As filed with the Securities and Exchange Commission on December 20, 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 MUTUAL FUNDS
(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 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.
--------------------------------------------------------------------------------
It is proposed that this filing will become effective on January 19, 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 Emerging Markets Equity Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
_____, 2000
Dear Shareholder:
Your Board of Trustees has called a Special Meeting of Shareholders of the
ING Emerging Markets Equity Fund scheduled to be held at _______ a.m., local
time, on February 22, 2001, at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258.
The Board of Trustees of ING Funds Trust, on behalf of ING Emerging Markets
Equity Fund, has approved a reorganization of ING Emerging Markets Equity Fund,
which is managed by ING Mutual Funds Mangement Co. LLC and is part of the ING
Funds, into Pilgrim Emerging Countries Fund, which is managed by ING Pilgrim
Investments, Inc. and is part of the Pilgrim Funds (the "Reorganization"). If
approved by shareholders, you would become a shareholder of Pilgrim Emerging
Countries Fund on the date that the Reorganization occurs. Pilgrim Emerging
Countries Fund has investment objectives and policies that are similar in many
respects to those of ING Emerging Markets Equity Fund.
You are being asked to vote to approve an Agreement and Plan of
Reorganization. The accompanying document describes the proposed transaction and
compares the policies and expenses of each of the funds for your evaluation.
After careful consideration, the Board of Trustees of ING Funds Trust
unanimously approved this proposal and recommended shareholders vote "FOR" the
proposal.
A Proxy Statement/Prospectus that describes the Reorganization is enclosed.
We hope that you can attend the Special Meeting in person; however, we urge you
in any event to vote your shares by completing and returning the enclosed proxy
card in the envelope provided at your earliest convenience.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER
TO AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN 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 Emerging Markets Equity Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ING EMERGING MARKETS EQUITY FUND
SCHEDULED FOR FEBRUARY 22, 2001
To the Shareholders:
A Special Meeting of Shareholders of the ING Emerging Markets Equity Fund
("Special Meeting") is scheduled for February 22, 2001, at _______ a.m., local
time, at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258.
The purposes of the Special Meeting of ING Emerging Markets Equity 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
Emerging Markets Equity Fund by Pilgrim Emerging Countries Fund in
exchange for shares of the corresponding Class of Pilgrim Emerging
Countries Fund and the subsequent liquidation of ING Emerging Markets
Equity 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......................................6
Relative Performance.........................................................7
Comparison of Investment Techniques and Risks of the Funds...................7
COMPARISON OF FEES AND EXPENSES................................................8
Annual Fund Operating Expenses...............................................9
General Information.........................................................13
Special Rules for Class A Shares of ING Emerging Markets Equity Fund .......14
ADDITIONAL INFORMATION ABOUT PILGRIM EMERGING COUNTRIES FUND..................14
Investment Personnel........................................................14
Performance of Pilgrim Emerging Countries Fund..............................15
INFORMATION ABOUT THE REORGANIZATION..........................................16
ADDITIONAL INFORMATION ABOUT THE FUNDS........................................19
GENERAL INFORMATION ABOUT THE PROXY STATEMENT.................................20
Solicitation of Proxies.....................................................20
Voting Rights...............................................................21
Other Matters to Come Before the Special Meeting............................22
Shareholder Proposals.......................................................22
Reports to Shareholders.....................................................22
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 EMERGING MARKETS EQUITY FUND
(a series of ING Funds Trust)
Relating to the Reorganization into
PILGRIM EMERGING COUNTRIES FUND
(a series of Pilgrim Mutual Funds)
(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 Emerging Markets Equity Fund to Pilgrim Emerging
Countries Fund in exchange for shares of Pilgrim Emerging Countries Fund (the
"Reorganization"). ING Emerging Markets Equity Fund would then distribute to its
shareholders their portion of the shares of Pilgrim Emerging Countries Fund it
receives in the Reorganization. The result would be a liquidation of ING
Emerging Markets Equity Fund. You would receive shares of Pilgrim Emerging
Countries Fund having an aggregate value equal to the aggregate value of the
shares you held of ING Emerging Markets Equity 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 Emerging Markets Equity Fund, are
being asked to approve a transaction that will result in your holding of shares
of Pilgrim Emerging Countries Fund, this Proxy Statement also serves as a
Prospectus for Pilgrim Emerging Countries Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Pilgrim Emerging Countries Fund
that you should know. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of Pilgrim Emerging Countries Fund,
see the Prospectus (the "Pilgrim Prospectus") and the Statement of Additional
Information ("SAI") for the Pilgrim Emerging Countries 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 ING Emerging Markets
Equity Fund, see the Prospectus (the "ING Prospectus") and SAI for ING Emerging
Markets Equity Fund, each dated November 6, 2000, which are incorporated herein
by reference and copies of 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 Fund,
including investment results and financial information. The annual report for
Pilgrim Emerging Countries Fund dated June 30, 2000, is 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 avilable on the EDGAR Database on the Commission's Internet site at
http://www.sec.gov. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
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SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, the ING
Prospectus, and the Agreement and Plan of Reorganization, which is attached
hereto as Appendix B.
THE PROPOSED REORGANIZATION. On November 16, 2000, the Board of Trustees of
ING Funds Trust, on behalf of ING Emerging Markets Equity Fund, approved an
Agreement and Plan of Reorganization with respect to ING Emerging Markets Equity
Fund (the "Reorganization Agreement"). Subject to shareholder approval, the
Reorganization Agreement provides for:
* the transfer of all of the assets of ING Emerging Markets Equity Fund
to Pilgrim Emerging Countries Fund, in exchange for shares of Pilgrim
Emerging Countries Fund;
* the assumption by Pilgrim Emerging Countries Fund of all of the
liabilities of ING Emerging Markets Equity Fund;
* the distribution of Pilgrim Emerging Countries Fund shares to the
shareholders of ING Emerging Markets Equity Fund; and
* the complete liquidation of ING Emerging Markets Equity 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 Emerging Markets Equity Fund would become a shareholder
of the following Class of shares of Pilgrim Emerging Countries Fund:
ING EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES 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 Emerging Countries Fund having an aggregate value equal to the
aggregate value of the shares of that corresponding Class of ING Emerging
Markets Equity Fund held by that shareholder as of the close of business on the
business day of the Closing.
The Reorganization is one of many reorganizations that are proposed among
various ING Funds and various Pilgrim Funds. These reorganizations are occurring
in connection with the integration of the ING Funds and Pilgrim Funds, as part
of which the distributor, administrator, and other service providers of the ING
Funds have been changed to those of the Pilgrim Funds. In September, 2000, ING
Groep N.V., the indirect parent company of ING Mutual Funds Management Co. LLC
("IMFC"), the investment adviser to the ING Funds, acquired ReliaStar Financial
Corp., the indirect parent company of ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments"), the investment adviser to the Pilgrim Funds. Management
of the ING Funds and the Pilgrim Funds have proposed the consolidation of a
number of the ING Funds and Pilgrim Funds that they believe have similar or
compatible investment policies. The proposed reorganizations are designed to
reduce the substantial overlap in funds offered by both the ING Funds and
Pilgrim Funds, thereby eliminating duplication of costs and other inefficiencies
arising from having similar portfolios within the same fund group. IMFC and ING
Pilgrim Investments also believe that the reorganizations may benefit fund
shareholders by resulting in surviving funds with a greater asset base. This is
2
<PAGE>
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.
In considering whether to approve the Reorganization, you should note that:
* The Funds have investment objectives and policies that are
substantially similar in many respects.
* The proposed Reorganization is expected to result in a reduction in
total operating expenses for shareholders of the ING Emerging Markets
Equity Fund before taking management subsidies into account. For
example, the operating expenses, expressed as a percentage of net
asset value per share of Class A shares, are as follows:
* Expenses of ING Emerging Markets Equity Fund -- before 2.50%
expense reimbursements from management (based on the
period March 1, 2000 (inception of the Fund) to
June 30, 2000 annualized)(1):
* Expenses of ING Emerging Markets Equity Fund -- after 1.70%
expense reimbursements from management (based on the
period March 1, 2000 (inception of the Fund) to
June 30, 2000 annualized)(1)(2):
2.28%
* Expenses of Pilgrim Emerging Countries Fund -- before
expense reimbursements from management (based on the
year ended June 30, 2000):
2.13%
* Expenses of Pilgrim Emerging Countries Fund -- after
expense reimbursements from management (based on the
year ended June 30, 2000)
* Projected expenses of Pilgrim Emerging Countries Fund 2.27%
after the Reorganization -- before expense reimbursements
from management (pro forma) (based on the year ended
June 30, 2000).
* Projected expenses of Pilgrim Emerging Countries Fund 2.13%
after the Reorganization -- after expense reimbursements
from management (pro forma) (based on the year ended
June 30, 2000).
----------
(1) Based upon expenses incurred by the ING Emerging Markets Equity Fund from
March 1, 2000 (inception of the Fund) through June 30, 2000, annualized,
adjusted for current expenses of contracts and 12b-1 plans which were in
effect on November 6, 2000.
(2) 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.
* The Funds have affiliated management. ING Pilgrim Investments, 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
investment manager to Pilgrim Emerging Countries Fund. IMFC, 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258, is the investment
manager to ING Emerging Markets Equity Fund. Both are affiliated
subsidiaries of the same holding company, ING Groep N.V. Different
investment personnel, however, manage the Funds. After the
Reorganization, ING Pilgrim Investments would continue to manage
Pilgrim Emerging Countries Fund, which would include the assets from
ING Emerging Markets Equity Fund.
Approval of the Reorganization Agreement, with respect to ING Emerging
Markets Equity Fund, requires the vote of a majority of the Shares present in
person or by proxy of the ING Emerging Markets Equity Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF ING FUNDS TRUST, ON
BEHALF OF ING EMERGING MARKETS EQUITY FUND, UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
3
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
ING EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES FUND
-------------------------------- -------------------------------
<S> <C> <C>
INVESTMENT OBJECTIVE Seeks long-term capital appreciation. Seeks maximum long-term capital appreciation.
INVESTMENT STRATEGIES * Normally invests at least 65% of its total * Invests at least 65% of its net
assets in equity securities of issuers assets in securities of issuers located
located in emerging market countries. in at least three countries with
emerging securities markets. Countries
* Will invest in at least seven emerging market with emerging securities markets are
countries and will not invest more than 25% of those countries which generally are
its assets in any one emerging market country. considered to be emerging market
countries by the international financial
* The Fund considers emerging market issuers to community.
be companies:
* May invest up to 35% of its total
- the securities of which are assets in securities of U.S. and other
principally traded in the capital developed market issuers, including
markets of emerging market countries; investment-grade debt securities of U.S.
issuers.
- that derive at least 50% of their
total revenue or earnings from * Normally invests at least 75% of its
either goods produced or services total assets in common and preferred
rendered in emerging market stock, warrants and convertible
countries (regardless of where the securities.
securities are principally traded);
or * In selecting securities of issuers
located in emerging market countries,
- that are organized under the laws of the adviser uses a "bottom-up"
and have a principal office in an fundamental analysis to identify
emerging market country. companies which it believes have good
earnings growth prospects and that can
* An emerging market country is any be bought at a price which seems
country the economy and market of which reasonable. The adviser seeks
the World Bank or the United Nations securities of emerging market issuers
considers to be emerging or developing or which are relatively liquid and covered
any country determined by the by professional securities analysts.
sub-advisers to have emerging economies
or developing markets. * In selecting stocks listed in
developed markets, the portfolio
* As a general matter, the Fund expects to managers seek the most attractive
invest in common stocks of large, opportunities in such markets. For such
mid-sized, and small companies. securities, the portfolio managers use
"bottom-up" analysis to choose companies
* May use options and futures contacts which offer good value relative to their
involving foreign currencies. peers in the same industry, sector or
region. They also use "top-down" analysis
* The sub-advisers employ a highly to identify important themes or issues
disciplined, four step investment process environment which may affect the investment
that seeks to identify unrecognized in certain regions or sectors and to
growth potential in stocks of emerging estimate regional market risks. In
market issuers: conducting their fundamental analysis, the
portfolio managers focus on various
- A comprehensive analysis of the matters, including valuation of the
relative value of geographic regions companies, potential catalysts to stock
is performed to determine the degree price appreciation, quality of management
of representation of such geographic and financial measures, especially cash
regions in the Fund's portfolio; flow and cash flow return on capital.
- Determinations are reviewed by an * May lend portfolio securities on a
independent committee within the short-term or long-term basis, up to 30%
sub-advisers; of its total assets.
- Investments are selected within the
selected geographical regions based
on comprehensive fundamental
analysis; and
- In-house traders use specifically
developed computer programs to
efficiently purchase targeted
</TABLE> securities.
4
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<TABLE>
<CAPTION>
ING EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES FUND
-------------------------------- -------------------------------
<S> <C> <C>
* The Fund is diversified. * The Fund is diversified.
INVESTMENT ADVISER IMFC ING Pilgrim Investments
SUB-ADVISERS Baring Asset Management, Inc., N/A
Baring International Investment Limited, and
Baring Asset Management (Asia) Limited
PORTFOLIO MANAGERS Kate Munday Richard T. Saler, Philip A. Schwartz, Jan Wim
Derks, Eric Anderson and Bratin Sanyal
</TABLE>
As you can see from the chart above, the investment objectives and
strategies of the Funds are substantially similar.
