non-party directors"), or independent legal counsel,
in a written opinion, shall have determined, based on a review of facts readily
available to the corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
3. PROCEDURE. At the request of any person claiming indemnification under
this Article, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the General Corporation Law, whether the standards
required by this Article have been met. Indemnification shall be made only
following: (a) a final decision on the merits by a court or other body before
whom the proceeding was brought that the person to be indemnified was not liable
by reason of disabling conduct or (b) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by (i) the vote of
a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and agents who are
not officers or directors of the corporation may be indemnified, and reasonable
expenses may be advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any limitations
imposed by the Investment Company Act of 1940, as amended.
5. OTHER RIGHTS. The Board of Directors may make further provision
consistent with law for indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed exclusive of any
other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance or other agreement
or resolution of stockholders or disinterested non-party directors or otherwise.
6. AMENDMENTS. References in this Article are to the General Corporation
Law and to the Investment Company Act of 1940 as from time to time amended. No
amendment of the by-laws shall affect any right of any person under this Article
based on any event, omission or proceeding prior to the amendment.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant by the Registrant pursuant to
the Trust Instrument or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and, therefore, is
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 trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in connection with
the shares 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 issues.
2
<PAGE>
ITEM 16. EXHIBITS
(1) (a) Form of Articles of Incorporation - Filed as an exhibit to
Post-Effective Amendment No. 69 to Registrant's Registration Statement
on Form N-1A on July 26, 2000 and incorporated herein by reference.
(b) Form of Articles Supplementary Designating Classes A, B, C & Q - Filed
as an exhibit to Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A on July 26, 2000 and incorporated
herein by reference.
(2) Form of Bylaws - Filed as an exhibit to Post-Effective Amendment No.
69 to 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 Growth
and Income Fund, Inc. on behalf of Pilgrim Growth and Income Fund and
ING Funds Trust on behalf of ING Growth & Income Fund.
(5) Not Applicable
(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 State Street Bank &
Trust Company - Filed as an exhibit to Post-Effective Amendment No. 69
to Registrant's Registration Statement on Form N-1A 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. 69 to Registrant's
Registration Statement on Form N-1A on July 26, 2000 and incorporated
herein by reference.
(b) Form of Service and Distribution Plan for Class B Shares - Filed as an
exhibit to Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A on July 26, 2000 and incorporated
herein by reference.
(c) Form of Service and Distribution Plan for Class C Shares - Filed as an
exhibit to Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A on July 26, 2000 and incorporated
herein by reference.
(d) Form of Shareholder Service Plan for Class Q Shares - Filed as an
exhibit to Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A on July 26, 2000 and incorporated
herein by reference.
3
<PAGE>
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(13) (a) Form of Administration Agreement between Registrant and Pilgrim Group,
Inc. - Filed as an exhibit to Post-Effective Amendment No. 69 to
Registrant's Registration Statement on Form N-1A on July 26, 2000 and
incorporated herein by reference.
(b) Form of Expense Limitation Agreement between Registrant and Pilgrim
Investments, Inc. - Filed as an exhibit to Post-Effective Amendment
No. 69 to Registrant's Registration Statement on Form N-1A on July 26,
2000 and incorporated herein by reference.
(14) Consents of Independent Auditors
(15) Not Applicable
(16) Powers of Attorney
(17) Not Applicable
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 of 1933
[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 of 1933, 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.
4
<PAGE>
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 19th day of December, 2000.
PILGRIM GROWTH AND INCOME 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 December 19, 2000
----------------------------
John G. Turner*
/s/ Robert W. Stallings Director and President December 19, 2000
---------------------------- (Chief Executive Officer)
Robert W. Stallings*
/s/ Al Burton Director December 19, 2000
----------------------------
Al Burton*
/s/ Paul S. Doherty Director December 19, 2000
----------------------------
Paul S. Doherty*
/s/ Robert B. Goode Director December 19, 2000
----------------------------
Robert B. Goode*
/s/ Alan L. Gosule Director December 19, 2000
----------------------------
Alan L. Gosule*
/s/ Walter H. May Director December 19, 2000
----------------------------
Walter H. May*
5
<PAGE>
/s/ Jock Patton Director December 19, 2000
----------------------------
Jock Patton*
/s/ David W.C. Putnam Director December 19, 2000
----------------------------
David W.C. Putnam*
/s/ John R. Smith Director December 19, 2000
----------------------------
John R. Smith*
/s/ David W. Wallace Director December 19, 2000
----------------------------
David W. Wallace*
/s/ Michael J. Roland Senior Vice President and December 19, 2000
---------------------------- Principal Financial Officer
Michael J. Roland*
* By: /s/ James M. Hennessy
-----------------------------
James M. Hennessy
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
6
<PAGE>
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 Growth and Income 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
7
<PAGE>
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 Growth and Income 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
8
<PAGE>
EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between Pilgrim Growth and
Income Fund, Inc. on behalf of Pilgrim Growth and Income Fund and ING Funds
Trust on behalf of ING Growth & Income 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 Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(14) Consents of Independent Auditors
<PAGE>
ING GROWTH & INCOME FUND
(a series of ING Funds Trust)
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) [________________] and [________________] or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the ING Growth & Income Fund (the "Fund") (a series of ING Funds
Trust) which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the Fund to be held at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258 on ________ ___, 2001 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 TRUSTEES 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 Class A, Class B and Class C shares of ING
Growth & Income Fund by Pilgrim Growth and Income Fund, Inc.in exchange for
Class A, Class B and Class C shares of common stock of Pilgrim Growth and Income
Fund, Inc., respectively, and the assumption by Pilgrim Growth and Income Fund,
Inc. of all of the liabilities of ING Growth & Income 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.
_______________________________ _______________________________
Signature Date
_______________________________ _______________________________
Signature (if held jointly) Date
