As filed with the Securities and Exchange Commission on December 15, 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 SMALLCAP OPPORTUNITIES FUND
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258
(Address of Principal Executive Offices) (Zip Code)
(800) 992-0180
(Registrant's Area Code and Telephone Number)
James M. Hennessy
ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz And Steven R. Howard
Dechert Paul, Weiss, Rifkind, Wharton & Garrison
1775 Eye Street, N.W. 1285 Avenue of the Americas
Washington, DC 20006 New York, New York 10019
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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 14, 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 Small Cap Growth Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
1-800-992-0180
_____________, 2000
Dear Shareholder:
Your Board of Trustees has called a Special Meeting of Shareholders of the
ING Small Cap Growth Fund scheduled to be held at _______ [a.m./p.m.], local
time, on February 22, 2001 at 7337 East Doubletree Ranch Road, Scottsdale, AZ
85258.
The Board of Trustees of ING Funds Trust, on behalf of ING Small Cap Growth
Fund, has approved a reorganization of ING Small Cap Growth Fund, which is
managed by ING Mutual Funds Management Co. LLC and is part of the ING Funds,
into Pilgrim SmallCap Opportunities 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 the Pilgrim SmallCap
Opportunities Fund on the date that the Reorganization occurs. Pilgrim SmallCap
Opportunities Fund has investment objectives and policies that are similar in
many respects to those of ING Small Cap Growth Fund.
You are being asked 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 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
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 FEBRUARY 21,
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 Small Cap Growth Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ING SMALL CAP GROWTH FUND
SCHEDULED FOR FEBRUARY 22, 2001
To the Shareholders:
A Special Meeting of Shareholders of the ING Small Cap Growth Fund
("Special Meeting") is scheduled for February 22, 2001 at _______ [a.m./p.m.],
local time, at 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.
The purposes of the Special Meeting of ING Small Cap Growth 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
Small Cap Growth Fund by Pilgrim SmallCap Opportunities Fund in
exchange for shares of the corresponding class of Pilgrim SmallCap
Opportunities Fund and the subsequent liquidation of ING Small Cap
Growth Fund; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on December 26, 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
_________ ___, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION................................................................ 1
SUMMARY..................................................................... 2
Comparison Of Investment Objectives And Strategies....................... 4
Comparison of Portfolio Characteristics.................................. 5
Relative Performance..................................................... 6
Comparison of Investment Techniques and Risks of the Funds............... 6
COMPARISON OF FEES AND EXPENSES............................................. 8
Annual Fund Operating Expenses........................................... 9
General Information...................................................... 11
Special Rules for Class A Shares of ING Small Cap Growth Fund............ 11
ADDITIONAL INFORMATION ABOUT PILGRIM SMALLCAP OPPORTUNITIES FUND............ 12
Investment Personnel..................................................... 12
Performance of Pilgrim SmallCap Opportunities Fund....................... 12
INFORMATION ABOUT THE REORGANIZATION........................................ 14
ADDITIONAL INFORMATION ABOUT THE FUNDS...................................... 16
GENERAL INFORMATION ABOUT THE PROXY STATEMENT............................... 18
Solicitation of Proxies.................................................. 18
Voting Rights............................................................ 18
Other Matters to Come Before the Special Meeting......................... 19
Shareholder Proposals.................................................... 19
Reports to Shareholders.................................................. 19
APPENDIX A.................................................................. A-1
APPENDIX B.................................................................. B-1
APPENDIX C.................................................................. C-1
APPENDIX D.................................................................. D-1
APPENDIX E.................................................................. E-1
<PAGE>
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
FEBRUARY 22, 2001
ING SMALL CAP GROWTH FUND
(a series of ING Funds Trust)
Relating to the Reorganization into
PILGRIM SMALLCAP OPPORTUNITIES FUND
(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 Small Cap Growth Fund to Pilgrim SmallCap Opportunities
Fund in exchange for shares of Pilgrim SmallCap Opportunities Fund (the
"Reorganization"). ING Small Cap Growth Fund would then distribute to its
shareholders their portion of the shares of Pilgrim SmallCap Opportunities Fund
it receives in the Reorganization. The result would be a liquidation of ING
Small Cap Growth Fund. You would receive shares of Pilgrim SmallCap
Opportunities Fund having an aggregate value equal to the aggregate value of the
shares you held of ING Small Cap Growth 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 Small Cap Growth Fund, are being asked
to approve a transaction that will result in your holding of shares of Pilgrim
SmallCap Opportunities Fund, this Proxy Statement also serves as a Prospectus
for Pilgrim SmallCap Opportunities Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Pilgrim SmallCap Opportunities
Fund that you should know before investing. For a more detailed discussion of
the investment objectives, policies, restrictions and risks of the Pilgrim
SmallCap Opportunities Fund, see the Prospectus (the "Pilgrim Prospectus") and
the Statement of Additional Information for Pilgrim SmallCap Opportunities Fund,
each dated November 1, 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 Small Cap Growth Fund, see the Prospectus (the "ING
Prospectus") and Statement of Additional Information, 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 SmallCap Opportunities 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.
<PAGE>
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 Small Cap Growth Fund, approved an Agreement
and Plan of Reorganization with respect to ING Small Cap Growth Fund (the
"Reorganization Agreement"). Subject to shareholder approval, the Reorganization
Agreement provides for:
* the transfer of all of the assets of ING Small Cap Growth Fund to
Pilgrim SmallCap Opportunities Fund, in exchange for shares of Pilgrim
SmallCap Opportunities Fund;
* the assumption by Pilgrim SmallCap Opportunities Fund of all of the
liabilities of ING Small Cap Growth Fund;
* the distribution of Pilgrim SmallCap Opportunities Fund shares to the
shareholders of ING Small Cap Growth Fund; and
* the complete liquidation of ING Small Cap Growth 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 Small Cap Growth Fund, would become a shareholder in the
following Class of shares of Pilgrim SmallCap Opportunities Fund:
ING SMALL CAP PILGRIM SMALLCAP
GROWTH FUND OPPORTUNITIES 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 SmallCap Opportunities Fund having an aggregate value equal to the
aggregate value of the shares of the corresponding Class of ING Small Cap Growth
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 a part
of which the distributor, administrator, and other service providers of the ING
Funds have been changed to 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 ING Funds and Pilgrim
Funds, thereby eliminating duplication of costs and other inefficiencies arising
from having similar portfolios in 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
2
<PAGE>
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.
In considering whether to approve the Reorganization, you should note that:
* The Funds have investment objectives and policies that are substantially
similar;
* The selection criteria for investments for each of the Funds are
substantially similar;
* For the year ended December 31, 1999 and the first nine months of 2000,
Pilgrim SmallCap Opportunities Fund outperformed ING Small Cap Growth Fund;
(1)
* Before giving effect to expense subsidies by management, the proposed
Reorganization is expected to result in a reduction in total operating
expenses for the shareholders of ING Small Cap Growth Fund. For example,
the total operating expenses, expressed as a percentage of net asset value
per share for Class A shares, are as follows:
* Expenses of ING Small Cap Growth Fund - before expense reimbursement
by management (based on the 12 month period ended 6/30/00)(2) 2.01%
* Expenses of ING Small Cap Growth Fund - after expense reimbursement by
management (based on 12 month period ended 6/30/00)(2)(3) 1.43%
* Expenses of Pilgrim SmallCap Opportunities Fund (based on
12 month period ended 6/30/00)(3)(4) 1.62%
* Projected expenses of Pilgrim SmallCap Opportunities Fund -
after the Reorganization (PRO FORMA) 1.60%
* The Funds have affiliated management. ING Pilgrim Investments, 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
investment manager to Pilgrim SmallCap Opportunities Fund and the
subadvisor to ING Small Cap Growth Fund. IMFC, 7337 East Doubletree
Ranch Road, Scottsdale, Arizona 85258, is the investment manager to
ING Small Cap Growth Fund. Both are affiliated subsidiaries of the
same holding company, ING Groep N.V. After the Reorganization, ING
Pilgrim Investments would continue to manage Pilgrim SmallCap
Opportunities Fund, which would include the assets from ING Small Cap
Growth Fund. In addition, the portfolio manager of each Fund, Mary
Lisanti, is the same.
Approval of the Reorganization Agreement requires the vote of a majority of
the Shares present in person or by proxy of the ING Small Cap Growth Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF ING FUNDS TRUST, ON
BEHALF OF ING SMALL CAP GROWTH FUND, UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
----------
(1) The Pilgrim SmallCap Opportunities Fund's past performance is not
necessarily an indication of how the fund will perform in the future.
(2) 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.
(3) The current expense limitation contract will remain in effect until
February 28, 2001. There is no assurance that the expense limitation will
be continued after that date.
(4) Adjusted for increase in management fee from 0.75% to 1.00% effective
August 25, 2000.
3
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
ING SMALL CAP GROWTH FUND PILGRIM SMALLCAP OPPORTUNITIES FUND
------------------------- -----------------------------------
<S> <C> <C>
INVESTMENT OBJECTIVE Seeks long-term capital appreciation Seeks capital appreciation
INVESTMENT STRATEGIES * Normally invests at least 65% of * Normally invests at least 65% of
its assets in equity securities of its total assets in the common
smaller companies the portfolio stocks of smaller, lesser-known U.S.
manager believes possess growth companies that the portfolio manager
potential. Smaller companies are believes have above average
those with market capitalizations prospects for growth. Smaller
falling within the Russell 2500 companies are those with market
Growth Index. capitalizations that fall within the
range of companies in the Russell
* In choosing investments for the 2000 Index.
Fund, the portfolio manager employs
a disciplined investment process * The portfolio manager uses a
that combines economic analysis and "top-down" disciplined investment
extensive company research to process, which includes extensive
identify companies with superior database screening, frequent
long-term growth potential. fundamental research, identification
and implementation of a
The portfolio manager reviews brand-oriented approach in
economic and industry trends to structuring the portfolio and a sell
develop themes to use in the discipline.
development of the overall
portfolio, which in turn helps The portfolio manager seeks to
identify specific companies to invest in companies expected to
consider. benefit most from the major social,
economic and technological trends
With regard to companies under that are likely to shape the future
consideration, the portfolio manager of business and commerce over the
next reviews their respective next three to five years and
business models and management and attempts to provide a framework for
meets with senior executives. The identifying the companies and
portfolio manager also analyzes the industries expected to benefit the
company's price-to-earnings ratios, most.
earnings forecasts and cash flow.
The top-down approach is combined
* The Fund generally expects to with rigorous fundamental research
invest in common stocks. (a bottom-up approach) to guide
stock selection and portfolio
structure.
* The Fund also may invest in * The Fund also may invest in
initial public offerings. initial public offerings.
INVESTMENT ADVISER ING Mutual Funds Management Co. LLC ING Pilgrim Investments, Inc.
SUB-ADVISER ING Pilgrim Investments, Inc. N/A
PORTFOLIO MANAGER Mary Lisanti Mary Lisanti
</TABLE>
As you can see from the chart above, the investment objectives and
strategies of the Funds are substantially similar.
4
<PAGE>
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
ING SMALL CAP GROWTH FUND PILGRIM SMALLCAP OPPORTUNITIES FUND
------------------------- -----------------------------------
<S> <C> <C>
Net Assets $55,292,631 $699,767,454
Number of Holdings 84 147
As a percentage of net assets:
Equity Securities 89.38% 99.50%
Short Term Debt Investments 10.93% 0.88%
Companies with market
capitalization less than
$5 billion 70.37% 92.29%
Companies with market
capitalization between $5
billion and $10 billion 11.54% 5.97%
Companies with market
capitalization over $10 billion 7.47% 1.23%
Average market capitalization
of companies in portfolio $2.9 billion $1.8 billion
Median market capitalization
of companies in portfolio $1.6 billion $1.3 billion
Market capitalization range
of companies in portfolio $23.0 million to $18.5 billion $113.0 million to $21.8 billion
Portfolio Turnover Rate * 225.00% 128.00%
Top 5 Industries Electronic Components-Semiconductors 11.80% Semiconductors 17.65%
(as a % of net assets) Internet Software 9.00% Pharmaceuticals 15.70%
Enterprise Software/Service 7.80% Software 8.51%
Wireless Equipment 5.50% Telecommunications 8.00%
Telecommunication Equipment 3.60% Healthcare-Services 7.43%
Top 10 Holdings Alteon Websystems, Inc. 4.07% Cor Therapeutics, Inc. 2.25%
(as a % of net assets) LTX Corp. 3.10% Natural Microsystems Corp. 1.92%
Handspring, Inc. 2.93% Digital Lightwave, Inc. 1.62%
Metasolv Software, Inc. 2.79% Virata Corp. 1.53%
Netro Corp. 2.59% Cytyc Corp. 1.49%
Novellus Systems, Inc. 2.42% Celgene Corp. 1.47%
Medarex, Inc. 2.40% Serena Software, Inc. 1.43%
TriQuint Semiconductor, Inc. 2.39% Micromuse, Inc. 1.42%
Mercury Interactive Corp. 2.27% Aurora Bioscience Corp. 1.42%
Mercator Software, Inc. 2.24% Heidrick & Struggles Int'l., Inc. 1.33%
</TABLE>
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* For the 12 month period ended June 30, 2000.