5
<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 EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES FUND
-------------------------------- -------------------------------
<S> <C> <C>
Net Assets $9,502,741 $254,493,959
Number of Holdings 123 82
As a percentage of net assets:
Equity Securities 97.56% 98.92%
Short-Term Debt Securities 2.21% 0.48%
Emerging markets issuers 70.47% 68.63%
Developed markets issuers 27.09% 30.29%
Holdings in companies with market
capitalization over $10 billion 42.27% 46.95%
Holdings in companies with market
capitalization between $5 and $10 billion 22.87% 22.36%
Holdings in companies with market
capitalization under $5 billion 32.42% 29.61%
Portfolio Turnover Rate 26.00%(1) 211.00%(2)
Top 5 industries (as % of net assets) Telephone-Integrated 9.20% Semiconductors 10.40%
Electrical Components - Semiconductor 8.80% Telecom Services 8.64%
Cellular Telecom 6.20% Telephone-Integrated 7.66%
Electric Products - Misc. 6.20% Electrical Components & Equipment 7.01%
Oil Companies - Integrated 5.60% Cellular Telecom 5.91%
Top 10 countries (as % of net assets) Taiwan 15.02% South Korea 16.51%
South Korea 14.13% Mexico 15.70%
Brazil 12.14% Brazil 11.72%
Mexico 11.71% Taiwan 11.55%
South Africa 5.78% India 6.69%
India 5.54% Israel 6.28%
Hong Kong 5.48% Hong Kong 5.20%
Israel 5.20% Singapore 4.43%
Russia 3.53% Turkey 4.01%
Malaysia 3.30% Malaysia 3.87%
Top 10 equity holdings (as % of net assets) Samsung Electronics 6.20% Samsung Electronics 6.89%
Taiwan Semiconductor Telefonos de Mexico SA 5.27%
Manufacturing Co. 4.93% Taiwan Semiconductor
Telefonos de Mexico SA ADR 4.42% Manufacturing Co. 3.99%
China Mobile (Hong Kong) Ltd 4.27% United Microelectronics 3.62%
India Fund, Inc. 2.67% China Mobile (Hong Kong) Ltd 3.62%
Embratel Participacoes SA 2.44% Datacraft Asia Limited 3.10%
Petroleo Brasileiro SA 2.29% Korea Electric Power Corp. 3.04%
China Steel Corp. ADR 2.24% SK Telecom Co Ltd. 2.76%
Asustek Computer, Inc. 2.10% Infosys Technologies Ltd. 2.50%
Grupo Televisa SA GDR 2.03% Corp Interamericana de Entreten 2.30%
</TABLE>
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(1) For the period from March 1, 2000 (inception of the Fund) to June 30, 2000.
(2) For the year ended June 30, 2000.
6
<PAGE>
RELATIVE PERFORMANCE
The following table shows, for the periods shown, the average annual total
return for: (a) Class A shares of ING Emerging Markets Equity Fund; (b) Class A
shares of Pilgrim Emerging Countries Fund; and (c) the Morgan Stanley Capital
International Emerging Markets Free (MSCI EMF) Index. Performance of the Funds
in the table does not reflect the deduction of sales loads, and would be lower
if it did. The index has an inherent performance advantage over the Funds since
it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. Total return
is calculated assuming reinvestment of all dividends and capital gain
distributions at net asset value and excluding the deduction of sales charges.
Each Fund's past performance is not an indication of its future performance.
ING EMERGING PILGRIM EMERGING
MARKETS EQUITY COUNTRIES MSCI EMF
PERIOD ENDED FUND(2) FUND(3) INDEX(4)
------------ ------- ------- --------
3/1/00-9/30/00(1) -27.60% -26.40% -21.46%
----------
(1) Not annualized.
(2) ING Emerging Markets Equity Fund commenced operations on March 1, 2000.
(3) Prior to October 1, 2000, Pilgrim Emerging Countries Fund was managed by a
sub-adviser. For more information about the performance of Pilgrim Emerging
Countries Fund, see "Additional Information about Pilgrim Emerging
Countries Fund."
(4) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
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 Emerging Countries Fund are similar to the risks of investing in ING
Emerging Markets Equity Fund. A principal risk of an investment in each of the
Funds is that you may lose money on your investment. Each Fund's shares may go
up or down, sometimes rapidly and unpredictably. Market conditions, financial
conditions of issuers represented in the portfolio, investment policies,
portfolio management, and other factors affect the volatility of each Fund's
shares.
EQUITY SECURITIES. Both ING Emerging Markets Equity Fund and Pilgrim
Emerging Countries Fund are subject to risks associated with investing primarily
in equity securities, including market risks, issuer risk including credit
risks, price volatility risks and market trends risks. Market risk is the risk
that securities may decline in value due to factors affecting securities markets
7
<PAGE>
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 growth securities in which the Funds invest, 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. Additionally, both
Funds may invest in medium-sized and small-sized companies, which may be more
susceptible to price swings than larger companies because they have fewer
financial resources, more limited product and market diversification and many
are dependent on a few key managers. Smaller companies also may experience
relatively high growth rates and higher failure rates than do larger companies.
The securities of smaller companies may trade in lower volumes and may be less
liquid than the securities of larger, more established companies. A Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
FOREIGN SECURITIES. Both Pilgrim Emerging Countries Fund and ING Emerging
Markets Equity Fund invest at least 65% of their total assets 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.
EMERGING MARKET INVESTMENTS. Both Funds invest at least 65% of their total
assets in emerging markets. Because of less developed markets and economies and,
in some countries, less mature governments or governmental institutions, the
risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in emerging
market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete or unseasoned financial systems; environmental problems; less well
developed legal systems; and less reliable custodial services and settlement
practices.
DERIVATIVE SECURITIES: Both Funds may invest in derivative securities - ING
Emerging Markets Equity Fund and Pilgrim Emerging Countries Fund may use options
and futures contracts involving foreign currencies. Foreign currency futures
contracts provide for the future sale by one party and purchase by another party
of a specified quantity of a foreign currency at a specified price and time. The
Funds may use foreign currency futures contracts for hedging purposes. There is
a risk that there will be an imperfect correlation between the movement in the
price of the futures contract and movement in the price of the foreign currency
which is the subject of the hedge. If the price of the currency being hedged has
moved in an unfavorable direction, a Fund would be in a better position that if
it had not hedged. If the price of a currency moves in a favorable direction,
this advantage will be partially offset by the loss on the future.
An option on a foreign currency gives the purchaser the right to sell or
purchase a foreign currency at the exercise price until the option expires. The
Fund uses foreign currency options to control currency volatility. Writing
options on foreign currencies constitutes only a partial hedge, up to the amount
of the premium received. The Funds could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations; however, in the event of exchange rate
movements adverse to a Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs.
8
<PAGE>
LENDING PORTFOLIO SECURITIES. Each Fund may lend portfolio securities on a
short-term or long-term basis, up to 30% of its total assets, although the Funds
currently do not do so as a principal investment strategy. There is the risk
that when lending portfolio securities, the securities may not be available to
the Fund on a timely basis and the Fund may, therefore, lose the opportunity to
sell the securities at a desirable price.
TEMPORARY DEFENSIVE STRATEGIES. For both Funds, when the Adviser or
Sub-Adviser to the Fund anticipates unusual market or other conditions, the Fund
may temporarily depart from its principal investment strategies as a defensive
measure. To the extent a Fund is engaged in temporary defensive investments, it
will not be pursuing its investment objective.
PORTFOLIO TURNOVER. Pilgrim Emerging Countries Fund may engage in frequent
and active trading of portfolio securities to achieve its investment objective.
A high portfolio turnover rate involves greater expenses to the 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.
CHANGE IN PORTFOLIO MANAGEMENT. Pilgrim Emerging Countries Fund recently
underwent a change in portfolio management. Since October 1, 2000, ING Pilgrim
Investments has managed the Fund directly. Prior to that date, another
investment adviser served as sub-adviser to the Fund. The current portfolio
managers were not managing the Fund at the time of the performance information
presented in this Proxy Statement/Prospectus. Shareholders bear the risk that
the new portfolio managers will not be able to sustain the Fund's historical
relative performance.
With the assumption of portfolio management duties by ING Pilgrim
Investments, portfolio turnover may be higher than usual in connection with the
potential restructuring of the holdings of Pilgrim Emerging Countries Fund to
reflect the management style of ING Pilgrim Investments. Such potential
restructuring may result in transactional costs to the Fund and may result in
accelerated capital gain distribution as a result of the turnover.
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 Emerging
Countries Fund, see "Appendix C: Additional Information Regarding Pilgrim
Emerging Countries Fund."
OPERATING EXPENSES. The operating expenses of Pilgrim Emerging Countries
Fund, expressed as a ratio of expenses to average daily net assets ("expense
ratio"), are lower than those of ING Emerging Markets Equity Fund, before giving
effect to the expense limitation arrangements for ING Emerging Markets Equity
Fund and Pilgrim Emerging Countries Fund described below. After giving effect to
the expense limitation arrangements for both funds, the net expenses for Class
A, Class B and Class C shares of ING Emerging Markets Equity Fund for the period
March 1, 2000 (inception of the Fund) to June 30, 2000 were 1.70%, 2.35% and
2.35%, respectively, which are lower than those of the same Classes of Pilgrim
Emerging Countries Fund. Without the expense limitation arrangements, the total
operating expenses for Class A, Class B and Class C of the ING Emerging Markets
Equity Fund would have been 2.50%, 3.15% and 3.15%, respectively, which are
higher than those of the corresponding Class of shares of the Pilgrim Emerging
Countries Fund.
MANAGEMENT FEE. Each Fund has an annual management fee of 1.25% of the
Fund's average daily net assets.
DISTRIBUTION AND SERVICE FEES. The distribution (12b-1) and service fees
for Class A, Class B and Class C shares of ING Emerging Markets Equity Fund are,
in the aggregate, identical to those of the corresponding Class of Pilgrim
Emerging Countries Fund.
EXPENSE LIMITATION ARRANGEMENTS. Expense limitation arrangements are in
place for both ING Emerging Markets Equity Fund and Pilgrim Emerging Countries
Fund.
9
<PAGE>
Under the terms of the expense limitation contract for ING Emerging Markets
Equity Fund, 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 contract
will be continued after that date. The expense limitations for Class A, Class B,
and Class C of ING Emerging Markets Equity Fund are 1.70%, 2.35% and 2.35%,
respectively.
Under the terms of the expense limitation agreement for Pilgrim Emerging
Countries Fund, ING Pilgrim Investments has agreed to limit the expenses of the
Fund, excluding interest, taxes, brokerage, and extraordinary expenses subject
to possible reimbursement to ING Pilgrim Investments within three years. The
current expense limitation agreement for the Fund provides that it will remain
in effect through at least October 31, 2001. There is no assurance that the
expense limitation agreement will be continued after that date. The net expenses
for Class A, Class B, and Class C of Pilgrim Emerging Countries Fund are 2.13%,
2.78%, and 2.78%, respectively.
Absent the expense limitation arrangements, the expense ratio for each
Class of ING Emerging Markets Equity Fund was higher than the expense ratio for
the same Class of Pilgrim Emerging Countries Fund. For the period from March 1,
2000 (inception of the Fund) to June 30, 2000, for example, the expense ratio
for Class A shares of ING Emerging Markets Equity Fund was 2.50% compared to
2.28% for Pilgrim Emerging Countries 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 ING Emerging Markets Equity Fund are annualized
based upon the operating expenses incurred by Class A, Class B, and Class C
shares of the Fund for the period from March 1, 2000 (inception of the Fund) to
June 30, 2000, as adjusted for current expenses of contracts and 12b-1 plans
which were in effect on November 6, 2000. Expenses for Pilgrim Emerging
Countries Fund are based on operating expenses incurred by Class A, Class B, and
Class C of the Fund for the 12 month period ended June 30, 2000. PRO FORMA fees
show estimated fees of Pilgrim Emerging Countries Fund after giving effect to
the proposed Reorganization as adjusted to reflect changes in contractual
changes. Pro forma numbers are estimated in good faith and are hypothetical.
10
<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 Emerging Markets
Equity Fund 1.25% 0.35%(4) 0.90% 2.50% -0.80% 1.70%
Pilgrim Emerging
Countries Fund 1.25% 0.35% 0.68% 2.28% -0.15% 2.13%
Surviving Fund after
Reorganization (PRO
FORMA) 1.25% 0.35% 0.67% 2.27% -0.14% 2.13%
CLASS B
ING Emerging Markets
Equity Fund 1.25% 1.00% 0.90% 3.15% -0.80% 2.35%
Pilgrim Emerging
Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Surviving Fund after
Reorganization (PRO
FORMA) 1.25% 1.00% 0.67% 2.92% -0.14% 2.78%
CLASS C
ING Emerging Markets
Equity Fund 1.25% 1.00% 0.90% 3.15% -0.80% 2.35%
Pilgrim Emerging
Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Surviving Fund after
Reorganization (PRO
FORMA) 1.25% 1.00% 0.67% 2.92% -0.14% 2.78%
</TABLE>
----------
(1) Pilgrim Emerging Countries Fund's fiscal year ends on June 30. The fiscal
year end for ING Emerging Markets Equity Fund is October 31. Expenses of
Pilgrim Emerging Countries Fund are based upon expenses incurred by the
Fund for the year ended June 30, 2000. Expenses of ING Emerging Markets
Equity Fund are based upon expenses incurred by the Fund from March 1, 2000
(inception of the Fund) through June 30, 2000 annualized, 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.
11
<PAGE>
(3) IMFC has entered into an expense limitation contract that limits expenses
of ING Emerging Markets Equity Fund (excluding interest, taxes, brokerage
and extraordinary expenses) to 1.70%, 2.35%, and 2.35% for Class A, Class
B, and Class C shares, respectively. IMFC has agreed that the expense
limitations shown in the table will apply to ING Emerging Markets Equity
Fund until at least February 28, 2001. ING Pilgrim Investments has entered
into an expense limitation agreement that limits expenses of Pilgrim
Emerging Countries Fund (excluding interest, taxes, brokerage and
extraordinary expenses) to 2.25%, 2.90%, and 2.90% for Class A, Class B,
and Class C shares, respectively, subject to possible recoupment. ING
Pilgrim Investments has agreed that the expense limitation shown in the
table will apply until at least October 31, 2001. There can be assurances
that the expense limitation arrangements will remain in effect 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.
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of ING Emerging Markets Equity Fund that are
transferred to Pilgrim Emerging Countries Fund in connection with the
Reorganization may be sold. Such sales may result in increased transaction costs
for Pilgrim Emerging Countries Fund, and the realization of taxable gains or
losses for Pilgrim Emerging Countries 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 EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES 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 $814 $1,309 $1,829 $3,248 $779 $1,233 $1,712 $3,029 $779 $1,231 $1,708 $3,020
Class B 818 1,271 1,849 3,308* 781 1,193 1,730 3,088* 781 1,191 1,726 3,079*
Class C 418 971 1,649 3,457 381 893 1,530 3,241 381 891 1,526 3,233
</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 EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES 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 $814 $1,309 $1,829 $3,248 $779 $1,233 $1,712 $3,029 $779 $1,231 $1,708 $3,020
Class B 318 971 1,649 3,308* 281 893 1,530 3,088* 281 891 1,526 3,079*
Class C 318 971 1,649 3,457 281 893 1,530 3,241 281 891 1,526 3,233
</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.
12
<PAGE>
GENERAL INFORMATION
Class A, Class B, and Class C shares of Pilgrim Emerging Countries 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 Emerging Markets Equity Fund held by that
shareholder immediately prior to the Reorganization.
In addition, the period that the shareholder held shares of ING Emerging
Markets Equity Fund will be included in the holding period of Pilgrim Emerging
Countries Fund shares for purposes of calculating any contingent deferred sales
charge. Similarly, Class B shares of Pilgrim Emerging Countries 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 Emerging Markets
Equity Fund were purchased by the shareholder. Pilgrim Emerging Countries Fund
and ING Emerging Markets Equity Fund are each subject to the sales load
structure described in the table below.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
CLASS A CLASS B CLASS 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)
----------
(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 and "Special Rules for
Class A Shares of ING Emerging Markets Equity Fund" below.
(3) Imposed upon redemptions within six 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 ING Emerging Markets Equity Fund nor Pilgrim Emerging Countries
Fund have any redemption fees, exchange fees or sales charges on reinvested
dividends.
13
<PAGE>
SPECIAL RULES FOR CLASS A SHARES OF THE ING EMERGING MARKETS EQUITY FUND
Prior to November 6, 2000, the contingent deferred sales charge on
purchases of Class A shares of ING Emerging Markets Equity Fund in excess of $1
million was different than the contingent deferred sales charge on similar
purchases of Pilgrim Emerging Countries Fund. Shareholders of ING Emerging
Markets Equity 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:
TIME PERIOD DURING WHICH
CDSC CDSC APPLIES
----------------------- -----------------------
CDSC ON PURCHASES OF: 11/06/00 AND BEFORE 11/06/00 AND BEFORE
AFTER 11/06/00 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 EMERGING COUNTRIES FUND
INVESTMENT PERSONNEL
Since October 1, 2000, Richard T. Saler, Philip A. Schwartz, Jan Wim Derks,
Eric Anderson, and Bratin Sanyal of ING Pilgrim Investments have managed Pilgrim
Emerging Countries Fund. Prior to October 1, 2000, Pilgrim Emerging Countries
Fund was managed by a sub-adviser.
Richard T. Saler has over 13 years of experience in international
investments. He is Senior Vice President of ING Pilgrim Investments and held the
same position with Lexington Management Corporation ("LMC") prior to LMC's
recent acquisition by the parent company of ING Pilgrim Investments in July
2000. Mr. Saler has focused on international markets since joining LMC in 1986.
Phillip A. Schwartz has over 12 years of experience in international
investments. He is a Senior Vice President at ING Pilgrim Investments, and was a
Vice President with LMC prior to LMC's recent acquisition by the parent company
of ING Pilgrim Investments in July 2000. Prior to joining LMC in 1993, Mr.
Schwartz was Vice President of European Research Sales with Cheuvreux De Virieu
in Paris and New York, serving the institutional market. Prior to Cheuvreux, Mr.
Schwartz was affiliated with Olde and Co. and Kidder, Peabody as a stockbroker.
Jan Wim Derks, Vice President of ING Pilgrim Investments, also serves as
Director of Global Emerging Markets Equities at ING Investment
Management--Europe. Prior to joining ING Investment Management--Europe in 1997,
Mr. Derks managed a Latin American equity fund with ABN AMRO.
Eric Anderson, Vice President of ING Pilgrim Investments, also serves as
Senior Portfolio Manager--Global Emerging Markets Equities at ING Investment
Management--Americas. Prior to joining ING Investment Management--Americas in
1997, Mr. Anderson managed a Latin America equity portfolio and participated in
the management of an emerging market debt portfolio at Offitbank in New York.
Bratin Sanyal, Vice President of ING Pilgrim Investments, also serves as
the Senior Portfolio Manager--Global Emerging Markets Equities at ING Investment
Management--Europe. Mr. Sanyal has held several positions with ING Investment
14
<PAGE>
Management--Europe, most recently as an Asian equity fund manager. Prior to
joining ING Investment Management--Europe in 1993, he was an economist at the
World Bank where he structured debt workouts for the highly indebted countries.
PERFORMANCE OF PILGRIM EMERGING COUNTRIES FUND
The bar chart and table that follow provide an indication of the risks of
investing in Pilgrim Emerging Countries Fund by showing (on a calendar year
basis) changes in Pilgrim Emerging Countries Fund's annual total return from
year to year and by showing (on a calendar year basis) how Pilgrim Emerging
Countries Fund's average annual returns for one year, five years, and since
inception compare to those of the MSCI EMF Index. The information in the bar
chart is based on the performance of the Class A shares of the Pilgrim Emerging
Countries Fund although the bar chart does not reflect the deduction of the
sales load on Class A shares. If the bar chart included the sales load, returns
would be less than those shown. Pilgrim Emerging Countries 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. ING Pilgrim Investments has
been the Fund's investment adviser since May 24, 1999; prior to that date,
another firm served as adviser. In addition, prior to October 1, 2000, the Fund
was advised by a sub-adviser.
CALENDAR YEAR-BY-YEAR RETURNS(1)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(2)
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
6.34% 27.50% 9.44% -22.19% 75.80
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was 36.28% for the quarter ended December 31, 1999, and the Fund's worst
quarterly performance was -26.06% for the quarter ended September 30, 1998.
The Fund's year-to-date return as of September 30, 2000 was -20.85%. The
data does not reflect sales charges and would be lower if it did.
(2) Returns in 1999 were achieved during unusually favorable conditions in the
stock market, particularly for emerging market companies. You should not
expect that such favorable returns can be consistently achieved.
The table below shows what the average annual total returns of Pilgrim
Emerging Countries Fund would equal if you averaged out actual performance over
various lengths of time, compared to the MSCI EMF Index. The MSCI EMF Index has
an inherent performance advantage over Pilgrim Emerging Countries 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 Emerging
Countries Fund's performance reflected in the table assumes the deduction of the
maximum sales charge in all cases.
15
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
<TABLE>
<CAPTION>
SINCE SINCE
INCEPTION OF INCEPTION OF
1 YEAR 5 YEARS CLASSES A AND C(5) CLASS B(5)
------ ------- ------------------ ----------
<S> <C> <C> <C> <C>
Pilgrim Emerging Countries Fund - Class A (1) 65.74% 13.85% 12.58% N/A
Pilgrim Emerging Countries Fund - Class B (2) 69.71% N/A N/A 14.66%
Pilgrim Emerging Countries Fund - Class C (3) 73.71% 14.38% 12.89% N/A
MSCI EMF Index (4) 63.70% 2.00% -1.77% 0.84%
</TABLE>
----------
(1) Reflects deduction of sales charge of 5.75%.
(2) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
the 1 year and since inception returns.
(3) Reflects deduction of deferred sales charge of 1% for the 1 year return.
(4) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(5) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
The table below shows the performance of Pilgrim Emerging Countries Fund if
sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
SINCE
1 YEAR 5 YEARS INCEPTION(1)
------ ------- ------------
Pilgrim Emerging Countries Fund- Class A 75.80% 15.21% 13.89%
Pilgrim Emerging Countries Fund- Class B 74.71% N/A 14.93%
Pilgrim Emerging Countries Fund- Class C 74.71% 14.38% 12.89%
----------
(1) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
For a discussion by the adviser regarding the performance of Pilgrim
Emerging Countries Fund for the year ended June 30, 2000, see Appendix A to this
Proxy Statement/Prospectus. Additional information about Pilgrim Emerging
Countries Fund is included in Appendix C to this Proxy Statement/Prospectus.
16
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT. The Reorganization Agreement provides for the
transfer of all of the assets and liabilities of ING Emerging Markets Equity
Fund to Pilgrim Emerging Countries Fund in exchange for shares of Pilgrim
Emerging Countries Fund. ING Emerging Markets Equity Fund will distribute the
shares of Pilgrim Emerging Countries Fund received in the exchange to the
shareholders of ING Emerging Markets Equity Fund and then ING Emerging Markets
Equity Fund will be liquidated.
After the Reorganization, each shareholder of ING Emerging Markets Equity
Fund will own shares in Pilgrim Emerging Countries Fund having an aggregate
value equal to the aggregate value of each respective Class of shares in ING
Emerging Markets Equity Fund held by that shareholder as of the close of
business on the business day of the Closing. Shareholders of the following Class
of shares of ING Emerging Markets Equity Fund will receive shares of the
following Class of Pilgrim Emerging Countries Fund:
ING EMERGING MARKETS EQUITY FUND PILGRIM EMERGING COUNTRIES FUND
-------------------------------- -------------------------------
Class A Class A
Class B Class B
Class C Class C
In the interest of economy and convenience, shares of Pilgrim Emerging Countries
Fund generally will not be represented by physical certificates unless requested
in writing.
Until the Closing, shareholders of ING Emerging Markets Equity Fund will
continue to be able to redeem their shares. Redemption requests received after
the Closing will be treated as requests received by Pilgrim Emerging Countries
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 Emerging
Markets Equity 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 A to review the terms and
conditions of the Reorganization Agreement.
REASONS FOR THE REORGANIZATION. The Reorganization is one of many
reorganizations that are proposed among various ING Funds and various Pilgrim
Funds. These reorganizations are occurring in connection with the integration of
the ING Funds and Pilgrim Funds, as part of which the distributor,
administrator, and other service providers of the ING Funds have been changed to
those of the Pilgrim Funds. In September, 2000, ING Groep N.V., the indirect
parent company of IMFC, the investment adviser to the ING Funds, acquired
ReliaStar Financial Corp., the indirect parent company of ING Pilgrim
Investments, the investment adviser to the Pilgrim Funds. Management of the ING
Funds and the Pilgrim Funds have proposed the consolidation of a number of the
ING Funds and Pilgrim Funds that they believe have similar or compatible
investment policies. The proposed reorganizations are designed to reduce the
substantial overlap in funds offered by both the ING Funds and Pilgrim Funds,
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios within the same fund group. IMFC and ING Pilgrim
Investments also believe that the reorganizations may benefit fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions. The integration of the ING Funds and the Pilgrim Funds is expected to
17
<PAGE>
provide further benefits to shareholders of the ING Funds because shareholders
will have the ability to exchange into Pilgrim Funds that offer the same Class
of shares. For information about a Pilgrim Fund, call the Pilgrim Funds at
1-800-992-0180 to request a prospectus. You should read a fund's prospectus
before investing in the fund.
The proposed Reorganization was presented to the Board of Trustees of ING
Funds Trust, on behalf of ING Emerging Markets Equity Fund, for consideration at
a meeting held on October 25, 2000 and for approval at a meeting held on
November 16, 2000. For the reasons discussed below, the Trustees, including all
of the Trustees who are not "interested persons" (as defined in the Investment
Company Act of 1940) of ING Funds Trust, determined that the interests of the
shareholders of ING Emerging Markets Equity Fund will not be diluted as a result
of the proposed Reorganization, and that the proposed Reorganization is in the
best interests of ING Emerging Markets Equity Fund and its shareholders.
The Reorganization will allow ING Emerging Markets Equity Fund's
shareholders to continue to participate in a professionally-managed portfolio
which seeks to achieve an objective of appreciation or growth of capital. As
shareholders of Pilgrim Emerging Countries Fund, these shareholders will be able
to exchange into other mutual funds in the group of Pilgrim Funds or ING Funds
that offer the same class of shares in which such shareholder is currently
invested. A list of the Pilgrim Funds and ING Funds and Classes available after
the Reorganization is contained in Appendix D.