5
<PAGE>
RELATIVE PERFORMANCE
The following table shows, for the periods shown, the average annual total
return for: (a) Class A shares of ING Small Cap Growth Fund; (b) Class A shares
of Pilgrim SmallCap Opportunities Fund; (c) the Russell 2000 Index; and (d) the
Russell 2500 Growth Index. Performance of the Funds in the table does not
reflect the deduction of sales loads, and would be lower if it did. The indices
have an inherent performance advantage over the Funds since they have no cash in
their portfolios, impose no sales charges and incur 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.
PILGRIM
CALENDAR ING SMALL CAP SMALLCAP
YEAR ENDED/ GROWTH OPPORTUNITIES RUSSELL 2000 RUSSELL 2500
PERIOD FUND(2)(3) FUND(4) INDEX(5) GROWTH INDEX(6)
------ ---------- ------- -------- ---------------
12/31/99 37.80% 146.94% 21.26% 55.48%
1/1/00 - 9/30/00(1) 2.94% 14.51% 4.18% 6.48%
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(1) Not annualized.
(2) ING Small Cap Growth Fund commenced operations on December 15, 1998.
(3) Prior to December 4, 2000, the ING Small Cap Growth Fund was managed by a
different sub-adviser.
(4) Class A, Class B, and Class C shares of Pilgrim SmallCap Opportunities Fund
commenced operations on June 5, 1995. For more information about the
performance of Pilgrim SmallCap Opportunities Fund, see "Additional
Information about Pilgrim SmallCap Opportunities Fund."
(5) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(6) The Russell 2500 Growth Index measures the performance of small cap
companies with higher than average price-to-book ratios and forecasted
growth values.
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 SmallCap Opportunities Fund are similar to the risks of investing in ING
Small Cap Growth Fund. A principal risk of an investment in either Fund 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 ING Small Cap Growth Fund and Pilgrim SmallCap
Opportunities Fund invest in equity securities and securities with equity
characteristics, such as common stocks, preferred stocks, convertible securities
and warrants and other stock purchase rights. Both Funds normally invest at
least 65% of their assets in smaller companies. Pilgrim SmallCap Opportunities
Fund and ING Small Cap Growth Fund are subject to risks associated with
investing primarily in equity securities, including market risks, issuer risks
including credit risks, price volatility risks and market trends risks. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer. Credit risk is the
risk that an issuer may not be able to meet its financial obligations when due,
including payments on outstanding debt. Market trend risk is the risk that the
market may not favor the small-cap growth securities in which the Fund invests.
The market could instead favor value-oriented stocks or large company stocks, or
may 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.
6
<PAGE>
Small-cap companies will tend to be smaller, more emerging companies and
investment in these companies may involve greater risk than is customarily
associated with securities of larger, more established companies due to the
greater business risks of small size, limited markets and financial resources,
narrow product lines and frequent lack of depth of management. The securities of
smaller companies are often traded over-the-counter and may not be traded in
volumes typical on a national securities exchange. Consequently the securities
of smaller companies may have limited market stability and may be subject to
more abrupt or erratic market movements than securities of larger, more
established growth companies or the market averages in general. The securities
of the smaller-size companies in which the Funds may invest trade in lower
volume and may be less liquid than securities of larger, more established
companies. Both Funds could lose money if they cannot sell a security at the
time and place that would be most beneficial to the Funds.
FOREIGN SECURITIES. Pilgrim SmallCap Opportunities Fund may invest up to
20% of its total assets in foreign securities, of which 10% of its net assets
may be invested in foreign securities that are not listed on a U.S. securities
exchange. ING Small Cap Growth 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.
INITIAL PUBLIC OFFERINGS. Pilgrim SmallCap Opportunities Fund is permitted
to invest in initial public offerings. While not a principal investment
strategy, the ING Mid Cap Growth Fund also may invest in initial public
offerings. A significant portion of a Fund's return may be attributable to its
investment in initial public offerings. When a Fund's asset base is small, the
impact of such investments on a Fund's return will be magnified. As a Fund's
assets grow, it is probable that the effect of a Fund's investment in initial
public offerings on the Fund's total return will decline.
PORTFOLIO TURNOVER. Each Fund is generally expected to engage in frequent
and active trading of portfolio securities to achieve its investment objective.
A high portfolio turnover rate involves greater expenses to a Fund, including
brokerage commissions and other transaction costs, and is likely to generate
more taxable short-term gains for shareholders which may have an adverse effect
on the performance of the Fund.
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 it 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 SmallCap
Opportunities Fund, see "Appendix C: Additional Information Regarding Pilgrim
SmallCap Opportunities Fund."
OPERATING EXPENSES. The operating expenses of Pilgrim SmallCap
Opportunities Fund, expressed as a ratio of expenses to average daily net assets
("expense ratio"), are lower than those of ING Small Cap Growth Fund, before
giving effect to the expense limitation contract for ING Small Cap Growth Fund
described below. After giving effect to the expense limitation contract, the net
expenses for Class A, Class B, and Class C shares of ING Small Cap Growth Fund
for the 12 month period ending June 30, 2000 were 1.43%, 2.08% and 2.08%,
respectively, which are lower than those of the same Classes of Pilgrim SmallCap
Opportunities Fund. Without the expense limitation contract, the total operating
expenses for Class A, Class B, and Class C of the ING Small Cap Growth Fund
would have been 2.01%, 2.66%, and 2.66%, respectively, which are higher than
those of the same Class of Pilgrim SmallCap Opportunities Fund.
MANAGEMENT FEE. Both Funds have an annual management fee of 1.00% of the
Fund's average daily net assets.
DISTRIBUTION AND SERVICE FEES. The distribution (12b-1) and service fees of
ING Small Cap Growth Fund are, in the aggregate, the same as those of Pilgrim
SmallCap Opportunities Fund, except that the distribution and service fees for
Class A shares of ING Small Cap Growth Fund are 0.05% higher than those of Class
A shares of Pilgrim SmallCap Opportunities Fund.
EXPENSE LIMITATION ARRANGEMENTS. An expense limitation contract is in place
for ING Small Cap Growth Fund. Under the terms of the expense limitation
contract, IMFC has agreed to limit the expenses of the Fund, excluding interest,
taxes, brokerage and extraordinary expenses. The current expense limitation
contract for the Fund provides that it will remain in effect until February 28,
2001. There is no assurance that the expense limitation will be continued after
that date. The expense limitations for Class A, Class B, and Class C of ING
Small Cap Growth Fund are 1.43%, 2.08%, and 2.08%, respectively.
Absent this expense limitation arrangement, the expense ratio for each
Class of ING Small Cap Growth Fund was higher than the expense ratio for the
same Class of Pilgrim SmallCap Opportunities Fund. For the 12 month period ended
June 30, 2000, for example, the expense ratio for Class A shares of ING Small
Cap Growth Fund was 2.01% compared to 1.43% for Pilgrim SmallCap Opportunities
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. Expenses for the Funds are based upon the operating
expenses incurred by Class A, Class B, and Class C shares of the Fund for the
twelve month period ended June 30, 2000. Expenses of Pilgrim SmallCap
Opportunities Fund are based upon the expenses incurred by the Fund for the
12-month period ended June 30, 2000. Expenses of the ING Small Cap Growth 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 June 6, 2000. PRO FORMA fees show estimated fees of Pilgrim
SmallCap Opportunities 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 Small Cap Growth Fund 1.00% 0.35%(4) 0.66% 2.01% -0.58% 1.43%
Pilgrim SmallCap
Opportunities Fund 1.00%(5) 0.30% 0.32% 1.62% -- 1.62%
Pilgrim SmallCap
Opportunities Fund -
After the Reorganization
(PRO FORMA) 1.00% 0.30% 0.30% 1.60% -- 1.60%
CLASS B
ING Small Cap Growth Fund 1.00% 1.00% 0.66% 2.66% -0.58% 2.08%
Pilgrim SmallCap
Opportunities Fund 1.00%(5) 1.00% 0.32% 2.32% -- 2.32%
Pilgrim SmallCap
Opportunities Fund -
After the Reorganization
(PRO FORMA) 1.00% 1.00% 0.30% 2.30% -- 2.30%
CLASS C
ING Small Cap Growth Fund 1.00% 1.00% 0.66% 2.66% -0.58% 2.08%
Pilgrim SmallCap
Opportunities Fund 1.00%(5) 1.00% 0.32% 2.32% -- 2.32%
Pilgrim SmallCap
Opportunities Fund -
After the Reorganization
(PRO FORMA) 1.00% 1.00% 0.30% 2.30% -- 2.30%
</TABLE>
----------
(1) Pilgrim SmallCap Opportunities Fund's and ING Small Cap Growth Fund's
fiscal years end on December 31 and October 31, respectively. Expenses of
Pilgrim SmallCap Opportunities Fund are based upon expenses incurred by the
Fund for the twelve month period ended June 30, 2000. Expenses of the ING
SmallCap Growth Fund are based upon expenses incurred by the Fund for the
twelve 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) IMFC has entered into an expense limitation contract that limits expenses
(excluding interest, taxes, brokerage and extraordinary expenses) for ING
Small Cap Growth Fund to annual rates of 1.43%, 2.08%, and 2.08% for Class
A, Class B, and Class C shares respectively. The agreement is valid through
February 28, 2001. There is no assurance that the expense limitation
agreement will be continued after that date.
(4) Prior to November 6, 2000, the Class A distribution fee was 0.50% of net
assets and the shareholder servicing fee was 0.25% of net assets.
(5) Prior to August 25, 2000 the management fee was 0.75%.
9
<PAGE>
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of ING Small Cap Growth Fund that are transferred
to Pilgrim SmallCap Opportunities Fund in connection with the Reorganization may
be sold. Such sales may result in increased transaction costs for Pilgrim
SmallCap Opportunities Fund, and the realization of taxable gains or losses for
Pilgrim SmallCap Opportunities Fund.
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 SMALL CAP GROWTH FUND PILGRIM SMALLCAP OPPORTUNITIES 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 $767 $1,169 $1,596 $2,778 $730 $1,057 $1,406 $2,386 $728 $1,051 $1,396 $2,366
Class B 769 1,126 1,610 2,836* 735 1,024 1,440 2,481* 733 1,018 1,430 2,461*
Class C 369 826 1,410 2,993 335 724 1,240 2,656 333 718 1,230 2,636
</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 SMALL CAP GROWTH FUND PILGRIM SMALLCAP OPPORTUNITIES 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 $767 $1,169 $1,596 $2,778 $730 $1,057 $1,406 $2,386 $728 $1,051 $1,396 $2,366
Class B 269 826 1,410 2,836* 235 724 1,240 2,481* 233 718 1,230 2,461*
Class C 269 826 1,410 2,993 235 724 1,240 2,656 233 718 1,230 2,636
</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
10
<PAGE>
GENERAL INFORMATION
Class A, Class B and Class C shares of Pilgrim SmallCap Opportunities 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 Small Cap Growth Fund held by that shareholder
immediately prior to the Reorganization.
In addition, the period that the shareholder held shares of ING Small Cap
Growth Fund will be included in the holding period of Pilgrim SmallCap
Opportunities Fund shares for purposes of calculating any contingent deferred
sales charge. Similarly, Class B shares of Pilgrim SmallCap Opportunities 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 Small
Cap Growth Fund were purchased by the shareholder. ING Small Cap Growth Fund and
Pilgrim SmallCap Opportunities Fund are each subject to the sales load structure
described in the table below.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
<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 SmallCap Opportunities Fund nor ING Small Cap Growth Fund
have any redemption fees, exchange fees or sales charges on reinvested
dividends.
SPECIAL RULES FOR CLASS A SHARES OF ING SMALL CAP GROWTH FUND
Prior to November 6, 2000, the contingent deferred sales charge on
purchases of Class A shares of ING Small Cap Growth Fund in excess of $1 million
was different than the contingent deferred sales charge on similar purchases of
Pilgrim SmallCap Opportunities Fund. Shareholders of ING Small Cap Growth 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 charges on such purchases before and after November 6, 2000 were as
follows:
11
<PAGE>
TIME PERIOD DURING
CDSC WHICH CDSC APPLIES
--------------------- ---------------------
11/06/00 BEFORE 11/06/00 BEFORE
CDSC ON PURCHASES OF: AND AFTER 11/06/00 AND AFTER 11/06/00
--------- -------- --------- --------
$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
ADDITIONAL INFORMATION ABOUT PILGRIM SMALLCAP
OPPORTUNITIES FUND
INVESTMENT PERSONNEL
Mary Lisanti, Executive Vice President and Chief Investment Officer --
Domestic Equities of ING Pilgrim Investments, has served as Senior Portfolio
Manager of Pilgrim SmallCap Opportunities Fund since July 1998. Prior to joining
ING Pilgrim Investments in October 1999 Ms. Lisanti was Executive Vice President
and Chief Investment Officer -- Domestic Equities with Northstar Investment
Management Corp., which subsequently merged into ING Pilgrim Investments. From
1996 to 1998, Ms. Lisanti was a Portfolio Manager at Strong Capital Management.