The Board of Trustees of Pilgrim Emerging Countries Fund also has approved
the reorganization of two other funds, Pilgrim Emerging Markets Value Fund and
Pilgrim Worldwide Emerging Markets Fund, into Pilgrim Emerging Countries Fund.
If shareholders of Pilgrim Emerging Markets Value Fund and/or Pilgrim Worldwide
Emerging Markets Fund approve that reorganization, it is expected that that
reorganization will occur during the first quarter of 2001.
BOARD CONSIDERATIONS. The Board of Trustees of ING Funds Trust, on behalf
of ING Emerging Markets Equity Fund, in recommending the proposed transaction,
considered a number of factors, including the following:
(1) the plans of management to integrate the ING Funds and the Pilgrim
Funds;
(2) expense ratios and information regarding fees and expenses of ING
Emerging Markets Equity Fund and Pilgrim Emerging Countries Fund,
including the expense limitation arrangements;
(3) estimates that show that combining the Funds is expected to result in
lower total expense ratios 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 Emerging
Markets Equity Fund's current shareholders;
(5) the relative investment performance and risks of Pilgrim Emerging
Countries Fund as compared to ING Emerging Markets Equity Fund;
(6) the similarity or compatibility of Pilgrim Emerging Countries Fund's
investment objectives, policies and restrictions with those of ING
Emerging Markets Equity Fund;
(7) the tax-free nature of the Reorganization to ING Emerging Markets
Equity Fund and its shareholders;
(8) the investment resources of ING Pilgrim Investments and the
distribution capabilities of ING Pilgrim Securities, Inc., distributor
of the Pilgrim Emerging Countries Fund;
(9) the quality and caliber of services that have been enjoyed by
shareholders of the Pilgrim Emerging Countries Fund; and
(10) alternatives to combining the Funds.
18
<PAGE>
The Board of Trustees also considered the future potential benefits to ING
Pilgrim Investments in that its costs to limit the expenses of Pilgrim Emerging
Countries Fund are likely to be reduced if the Reorganization is approved.
THE TRUSTEES OF ING FUNDS TRUST, ON BEHALF OF ING EMERGING MARKETS EQUITY
FUND, RECOMMEND THAT SHAREHOLDERS APPROVE THE REORGANIZATION WITH PILGRIM
EMERGING COUNTRIES FUND.
TAX CONSIDERATIONS. The Reorganization is intended to qualify for Federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended. Accordingly, pursuant to this
treatment, neither ING Emerging Markets Equity Fund nor its shareholders nor
Pilgrim Emerging Countries Fund is expected to recognize any gain or loss for
federal income tax purposes from the transactions contemplated by the
Reorganization Agreement. As a condition to the Closing of the Reorganization,
the Funds will receive an opinion from the law firm of Dechert to the effect
that the Reorganization will qualify as a tax-free reorganization for Federal
income tax purposes. That opinion will be based in part upon certain assumptions
and upon certain representations made by ING Funds Trust and Pilgrim Mutual
Funds.
Immediately prior to the Reorganization, ING Emerging Markets Equity 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 Emerging
Markets Equity 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 Emerging Markets Equity Fund's shareholders.
As of June 30, 2000, Pilgrim Emerging Countries Fund had accumulated
capital loss carryforwards of approximately $32,840,931. The ability of
Pilgrim Emerging Countries 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 Pilgrim Emerging Countries 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 Emerging Countries Fund.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, adviser to Pilgrim
Emerging Countries Fund, will bear half the cost of the Reorganization. The
Funds will bear the other half of the expenses relating to the proposed
Reorganization, including, but not limited to, the costs of solicitation of
voting instructions and any necessary filings with the Securities and Exchange
Commission. Of the Reorganization expenses allocated to the Funds, each Fund
will bear a ratable portion based on its relative net asset value immediately
before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORM OF ORGANIZATION. Pilgrim Emerging Countries Fund is a series of
Pilgrim Mutual Funds, which is a Delaware business trust. ING Emerging Markets
Equity Fund is a series of ING Funds Trust, which is a Delaware business trust.
Pilgrim Mutual Funds and ING Funds Trust are each governed by their respective
Board of Trustees. Pilgrim Mutual Funds has eleven Trustees, and ING Funds Trust
has four Trustees.
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.
19
<PAGE>
Pilgrim Emerging Countries Fund also offers Class Q shares, which have
different sales charges and other expenses that may affect its performance. You
can obtain more information about this other share class by calling
1-800-992-0180.
DIVIDENDS AND OTHER DISTRIBUTIONS. Both Pilgrim Emerging Countries Fund and
ING Emerging Markets Equity 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 ING Emerging Markets Equity
Fund's shareholders, then as soon as practicable before the Closing, ING
Emerging Markets Equity Fund will pay its shareholders a cash distribution of
substantially all undistributed net investment income and undistributed realized
net capital gains.
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of each of the Funds as of June 30, 2000, and on a PRO FORMA
basis as of June 30, 2000, giving effect to the Reorganization:
<TABLE>
<CAPTION>
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
<S> <C> <C> <C>
ING EMERGING MARKETS EQUITY FUND
Class A $ 9,072,234 $ 8.64 1,050,072
Class B $ 297,552 $ 8.63 34,494
Class C $ 88,479 $ 8.62 10,268
Class X* $ 44,476 $ 8.62 5,160
PILGRIM EMERGING COUNTRIES FUND
Class A $ 75,311,162 $20.17 3,734,633
Class B $ 30,321,732 $20.30 1,493,431
Class C $ 29,610,258 $19.56 1,513,876
Class Q $119,250,807 $20.74 5,749,575
PRO FORMA - PILGRIM EMERGING COUNTRIES FUND INCLUDING ING EMERGING MARKETS EQUITY FUND
Class A $ 84,383,396 $20.17 4,184,421
Class B $ 30,663,760 $20.30 1,510,280
Class C $ 29,698,737 $19.56 1,518,399
Class Q $119,250,807 $20.74 5,749,575
</TABLE>
----------
* Class X shares merged into Class B shares effective November 16, 2000.
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about ________, 2001.
Shareholders of ING Emerging Markets Equity Fund whose shares are held by
nominees, such as brokers, can vote their proxies by contacting their respective
nominee. In addition to the solicitation of proxies by mail, employees of ING
Funds Trust and its affiliates, without additional compensation, may solicit
proxies in person or by telephone, telegraph, facsimile, or oral communication.
20
<PAGE>
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with ING Emerging Markets Equity Fund, a written revocation or
duly executed proxy bearing a later date. In addition, any shareholder who
attends the Special Meeting in person may vote by ballot at the Meeting, thereby
canceling any proxy previously given. The persons named in the accompanying
proxy card will vote as directed by the proxy, 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 Meeting.
VOTING RIGHTS
Shareholders of ING Emerging Markets Equity 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 Emerging Markets Equity 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 Emerging Markets Equity Fund at the Meeting with
respect to their shares owned as of that Record Date. As of the Record Date,
______ shares of ING Emerging Markets Equity Fund were outstanding and entitled
to vote.
Approval of the Reorganization, with respect to the ING Emerging Markets
Equity Fund, requires the affirmative vote of a majority of the Shares present
in person or by proxy of the ING Emerging Markets Equity 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 Emerging Markets Equity 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 Emerging Markets Equity
Fund understands that the broker-dealers that are the members of the New York
Stock Exchange may vote on items to be considered at the Special Meeting on
behalf of their customers and beneficial owners under the rules of the New York
Stock Exchange.
As of December 1, 2000, ING America Insurance Holdings, Inc. ("ING") owns
88.50% of the outstanding voting shares of ING Emerging Markets Equity Fund, and
therefore controls the Fund. ING intends to vote its shares in favor of the
Reorganization, in which case the Reorganization will be approved.
To the knowledge of ING Funds Trust, as of November 1, 2000, no current
Trustee owns 1% or more of the outstanding shares of ING Emerging Markets Equity
Fund, and the officers and Trustees own, as a group, less than 1% of the shares
of ING Emerging Markets Equity Fund.
21
<PAGE>
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 Emerging Markets Equity Fund or Pilgrim Emerging Countries 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 Emerging Markets Equity Fund and the most recent
Semi-Annual Report succeeding the Annual Report, if any, on request. Requests
for such reports should be directed to ING Funds Trust at 7337 East Doubletree
Ranch Road, Scottsdale, Arizona 85258 or at 1-800-992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE 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
22
<PAGE>
APPENDIX A
Set forth below is an expert from Pilgrim Emerging Countries Fund's Annual
Report, dated June 30, 2000, regarding the Fund's performance, including a
report from the former sub-adviser to the Fund - Nicholas Applegate Capital
Management.
PILGRIM EMERGING COUNTRIES FUND
PORTFOLIO MANAGER'S REPORT
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT - PORTFOLIO MANAGEMENT TEAM.
Catherine Somhegyi, Chief Investment Officer; Pedro V. Marcal, Partner,
Portfolio Manager; Ernesto Ramos, Ph.D., Portfolio Manager; Lawrence S.
Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and
Research; Jessica Goncalves, Portfolio Manager; Jason Campbell, Portfolio
Manager; Theodora Jamison, Investment Analyst; John Mazur, Investment Analyst;
Andrew Parmet, Investment Analyst.
GOAL. The Fund seeks to provide long-term capital appreciation through
investing in companies of developing countries around the world.
MARKET OVERVIEW. Stocks in the world's emerging countries trekked higher
during the fiscal year ended June 30, 2000. The MSCI Emerging Markets Free Index
increased 8.8%, largely due to impressive fourth quarter 1999 gains in the
Europe, Middle East, and Africa (EMEA) region and Latin America.
Gains in EMEA markets were attributable to the improvement in macroeconomic
conditions in the region, such as strength in manufacturing output, a massive
decrease in inflation, robust consumption and robust export growth.
The MSCI Turkey Index turned in a stellar performance, up 118.0% for the
12-month period. Returns were driven by many factors, including:
* Strong capital inflows resulting from the country's privatization program
* The Central Bank of Turkey's adoption of a new exchange rate regime in
support of the government's disinflation program
* An upgrade in Turkey's long-term credit rating by Standard & Poor's
Israel and Russian markets also posted significant gains. The MSCI Israel
Index advanced 60.9%. The election of reform-minded Vladimir Putin as Russia's
prime minister buoyed stocks in the country, as did massive foreign currency
reserves, a revival in domestic industry, and a boom in the price of
oil-Russia's chief export. The MSCI Russia index rose 40.2% for the fiscal year.
The MSCI EMF Latin America Index returned 16.7% in the period amid the
continued strength in the region's economies. Strong fundamentals, such as
increases in commodity prices, exports and industrial production boosted Latin
American economies. Brazil was the region's top-performing market, with the MSCI
Brazil Index advancing 52.2% during the period.
Stocks in emerging Asian countries dipped slightly during the fiscal year
as strength in Indian and Malaysian markets was offset by losses in Indonesia,
the Philippines and Thailand. Nevertheless, Asian markets continued to benefit
from the prevalent themes of strong earnings growth, increased exports to the
United States and improving domestic economies.
A-1
<PAGE>
PERFORMANCE: The Fund's Class A shares, excluding sales charges, provided a
total return of 20.49%, substantially outperforming the MSCI EMF Index, which
was up 9.47% for the same period.
PORTFOLIO SPECIFICS: The Fund's relative outperformance was primarily
attributable to stock selection in India and Mexico, as well as being in
Singapore. The Fund's overweighting in technology also contributed to
performance during the period.
Among the Fund's best-performing stocks were Infosys Technologies, an
Indian IT consulting and software services firm; SK Telecoms, a provider of
cellular services in South Korea; Brazil's Petrobras, an integrated oil company;
Dimension Data of South Africa, a systems integrator company; and China Telecom,
a provider of cellular telecommunications to many of China's most economically
developed provinces.
On a bottom-up, fundamental basis, we increased the Fund's exposure to the
technology stocks, while paring back holdings in the financial services and
manufacturing sectors.
MARKET OUTLOOK: We remain enthusiastic about the investment prospects for
the world's emerging markets, particularly within the technology sector. We
believe that technology will be at the core of the improvements in healthcare,
education and business that these developing countries are seeking.
<TABLE>
<CAPTION>
11/28/94 6/95 6/96 6/97 6/98 6/99 6/30/00
-------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Emerging Countries Fund
Class A With Sales Charge $10,000 $ 9,534 $11,724 $15,260 $12,265 $13,903 $16,751
Pilgrim Emerging Countries Fund
Class A Without Sales Charge $10,000 $10,114 $12,437 $16,187 $13,011 $14,748 $17,770
MSCI EMF Index $10,000 $ 8,896 $ 9,649 $10,887 $ 6,632 $ 8,536 $ 9,344
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2000
SINCE INCEPTION SINCE INCEPTION
OF CLASS A AND C OF CLASS B
1 YEAR 11/28/94 5/31/95
------ -------- -------
Including Sales Charge:
Class A(1) 13.56% 9.67% --
Class B(2) 14.55% -- 11.23%
Class C(3) 18.63% 9.87% --
Excluding Sales Charge:
Class A 20.49% 10.83% --
Class B 19.55% -- 11.35%
Class C 19.63% 9.87% --
MSCI EMF Index 9.47% -1.21%(4) 1.03%(5)
Based on an initial investment, the graph and table above illustrate the
total return of Pilgrim Emerging Countries Fund against the Morgan Stanley
Capital International Emerging Markets Free (MSCI EMF) 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.
A-2
<PAGE>
Total returns reflect the fact that the Investment Adviser has
contractually agreed to waive or defer its management fee and to pay other
operating expenses otherwise payable by the Fund, subject to possible later
reimbursement during a three-year period. Total returns would have been lower
had there been no deferral to the Fund
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 letter 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 portfolio
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) Reflect 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) Since inception performance for index is shown from 12/01/94.
(5) Since inception performance for index is shown from 06/01/95.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including currency fluctuation, economic and political risks not found in
investments that are solely domestic. Risks of foreign investing are generally
intensified for investments in emerging markets.
A-3
<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 Mutual Funds, a
Delaware business trust ("Pilgrim Trust") with its principal place of business
at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf of its
series, Pilgrim Emerging Countries Fund (the "Acquiring Fund"), and ING Funds
Trust, a Delaware business trust ("ING Trust") with its principal place of
business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf
of its series, ING Emerging Markets Equity 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) 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
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
B-1
<PAGE>
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 computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures in the
then-current prospectus and statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Trustees.
B-2
<PAGE>
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 _____ ___, 2000, 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
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.
B-3
<PAGE>
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 Fund Trust's Declaration of
Trust to own all of its properties and assets and to carry on its business as it
is now being conducted;
(b) ING Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of shares of the
Acquired Fund under the Securities Act of 1933, as amended ("1933 Act"), is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title to the Assets and full right, power, and authority to sell, assign,
transfer and deliver such Assets hereunder free of any liens or other
encumbrances, and upon delivery and payment for such Assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material violation
of the ING Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the ING
Trust, on behalf of the Acquired Fund, is a party or by which it is bound, or
(ii) the acceleration of any obligation, or the imposition of any penalty, under
any agreement, indenture, instrument, contract, lease, judgment or decree to
which the ING Trust, on behalf of the Acquired Fund, is a party or by which it
is bound;
B-4
<PAGE>
(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 Portfolio of Investments of the Acquired Fund at
October 31, 2000 have been audited by Ernst & Young LLP, independent auditors,
and are in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) present fairly, in all material respects, the financial
condition of the Acquired Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquired Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(j) Since October 31, 2000, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the ING Trust and have been offered and sold in every state
and the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
All of the issued and outstanding shares of the Acquired Fund will, at the time
of Closing, be held by the persons and in the amounts set forth in the records
of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph
B-5
<PAGE>
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, on behalf of the
Acquiring Fund, 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 Pilgrim 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 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) 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;
(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
B-6
<PAGE>
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 Pilgrim Trust, on
behalf of 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 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 the Acquiring
Fund's business or the Acquiring Fund's ability to consummate the transactions
herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Portfolio of Investments of the Acquiring Fund at June
30, 2000 have been audited by KPMG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since June 30, 2000, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business, other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquired Fund. For purposes of this subparagraph (i), a decline in net asset
value per share of the Acquiring Fund due to declines in market values of
securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by shareholders of the
Acquiring Fund, shall not constitute a material adverse change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
B-7
<PAGE>
investment company, has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, 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, and will do so for the taxable
year including 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 by the Pilgrim 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.
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
by the Pilgrim Trust;
(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.
(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.
B-8
<PAGE>
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 it will,
from time to time, as and when reasonably requested by the Pilgrim Trust, on
behalf of 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 Acquiring Fund 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.
B-9
<PAGE>
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;
B-10
<PAGE>
7.4 The ING Trust, on behalf of the Acquired Fund, shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by the ING Trust, on behalf of the
Acquired Fund, on or before the Closing Date;
7.5 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1; and
7.6 The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net realized capital
gains, if any, for the period from the close of its last fiscal year to 4:00
p.m. Eastern time on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to the extent not
otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been satisfied on or
before the Closing Date with respect to the ING Trust, on behalf of the Acquired
Fund, or the 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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<PAGE>
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 The 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 Acquired
and Acquiring Funds, and (2) half are borne by the Acquired and Acquiring Funds
and will be paid by the Acquired Fund and Acquiring Fund pro rata based upon the
relative net assets of the Acquired Fund and the Acquiring Fund as of the close
of business on the record date for determining the shareholders of the Acquired
Fund entitled to vote on the Reorganization. The costs of the Reorganization
shall include, but not be limited to, costs associated with obtaining any
necessary order of exemption from the 1940 Act, preparation of the Registration
Statement, printing and distributing the Acquiring Fund's prospectus and the
Acquired Fund's proxy materials, legal fees, accounting fees, securities
registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The 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.
B-12
<PAGE>
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, 1475 Dunwoody Drive, West Chester, Pennsylvania 19380, 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 State of Delaware without regard to its principles of conflicts
of laws.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
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<PAGE>
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 the ING Trust personally, but shall
bind only the trust property of the Pilgrim Trust or the ING Trust, as provided
in the Declaration of Trust of the Pilgrim Trust or 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.
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.
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 MUTUAL FUNDS on behalf of its
PILGRIM EMERGING COUNTRIES FUND series
By:
---------------------------------- ------------------------------------
SECRETARY Its:
-----------------------------------
ING FUNDS TRUST on behalf of its
Attest: ING EMERGING MARKETS EQUITY FUND series
By:
---------------------------------- ------------------------------------
SECRETARY Its:
-----------------------------------
B-14
<PAGE>
APPENDIX C
ADDITIONAL INFORMATION REGARDING PILGRIM EMERGING COUNTRIES FUND
(THE "FUND")
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to three separate Classes of 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 Emerging Markets Equity Fund shares held by you immediately prior
to the Reorganization, and the period that you held shares of ING Emerging
Markets Equity Fund will be included in the holding period of the Fund for
purposes of calculating contingent deferred sales charges and determining
conversion rights. Purchases of the shares of the Fund after the Reorganization
will be subject to the sales load structure and conversion rights discussed
below.
The sales charges and fees for each Class of shares of the Fund are shown
and contrasted in the chart below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge on Purchases 5.75%(1) None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00%(4)
Annual Service and Distribution (12b-1) Fees(5) 0.35% 1.00% 1.00%
Maximum Purchase Unlimited $ 250,000 Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A
</TABLE>
----------
(1) Reduced for purchases of $50,000 and over.
(2) For investments of $1 million or more, a CDSC of no more than 1% may be
assessed on redemptions of shares 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 Emerging Markets
Equity 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
Emerging Markets Equity 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.
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<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 Emerging Markets Equity 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 Emerging Markets Equity 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 amount multiplied by the maximum sales charge imposed
on purchases of the Fund and Class will be restricted within your account to
cover additional sales charges that may be due if your actual total investment
fails to qualify for the reduced sales charges. See the Statement of Additional
Information for the Fund for details on the Letter of Intent option or contact
the Shareholder Servicing Agent at (800) 992-0180 for more information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
Funds or ING Funds (excluding Pilgrim Money Market Fund) ("Rights of
Accumulation"). The reduced sales charges apply to quantity purchases made at
one time or on a cumulative basis over any period of time. See the Statement of
Additional Information for the Fund for details or contact the Shareholder
Servicing Agent at (800) 992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim Funds which impose a CDSC may
be combined with Class A shares for a reduced sales charge but will not affect
any CDSC which may be imposed upon the redemption of shares of the Fund which
imposes a CDSC.
C-2
<PAGE>
SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at (800) 992-0180, or see
the Statement of Additional Information for the Fund.
CLASS B SHARES: DEFERRED SALES CHARGE ALTERNATIVE. Class B shares are
offered at their NAV per share without any initial sales charge. Class B shares
that are redeemed within six years of purchase, however, will be subject to a
CDSC as described in the table that follows. Class B shares of the Fund are
subject to a distribution and service fee 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 Emerging Markets Equity
Fund will convert to Class A shares eight years after the purchase of the
original shares of ING Emerging Markets Equity 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.
C-3
<PAGE>
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 (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 (800) 992-0180 for more
information.
RULE 12B-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 applicable to each Class of shares of
the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, 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% 0.10%
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.
C-4
<PAGE>
PURCHASING SHARES. The Fund reserves the right to liquidate sufficient
shares to recover annual Transfer Agent fees should the investor fail to
maintain his/her account value at a minimum of $1,000.00 ($250.00 for IRA's).
The minimum initial investment in the Fund is $1,000 ($250 for IRAs), and the
minimum for additional investment in the Fund is $100. The minimum initial
investment for a pre-authorized retirement plan is $100, plus monthly
investments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
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
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 (800) 992-0180.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company ("SSB") acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB
currently receives a $12 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the NAV
next determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth above under "Purchase of Shares" have been
completed. If you purchase by wire, however, the order will be deemed to be in
proper form after the telephone notification and the federal funds wire have
been received. If you purchase by wire, you must submit an application form in a
C-5
<PAGE>
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
(800) 992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
than four per year). ING Pilgrim Investments reserves the right, upon 60 days'
prior notice, to restrict the frequency of, otherwise modify, or impose charges
of up to $5.00 upon exchanges. The total value of shares being exchanged must at
least equal the minimum investment requirement of the fund into which they are
being exchanged. The Fund may change or cancel its exchange policies at any
time, upon 60 days' written notice to shareholders.
Shares of one Class of the Fund generally may be exchanged for shares of
that same Class of any other open-end Pilgrim fund or ING fund without payment
of any additional sales charge in most instances. If you exchange and
subsequently redeem your shares, any applicable CDSC will be based on the full
period of the share ownership. Shareholders exercising the exchange privilege
with any other open-end Pilgrim fund or ING fund should carefully review the
Prospectus of that fund. Exchanges of shares are sales and may result in a gain
or loss for federal and state income tax purposes. You will automatically be
assigned the telephone exchange privilege unless you mark the box on the Account
Application that signifies you do not wish to have this privilege. The exchange
privilege is only available in states where shares of the fund being acquired
may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege.
SYSTEMATIC EXCHANGE PRIVILEGE. With an initial account balance of at least
$5,000 and subject to the information and limitations outlined above, you may
elect to have a specified dollar amount of shares systematically exchanged,
C-6
<PAGE>
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 (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.
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.
C-7
<PAGE>
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
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, B or C account in the Fund invested into a Pilgrim fund or ING
fund which offers Class A, B or 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 on your own tax adviser for advice about
the particular federal, state and local tax consequences to you of investing in
the Fund.
The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, most shareholders will be taxed on amounts they receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held your Fund
shares or whether you elect to receive your distributions in cash or reinvest
them in additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid
during the following January may be treated as having been received by
shareholders in the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital
gains distributions.
C-8
<PAGE>
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-9
<PAGE>
FINANCIAL HIGHLIGHTS
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00
Income from investment operations:
Net investment income (loss) $ (0.20) (0.05) (0.06) 0.03 (0.06) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.63 3.36 (3.81) 1.22 3.51 3.15
Total from investment operations $ 3.43 3.31 (3.87) 1.25 3.45 3.11
Less distributions from:
Net investment income $ -- -- 0.02 -- -- 0.02
Net realized gains on investments $ -- -- 0.07 1.06 0.28 0.06
Net asset value, end of period $ 20.17 16.74 13.43 17.39 17.20 14.03
Total Return(3): % 20.49 24.65 (22.23) 8.06 24.79 28.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,311 53,483 47,180 71,014 38,688 4,718
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.19 2.13 2.27 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.34 2.66 2.56 2.48 3.08 6.72
Net investment income (loss) after
expense reimbursement(4)(5) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35)
Portfolio turnover % 211 67 213 243 176 118
Class B
------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(1) to
June 30, June 30, Year Ended March 31, March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.98 13.64 17.64 17.29 14.02 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.07) (0.22) (0.07) (0.11) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.67 3.41 (3.70) 1.26 3.47 1.56
Total from investment operations $ 3.32 3.34 (3.92) 1.19 3.36 1.52
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.84 0.09 --
Net asset value, end of period $ 20.30 16.98 13.64 17.64 17.29 14.02
Total Return(3): % 19.55 24.49 (22.23) 7.47 24.00 12.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 30,322 26,342 22,338 38,796 24,558 3,557
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.91 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.20 3.06 3.66 7.58
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.80) (0.20) (1.77) (1.05)
Portfolio turnover % 211 67 213 243 176 118
Class C
-----------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79
Income from investment operations:
Net investment income (loss) $ (0.32) (0.07) (0.27) (0.12) (0.10) (0.05)
Net realized and unrealized gains
(loss) on investments $ 3.53 3.28 (3.49) 1.26 3.37 2.97
Total from investment operations $ 3.21 3.21 (3.76) 1.14 3.27 2.92
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.97 0.17 --
Net asset value, end of period $ 19.56 16.35 13.14 16.98 16.81 13.71
Total Return(3): % 19.63 24.43 (22.21) 7.47 23.94 27.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 29,610 24,230 19,246 36,986 29,376 4,345
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.90 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.19 3.09 3.12 6.23
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06)
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
C-10
<PAGE>
(1) Commencement of offering shares.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-advisor and the Fund changed its year end
to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
C-11
<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 the specified Class of Pilgrim Emerging
Countries 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
Emerging Markets Equity 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 A 93.71% 88.50%
Holding, Inc.