From 1993 to 1996, Ms. Lisanti was a Managing Director and Head of Small- and
Mid-Capitalization Equity Strategies at Bankers Trust Corp.
PERFORMANCE OF PILGRIM SMALLCAP OPPORTUNITIES FUND
The bar chart and table that follow provide an indication of the risks of
investing in Pilgrim SmallCap Opportunities Fund by showing (on a calendar year
basis) changes in Pilgrim SmallCap Opportunities Fund's annual total return from
year to year and by showing (on a calendar year basis) how Pilgrim SmallCap
Opportunities Fund's average annual returns for one year, five years, ten years
and since inception compare to those of the Russell 2000 Index. The information
in the bar chart is based on the performance of the Class A shares of the
Pilgrim SmallCap Opportunities 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, the returns would be less than those shown. The Pilgrim SmallCap
Opportunities 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(3)
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
-8.83 57.27 14.54 20.16 -4.86 11.34 18.16 14.92 7.59 146.94
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was up 68.12% for the quarter ended December 31, 1999, and the Fund's worst
quarterly performance was down 24.07% for the quarter ended September 30,
1998. The Fund's year-to-date return as of September 30, 2000, was 14.51%.
(2) The figures shown for the years 1996 to 1999 provide performance for Class
A shares of the Fund. The figures shown for the years 1990 to 1995 provide
performance for Class T shares of the Fund. Class T shares would have
substantially similar annual returns as Class A shares because the Classes
are invested in the same portfolio of securities. Annual returns would
differ only to the extent Class A shares and Class T shares have different
expenses.
(3) Returns in 1999 were achieved during unusually favorable conditions in the
market, particularly for technology companies and initial public offerings.
You should not expect that such favorable returns can be consistently
achieved.
12
<PAGE>
The table below shows what the average annual total returns of Pilgrim
SmallCap Opportunities Fund would equal if you averaged out actual performance
over various lengths of time, compared to the Russell 2000 Index. The Russell
2000 Index has an inherent performance advantage over Pilgrim SmallCap
Opportunities 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 SmallCap Opportunities Fund's performance reflected in the
table assumes the deduction of the maximum sales charge in all cases.
AVERAGE ANNUAL TOTAL RETURNS for the period ended December 31, 1999(1)
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
<S> <C> <C> <C> <C>
Pilgrim SmallCap Opportunities Fund - Class A (2) 132.73% N/A N/A 34.05%
Pilgrim SmallCap Opportunities Fund - Class B (3) 140.24% N/A N/A 34.71%
Pilgrim SmallCap Opportunities Fund - Class C (4) 144.12% N/A N/A 34.83%
Pilgrim SmallCap Opportunities Fund - Class T (5) 141.51% 31.45% 22.11% 16.73%
Russell 2000 Index (6) 21.26% 16.69% 13.40% 12.01%(7)
</TABLE>
----------
(1) Class A, Class B, and Class C shares commenced operations on June 5, 1995.
Class T commenced operations on February 3, 1986.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for
the 1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) Reflects the deduction of a deferred sales charge of 4% for the 1 year
return.
(6) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(7) The Index return is for the period beginning February 1, 1986.
The table below shows the performance of Pilgrim SmallCap Opportunities
Fund if sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the period ended December 31, 1999(1)
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION (1)
------ ------- -------- -------------
<S> <C> <C> <C> <C>
Pilgrim SmallCap Opportunities Fund - Class A 146.94% N/A N/A 35.79%
Pilgrim SmallCap Opportunities Fund - Class B 145.24% N/A N/A 34.86%
Pilgrim SmallCap Opportunities Fund - Class C 145.12% N/A N/A 34.83%
Pilgrim SmallCap Opportunities Fund - Class T 145.51% 31.45% 22.11% 16.73%
</TABLE>
----------
(1) Class T shares commenced operations on February 3, 1986. Class A, Class B,
and Class C shares commenced operations on June 5, 1995.
For a discussion by the adviser regarding the performance of Pilgrim
SmallCap Opportunities Fund for the year ended December 31, 1999, see Appendix A
to this Proxy Statement/Prospectus. Additional information about Pilgrim
SmallCap Opportunities Fund is included in Appendix C to this Proxy
Statement/Prospectus.
FUND CLOSURE
Pilgrim SmallCap Opportunities Fund is closed to new investors. However,
shareholders of ING Small Cap Growth Fund who receive shares of Pilgrim SmallCap
Opportunities Fund in exchange for shares of ING Small Cap Growth Fund may
continue to buy shares of Pilgrim SmallCap Opportunities Fund into accounts
existing on the day of the Closing. Pilgrim SmallCap Opportunities Fund may
reopen in the future subject to the discretion of the Board of Trustees.
13
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT. The Reorganization Agreement provides for the
transfer of all of the assets and liabilities of ING Small Cap Growth Fund to
Pilgrim SmallCap Opportunities Fund in exchange for shares of Pilgrim SmallCap
Opportunities Fund. ING Small Cap Growth Fund will distribute the shares of
Pilgrim SmallCap Opportunities Fund received in the exchange to the shareholders
of ING Small Cap Growth Fund and then ING Small Cap Growth Fund will be
liquidated.
After the Reorganization, each shareholder of ING Small Cap Growth Fund
will own shares of Pilgrim SmallCap Opportunities Fund having an aggregate value
equal to the aggregate value of each respective Class of shares in ING Small Cap
Growth 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 Small
Cap Growth Fund will receive shares of the following Classes of Pilgrim SmallCap
Opportunities Fund:
ING SMALL CAP PILGRIM SMALLCAP
GROWTH FUND OPPORTUNITIES FUND
----------- ------------------
Class A Class A
Class B Class B
Class C Class C
In the interest of economy and convenience, shares of Pilgrim SmallCap
Opportunities Fund generally will not be represented by physical certificates
unless requested in writing.
Until the Closing, shareholders of ING Small Cap Growth Fund will continue
to be able to redeem their shares. Redemption requests received after the
Closing will be treated as requests received by Pilgrim SmallCap Opportunities
Fund for the redemption of its shares.
The obligations of the Funds under the Reorganization Agreement are subject
to various conditions, including approval of the shareholders of ING Small Cap
Growth 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
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 a 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 ING Funds and Pilgrim Funds,
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios in 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.
14
<PAGE>
The proposed Reorganization was presented to the Board of Trustees of ING
Funds Trust, on behalf of ING Small Cap Growth Fund, for consideration at a
meeting held on October 25, 2000 and for approval at a meeting held 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 Small Cap Growth Fund will not be diluted as a result of the
proposed Reorganization, and that the proposed Reorganization is in the best
interests of ING Small Cap Growth Fund and its shareholders.
The Reorganization will allow ING Small Cap Growth Fund's shareholders to
continue to participate in a professionally managed portfolio which seeks to
achieve an objective of capital appreciation. As shareholders of Pilgrim
SmallCap Opportunities Fund, these shareholders will continue to 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 current Pilgrim Funds and ING 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 Small Cap Growth 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 Pilgrim Funds;
(2) expense ratios and information regarding fees and expenses of ING
Small Cap Growth Fund and Pilgrim SmallCap Opportunities Fund,
including the expense limitation arrangement offered by IMFC for ING
Small Cap Growth 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 Small Cap
Growth Fund's current shareholders;
(5) the relative investment performance and risks of Pilgrim SmallCap
Opportunities Fund as compared to ING Small Cap Growth Fund;
(6) the similarity of Pilgrim SmallCap Opportunities Fund's investment
objectives, policies and restrictions with those of ING Small Cap
Growth Fund;
(7) the investment resources of ING Pilgrim Investments and the
distribution capabilities of ING Pilgrim Securities, Inc., distributor
of the Pilgrim SmallCap Opportunities Fund;
(8) the quality and caliber of services that have been enjoyed by
shareholders of the Pilgrim SmallCap Opportunities Fund;
(9) alternatives to combining the Funds; and
(10) the tax-free nature of the Reorganization to ING Small Cap Growth Fund
and its shareholders.
THE TRUSTEES OF ING FUNDS TRUST, ON BEHALF OF ING SMALL CAP GROWTH FUND,
RECOMMEND THAT SHAREHOLDERS APPROVE THE REORGANIZATION WITH PILGRIM SMALLCAP
OPPORTUNITIES FUND.
15
<PAGE>
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 Small Cap Growth Fund nor its shareholders nor Pilgrim
SmallCap Opportunities Fund is expected to recognize any gain or loss for
federal income tax purposes from the transactions contemplated by the
Reorganization Agreement. As a condition to the Closing of the Reorganization,
the Funds will receive an opinion from the law firm of Dechert to the effect
that the Reorganization will qualify as a tax-free reorganization for Federal
income tax purposes. That opinion will be based in part upon certain assumptions
and upon certain representations made by the ING Funds Trust and Pilgrim
SmallCap Opportunities Fund.
Immediately prior to the Reorganization, ING Small Cap Growth 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 Small Cap Growth
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
Small Cap Growth Fund's shareholders.
As of June 30, 2000, ING Small Cap Growth Fund had accumulated capital loss
carryforwards in the amount of approximately $1,539,689. After the
Reorganization, the losses of ING Small Cap Growth Fund will be available to
Pilgrim SmallCap Opportunities Fund to offset its capital gains, although a
portion of the amount of these losses which may offset Pilgrim SmallCap
Opportunities Fund's capital gains in any given year may be limited. As a result
of this limitation, it is possible that Pilgrim SmallCap Opportunities Fund may
not be able to use such losses as rapidly as it might have had the
Reorganization not occurred, and part of these losses may not be useable at all.
The ability of Pilgrim SmallCap Opportunities Fund to absorb losses in the
future depends upon a variety of factors that cannot be known in advance,
including the existence of capital gains against which these losses may be
offset. In addition, the benefits of any of ING Small Cap Growth Fund's capital
loss carryforwards currently are available only to pre-Reorganization
shareholders of that Fund. After the Reorganization, however, these benefits
will inure to the benefit of all post-Reorganization shareholders of Pilgrim
SmallCap Opportunities Fund.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, investment adviser
to Pilgrim SmallCap Opportunities 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 their relative net
asset values immediately before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORM OF ORGANIZATION. Pilgrim SmallCap Opportunities Fund is a
Massachusetts business trust registered as an open-end management investment
company. ING Small Cap Growth Fund is a series of ING Funds Trust, which is a
Delaware business trust also registered as an open-end management investment
company. Pilgrim SmallCap Opportunities Fund and ING Funds Trust are both
governed by Trustees. The Board of Trustees of the Pilgrim SmallCap
Opportunities Fund consists of 11 members and the Board of Trustees of the ING
Funds Trust has 4 members.
16
<PAGE>
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.
The Pilgrim SmallCap Opportunities Fund also offers Class I and Class Q
shares, which have different sales charges and other expenses that may affect
their performance. You can obtain more information about these other share
classes by calling 1-800-992-0180.
DIVIDENDS AND OTHER DISTRIBUTIONS. Both Pilgrim SmallCap Opportunities Fund
and ING Small Cap Growth Fund pay dividends from net investment income and net
capital gains, if any, on an annual basis. Dividends and distributions of each
of the Funds are automatically reinvested in additional shares of the respective
class of the particular Fund, unless the shareholder elects to receive
distributions in cash.
If the Reorganization Agreement is approved by the ING Small Cap Growth
Fund's shareholders, then as soon as practicable before the Closing, ING Small
Cap Growth Fund will pay its shareholders a cash distribution of substantially
all undistributed net investment income and undistributed realized net capital
gains.
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of each of the Funds as of June 30, 2000 and on a PRO FORMA basis
as of June 30, 2000 giving effect to the Reorganization:
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
ING SMALL CAP GROWTH FUND
Class A $ 47,396,156 $16.32 2,903,867
Class B $ 3,196,772 $16.16 2,937,346
Class C $ 3,012,721 $16.15 2,749,888
Class X(1) $ 1,686,982 $16.17 1,440,322
PILGRIM SMALLCAP OPPORTUNITIES FUND
Class A $200,519,311 $63.97 3,134,517
Class B $331,731,146 $61.30 5,411,898
Class C $135,623,455 $61.20 2,215,945
Class I $ 307 $64.22 5
Class Q $ 1,464,086 $63.99 22,879
Class T $ 30,429,149 $61.69 493,272
PRO FORMA - PILGRIM SMALLCAP OPPORTUNITIES FUND
INCLUDING ING SMALL CAP GROWTH FUND
Class A $247,915,467 $63.97 3,875,429
Class B $336,614,900 $61.30 5,491,568
Class C $138,636,176 $61.20 2,265,172
Class I $ 307 $64.22 5
Class Q $ 1,464,086 $63.99 22,879
Class T $ 30,429,149 $61.69 493,272
(1) Class X shares merged into Class B on November 16, 2000.