Investment Accounts
5780 Powers Ferry Rd, NW
Atlanta, GA 30327
Robert Baird & Co Inc FBO B 10.36% 0.43%
Acct #6272-8958
777 East Wisconsin Avenue
Milwaukee, WI 53202
Robert Baird & Co Inc FBO B 5.94% 0.25%
Acct #4208-3731
777 East Wisconsin Avenue
Milwaukee, WI 53202
JB Oxford & Co FBO B 44.47% 1.86%
Immo-Invest-Anstalt, Acct #12436330
9665 Wilshire Blvd, Ste 302
Beverly Hills, CA 90212
Dennis & Judith Krumholz C 7.23% 0.10%
228 Cedar Ave
Morton, IL 61550
James & Janet Norris JTWROS C 10.58% 0.15%
505 N 3rd Street
Red Oak, IA 51566
First Clearing Corp FBO C 44.80% 0.62%
David Chisamore, Acct #4065-2847
4160 Suisun Vly, Ste E PMB 436
Suisun, Ca 94585
Eric Tilenius C 19.51% 0.27%
388 Beale St, Apt 808
San Francisco, Ca 94105
</TABLE>
E-1
<PAGE>
PART B
PILGRIM MUTUAL FUNDS
--------------------------------------------------------------------------------
Statement of Additional Information
________ ___, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Acquisition of the Assets and Liabilities of By and in Exchange for Shares of
ING Emerging Markets Equity Fund Pilgrim Emerging Countries Fund
(a series of ING Funds Trust) (a series of Pilgrim Mutual Funds)
7337 East Doubletree Ranch Road 7337 East Doubletree Ranch Road
Scottsdale, AZ 85258 Scottsdale, AZ 85258
</TABLE>
This Statement of Additional Information is available to the Shareholders of ING
Emerging Markets Equity Fund in connection with a proposed transaction whereby
all of the assets and liabilities of ING Emerging Markets Equity Fund, a series
of ING Funds Trust, will be transferred to Pilgrim Emerging Countries Fund, a
series of Pilgrim Mutual Funds, in exchange for shares of Pilgrim Emerging
Countries Fund.
This Statement of Additional Information of Pilgrim Mutual Funds consists of
this cover page, the proforma financial statements 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 Emerging Countries 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 ING Emerging Markets Equity Fund are included
in the Annual Report of ING Funds Trust dated October 31, 2000, as filed on
December __, 2000.
4. The Financial Statements of ING Emerging Markets Equity Fund are included
in the Semi-Annual Report of ING Funds Trust dated April 30, 2000, as filed
on July 7, 2000.
5. The Financial Statements of Pilgrim Emerging Countries Fund are included in
the Annual Report of Pilgrim Mutual Funds dated June 30, 2000, as filed on
September 7, 2000.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated ________ ___, 2000 relating to the reorganization of ING
Emerging Markets Equity Fund may be obtained, without charge, by writing to ING
Pilgrim Investments at 7337 East Doubletree Ranch Road Scottsdale, AZ 85258 or
calling 1-800-992-0180. This Statement of Additional Information should be read
in conjunction with the Proxy Statement/Prospectus.
1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and pro forma financial
statements for the combined Fund, assuming the Reorganization is consummated, as
of June 30, 2000. The first table presents Statements of Assets and Liabilities
(unaudited) for each Fund and pro forma figures for the combined Fund. The
second table presents Statements of Operations (unaudited) for each Fund and pro
forma figures for the combined Fund. The third table presents Portfolio of
Investments (unaudited) for each Fund and pro forma figures for the combined
Fund. The tables are followed by the Notes to the Pro Forma Financial Statements
(unaudited).
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PILGRIM ING
EMERGING EMERGING
COUNTRIES MARKETS PRO FORMA PRO FORMA
FUND EQUITY FUND ADJUSTMENTS COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at market value* $ 251,751,858 $ 9,270,880 $ 261,022,738
Repurchase Agreements 1,218,000 210,000 1,428,000
Foreign currency at value ** 3,713,846 343 3,714,189
Cash 10,779 (5,423) 5,356
Receivables:
Fund shares sold 1,950,335 -- 1,950,335
Dividends and interest 438,193 9,870 448,063
Investment securities sold 6,248,100 816,051 7,064,151
Other 40,470 -- 40,470
Prepaid expenses 19,893 4,699 24,592
------------- ------------- ------------- -------------
Total Assets 265,391,474 10,306,420 275,697,894
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 8,312,796 258,121 8,570,917
Payable for fund shares redeemed 1,000,921 536,346 1,537,267
Payable to affiliate 349,236 2,514 351,750
Estimated tax liability on Indian investments 860,486 -- 860,486
Other accrued expenses and liabilities 374,076 6,698 380,774
------------- ------------- ------------- -------------
Total Liabilities 10,897,515 803,679 11,701,194
------------- ------------- ------------- -------------
NET ASSETS $ 254,493,959 $ 9,502,741 $ 263,996,700
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 253,790,102 $ 10,980,794 $ 264,770,896
Undistributed net investment income -- 4,007 4,007
Accumulated net realized (loss) on investments
and foreign currency transactions (38,373,471) (343,756) (38,717,227)
Net unrealized appreciation (depreciation) of
investments and other assets, liabilities and
forward contracts denominated in foreign currencies 39,077,328 (1,138,304) 37,939,024
------------- ------------- ------------- -------------
Net Assets $ 254,493,959 $ 9,502,741 $ 263,996,700
============= ============= ============= =============
CLASS A:
Net Assets $ 75,311,162 $ 9,072,234 $ 84,383,396
Shares outstanding 3,734,633 1,050,072 (600,284)(A) 4,184,421
Net asset value and redemption price per share $ 20.17 $ 8.64 $ 20.17
Maximum offering price per share $ 21.40 $ 9.17 $ 21.40
CLASS B:
Net Assets $ 30,321,732 $ 297,552 $ 44,476 (B) $ 30,663,760
Shares outstanding 1,493,431 34,494 (17,645)(B) 1,510,280
Net asset value and redemption price per share $ 20.30 $ 8.63 $ 20.30
Maximum offering price per share $ 20.30 $ 8.63 $ 20.30
CLASS C:
Net Assets $ 29,610,258 $ 88,479 $ 29,698,737
Shares outstanding 1,513,876 10,268 (5,745)(A) 1,518,399
Net asset value and redemption price per share $ 19.56 $ 8.62 $ 19.56
Maximum offering price per share $ 19.56 $ 8.62 $ 19.56
CLASS Q:
Net Assets $ 119,250,807 N/A $ 119,250,807
Shares outstanding 5,749,575 N/A 5,749,575
Net asset value and redemption price per share $ 20.74 N/A $ 20.74
Maximum offering price per share $ 20.74 N/A $ 20.74
CLASS X:
Net Assets N/A $ 44,476 $ (44,476)(B) N/A
Shares outstanding N/A 5,160 (5,160)(B) N/A
Net asset value and redemption price per share N/A $ 8.62 N/A
Maximum offering price per share N/A $ 8.62 N/A
* Cost of securities $ 211,815,346 $ 10,414,713 $ 222,230,059
** Cost of foreign currency $ 3,714,465 $ 334 $ 3,714,799
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(B) Reflects the merging of Class X into Class B.
See Accompanying Notes to Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PILGRIM ING
EMERGING EMERGING
COUNTRIES MARKETS PRO FORMA PRO FORMA
FUND EQUITY FUND ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 2000(1) 2000 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 1,758,417 $ 36,845 $ 1,795,262
Interest 283,787 22,441 306,228
------------ ------------ ------------ ------------
Total investment income 2,042,204 59,286 -- 2,101,490
------------ ------------ ------------ ------------
EXPENSES:
Investment management fees 2,773,339 39,435 2,812,774
Distribution expenses
Class A 226,595 22,572 (12,038)(A) 237,129
Class B 295,635 937 142 (C) 296,714
Class C 276,850 633 277,483
Class Q 249,693 -- 249,693
Class X -- 142 (142)(C) --
Transfer agent and registrar fees 517,621 10,049 527,670
Shareholder Reporting 81,878 572 82,450
Registration and filing fees 77,620 5,979 (1,594)(B) 82,005
Recordkeeping and pricing fees 40,236 17,469 57,705
Professional fees 39,069 14,347 (3,826)(B) 49,590
Custodian fees 642,280 15,543 657,823
Shareholder servicing fees 14,946 -- 14,946
Directors' fees 15,000 1,058 16,058
Insurance 2,182 -- 2,182
Miscellaneous 23,960 816 24,776
Interest and credit facility fee 63,592 -- 63,592
------------ ------------ ------------ ------------
Total expenses 5,340,496 129,552 (17,458) 5,452,590
------------ ------------ ------------ ------------
Less:
Waived and reimbursed fees 346,154 74,110 (34,544)(A) 385,720
------------ ------------ ------------ ------------
Net expenses 4,994,342 55,442 17,086 5,066,870
------------ ------------ ------------ ------------
Net investment income (loss) (2,952,138) 3,844 (17,086) (2,965,380)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from:
Investments (net of foreign tax on sale of
Indian investments) 39,798,714 (314,154) 39,484,560
Foreign currency transactions (303,058) (29,603) (332,661)
Net change in unrealized (depreciation) of:
Investments (net of change in estimated tax
liability on Indian investments) (3,923,323) (1,143,833) (5,067,156)
Translation of other assets, liabilities and forward
contracts denominated in foreign currencies 72,100 5,494 77,594
------------ ------------ ------------ ------------
Net gain from investments and foreign currencies 35,644,433 (1,482,096) -- 34,162,337
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 32,692,295 $ (1,478,252) $ (17,086) $ 31,196,957
============ ============ ============ ============
</TABLE>
(1) Fund commenced operations on March 1, 2000.
(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
See Accompanying Notes to Financial Statements
3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ING ING
PILGRIM EMERGING PILGRIM EMERGING
EMERGING MARKETS EMERGING MARKETS
COUNTRIES EQUITY PRO FORMA COUNTRIES EQUITY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
----------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS: 94.10%
ARGENTINA: 0.01%
2,500 2,500 Banco Galicia Y Bueno ADR $ 37,031 $ 37,031
------------ ----------- ------------
BRAZIL: 6.98%
2,200 2,200 Aracruz Celulose SA - Spon Adr 42,488 42,488
3,100 3,100 Cia Cervejaria Brahma-Sp Adr 52,700 52,700
5,000 5,000 Cia Paranaense de Energia 46,563 46,563
900 900 Cia Siderurgica Nacional 27,731 27,731
2,000 2,000 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar 64,250 64,250
2,300 2,300 CVRD-Companhia Vale do Rio Doce 64,975 64,975
9,800 9,800 Embratel Participacoes SA 231,525 231,525
41,300 41,300 Grupo Pao de Acucar ADR $ 1,326,762 1,326,762
199,600 199,600 Embratel Participacoes SA ADR 4,715,550 4,715,550
43,600 43,600 Globo Cabo SA ADR 604,950 604,950
7,200 7,200 Petroleo Brasileiro SA 217,523 217,523
29,200 700 29,900 Tele Celular Sul Participacoes ADR 1,321,300 31,675 1,352,975
2,000 2,000 Tele Centro Oeste Celular Participacoes SA 24,000 24,000
1,100 1,100 Tele Centro Sul Participacoes ADR 80,369 80,369
113,610 5,884 119,494 Tele Norte Leste Participacoes ADR 2,684,028 139,009 2,823,037
26,600 26,600 Telecomunicacoes Brasileiras SA ADR 2,583,525 2,583,525
400 400 Telemig Celular Participacoes SA 28,600 28,600
47,500 800 48,300 Telesp Celular Participacoes SA ADR 2,131,563 35,900 2,167,463
65,100 2,300 67,400 Unibanco - Uniao de Bancos Brasilieros GDR 1,871,625 66,125 1,937,750
------------ ----------- ------------
17,239,303 1,153,433 18,392,736
------------ ----------- ------------
CHILE: 0.05%
1,900 1,900 Compania Telecomunicaciones de Chile S.A. 34,438 34,438
1,900 1,900 Distribucion Y Servicio D&S 33,013 33,013
2,400 2,400 Embotelladora Andina S.A. 28,200 28,200
2,000 2,000 Endesa (Chile) 22,125 22,125
700 700 Vina Concha Y Toro 25,506 25,506
------------ ----------- ------------
-- 143,282 143,282
------------ ----------- ------------
CHINA: 1.80%
17,377,000 140,000 17,517,000 PetroChina Co., Ltd. 3,611,153 29,094 3,640,247
5,801,000 5,801,000 Yizheng Chemical Fibre Co. 1,153,428 1,153,428
------------ ----------- ------------
4,764,581 29,094 4,793,675
------------ ----------- ------------
CZECH REPUBLIC: 1.35%
115,800 115,800 @ Cesky Telecom AS GDR 1,945,440 1,945,440
36,480 36,480 @ # Cesky Radiokomunikace GDR 1,623,360 1,623,360
------------ ----------- ------------
3,568,800 -- 3,568,800
------------ ----------- ------------
EGYPT: 0.71%
45,500 45,500 Al-Ahram Beverages Co. GDR 786,272 786,272
33,200 33,200 @ Mobinil - Egyptian Mobile Services 1,080,464 1,080,464
------------ ----------- ------------
1,866,736 -- 1,866,736
------------ ----------- ------------
GREECE: 0.04%
4,000 4,000 Hellenic Telecommunications Organization SA 97,605 97,605
------------ ----------- ------------
HONG KONG: 5.22%
1,043,400 46,000 1,089,400 @ China Mobile (Hong Kong), Ltd. 9,201,943 405,683 9,607,626
73,000 73,000 @ China Unicom ADR 1,551,250 1,551,250
16,000 16,000 Citic Pacific Ltd. 83,741 83,741
1,036,000 1,036,000 Giordano Int'l, Ltd. 1,574,832 1,574,832
936,000 936,000 Legend Holdings, Ltd. 906,523 906,523
58,000 58,000 Ng Fung Hong Ltd. 31,063 31,063
------------ ----------- ------------
13,234,548 520,487 13,755,035
------------ ----------- ------------
HUNGARY: 1.12%
23,300 23,300 EGIS Rt. 974,842 974,842
53,900 2,700 56,600 Matav Rt. ADR 1,856,181 92,981 1,949,162
800 800 OTP Bank Rt. 41,600 41,600
------------ ----------- ------------
2,831,023 134,581 2,965,604
------------ ----------- ------------
INDIA: 6.65%
3,300 3,300 Ashok Leyland Ltd. GDR 14,025 14,025
2,300 2,300 Doctor Reddy'S Lab-144A GDR 67,235 67,235
40,400 40,400 Himachal Futuristic Communications, Ltd. 1,284,747 1,284,747
2,400 2,400 Hindalco Industries-Spon GDR 46,980 46,980
2,819 2,819 ICICI Banking Ltd. 40,876 40,876
34,180 34,180 @ Infosys Technologies, Ltd. 6,368,159 6,368,159
3,100 3,100 ITC Ltd. GDR 59,520 59,520
5,300 5,300 Larsen & Tourbo GDR 57,505 57,505
4,400 4,400 Mahanagar Tele Nigam-GDR 44,825 44,825
54,900 54,900 NIIT, Ltd. 2,717,765 2,717,765
4,000 4,000 Pentamedia Graphics Ltd. GDR 55,500 55,500
485,000 1,400 486,400 @ Reliance Industries, Ltd. 3,702,945 29,400 3,732,345
44,300 44,300 Satyam Computer Services, Ltd. 2,958,922 2,958,922
1,670 1,670 Silverline Technologies Ltd. 36,114 36,114
3,300 3,300 SSI Ltd. GDR 21,615 21,615
3,400 3,400 Videsh Sanchar Nigam-Sp Adr 53,125 53,125
------------ ----------- ------------
17,032,538 526,720 17,559,258
------------ ----------- ------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ING ING
PILGRIM EMERGING PILGRIM EMERGING
EMERGING MARKETS EMERGING MARKETS
COUNTRIES EQUITY PRO FORMA COUNTRIES EQUITY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
----------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INDONESIA: 0.04%
22,000 22,000 Gudang Garam Tbk 35,567 35,567
45,500 45,500 Ramayana Lestari 29,112 29,112
91,000 91,000 PT Astra International, Inc. 28,592 28,592
53,500 53,500 PT Telekomunikasi 18,796 18,796
------------ ----------- ------------
-- 112,067 112,067
------------ ----------- ------------
ISRAEL: 6.24%
671,900 10,900 682,800 Bank Hapoalim, Ltd. 1,948,395 31,608 1,980,003
15,000 15,000 Bank Leumi Le-Israel 30,970 30,970
10,600 10,600 Bezeq The Israeli Telecom Company 59,062 59,062
24,100 750 24,850 @ Check Point Software Technologies, Ltd. 5,103,175 158,813 5,261,988
900 900 ECI Telecom Ltd. 32,175 32,175
16,300 250 16,550 @ Gilat Satellite Networks, Ltd. 1,130,812 17,344 1,148,156
500 500 IDB Holding Corp., Ltd. 19,202 19,202
25,200 25,200 @ M-Systems Flash Disk Pioneers, Ltd. 1,962,450 1,962,450
900 900 Orbotech Ltd. 83,588 83,588
31,300 31,300 @ Orckit Communications, Ltd. 942,913 942,913
88,400 1,100 89,500 Teva Pharmaceutical ADR 4,900,675 60,981 4,961,656
------------ ----------- ------------
15,988,420 493,743 16,482,163
------------ ----------- ------------
MALAYSIA: 3.85%
502,000 502,000 AMMB Holdings Berhad 1,677,737 1,677,737
7,000 7,000 British American Tobacco (Malaysia) Bhd 57,105 57,105
612,000 22,000 634,000 Malayan Banking Berhad 2,480,211 89,158 2,569,369
17,000 17,000 Resorts World Berhad 46,526 46,526
1,743,000 37,000 1,780,000 Tenaga Nasional Berhad 5,687,684 120,737 5,808,421
------------ ----------- ------------
9,845,632 313,526 10,159,158
------------ ----------- ------------
MEXICO: 15.55%
6,800 6,800 Alfa SA 15,575 15,575
6,754 6,754 Cemex SA de C.V. CPO 31,489 31,489
128,700 3,200 131,900 Coca-Cola Femsa SA ADR 2,429,213 60,400 2,489,613
1,494,430 1,494,430 @ Corp. Interamericana de Entretenmiento SA 5,843,546 5,843,546
28,100 2,500 30,600 Fomento Economico Mexicano SA ADR de CV 1,210,056 107,656 1,317,712
1,178,000 29,300 1,207,300 @ Grupo Financiero Banamex Accival SA de CV 4,953,199 124,997 5,078,196
127,200 127,200 Grupo Radio Centro SA ADR de CV 1,446,900 1,446,900
44,700 2,800 47,500 Grupo Televisa SA GDR 3,081,506 193,025 3,274,531
7,600 7,600 Kimberly-Clark de Mexico SA 21,499 21,499
2,400 2,400 Panamerican Beverages, Inc. 35,850 35,850
234,931 7,345 242,276 Telefonos de Mexico SA ADR 13,420,433 419,583 13,840,016
325,000 325,000 TV Azteca SA de CV ADR 4,285,938 4,285,938
526,000 526,000 TV Azteca SA de CV 430,587 430,587
1,212,000 43,900 1,255,900 @ Wal-Mart De Mexico SA de CV 2,843,510 103,006 2,946,516
------------ ----------- ------------
39,944,888 1,113,080 41,057,968
------------ ----------- ------------
PAKISTAN: 0.01%
600 600 Pakistan Telecomm-Spons GDR 30,960 30,960
------------ ----------- ------------
PHILIPPINES: 0.01%
1,680 1,680 Philippine Long Distance Telephone 30,104 30,104
------------ ----------- ------------
POLAND: 0.96%
21,200 21,200 Prokom Software SA 1,110,050 1,110,050
25,500 25,500 Softbank SA GDR 1,323,353 1,323,353
14,300 14,300 Telekomunikacja Polska SA 98,742 98,742
------------ ----------- ------------
2,433,403 98,742 2,532,145
------------ ----------- ------------
RUSSIA: 2.60%
2,300 2,300 AO Tatneft 22,569 22,569
26,000 26,000 @ Golden Telecom, Inc. 773,500 773,500
68,700 2,300 71,000 Lukoil-Holding ADR 3,511,944 117,576 3,629,520
1,400 1,400 Rostelecom 19,075 19,075
157,800 8,200 166,000 Surgutneftegaz ADR 2,102,685 109,265 2,211,950
5,900 5,900 Unified Energy System 66,670 66,670
6,000 6,000 @ Vimpelcom ADR 132,750 132,750
------------ ----------- ------------
6,520,879 335,155 6,856,034
------------ ----------- ------------
SINGAPORE: 4.27%
37,600 37,600 @ Chartered Semiconductor Mfg., Ltd. ADR 3,384,000 3,384,000
897,624 897,624 Datacraft Asia, Ltd. 7,899,091 7,899,091
------------ ----------- ------------
11,283,091 -- 11,283,091
------------ ----------- ------------
SOUTH AFRICA: 2.89%
14,300 14,300 African Bank Investments Ltd. 18,673 18,673
2,200 2,200 Anglo American Platinum Corp. 63,357 63,357
800 800 Anglogold Ltd. 32,660 32,660
3,700 3,700 Barloworld Ltd. 22,249 22,249
3,400 3,400 Bidvest Group Ltd. 23,451 23,451
1,900 1,900 De Beers Consolidated Mines Ltd.
/De Beers Centenary AG 46,205 46,205
376,565 3,900 380,465 @ Dimension Data Holdings, Ltd. 3,113,530 32,246 3,145,776
29,400 29,400 FirstRand Ltd. 30,331 30,331
75,500 1,200 76,700 Impala Platinum Holdings, Ltd. 2,806,352 45,453 2,851,805
800 800 Investec Group Ltd. 26,930 26,930
2,700 2,700 Johnnic Holdings Ltd. 37,008 37,008
240,300 240,300 M-Cell, Ltd. 1,163,427 1,163,427
15,700 15,700 Metropolitan Life Ltd. 20,478 20,478
9,400 9,400 Nampak Ltd. 20,296 20,296
1,300 1,300 Nedcor Ltd. 27,284 27,284
21,600 21,600 Sanlam Ltd. 25,499 25,499
3,100 3,100 Sappi Ltd. 23,301 23,301
4,900 4,900 Sasol Ltd. 32,859 32,859
2,800 2,800 South African Breweries PLC 20,881 20,881
------------ ----------- ------------
7,083,309 549,161 7,632,470
------------ ----------- ------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ING ING
PILGRIM EMERGING PILGRIM EMERGING
EMERGING MARKETS EMERGING MARKETS
COUNTRIES EQUITY PRO FORMA COUNTRIES EQUITY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
----------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SOUTH KOREA: 16.42%
4,790 4,790 Hyundai Electronics Industries 94,509 94,509
249,720 5,050 254,770 Korea Electric Power Corp. 7,748,985 156,705 7,905,690
58,780 1,480 60,260 Korea Telecom Corp. 5,176,741 71,595 5,248,336
23,610 23,610 @ Korea Telecom Freetel 1,573,259 1,573,259
3,360 3,360 LG Chemical 67,198 67,198
920 920 Pohang Iron & Steel Co. 78,054 78,054
123,000 4,970 127,970 Pohang Iron & Steel Co. ADR 2,952,000 119,280 3,071,280
52,981 1,780 54,761 Samsung Electronics 17,533,229 589,063 18,122,292
93 93 Samsung Fire & Marine Insurance 2,586 2,586
21,450 500 21,950 SK Telecom Co., Ltd. 7,021,591 163,673 7,185,264
------------ ----------- ------------
42,005,805 1,342,663 43,348,468
------------ ----------- ------------
TAIWAN: 11.67%
21,760 21,760 Asustek Computer, Inc. 199,648 199,648
15,600 15,600 China Steel Corp-Sp Adr 144A 213,247 213,247
435,600 4,000 439,600 Hon Hai Precision Industry 3,941,312 100,000 4,041,312
764 764 Macronix Int'l ADR 19,517 19,517
896,090 896,090 @ Macronix Int'l 2,245,693 2,245,693
9,000 9,000 Siliconware Precision Inds 83,250 83,250
8,000 8,000 Synnex Technology Int'l GDR 172,000 172,000
672,600 672,600 @ Systex Corp. 2,364,225 2,364,225
2,138,120 1,283 2,139,403 Taiwan Semiconductor Manufacturing Co. 10,159,985 468,216 10,628,201
3,313,600 3,313,600 United Microelectronics Corp., Ltd. 9,220,922 9,220,922
70,000 70,000 @ Via Technologies, Inc. 1,082,181 1,082,181
11,946 6,600 18,546 @ # Winbond Electronics Corp. GDR 345,204 191,180 536,384
------------ ----------- ------------
29,379,039 1,427,541 30,806,580
------------ ----------- ------------
THAILAND: 0.07%
5,300 5,300 Advanced Info Service Public Co Ltd. 66,022 66,022
9,300 9,300 BEC World PLC 55,551 55,551
80,300 80,300 Thai Farmers Bank 67,643 67,643
------------ ----------- ------------
-- 189,216 189,216
------------ ----------- ------------
TURKEY: 3.98%
27,372,000 585,750 27,957,750 Arcelik AS 1,345,625 28,796 1,374,421
127,768,200 1,268,900 129,037,100 @ Dogan Yayin Holding AS 2,162,369 21,475 2,183,844
147,700 147,700 Enka Holding Yatirim 32,734 32,734
130,221,700 2,890,000 133,111,700 Hurriyet Gazetecilik ve Matbaaccilik AS 1,259,367 27,949 1,287,316
180,000 180,000 Migros Turk TAS 33,365 33,365
74,725,000 74,725,000 Tofas Turk Otomobil Fabrikasi AS 1,294,768 1,294,768
700,000 700,000 Tupras Turkiye Petrol Rafine 36,669 36,669
228,722,690 3,657,900 232,380,590 Turkiye Garanti Bankasi AS 2,764,956 44,219 2,809,175
2,102,800 2,102,800 Turkiye IS Bankasi 44,909 44,909
4,554,000 4,554,000 @ Vestel Elektronik Sanayi Ve Ticaret AS 1,376,297 1,376,297
2,258,371 2,258,371 Yapi VE Kredi Bankasi 25,117 25,117
------------ ----------- ------------
10,203,382 295,233 10,498,615
------------ ----------- ------------
UNITED STATES: 1.59%
17,100 17,100 @ Amdocs, Ltd. 1,312,425 1,312,425
17,900 17,900 India Fund, Inc. 253,956 253,956
171,600 171,600 @ Tricom SA ADR 2,627,625 2,627,625
------------ ----------- ------------
3,940,050 253,956 4,194,006
------------ ----------- ------------
VENEZUELA: 0.02%
1,600 1,600 Compania Anonima Nacional Telefonos
de Venezuela (CANTV) 43,500 43,500
------------ ----------- ------------
TOTAL COMMON STOCKS (COST: $203,519,435,
$10,414,713, $213,934,148) 239,165,427 9,270,880 248,436,307
------------ ----------- ------------
PREFERRED STOCKS: 4.77%
BRAZIL: 4.77%
250,663 250,663 Banco Bradesco SA 2,182,097 2,182,097
50,700 50,700 Companhia Vale Do Rio Doce 1,430,901 1,430,901
62,599 62,599 Electropaulo Metropolitana 4,408,125 4,408,125
151,074 151,074 Petroleo Brasileiro SA 4,565,308 4,565,308
12,110 12,110 Unibanco Uniao De Barncos Bras -- --
------------ ----------- ------------
TOTAL PREFERRED STOCKS (COST $8,295,911,
$0, $8,295,911) 12,586,431 -- 12,586,431
------------ ----------- ------------
TOTAL LONG-TERM INVESTMENTS (COST $211,815,346,
$10,414,713, $222,230,059) 251,751,858 9,270,880 261,022,738
------------ ----------- ------------
Principal Amount SHORT-TERM INVESTMENTS: 0.54%
----------------------------------- REPURCHASE AGREEMENTS: 0.54%
$ 1,218,000 $ 210,000 $ 1,428,000 State Street Bank & Trust Repurchase Agreement,
6.200% due 07/03/00 1,218,000 210,000 1,428,000
------------ ----------- ------------
TOTAL SHORT-TERM INVESTMENTS ($1,218,000,
$210,000, $1,428,000) 1,218,000 210,000 1,428,000
------------ ----------- ------------
TOTAL INVESTMENTS IN SECURITIES
(COST $213,033,346, $10,624,713,
$223,658,059) 99.41% 252,969,858 9,480,880 262,450,738
OTHER ASSETS AND LIABILITIES - NET 0.59% 1,524,101 21,861 1,545,962
------ ------------ ----------- ------------
NET ASSETS 100.00% $254,493,959 $ 9,502,741 $263,996,700
====== ============ =========== ============
</TABLE>
@ Non-income producing security
# Illiquid security
ADR American Depository Receipt
GDR Global Depository Receipt
See Accompanying Notes to Financial Statements
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On November 2, 2000, the Board of Pilgrim Emerging Countries Fund
("Emerging Countries Fund") and on November 16, 2000 the Board of ING Emerging
Markets Equity Fund ("Emerging Markets Equity Fund"), approved an Agreement and
Plan of Reorganization (the "Plan") whereby, subject to approval by the
shareholders of Emerging Markets Equity Fund, Emerging Countries Fund will
acquire all of the assets of the Emerging Markets Equity 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 Emerging Countries 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 statement of assets and liabilities reflect the financial
position of Emerging Countries Fund and Emerging Markets Equity Fund at June 30,
2000. The unaudited pro forma statement of operations reflects the results of
operations of Emerging Countries Fund and Emerging Markets Equity 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 Emerging Countries Fund and Emerging Markets
Equity 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 Emerging Countries 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. All investments quoted in
foreign currencies will be valued daily in U.S. Dollars on the basis of the
foreign currency exchange rates prevailing at the time such valuation is
determined by each Fund's Custodian. Securities for which market quotations are
not readily available are valued at their respective fair values as determined
in good faith and in accordance with policies set by the Board of Directors.