17
<PAGE>
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 Small Cap Growth 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 IMFC 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 card at any time prior to
its use by filing with ING Small Cap Growth Fund, a written revocation or duly
executed proxy card bearing a later date. In addition, any shareholder who
attends the Special Meeting in person may vote by ballot at the Meeting, thereby
canceling any proxy card 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 in any proxy card that is signed and returned, they intend to vote
"FOR" the Reorganization proposal and may vote in their discretion with respect
to other matters not now known to the Board of Trustees of ING Funds Trust that
may be presented at the Special Meeting.
VOTING RIGHTS
Shareholders of ING Small Cap Growth 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 Small Cap Growth Fund at the close of business on
December 26, 2000 (the "Record Date") will be entitled to be present and give
voting instructions for ING Small Cap Growth Fund at the Special Meeting with
respect to their shares owned as of the Record Date. As of the Record Date,
______ shares of ING Small Cap Growth Fund were outstanding and entitled to
vote.
Approval of the Reorganization requires the vote of a majority of the
Shares present in person or by proxy of the ING Small Cap Growth 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.
ING Small Cap Growth 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, ING Small Cap Growth 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.
18
<PAGE>
As of December 1, 2000, ING America Insurance Holdings, Inc. owns 72.40% of
the outstanding voting shares of the Fund, and therefore controls the Fund. ING
America Insurance Holdings, Inc. 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 December 1, 2000, no current
Trustee owns 1% or more of the outstanding shares of ING Small Cap Growth Fund,
and the officers and Trustees own, as a group, less than 1% of the shares of ING
Small Cap Growth 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 Small Cap Growth Fund. As of December 1, 2000, no person owned beneficially
or of record 5% or more of the outstanding shares of any Class of Pilgrim
SmallCap Opportunities Fund.
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 Small Cap Growth 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 by phone at 1-800-992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
James M. Hennessy,
Secretary
______________ ___, 2000
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
19
<PAGE>
APPENDIX A
PILGRIM SMALLCAP OPPORTUNITIES FUND
Set forth below is an excerpt from SmallCap Opportunities Fund's Annual
Report, dated December 31, 1999, regarding the Fund's performance.
Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager
Goal: The SmallCap Opportunities Fund seeks capital appreciation by investing at
least 65% of its total assets in the common stocks of smaller lesser-known U.S.
companies that the Portfolio Manager feels have above average prospects for
growth.
Market Overview: In the final quarter of the year, U.S. equities powered ahead
using the same technology-driven formula responsible for some spectacular gains
in 1999. The economy showed continued strength with third quarter GDP being
revised upwards to 5.7%, but inflation remain subdued as the price index rose a
modest 1.7%. The Federal Reserve resisted the temptation to raise rates for the
fourth time this year, although there is an increased likelihood that rates will
be raised again in February. Economic news continued to be encouraging as
non-farm productivity showed its biggest increase since 1992, while consumer
confidence reached its highest point since 1968.
Technology's impact on the overall market continues to strengthen, as the
technology sector now accounts for more than a quarter of the S&P 500. However,
the stock market's performance was broader in December than it has been in
recent months. The exception to that broad strength was the financial sector,
which was dragged down by rising bond yields. Healthcare stocks were mixed as
large pharmaceuticals underperformed, but the biotechnology sector was
exceptionally strong.
Outside of the technology-heavy NASDAQ Composite, small cap stocks were the star
performers in the fourth quarter. For the quarter, the NASDAQ Composite soared
48.18%, while the Russell 2000 Index of small cap stocks gained 18.44%, setting
a new record high. The broader market also performed well, as the S&P 500 rose
14.88% in the final quarter, while the S&P Midcap Index earned 17.18%. The Dow
Jones Industrial Average tacked on an additional 11.22%, achieving another
record high.
Performance: For the one year ended December 31, 1999 the Fund's Class A shares,
excluding sales charges, provided a total return of 146.94% compared to a 21.26%
return for the Russell 2000 Index for the same period.
Portfolio Specifics: While the Fund has been overweight in technology, stock
selection and careful attention to valuation drove performance higher in the
fourth quarter. The themes that had the biggest impact on performance in the
final quarter of 1999 were the "Ubiquitous Semiconductor," "Telecommunications
Explosion," and "Managing the Information Age," while increased weightings in
"Life on the Net" and the "Life Sciences Revolution" also enhanced returns.
Looking at specific positions, Bluestone Software, Liberate Technologies,
Micromuse, and Abgenix were among the individual stocks with the biggest impact
on performance. Our biggest weighted themes as of year end were "Managing the
Information Age," "The Telecommunications Explosion," and "The Ubiquitous
Semiconductor."
Market Outlook: Looking out to the year 2000, we continue to see excellent
opportunities for growth stocks. While it is unlikely that the market indices
will repeat the spectacular performance of 1999, there are plenty of companies
with attractive prospects at reasonable valuations. Thus, we believe that active
managers will have the opportunity to outperform their benchmarks significantly
in 2000 as market breadth improves from its recent narrow focus. Technology
stocks should continue to lead the way as companies accelerate spending after
restraining budgets in front of Y2K.
We expect the U.S. economic expansion to continue into 2000, forcing the Federal
Reserve to continue to raise interest rates. Thus, we remain cautious towards
interest rate sensitive stocks, especially financials. However, spending on
communications networks should continue unabated as companies seek to realize
cost reductions from using the Internet and information technology. The
portfolio has focused on companies that provide the network infrastructure or
those that help companies design and implement solutions for their businesses.
We believe the portfolio is well positioned in the current environment. We have
focused on companies with very strong growth prospects and strong balance sheets
that sell at reasonable multiples relative to their growth rates.
A-1
<PAGE>
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim SmallCap Opportunities
Fund Class A With Sales
Charge (5) 10,000 8,654 13,666 15,742 19,018 18,218 20,402 24,107 27,709 29,812 73,617
Pilgrim SmallCap Opportunities
Fund Class A Without Sales
Charge (5) 10,000 9,182 14,500 16,703 20,179 19,329 21,647 25,578 29,399 31,630 78,108
Russell 2000 Index 10,000 8,049 11,756 13,920 16,552 16,251 20,872 24,314 29,751 28,992 35,164
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns for the Periods Ended December 31, 1999
--------------------------------------------------------------------
Since Inception Since Inception
of Class A, B and C of Class I
1 Year 5 Year 10 Year 6/5/95 4/1/99
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Including Sales Charge:
Class A (1) 132.73% -- -- 34.05% --
Class B (2) 140.24% -- -- 34.71% --
Class C (3) 144.12% -- -- 34.83% --
Class T (4) 141.51% 31.45% 22.11% -- --
Class I -- -- -- -- 126.05%
Excluding Sales Charge:
Class A 146.94% -- -- 35.79% --
Class B 145.24% -- -- 34.86% --
Class C 145.12% -- -- 34.83% --
Class T 145.51% 31.45% 22.11% -- --
Class I -- -- -- -- 126.05%
Russell 2000 Index 21.26% 16.69% 13.40% 16.24% 28.21%
</TABLE>
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim SmallCap Opportunities Fund against the Russell 2000 Index.
The Index has an inherent performance advantage over the 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. The Fund's performance
is shown both with and without the imposition of sales charges.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Reflects deduction of the deferred Class T sales charge of 4.00% for the 1
year return.
(5) The figures shown for the years 1996 to 1999 provide performance for Class
A shares of the Fund. The figures shown for the years 1989 to 1995 provide
performance for Class T shares of the Fund revised to reflect expenses of
Class A shares.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller companies may entail greater price variability than investing
in stocks of larger companies. This Fund may invest in IPO's which may
significantly impact performance.
* The Fund will close to new investors and new exchanges after February 29,
2000. Pilgrim reserves the right to close the Fund to new investors earlier
than that date if it determines that the Fund Manager's ability to invest is
being adversly affected by inflows.
A-2
<PAGE>
APPENDIX B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2001, by and between Pilgrim SmallCap
Opportunities Fund, a Massachusetts business trust ("Pilgrim Trust"), with its
principal place of business at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258, on behalf of its sole series, Pilgrim SmallCap Opportunities Fund
(the "Acquiring Fund"), and ING Funds Trust, a Delaware business trust ("ING
Trust"), with its principal place of business at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258, on behalf of its series, ING Small Cap Growth
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 beneficial interest (no 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 Trustees of the Pilgrim 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 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
B-1
<PAGE>
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").
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 of such assets 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
B-2
<PAGE>
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 Trustees.
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
with respect to the Acquiring Fund, and valuation procedures established by the
Acquiring Fund's Board of Trustees.
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 any 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
B-3
<PAGE>
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 Trustees of the Acquiring Fund, accurate
appraisal of the value of the net assets of the Acquiring Fund or the Acquired
Fund, respectively, is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading shall have been fully resumed
and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except 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 Pilgrim Trust as follows:
(a) The Acquired Fund is duly organized as a series of 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
B-4
<PAGE>
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 Pilgrim
Trust, on behalf of the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquired Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its business. 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;
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(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
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 Pilgrim Trust, the Pilgrim Trust, 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 Pilgrim Trust,
which is a business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, with power under the
Pilgrim 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) The Pilgrim 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
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;
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(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Pilgrim Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Pilgrim Trust, 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 Pilgrim Trust, 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 its 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 the Acquiring Fund's business. The Pilgrim Trust, on behalf of
the Acquiring Fund, knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to consummate
the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Schedule of Investments of the Acquiring Fund at
December 31, 1999 have been audited by PricewaterhouseCoopers LLP, independent
accountants, 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
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<PAGE>
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 (or will be 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 (recognizing that, under Massachusetts law, it is theoretically
possible that shareholders of the Acquiring Fund could, under certain
circumstances, be held personally liable for obligations of the Acquiring Fund)
and have been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration requirements of
the 1933 Act and state securities laws. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Pilgrim Trust, 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
(recognizing that, under Massachusetts law, it is theoretically possible that
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(o) The information to be furnished by the Pilgrim Trust for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading, provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
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(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.
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 The 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 Pilgrim Trust, 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's
Shares to be delivered hereunder, and (b) the Pilgrim Trust'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.
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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 the ING
Trust's election, to the performance by the Pilgrim Trust, 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 Pilgrim Trust, 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 Pilgrim Trust shall have delivered to the 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 the ING Trust and
dated as of the Closing Date, to the effect that the representations and
warranties of the Pilgrim Trust, 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;
6.3 The Pilgrim Trust, 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 Pilgrim Trust, 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 Pilgrim Trust, on behalf of the Acquiring Fund, to
complete the transactions provided for herein shall be subject, at the Pilgrim
Trust'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
Pilgrim Trust 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 Pilgrim Trust shall reasonably
request;
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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 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 Pilgrim Trust, on behalf of the Acquiring Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of 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 the
Pilgrim Trust nor the ING Trust 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 Pilgrim Trust 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 Pilgrim Trust 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 Pilgrim Trust and the ING Trust.
Notwithstanding anything herein to the contrary, neither the Pilgrim Trust nor
the ING Trust may waive the condition set forth in this paragraph 8.5.
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9. INDEMNIFICATION
9.1 The Pilgrim Trust, 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 Pilgrim Trust 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 Pilgrim Trust and each of its 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 Pilgrim
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 ING Trust of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
10. BROKERAGE FEES AND EXPENSES
10.1 Pilgrim Trust, on behalf of the Acquiring Fund, and the 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 Acquiring
Fund, 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 other 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 Pilgrim Trust 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.
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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 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.
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 Pilgrim Trust; provided, however, that following the meeting of the
shareholders of the Acquired Fund called by the ING Trust 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 Pilgrim Trust, 7337 E. Doubletree Ranch Road, Scottsdale, Arizona
85258, attn: James M. Hennessy, in each case with a copy to Dechert, 1775 Eye
Street, N.W., Washington, D.C. 20006, attn: Jeffrey S. Puretz.
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 Commonwealth of Massachusetts 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.
15.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Pilgrim Trust or ING Trust personally, but shall
bind only the trust property of the Acquiring Fund or the Acquired Fund, as
provided in the Declaration of Trust of the Pilgrim Trust and the ING Trust. The
execution and delivery by such officers shall not be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the trust property of such party.
B-13
<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.
Attest: PILGRIM SMALLCAP OPPORTUNITIES FUND
on behalf of its
PILGRIM SMALLCAP OPPORTUNITIES FUND
series
----------------------------------- By:
SECRETARY -------------------------------------
Its:
------------------------------------
Attest: ING FUNDS TRUST on behalf of its
ING SMALL CAP GROWTH FUND series
----------------------------------- By:
SECRETARY -------------------------------------
Its:
------------------------------------
B-14
<PAGE>
APPENDIX C
ADDITIONAL INFORMATION REGARDING
PILGRIM SMALLCAP OPPORTUNITIES FUND
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to three separate Classes of the
Pilgrim SmallCap Opportunities Fund (the "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 Small Cap Growth Fund
shares held by you immediately prior to the Reorganization, and the period that
you held shares of ING Small Cap Growth Fund will be included in the holding
period of the Fund for purposes of calculating contingent deferred sales charges
and determining conversion rights. Purchases of the shares of the Fund after the
Reorganization will be subject to the sales load structure and conversion rights
discussed below.
The sales charges and fees for each Class of shares of the Fund involved in
the Reorganization are shown and contrasted in the chart below.
CLASS A CLASS B CLASS 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 Distribution (12b-1) and
Service Fees (5) 0.30% 1.00% 1.00%
Maximum Purchase Unlimited $250,000 Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A
----------
(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 made within 2 years of purchase. 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 redemption within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund issued to shareholders of ING Small Cap Growth
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 Small
Cap Growth 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.
C-1
<PAGE>
CLASS A SHARES: INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the
Fund are sold at the net asset value ("NAV") per share in effect plus a sales
charge as described in the following table. For waivers or reductions of the
Class A shares sales charges, see "Special Purchases without a Sales Charge" and
"Reduced Sales Charges" below.
AS A % OF THE AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV
--------------- -------------- ------
Less than $50,000 5.75% 6.10%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $1,000,000 2.00% 2.04%
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 Small Cap Growth Fund that were subject to
a CDSC at the time of the Reorganization, will be subject to a CDSC of up to 1%
for a period of 12 months from the date of purchase of the original shares of
ING Small Cap Growth Fund.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced
sales charge on a purchase of Class A shares of the Fund or other open-end funds
in the Pilgrim funds or ING funds which offer Class A shares, or shares with
front-end sales charges ("Participating Funds") by completing the Letter of
Intent section of an Application to purchase Fund shares. Executing the Letter
of Intent expresses an intention to invest during the next 13 months a specified
amount, which, if made at one time, would qualify for a reduced sales charge. An
amount equal to the Letter of Intent amount multiplied by the maximum sales
charge imposed on purchases of the Fund and Class will be restricted within your
account to cover additional sales charges that may be due if your actual total
investment fails to qualify for the reduced sales charges. See the Statement of
Additional Information for the Fund for details on the Letter of Intent option
or contact the Shareholder Servicing Agent at 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.
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.
C-2
<PAGE>
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 distribution and service fees at an annual rate of 1.00% of the
average daily net assets of the Class, which is higher than the distribution and
service fees of Class A shares. The higher distribution and service 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 Small Cap Growth Fund
will convert to Class A shares eight years after the purchase of the original
shares of ING Small Cap Growth 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 Pilgrim 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.
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.
C-3
<PAGE>
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, ING Pilgrim Securities,
Inc. (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% 0.05%
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 and 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 Trustees
who are not affiliated with ING Pilgrim Investments, Inc. ("ING Pilgrim
Investments"). Most Fund expenses are allocated proportionately among all of the
outstanding shares of that Fund. However, the Rule 12b-1 Plan fees for each
Class of shares are charged proportionately only to the outstanding shares of
that Class.
PURCHASING SHARES. The Fund reserves the right to liquidate sufficient
shares to recover annual Transfer Agent fees should the investor fail to
maintain his/her account value at a minimum of $1,000.00 ($250.00 for IRAs). The
minimum initial investment in the Fund is $1,000 ($250 for IRAs), and the
minimum for additional investment in the Fund is $100. The minimum initial
investment for a pre-authorized retirement plan is $100, plus monthly
investments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable
sales charge. When you sell shares, you receive the NAV minus any applicable
deferred sales charge. Exchange orders are effected at NAV.
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. New York City time) on each day that it is
open for business. The NAV of each Class represents that Class' pro rata share
of that Fund's net assets as adjusted for any class specific expenses (such as
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 for situations where market
C-4
<PAGE>
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 Trustees. Valuing securities at fair
value involves greater reliance on judgment than valuing securities that have
readily available market quotations. 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 NAV
next determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth under "How to Purchase Shares" in the Pilgrim
Prospectus have been completed. If you purchase by wire, however, the order will
be deemed to be in proper form after the telephone notification and the federal
funds wire have been received. If you purchase by wire, you must submit an
application form in a timely fashion. If an order or payment by wire is received
after the close of regular trading on the New York Stock Exchange (normally 4:00
p.m. Eastern Time), the shares will not be credited until the next business day.
You will receive a confirmation of each new transaction in your account,
which also will show you the number of shares of the Fund you own including the
number of shares being held in safekeeping by the Transfer Agent for your
account. You may rely on these confirmations in lieu of certificates as evidence
of your ownership. Certificates representing shares of the Fund will not be
issued unless you request them in writing.
TELEPHONE ORDERS. The Fund and its Transfer Agent will not be responsible
for the authenticity of phone instructions or losses, if any, resulting from
unauthorized shareholder transactions if they reasonably believe that such
instructions were genuine. The Fund and its Transfer Agent have established
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include recording telephone instructions for exchanges
and expedited redemptions, requiring the caller to give certain specific
identifying information, and providing written confirmation to shareholders of
record not later than five days following any such telephone transactions. If
the Fund and its Transfer Agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Telephone redemptions may be executed on all accounts other than retirement
accounts.
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.
C-5
<PAGE>
Shares of any 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. 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.
Exchanges of shares are sales and may result in a gain or loss for federal
and state income tax purposes.
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
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. 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.
C-6
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund. ING
Pilgrim Investments provides the Fund with office space, equipment and personnel
necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of Trustees of the Fund upon 60 days' written notice.
Organized in December 1994, ING Pilgrim Investments is registered as an
investment adviser with the Securities and Exchange Commission. As of September
30, 2000, ING Pilgrim Investments managed over $20.7 billion in assets. ING
Pilgrim Investments bears its expenses of providing the services described
above. Investment management fees are computed and accrued daily and paid
monthly.
PARENT COMPANY AND DISTRIBUTOR. ING Pilgrim Investments and the Distributor
are indirect, wholly-owned subsidiaries of ING Groep N.V. (NYSE: ING) ("ING
Group"). ING Group is a global financial institution active in the field of
insurance, banking and asset management in more than 65 countries, with almost
100,000 employees.
SHAREHOLDER SERVICING AGENT. ING Pilgrim Group, Inc. serves as Shareholder
Servicing Agent for the Fund. The Shareholder Servicing Agent is responsible for
responding to written and telephonic inquiries from shareholders. The Fund pays
the Shareholder Servicing Agent a monthly fee on a per-contact basis, based upon
incoming and outgoing telephonic and written correspondence.
PORTFOLIO TRANSACTIONS. ING Pilgrim Investments will place orders to
execute securities transactions that are designed to implement the Fund's
investment objectives and policies. ING Pilgrim Investments will use its
reasonable efforts to place all purchase and sale transactions with brokers,
dealers and banks ("brokers") that provide "best execution" of these orders. In
placing purchase and sale transactions, ING Pilgrim Investments may consider
brokerage and research services provided by a broker to ING Pilgrim Investments
or its affiliates, and the Fund may pay a commission for effecting a securities
transaction that is in excess of the amount another broker would have charged if
ING Pilgrim Investments determines in good faith that the amount of commission
is reasonable in relation to the value of the brokerage and research services
provided by the broker. In addition, ING Pilgrim Investments may place
securities transactions with brokers that provide certain services to the Fund.
ING Pilgrim Investments also may consider a broker's sale of Fund shares if ING
Pilgrim Investments is satisfied that the Fund would receive best execution of
the transaction from that broker.
DIVIDENDS, DISTRIBUTIONS & TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund generally distributes most or all of
its net earnings in the form of dividends. The Fund pays dividends and capital
gains, if any, annually. Dividends and distributions will be determined on a
Class basis.
Any dividends and distributions paid by the Fund will be automatically
reinvested in additional shares of the respective Class of that Fund, unless you
elect to receive distributions in cash. When a dividend or distribution is paid,
the NAV per share is reduced by the amount of the payment. You may, upon written
request or by completing the appropriate section of the Account Application in
the Pilgrim Prospectus, elect to have all dividends and other distributions paid
on a Class A, Class B, or Class C account in the Fund invested into a Pilgrim
Fund or ING Fund which offers Class A, Class B, or Class C shares.
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's Statement of Additional Information for
additional information. You should rely your own tax adviser for advice about
the particular federal, state and local tax consequences to you of investing in
the Fund.
C-7
<PAGE>
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>
PILGRIM SMALLCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The information in the table below, except the six months ended June 30, 2000,
has been audited by PricewaterhouseCoopers LLP, independent auditors.
<TABLE>
<CAPTION>
Six Months Class A
Ended Year Ended December 31,
June 30, 2000 ---------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995(1)
----------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 59.35 29.00 27.77 24.72 20.92 19.56
Net investment loss $ (0.13) (0.32) (0.27) (0.02) (0.04) (0.09)
Net realized and unrealized gain
on investments $ 4.75 38.23 2.23 3.68 3.84 2.48
Total from investment operations $ 4.62 37.91 1.96 3.66 3.80 2.39
Distributions from net realized gain $ -- (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ -- (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 63.97 59.35 29.00 27.77 24.72 20.92
Total return(2) % 7.78 146.94 7.59 14.92 18.16 12.20
Ratios and supplemental data:
Net assets at the end of the period (000s) $ 200,519 123,377 45,461 78,160 65,660 2,335
Ratio of expenses to average net assets
after reimbursement % 1.31 (3) 1.43 1.47 1.43 1.46 1.50 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 1.31 (3) 1.43 1.47 1.43 1.47 1.50 (3)
Ratio of net investment loss to
average net assets % (0.80)(3) (1.21) (0.70) (0.07) (0.30) (0.91)(3)
Portfolio turnover % 64 223 257 175 140 71
Six Months Class B
Ended Year Ended December 31,
June 30, 2000 ------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995(1)
----------- ---- ---- ---- ---- -------
Operating performance:
Net asset value, beginning of the period $ 57.06 28.26 27.27 24.46 20.84 19.56
Net investment loss $ (0.39) (0.60) (0.48) (0.19) (0.12) (0.12)
Net realized and unrealized gain
on investments $ 4.63 36.96 2.20 3.61 3.74 2.43
Total from investment operations $ 4.24 36.36 1.72 3.42 3.62 2.31
Distributions from net realized gain $ -- (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ -- (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 61.30 57.06 28.26 27.27 24.46 20.84
Total return(2) % 7.43 145.24 6.84 14.10 17.37 11.79
Ratios and supplemental data:
Net assets at the end of the period (000s) $ 331,731 264,677 124,065 169,516 126,859 1,491
Ratio of expenses to average net assets
after reimbursement % 2.01 (3) 2.15 2.18 2.15 2.17 2.20 (3)
Ratio of expenses to average net assets
prior to expense reimbursement % 2.01 (3) 2.15 2.18 2.15 2.18 2.21 (3)
Ratio of net investment loss to
average net assets % (1.53)(3) (1.93) (1.43) (0.78) (1.01) (1.64)(3)
Portfolio turnover % 64 223 257 175 140 71
Six Months Class C
Ended Year Ended Dec. 31,
June 30, 2000 --------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995(1)
----------- ---- ---- ---- ---- -------
Operating performance:
Net asset value, beginning of the period $ 56.98 28.24 27.26 24.46 20.84 19.56
Net investment loss $ (0.22) (0.53) (0.55) (0.20) (0.13) (0.15)
Net realized and unrealized gain
(loss) on investments $ 4.44 36.83 2.26 3.61 3.75 2.46
Total from investment operations $ 4.22 36.30 1.71 3.41 3.62 2.31
Distributions from net realized gain $ -- (7.56) (0.73) (0.61) -- (1.03)
Total distributions $ -- (7.56) (0.73) (0.61) -- (1.03)
Net asset value, end of the period $ 61.20 56.98 28.24 27.26 24.46 20.84
Total return(2) % 7.41 145.12 6.81 14.06 17.37 11.79
Ratios and supplemental data:
Net assets at the end of the period (000s) $ 135,623 72,581 29,746 51,460 37,342 62
Ratio of expenses to average net
assets after reimbursement % 2.01 (3) 2.18 2.22 2.18 2.20 2.20 (3)
Ratio of expenses to average net
assets prior to expense reimbursement % 2.01 (3) 2.18 2.22 2.18 2.21 2.23 (3)
Ratio of net investment loss to average
net assets % (1.57)(3) (1.96) (1.45) (0.82) (1.03) (1.60)(3)
Portfolio turnover % 64 223 257 175 140 71
</TABLE>
----------
(1) Classes A, B & C commenced operations on June 5, 1995.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
See Accompanying Notes to Financial Statements
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, 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, no persons owned beneficially or of record 5% or
more of the outstanding shares of any Class of Pilgrim SmallCap Opportunities
Fund.
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 Small
Cap Growth Fund:
<TABLE>
<CAPTION>
% OF CLASS % OF FUND % OF FUND
BEFORE BEFORE AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ING America Insurance Holdings, Inc. A 85.54% 72.40% ___%
Investment Accounts
Attn: David Pendergrass
5780 Powers Ferry Rd. NW
Atlanta, Georgia 30327-4347
</TABLE>
E-1
<PAGE>
PART B
PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
Statement of Additional Information
__________ ___, 2000
--------------------------------------------------------------------------------
Acquisition of the Assets and Liabilities By and in Exchange for Shares of
of ING Small Cap Growth Fund Pilgrim SmallCap Opportunities Fund
(a series of ING Funds Trust) 7337 East Doubletree Ranch Road
7337 East Doubletree Ranch Road Scottsdale, Arizona 85258
Scottsdale, Arizona 85258
This Statement of Additional Information is available to the Shareholders
of ING Small Cap Growth Fund in connection with a proposed transaction whereby
all of the assets and liabilities of ING Small Cap Growth Fund, a series of ING
Funds Trust, will be transferred to Pilgrim SmallCap Opportunities Fund in
exchange for shares of Pilgrim SmallCap Opportunities Fund.
This Statement of Additional Information of the Pilgrim SmallCap
Opportunities Fund 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 SmallCap Opportunities
Fund dated November 1, 2000, as filed on November 1, 2000.
2. The Statement of Additional Information for ING Funds Trust dated November
6, 2000, as filed on November 6, 2000.
3. The Financial Statements of Pilgrim SmallCap Opportunities Fund are
included in the Annual Report of Pilgrim SmallCap Opportunities Fund dated
December 31, 1999, as filed on March 6, 2000.
4. The Financial Statements of Pilgrim SmallCap Opportunities Fund are
included in the Semi-Annual Report of Pilgrim SmallCap Opportunities Fund
dated June 30, 2000, as filed on September 11, 2000.
5. The Financial Statements of ING Small Cap Growth Fund are included in the
Annual Report of ING Funds Trust dated October 31, 1999, as filed on
December 29, 1999.
6. The Financial Statements of ING Small Cap Growth 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 Small Cap Growth Fund may be obtained, without charge, by writing to ING
Funds Trust at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258 or by
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 Portfolios 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).
STATEMENT OF ASSETS AND LIABILITIES AS OF JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PILGRIM ING
SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
---- ---- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value* $696,236,705 $49,420,776 $ 745,657,481
Repurchase agreements 6,123,000 6,046,000 12,169,000
Cash 100 53,704 53,804
Receivable for investment securities sold 10,211,605 709,078 10,920,683
Receivable for fund shares of beneficial
interest sold 473,268 23,392 496,660
Dividends and interest receivable 26,195 3,703 29,898
Other receivables -- 18,041 18,041
Prepaid expenses 103,498 14,676 118,174
------------ ----------- ------------ ------------
Total Assets 713,174,371 56,289,370 -- 769,463,741
------------ ----------- ------------ ------------
LIABILITIES:
Payable for investment securities purchased 11,289,539 922,366 12,211,905
Investment advisory fee payable 409,087 -- 409,087
Payable for fund shares of beneficial
interest reacquired 937,329 -- 937,329
Distribution fees payable 433,294 -- 433,294
Administrative service fees payable 46,357 -- 46,357
Transfer agent fees payable 233,341 -- 233,341
Other accrued expenses and liabilities 57,970 74,373 132,343
------------ ----------- ------------ ------------
Total Liabilities 13,406,917 996,739 -- 14,403,656
------------ ----------- ------------ ------------
NET ASSETS $699,767,454 $55,292,631 $ -- $755,060,085
============ =========== ============ ============
NET ASSETS CONSIST OF:
Paid-in capital for shares of beneficial
interest, $.01 par value 397,860,986 37,501,982 435,362,968
Accumulated net investment loss (4,501,533) (511,065) (5,012,598)
Accumulated net realized gain (loss)
on investments 82,781,042 7,237,420 90,018,462
Net unrealized appreciation (depreciation)
of investments 223,626,959 11,064,294 234,691,253
------------ ----------- ------------ ------------
Net Assets $699,767,454 $55,292,631 $ 0 $755,060,085
============ =========== ============ ============
CLASS A:
Net Assets $200,519,311 $47,396,156 $247,915,467
Shares outstanding 3,134,517 2,903,867 (2,162,955)(A) 3,875,429
Net asset value and redemption price per share $ 63.97 $ 16.32 $ 63.97
Maximum offering price per share $ 67.87 $ 17.32 $ 67.87
CLASS B:
Net Assets $331,731,146 $ 3,196,772 $ 1,686,982 (A)(B) $336,614,900
Shares outstanding 5,411,898 197,831 (118,161)(A)(B) 5,491,568
Net asset value and redemption price per share $ 61.30 $ 16.16 $ 61.30
Maximum offering price per share $ 61.30 $ 16.16 $ 61.30
CLASS C:
Net Assets $135,623,455 $ 3,012,721 $138,636,176
Shares outstanding 2,215,945 186,491 (137,264)(A) 2,265,172
Net asset value and redemption price per share $ 61.20 $ 16.15 $ 61.20
Maximum offering price per share $ 61.20 N/A $ 61.20
CLASS T:
Net Assets $ 30,429,149 N/A $ 30,429,149
Shares outstanding 493,272 N/A 493,272
Net asset value and redemption price per share $ 61.69 N/A $ 61.69
Maximum offering price per share $ 61.69 N/A $ 61.69
CLASS I:
Net Assets $ 307 N/A $ 307
Shares outstanding 5 N/A 5
Net asset value and redemption price per share $ 64.22 N/A $ 64.22
Maximum offering price per share $ 64.22 N/A $ 64.22
CLASS Q:
Net Assets $ 1,464,086 N/A $ 1,464,086
Shares outstanding 22,879 N/A 22,879
Net asset value and redemption price per share $ 63.99 N/A $ 63.99
Maximum offering price per share $ 63.99 N/A $ 63.99
CLASS X:
Net Assets N/A $ 1,686,982 $ (1,686,982)(B) N/A
Shares outstanding N/A 104,357 (104,357)(B) N/A
Net asset value and redemption price per share N/A $ 16.17 N/A
Maximum offering price per share N/A N/A N/A
* Cost of securities $472,609,746 $38,356,482 $ 510,966,228
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(B) Reflects merging of Class X into Class B.
See Accompanying Notes to Financial Statements
2
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PILGRIM ING
SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------- ------------- ------------- -------------
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED
30-JUN-2000 30-JUN-2000 30-JUN-2000 30-JUN-2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 312,673 $ 36,088 $ 348,761
Interest 1,656,395 197,563 1,853,958
Other 150,488 -- 150,488
------------ ----------- --------- ------------
Total investment income 2,119,556 233,651 2,353,207
------------ ----------- --------- ------------
EXPENSES:
Investment advisory fees 4,892,373(D) 438,044 5,330,417
Distribution expenses
Class A 384,334 296,470 (177,483)(A) 503,321
Class B 2,500,105 16,252 10,297 (C) 2,526,654
Class C 830,583 15,144 845,727
Class T 264,715 -- 264,715
Class Q 480 -- 480
Class X -- 10,297 (10,297)(C) --
Administrative fees 446,932 -- 43,874 (A) 490,806
Transfer agent and shareholder servicing expenses 610,864 142,457 (85,149)(A) 668,172
Directors' fees and expenses 10,554 489 (489)(B) 10,554
Professional fees 24,292 26,133 (20,906)(B) 29,519
Printing and mailing expenses 147,607 14,839 162,446
Accounting and custodian expenses 135,237 69,967 (55,974)(B) 149,230
Registration fees 52,486 46,813 (37,450)(B) 61,849
Miscellaneous expenses 129,748 9,924 139,672
------------ ----------- --------- ------------
Total expenses 10,430,310 1,086,830 (333,577) 11,183,562
Less expenses reimbursed by management company 457,599 (457,599)(A) --
------------ ----------- --------- ------------
Net expenses 10,430,310 629,231 124,022 11,183,562
Net investment income (loss) (8,310,754) (395,580) (124,022) (8,830,355)
------------ ----------- --------- ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from:
Investments 136,163,602 7,237,422 143,401,024
Net change in unrealized appreciation of:
Investments 34,800,263 23,735,969 58,536,232
------------ ----------- --------- ------------
Net gain from investments 170,963,865 30,973,391 201,937,256
------------ ----------- --------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $162,653,111 $30,577,811 $(124,022) $193,106,901
============ =========== ========= ============
</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 merging of Class X into Class B.
(D) Reflects increase in management fee from 0.75% to 1.00% effective August 25,
2000.
See Accompanying Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
SMALLCAP SMALLCAP SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA OPPORTUNITIES GROWTH PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS: 98.75%
ADVERTISING: 0.04%
7,700 7,700 Lamar Advertising Co. $ 333,506 $ 333,506
------------- ------------ -------------
AGRICULTURE: 0.07%
20,000 20,000 Delta & Pine Land Company 501,250 501,250
------------- ------------ -------------
APPAREL: 0.17%
10,000 10,000 McNaughton Apparel Group, Inc. 105,000 105,000
59,700 59,700 Russell Corp. $ 1,194,000 1,194,000
------------- ------------ -------------
1,194,000 105,000 1,299,000
------------- ------------ -------------
BANKS: 0.06%
10,000 10,000 Slicon Valley Bancshares 426,250 426,250
------------- ------------ -------------
BIOTECHNOLOGY: 6.53%
99,100 99,100 @ Aclara BioSciences, Inc. 5,047,905 5,047,905
116,800 116,800 @ Charles River Laboratories Int'l 2,591,500 2,591,500
6,800 6,800 CuraGen Corp. 258,825 258,825
137,900 137,900 @ Diacrin, Inc. 1,085,961 1,085,961
45,600 45,600 @ Genome Therapeutics Corp. 1,387,950 1,387,950
7,200 7,200 Idec Pharmaceuticals Corp. 844,650 844,650
80,000 80,000 @ Incyte Genomics, Inc. 6,575,000 6,575,000
35,300 35,300 @ Inhale Therapeutic Systems, Inc. 3,581,847 3,581,847
54,300 54,300 @ Invitrogen Corp. 4,083,530 4,083,530
53,500 53,500 @ Maxygen 3,036,961 3,036,961
25,200 25,200 @ Orchid BioSciences, Inc. 956,813 956,813
44,700 2,800 47,500 @ Protein Design Labs, Inc. 7,373,405 461,869 7,835,274
47,300 47,300 @ Sequenom, Inc. 2,146,238 2,146,238
341,800 341,800 @ Texas Biotech Corp. 6,494,200 6,494,200
10,800 10,800 Vical, Inc. 207,900 207,900
70,600 70,600 @ Visible Genetics, Inc. 3,185,825 3,185,825
------------- ------------ -------------
47,547,135 1,773,244 49,320,379
------------- ------------ -------------
COMMERCIAL SERVICES: 5.23%
131,000 131,000 @ Albany Molecular Research, Inc. 7,131,313 7,131,313
145,600 145,600 @ Aurora Biosciences Corp. 9,928,100 9,928,100
30,000 30,000 Boren Lapore & Associates Inc. 277,500 277,500
75,700 75,700 @ First Health Group Corp. 2,483,906 2,483,906
147,300 147,300 @ Heidrick & Struggles, Inc. 9,298,312 9,298,312
282,600 282,600 @ Korn/Ferry Int'l 8,954,888 8,954,888
65,000 65,000 Spherion Corporation 1,153,750 1,153,750
20,000 20,000 Sylvan Learning Systems Inc. 275,000 275,000
------------- ------------ -------------
37,796,519 1,706,250 39,502,769
------------- ------------ -------------
COMPUTERS: 1.44%
40,900 40,900 @ Immersion 1,227,000 1,227,000
176,000 176,000 @ Manhattan Associates, Inc. 4,400,000 4,400,000
37,000 37,000 @ Silicon Storage Technology, Inc. 3,267,563 3,267,563
37,000 37,000 @ Stratos Lightwave, Inc 1,031,375 1,031,375
5,600 5,600 @ Turnstone Systems, Inc 927,763 927,763
------------- ------------ -------------
10,853,701 -- 10,853,701
------------- ------------ -------------
DIVERSIFIED FINANCIAL SERVICES: 1.67%
151,100 151,100 @ CompuCredit Corp. 4,533,000 4,533,000
178,100 178,100 Paine Webber Group, Inc. 8,103,550 8,103,550
------------- ------------ -------------
12,636,550 -- 12,636,550
------------- ------------ -------------
ELECTRIC: 0.85%
188,800 188,800 Kansas City Power & Light 4,248,000 4,248,000
117,500 117,500 @ NRG Energy, Inc. 2,144,375 2,144,375
------------- ------------ -------------
6,392,375 -- 6,392,375
------------- ------------ -------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.61%
104,200 104,200 @ Advanced Energy Industries 6,141,286 6,141,286
8,600 8,600 @ Capstone Turbine Corp. 387,537 387,537
49,350 49,350 @ Power-One, Inc. 5,622,816 5,622,816
------------- ------------ -------------
12,151,639 -- 12,151,639
------------- ------------ -------------
ELECTRONICS: 1.73%
65,900 65,900 @ Electro Scientific Industries, Inc. 2,901,659 2,901,659
231,800 231,800 @ Kent Electronics Corp. 6,910,538 6,910,538
20,000 20,000 Kinseki 338,376 338,376
107,300 107,300 @ Packard Biosciences 1,824,100 1,824,100
11,200 11,200 Sawtek, Inc. 644,700 644,700
30,000 30,000 Surge Components, Inc. 142,031 142,031
7,500 7,500 Vishay Intertechnology, Inc. 284,531 284,531
------------- ------------ -------------
11,636,297 1,409,638 13,045,935
------------- ------------ -------------
ENVIRONMENTAL CONTROL: 0.02%
8,000 8,000 @ Waste Connections, Inc. 158,000 158,000
------------- ------------ -------------
HEALTHCARE-PRODUCTS: 2.07%
196,000 196,000 @ Cytyc Corp. 10,461,500 10,461,500
203,300 203,300 @ Edwards Lifesciences Corp. 3,888,113 3,888,113
114,100 114,100 @ Kensey Nash Corp. 1,269,363 1,269,363
------------- ------------ -------------
15,618,976 -- 15,618,976
------------- ------------ -------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
SMALLCAP SMALLCAP SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA OPPORTUNITIES GROWTH PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HEALTHCARE-SERVICES: 6.99%
266,000 266,000 @ Community Health Systems, Inc. 4,305,875 4,305,875
89,400 89,400 @ Coventry Health Care, Inc. 1,191,534 1,191,534
57,000 57,000 Health Management Associates, Inc. 744,562 744,562
89,900 89,900 @ Laboratory Corp. of America Holdings 6,933,538 6,933,538
319,800 319,800 @ LifePoint Hospitals, Inc 7,115,550 7,115,550
139,200 139,200 @ Oxford Health Plans 3,314,700 3,314,700
196,400 196,400 @ Province Healthcare Co. 7,094,950 7,094,950
99,200 99,200 @ Quest Diagnostics, Inc. 7,099,000 7,099,000
338,800 338,800 @ Triad Hospitals, Inc. 8,194,725 8,194,725
131,400 131,400 @ Trigon Healthcare, Inc. 6,775,313 6,775,313
------------- ------------ -------------
52,025,185 744,562 52,769,747
------------- ------------ -------------
HOME BUILDERS: 0.07%
40,000 40,000 DR Horton, Inc. 542,500 542,500
------------- ------------ -------------
INSURANCE: 1.31%
166,900 166,900 Radian Group, Inc. 8,637,075 8,637,075
35,700 35,700 PartnerRe, Ltd. 1,265,119 1,265,119
------------- ------------ -------------
9,902,194 - 9,902,194
------------- ------------ -------------
INTERNET: 1.08%
22,500 22,500 Alteon Websystems Inc. 2,251,406 2,251,406
44,000 44,000 C-Bridge Internet Solutions Inc. 764,500 764,500
9,000 9,000 Checkfree Corporation 464,063 464,063
21,800 21,800 @ Digital Insight Corp. 741,200 741,200
21,000 21,000 Emusic.com, Inc. 49,875 49,875
15,000 15,000 Integrated Information Systems, Inc. 122,812 122,812
15,000 15,000 Kana Communications, Inc. 928,125 928,125
10,000 10,000 Keynote Systems, Inc. 705,625 705,625
3,000 3,000 Lante Corp. 61,313 61,313
5,000 5,000 Portal Software, Inc. 319,375 319,375
6,000 6,000 QRS Corp. 147,375 147,375
4,000 4,000 Smartserv Online, Inc. 282,250 282,250
20,000 20,000 Teligent, Inc. 472,500 472,500
20,000 20,000 Viant Corp. 592,500 592,500
4,250 4,250 WatchGuard Technologies 233,484 233,484
------------- ------------ -------------
741,200 7,395,203 8,136,403
------------- ------------ -------------
MACHINERY-DIVERSIFIED: 0.84%
23,300 23,300 @ Brooks Automation, Inc. 1,489,742 1,489,742
74,600 74,600 @ PRI Automation, Inc. 4,878,141 4,878,141
------------- ------------ -------------
6,367,883 - 6,367,883
------------- ------------ -------------
MEDIA: 0.43%
78,800 78,800 @ Emmis Communications Corp. 3,260,350 3,260,350
------------- ------------ -------------
OIL & GAS PRODUCERS: 6.63%
125,000 125,000 @ Atwood Oceanics 5,546,875 5,546,875
295,300 295,300 Cross Timbers Oil Co. 6,533,513 6,533,513
4,000 4,000 Devon Energy Corp. 224,750 224,750
10,000 10,000 EOG Resources, Inc. 335,000 335,000
10,000 10,000 Forest Oil Corp. 159,375 159,375
128,100 128,100 @ HS Resources, Inc. 3,843,000 3,843,000
403,100 403,100 @ Key Energy Group 3,879,838 3,879,838
74,000 74,000 @ Louis Dreyfus Natural Gas 2,317,125 2,317,125
131,200 131,200 @ Marine Drilling Co., Inc. 3,673,600 3,673,600
78,200 78,200 @ Newfield Exploration Co. 3,059,575 3,059,575
186,000 2,300 188,300 @ Precision Drilling Corp. 7,184,250 88,838 7,273,088
223,900 223,900 @ Pride Int'l, Inc. 5,541,525 5,541,525
130,600 130,600 @ Spinnaker Exploration Co. 3,346,625 3,346,625
40,800 10,000 50,800 @ Stone Energy Corp. 2,437,800 597,500 3,035,300
10,000 10,000 Swift Energy Co. 283,750 283,750
19,000 19,000 Transocean Sedco Forex Inc. 1,015,313 1,015,313
------------- ------------ -------------
47,363,726 2,704,526 50,068,252
------------- ------------ -------------
OIL & GAS SERVICES: 4.40%
109,800 109,800 @ BJ Services Co. 6,862,500 6,862,500
116,700 116,700 @ Cooper Cameron Corp. 7,702,200 7,702,200
124,000 6,000 130,000 @ Dril-Quip 5,797,000 280,500 6,077,500
107,600 107,600 @ Global Industries Ltd. 2,030,950 2,030,950
50,000 50,000 Input/Output, Inc. 421,875 421,875
190,000 190,000 @ National-Oilwell, Inc. 6,246,250 6,246,250
92,400 92,400 @ Universal Compression Holdings 3,095,400 3,095,400
29,400 29,400 Veritas DGC, Inc. 764,400 764,400
------------- ------------ -------------
31,734,300 1,466,775 33,201,075
------------- ------------ -------------
PHARMACEUTICALS: 14.95%
75,400 75,400 @ Abgenix, Inc. 9,037,397 9,037,397
141,700 141,700 @ Alkermes, Inc. 6,677,611 6,677,611
61,200 61,200 Alpharma, Inc. 3,809,700 3,809,700
30,000 30,000 Amerisource Health Corp. 930,000 930,000
130,700 130,700 @ Anesta Corp. 3,251,163 3,251,163
35,000 35,000 Avax Technologies, Inc. 317,187 317,187
174,900 174,900 @ Celgene Corp. 10,297,238 10,297,238
141,300 141,300 @ Cephalon, Inc. 8,460,338 8,460,338
184,400 184,400 @ COR Therapeutics, Inc. 15,731,625 15,731,625
81,500 81,500 @ Cubist Pharmaceuticals, Inc. 4,013,875 4,013,875
30,000 30,000 Genta, Inc. 195,000 195,000
170,500 170,500 @ Ilex Oncology, Inc. 6,010,125 6,010,125
46,500 46,500 Inkine Pharmaceutical Co. 226,688 226,688
321,600 321,600 @ Intrabiotics Pharmaceuticals, Inc. 8,582,700 8,582,700
15,700 15,700 Medarex, Inc. 1,326,650 1,326,650
140,400 140,400 @ Pharmacopeia, Inc. 6,511,050 6,511,050
67,700 67,700 @ Priority Healthcare Corp. 5,030,956 5,030,956
105,800 105,800 @ Syncor Int'l Corp. 7,617,600 7,617,600
80,100 80,100 @ Trimeris, Inc. 5,601,994 5,601,994
52,400 52,400 @ United Therapeutics Corp. 5,678,850 5,678,850
33,900 33,900 @ Vertex Pharmaceuticals, Inc. 3,572,212 3,572,212
------------- ------------ -------------
109,884,434 2,995,525 112,879,959
------------- ------------ -------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
SMALLCAP SMALLCAP SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA OPPORTUNITIES GROWTH PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PIPELINES: 0.10%
15,300 15,300 EL Paso Energy Corp. 779,344 779,344
------------- ------------ -------------
RETAIL: 5.43%
48,900 48,900 @ AnnTaylor Stores Corp. 1,619,812 1,619,812
12,500 12,500 American Eagle Outfitters 175,000 175,000
9,150 9,150 Cost Plus, Inc. /California 262,491 262,491
91,400 91,400 @ Factory 2-U Stores, Inc. 3,456,063 3,456,063
37,300 37,300 @ Krispy Kreme Doughnuts, Inc. 2,741,550 2,741,550
16,300 16,300 @ Linens 'N Things, Inc. 442,138 442,138
156,400 156,400 @ Michaels Stores, Inc. 7,165,075 7,165,075
266,000 266,000 @ MSC Industrial Direct Co. 5,569,375 5,569,375
171,000 171,000 @ Pacific Sunwear of California 3,206,250 3,206,250
60,000 60,000 Pier 1 Imports, Inc 585,000 585,000
81,200 81,200 Talbots, Inc. 4,460,925 4,460,925
156,100 156,100 @ Too, Inc. 3,970,794 3,970,794
242,100 242,100 @ Tweeter Home Entertainment Group 7,353,788 7,353,788
------------- ------------ -------------
39,985,770 1,022,491 41,008,261
------------- ------------ -------------
SAVINGS & LOANS: 0.02%
10,000 10,000 American Financial Holdings, Inc. 158,750 158,750
------------- ------------ -------------
SEMICONDUCTORS: 17.45%
74,200 74,200 @ Alpha Industries 3,269,438 3,269,438
15,000 15,000 Anadigics, Inc. 510,937 510,937
159,200 11,800 171,000 @ Asyst Technologies, Inc. 5,452,600 404,150 5,856,750
146,400 146,400 @ ATMI, Inc. 6,807,600 6,807,600
5,000 5,000 Bookham Technology PLC 296,250 296,250
103,000 15,000 118,000 @ Credence Systems Corp. 5,684,313 827,812 6,512,125
97,200 97,200 @ Exar Corp. 8,474,625 8,474,625
84,500 84,500 @ Fairchild Semiconductor Int'l 3,422,250 3,422,250
53,100 53,100 @ Globespan, Inc. 6,482,348 6,482,348
24,100 24,100 Helix Technology Corp. 939,900 939,900
60,000 60,000 @ Integrated Device Technology, Inc. 3,592,500 3,592,500
75,400 75,400 @ Intersil Holding Corp. 4,076,313 4,076,313
5,800 5,800 Kla-Tencor Corp. 339,663 339,663
133,100 133,100 @ Kulicke & Soffa Industries 7,902,813 7,902,813
141,300 14,100 155,400 @ Lam Research Corp. 5,298,750 528,750 5,827,500
49,000 49,000 LTX Corp. 1,711,938 1,711,938
167,400 167,400 @ Micrel, Inc. 7,271,438 7,271,438
23,700 23,700 Novellus Systems Inc. 1,340,531 1,340,531
5,000 5,000 Quantum Effect Devices Inc. 285,000 285,000
50,800 50,800 @ Qlogic Corp. 3,355,975 3,355,975
232,200 232,200 @ Quicklogic Corp. 5,166,450 5,166,450
26,100 26,100 @ Rudolph Technologies, Inc. 1,011,375 1,011,375
90,600 90,600 @ Semtech Corp. 6,929,484 6,929,484
31,800 31,800 @ Silicon Image, Inc. 1,586,025 1,586,025
169,100 169,100 Stewart & Stevenson Services 2,547,069 2,547,069
204,100 204,100 @ Therma-Wave, Inc. 4,553,981 4,553,981
46,500 46,500 @ Three-Five Systems, Inc. 2,743,500 2,743,500
103,225 103,225 @ Transwitch Corp. 7,967,680 7,967,680
28,200 13,800 42,000 @ Triquint Semiconductor, Inc. 2,698,388 1,320,488 4,018,876
88,100 88,100 @ Varian Semiconductor Equipment 5,533,781 5,533,781
179,800 12,000 191,800 @ Virata Corp. 10,720,573 715,500 11,436,073
------------- ------------ -------------
123,489,169 8,281,019 131,770,188
------------- ------------ -------------
SOFTWARE: 8.98%
42,500 42,500 @ AppNet, Inc. 1,530,000 1,530,000
37,000 37,000 @ Art Technology Group, Inc. 3,734,686 3,734,686
16,000 16,000 BEA Systems, Inc. 791,000 791,000
37,500 37,500 @ Clarent Corp. 2,681,250 2,681,250
30,000 30,000 Compuware Corp. 311,250 311,250
154,400 154,400 @ Exchange Applications, Inc. 4,110,900 4,110,900
90,000 90,000 eXcelon Corp. 714,375 714,375
90,900 90,900 @ Extensity, Inc. 3,113,324 3,113,324
17,000 17,000 Hyperion Solutions Corp. 551,438 551,438
10,000 10,000 Intuit, Inc. 413,750 413,750
120,500 120,500 @ Manugistics Group, Inc. 5,633,375 5,633,375
18,000 18,000 Mercator Software, Inc. 1,237,500 1,237,500
13,000 13,000 Mercury Interactive Corp. 1,257,750 1,257,750
35,000 35,000 Metasolv Software, Inc. 1,540,000 1,540,000
60,200 60,200 @ Micromuse, Inc. 9,962,159 9,962,159
10,000 10,000 MicroStrategy, Inc. 300,000 300,000
70,500 70,500 @ Numerical Technologies, Inc. 3,428,063 3,428,063
174,600 174,600 @ Open Market, Inc. 2,411,663 2,411,663
126,000 126,000 @ OTG Software, Inc. 3,598,875 3,598,875
32,800 32,800 @ PC-Tel, Inc. 1,246,400 1,246,400
3,200 3,200 @ RADVision, Ltd. 89,400 89,400
20,000 20,000 Remedy Corp. 1,115,000 1,115,000
220,200 220,200 @ Serena Software Inc. 9,998,456 9,998,456
47,100 47,100 @ Universal Access, Inc. 1,153,950 1,153,950
19,400 19,400 @ Webmethods, Inc. 3,049,438 3,049,438
151,300 151,300 @ Websense, Inc 3,801,413 3,801,413
------------- ------------ -------------
59,543,352 8,232,063 67,775,415
------------- ------------ -------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING PILGRIM ING
SMALLCAP SMALLCAP SMALLCAP SMALLCAP
OPPORTUNITIES GROWTH PRO FORMA OPPORTUNITIES GROWTH PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS: 8.58%
7,500 7,500 @ Accelerated Networks, Inc. 316,406 316,406
4,300 4,300 ADC Telecommunications, Inc. 360,662 360,662
239,700 239,700 @ Andrew Corp. 8,044,931 8,044,931
12,000 12,000 Avanex Corp. 1,146,000 1,146,000
20,000 20,000 Cabletron Systems 505,000 505,000
18,000 18,000 Com21, Inc. 450,000 450,000
112,500 112,500 @ Digital Lightwave, Inc. 11,306,250 11,306,250
86,800 86,800 @ Ditech Communications Corp. 8,208,025 8,208,025
5,000 5,000 Efficient Networks, Inc. 367,812 367,812
10,000 10,000 Emulex Corp. 656,875 656,875
60,000 60,000 Handspring, Inc. 1,620,000 1,620,000
194,300 194,300 @ I3 Mobile, Inc. 3,570,263 3,570,263
29,400 29,400 @ Inet Technologies, Inc. 1,594,950 1,594,950
25,500 25,500 McLeodUSA, Inc. 527,531 527,531
119,600 119,600 @ Natural Microsystems Corp. 13,447,525 13,447,525
1,000 1,000 @ New Focus, Inc 82,125 82,125
25,000 25,000 Netro Corp. 1,434,375 1,434,375
6,000 6,000 Powertel, Inc. 425,625 425,625
30,300 30,300 @ SDL, Inc. 8,641,181 8,641,181
8,000 8,000 Time Warner Telecom, Inc. 515,000 515,000
55,600 55,600 Westell Technologies, Inc. 834,000 834,000
67,100 67,100 @ World Access, Inc. 742,294 742,294
------------- ------------ -------------
55,953,950 8,842,880 64,796,830
------------- ------------ -------------
TOTAL COMMON STOCKS (COST $472,609,746,
$38,356,482, $510,966,228) $ 696,236,705 $ 49,420,776 $ 745,657,481
------------- ------------ -------------
PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS: 1.62%
----------------------------------
REPURCHASE AGREEMENT: 1.62%
$6,123,000 $6,123,000 State Street Bank & Trust Repurchase
Agreement, 6.200% due 07/03/00 $ 6,123,000 $ 6,123,000
$6,046,000 6,046,000 State Street Bank & Trust Repurchase
Agreement, 6.430% due 07/03/00 $ 6,046,000 6,046,000
------------- ------------ -------------
TOTAL SHORT-TERM INVESTMENTS
(COST: $6,123,000, $6,046,000,
$12,169,000) $ 6,123,000 $ 6,046,000 $ 12,169,000
------------ ------------ -------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $478,732,746, $44,402,482,
$523,135,228) 100.37% $702,359,705 $ 55,466,776 $ 757,826,481
------ ------------ ------------ -------------
OTHER ASSETS AND LIABILITIES-NET -0.37% (2,592,251) (174,145) (2,766,396)
------ ------------ ------------ -------------
NET ASSETS 100.00% $699,767,454 $ 55,292,631 $ 755,060,085
====== ============ ============ =============
</TABLE>
@ Non income producing security
See Accompanying Notes to Financial Statements
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Combination:
On November 2, 2000, the Board of Trustees of Pilgrim SmallCap
Opportunities Fund ("SmallCap Opportunities Fund") and on November 16, 2000 the
Board of Trustees of ING Small Cap Growth Fund ("SmallCap Growth Fund"),
approved an Agreement and Plan of Reorganization (the "Plan") whereby, subject
to approval by the shareholders of SmallCap Growth Fund, SmallCap Opportunities
Fund will acquire all the assets of SmallCap Growth 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 SmallCap Opportunities 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 pro forma statement of assets and liabilities reflect
the financial position of SmallCap Opportunities Fund and SmallCap Growth Fund
at June 30, 2000. The unaudited pro forma statement of operations reflects the
results of operations of SmallCap Opportunities Fund and SmallCap Growth 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 SmallCap Opportunities Fund and SmallCap
Growth 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 SmallCap Opportunities Fund for pre-combination periods
will not be restated.
The unaudited pro forma portfolio of investments, and unaudited pro forma
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 SmallCap
Growth Fund by SmallCap Opportunities Fund as of June 30, 2000. The number of
additional shares issued was calculated by dividing the net asset value of each
class of shares SmallCap Growth Fund by the respective class net asset value per
share of SmallCap Opportunities Fund.
8
<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. SmallCap
Growth Fund expenses were adjusted assuming SmallCap Opportunities 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
recurring. 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.
9
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Section 5.4 of Registrant's Declaration of Trust provides the following:
(a) Subject to Paragraph (c) hereof, every person who is, or has been, a
Trustee, officer, employee or agent of the Trust shall be indemnified by the
Trust to the fullest extent permitted by law against all liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee, officer, employee or agent and
against amounts paid or incurred by him in the settlement thereof in such
manner, provided, that, to the extent any claim, action, suit or proceeding
involves any act or omission of such Person with respect to one or more
particular Series or Classes of Shares of the Trust or the assets or operations
of one or more Series or Classes of Shares, such indemnification shall be
provided only from the assets (or proceeds thereof or income therefrom) of such
one or more Series or Classes of Shares and not from the assets (or proceeds
thereof or income therefrom) of any other Series or Class of Shares of the
Trust.
(b) The words "claim", "action", "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(c) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or the
Shareholders by reason of a final adjudication by a court or other body before
which a proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; and
(iii)in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a
payment by a Trustee or officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon the review of readily available facts (as opposed
to full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a majority
of the Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(d) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
1
<PAGE>
(e) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient or the Trust shall be insured
against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter) or an
independent legal counsel in a written opinion shall determine, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
As used in this Section, a "Disinterested Trustee" is one who is not (i) an
Interested Person of the Trust (including anyone who has been exempted from
being an Interested Person by any rule, regulation or order of the Commission),
or (ii) involved in the claim, action, suit or proceeding.
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.
ITEM 16. EXHIBITS
(1) (A) Declaration of Trust -- previously filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration Statement
on Form N-1A on December 29, 1995 and incorporated herein by
reference.
(B) Certificate of Amendment to Declaration of Trust -- previously filed
as an Exhibit to Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A on March 3, 1997 and incorporated
herein by reference.
(2) Bylaws of Registrant -- previously filed as an Exhibit to the Registrant's
Post-Effective Amendment No. 15 to Registrant's Registration Statement on
Form N-1A on December 29, 1995 and incorporated herein by reference.
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between ING Funds Trust on
behalf of ING Small Cap Growth Fund and Pilgrim SmallCap Opportunities Fund
-- filed herein.
(5) Not Applicable
(6) Investment Advisory Agreement between Registrant and Pilgrim Investments,
Inc. -- filed herein.
2
<PAGE>
(7) Underwriting Agreement between Registrant and Pilgrim Securities, Inc. --
filed herein.
(8) Not Applicable
(9) (A) Custodian Agreement -- previously filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration Statement
on Form N-1A on December 29, 1995 and incorporated herein by
reference.
(B) Amendment to Custodian Agreement -- previously filed as an Exhibit to
Post-Effective Amendment No. 22 to Registrant's Registration Statement
on Form N-1A on February 27, 1998 and incorporated herein by
reference.
(10) (A) Form of Rule 12b-1 Plan -- previously filed as an Exhibit to
Post-Effective Amendment No. 27 to Registrant's Registration Statement
on Form N-1A on January 4, 2000 and incorporated herein by reference.
(B) Form of Rule 18f-3 Plan -- previously filed as an Exhibit to
Post-Effective Amendment No. 27 to Registrant's Registration Statement
on Form N-1A on January 4, 2000 and incorporated herein by reference
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(13) (A) Other Material Contracts -- previously filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration Statement
on Form N-1A on December 29, 1995 and incorporated herein by
reference.
(B) Other Material Contracts -- previously filed as an Exhibit to
Post-Effective Amendment No. 16 to Registrant's Registration Statement
on Form N-1A on February 29, 1996 and incorporated herein by
reference.
(14) Consents of Independent Auditors
(15) Not Applicable
(16) Not Applicable
(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.
3
<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 14th day of December, 2000.
PILGRIM SMALLCAP OPPORTUNITIES FUND
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 Trustee and Chairman December 14, 2000
---------------------------
John G. Turner*
/s/ Robert W. Stallings Trustee and President December 14, 2000
--------------------------- (Chief Executive Officer)
Robert W. Stallings*
/s/ Al Burton Trustee December 14, 2000
---------------------------
Al Burton*
/s/ Paul S. Doherty Trustee December 14, 2000
---------------------------
Paul S. Doherty*
/s/ Robert B. Goode Trustee December 14, 2000
---------------------------
Robert B. Goode*
/s/ Alan L. Gosule Trustee December 14, 2000
---------------------------
Alan L. Gosule*
/s/ Walter H. May Trustee December 14, 2000
---------------------------
Walter H. May*
4
<PAGE>
/s/ Jock Patton Trustee December 14, 2000
---------------------------
Jock Patton*
/s/ David W.C. Putnam Trustee December 14, 2000
---------------------------
David W.C. Putnam*
/s/ John R. Smith Trustee December 14, 2000
---------------------------
John R. Smith*
/s/ David W. Wallace Trustee December 14, 2000
---------------------------
David W. Wallace*
/s/ Michael J. Roland Senior Vice President and December 14, 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.
5
<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 SmallCap Opportunities Fund 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 /s/ John R. Smith
---------------------------------- ----------------------------------------
Robert B. Goode John R. Smith
/s/ David W. Wallace
----------------------------------
David W. Wallace
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 SmallCap Opportunities Fund 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
7
<PAGE>
EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between ING Funds Trust, on
behalf of ING Small Cap Growth Fund, and Pilgrim SmallCap Opportunities
Fund.
(6) Investment Advisory Agreement between Registrant and Pilgrim
Investments, Inc.
(7) 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 SMALL CAP GROWTH FUND
(a series of ING Funds Trust)
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY ___, 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
Small Cap Growth 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 the offices of the Fund at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258 on February ___, 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
Small Cap Growth Fund by Pilgrim SmallCap Opportunities Fund in exchange for
Class A, Class B, and Class C shares of beneficial interest of Pilgrim SmallCap
Opportunities Fund and the assumption by Pilgrim SmallCap Opportunities Fund,
respectively, of all of the liabilities of ING Small Cap Growth Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
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Signature Date
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Signature (if held jointly) Date