Investments in securities maturing in less than 60 days are valued at cost,
which, when combined with accrued interest, approximates market value.
NOTE 3 - FOREIGN CURRENCY TRANSACTIONS:
The books and records of the funds are maintained in U.S. dollars. Any foreign
currency amounts are translated into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from the changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gains or losses from the investments. Reported net realized foreign
exchange gains or losses arise from sales and maturities of short-term
securities, sales of foreign currencies, currency gains or losses realized
between the trade and settlement on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange rate.
7
<PAGE>
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with investing in U.S. companies and the U.S.
Government. These risks include but are not limited to re-evaluation of
currencies and future adverse political and economic developments which could
cause securities and their markets to be less liquid and prices more volatile
than those in the United States.
NOTE 4 - CAPITAL SHARES:
The unaudited pro forma net asset value per share assumes additional shares
of beneficial interest issued in connection with the proposed acquisition of
Emerging Markets Equity Fund by Emerging Countries Fund as of June 30, 2000. The
number of additional shares issued was calculated by dividing the net asset
value of each class of Emerging Markets Equity Fund by the respective class net
asset value per share of Emerging Countries Fund.
NOTE 5 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on June 30, 2000. Emerging
Markets Equity Fund expenses were adjusted assuming Emerging Countries Fund's
fee structure was in effect for the year ended June 30, 2000.
NOTE 6 - MERGER COSTS:
Merger costs are estimated at approximately $125,000 and are not included
in the unaudited pro forma statement of operations since these costs are not
reccurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger.
NOTE 7 - FEDERAL INCOME TAXES:
It is the policy of the Funds to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Fund intends not to be subject to any federal excise tax.
The Fund intends to offset any net capital gains with any available capital
loss carryforward until each carryforward has been fully utilized or expires.
The amount of capital loss carryforward, which may offset Emerging Countries
Fund's capital gains in any given year may be limited as a result of previous
reorganizations. In addition, no capital gain distribution shall be made until
the capital loss carryforward has been fully utilized or expires.
8
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article 5.2 of the Amended and Restated Declaration of Trust provides for
the indemnification of Registrant's trustees, officers, employees and agents
against liabilities incurred by them in connection with the defense or
disposition of any action or proceeding in which they may be involved or with
which they may be threatened, while in office or thereafter, by reason of being
or having been in such office, except with respect to matters as to which it has
been determined that they acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office ("disabling conduct").
Section 8 of Registrant's Administration Agreement provides for the
indemnification of Registrant's Administrator against all liabilities incurred
by it in performing its obligations under the agreement, except with respect to
matters involving its disabling conduct. Section 9 of Registrant's Distribution
Agreement provides for the indemnification of Registrant's Distributor against
all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its disabling conduct.
Section 4 of the Shareholder Service Agreement provides for the indemnification
of Registrant's Distributor against all liabilities incurred by it in performing
its obligations under the Agreement, except with respect to matters involving
its disabling conduct.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS
(1) (A) Form of Certificate of Trust of Registrant - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference.
(B) Form of Certificate of Amendment of Certificate of Trust - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference.
(C) Form of Amended and Restated Declaration of Trust - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference.
1
<PAGE>
(D) Form of Establishment of Additional Series - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference.
(E) Form of Establishment of Additional Series- Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference.
(F) Form of Amendment No. 2 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(G) Form of Amendment No. 3 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(H) Form of Amendment No. 4 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(I) Form of Amendment No. 5 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(J) Form of Amendment No. 6 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(K) Form of Amendment No. 7 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(L) Form of Amendment No. 8 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(M) Form of Amendment No. 9 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
(N) Form of Amendment No. 10 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 29 to
Registrant's Form N-1A Registration Statement on May 3, 1996 and
incorporated herein by reference.
(O) Form of Amendment No. 11 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 38 to
Registrants Form N-1A Registration Statement of January 3, 1997 and
incorporated herein by reference.
(P) Form of Amendment No. 12 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 38 to
Registrants Form N-1A Registration Statement of January 3, 1997 and
incorporated herein by reference.
(Q) Form of Amendment No. 13 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference.
2
<PAGE>
(R) Form of Amendment No. 14 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 40 to
Registrants form N-1A Registration Statement on May 2, 1997 and
incorporated herein by reference.
(S) Form of Amendment No. 15 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 43 to
Registrant's Form N-1A Registration Statement on July 14, 1997 and
incorporated herein by reference.
(T) Form of Amendment No. 16 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference.
(U) Form of Amendment No. 17 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference.
(V) Form of Amendment No. 18 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference.
(W) Form of Amendment No. 19 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 63 to
Registrant's Form N-1A Registration Statement on July 21, 1998 and
incorporated herein by reference.
(X) Form of Amendment No. 20 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 63 to
Registrant's Form N-1A Registration Statement on July 21, 1998 and
incorporated herein by reference.
(Y) Form of Amendment No. 21 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 66 to
Registrant's Form N-1A Registration Statement on August 14, 1998 and
incorporated herein by reference.
(Z) Form of Certificate of Amendment to Certificate of Trust - Filed as an
exhibit to Post-Effective Amendment No. 67 to the Registrant's Form
N-1A Registration Statement on March 25, 1999 and incorporated herein
by reference.
(AA) Form of Amendment No. 22 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference.
(BB) Form of Amendment No. 23 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference.
(CC) Form of Amendment No. 24 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 75 to the
Registrant's Form N-1A Registration Statement on January 4, 2000 and
incorporated herein by reference.
(2) (A) Form of Amended Bylaws of Registrant - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference.
(B) Form of Amendment to Section 2.5 of Bylaws of Registrant - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference.
(3) Not Applicable
3
<PAGE>
(4) Form of Agreement and Plan of Reorganization between ING Funds Trust on
behalf of ING Emerging Markets Equity Fund and Pilgrim Mutual Funds on
behalf of Pilgrim Emerging Countries Fund
(5) Not Applicable
(6) Form of Investment Management Agreement between the Trust and Pilgrim
Investments, Inc.- Filed as an exhibit to Post-Effective Amendment No. 80
to the Registrant's Form N-1A Registration Statement on November 1, 2000
and incorporated herein by reference.
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc.
(8) Not Applicable.
(9) (A) Form of Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. dated as of June 1, 1998. - Filed as an exhibit to
Post-Effective Amendment No. 66 to Registrant's Form N-1A Registration
Statement on August 14, 1998 and incorporated herein by reference.
(B) Form of Amendment to Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 66 to Registrant's Form N-1A Registration Statement on
August 14, 1998 and incorporated herein by reference.
(C) Form of Foreign Custody Manager Delegation Agreement between
Registrant and Brown Brothers Harriman & Co. dated as of June 1, 1998
- Filed as an exhibit to Post-Effective Amendment No. 66 to
Registrant's Form N-1A Registration Statement on August 14, 1998 and
incorporated herein by reference.
(D) Form of Novation Agreement to Custody Agreement with Brown Brothers
Harriman & Co. - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference.
(E) Form of Appendix C to Custody Agreement with Brown Brothers Harriman &
Co. - Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference.
(F) Form of Novation Agreement to Foreign Custody Manager Delegation
Agreement with Brown Brothers Harriman & Co. - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(G) Form of Appendix C to Foreign Custody Manager Delegation Agreement
with Brown Brothers Harriman & Co. - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(H) Form of Custodian Agreement with Investors Fiduciary Trust Company -
Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference.
(10) (A) Form of Amended and Restated Service and Distribution Plan for Class A
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference.
(B) Form of Amended and Restated Service and Distribution Plan for Class B
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference.
4
<PAGE>
(C) Form of Amended and Restated Service and Distribution Plan for Class C
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference.
(D) Form of Amended and Restated Service Plan for Class Q - Filed as an
exhibit to Post-Effective Amendment No. 67 to the Registrant's Form
N-1A Registration Statement on March 25, 1999 and incorporated herein
by reference.
(E) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class B - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference.
(F) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class C - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference.
(G) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class A - Filed as an exhibit to Post-Effective Amendment No.
73 to the Registrant's Form N-1A Registration Statement on October 29,
1999 and incorporated herein by reference.
(H) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class T - Filed as an exhibit to Post-Effective Amendment No.
74 to the Registrant's Form N-1A Registration Statement on November 5,
1999 and incorporated herein by reference.
(I) Form of Multiple Class Plan Pursuant to Rule 18f-3 - Filed as an
exhibit to Post-Effective Amendment No. 74 to the Registrant's Form
N-1A Registration Statement on November 5, 1999 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) Form of Administration Agreement - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(B) Form of Agency Agreement - Filed as an exhibit to Post-Effective
Amendment No. 68 to the Registrant's Form N-1A Registration Statement
on May 24, 1999 and incorporated herein by reference.
(C) Form of Shareholder Service Agreement - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(D) Form of Expense Limitation Agreement - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(E) Form of Recordkeeping Agreement - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference.
(F) Form of Expense Limitation Agreement pertaining to Money Market Fund -
Filed as an exhibit to Post-Effective Amendment No. 71 to the
Registrant's Form N-1A Registration Statement on July 1, 1999 and
incorporated herein by reference.
5
<PAGE>
(G) Form of Agreement among Reserve Institutional Trust; Reserve
Management Company, Inc.; Resrv Partners, Inc.; Pilgrim Mutual Funds;
Pilgrim Investments, Inc. with Pilgrim Securities, Inc. - Filed as an
exhibit to Post-Effective Amendment No. 71 to the Registrant's Form
N-1A Registration Statement on July 1, 1999 and incorporated herein by
reference.
(H) Form of Amended and Restated Expense Limitation Agreement - Filed as
an exhibit to Post-Effective Amendment No. 75 to the Registrant's Form
N-1A Registration Statement on January 4, 2000 and incorporated herein
by reference.
(14) Consent of Independent Auditor
(15) Not Applicable.
(16) Powers of Attorney
(17) Not Applicable
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act 17 CFR
230.145(c), the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
6
<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 20th day of December, 2000.
PILGRIM MUTUAL FUNDS
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
------------------------------
John G. Turner*
/s/ Robert W. Stallings Trustee and President December 20, 2000
------------------------------ (Chief Executive Officer)
Robert W. Stallings*
/s/ Al Burton Trustee December 20, 2000
------------------------------
Al Burton*
/s/ Paul S. Doherty Trustee December 20, 2000
------------------------------
Paul S. Doherty*
/s/ Robert B. Goode Trustee December 20, 2000
------------------------------
Robert B. Goode*
/s/ Alan L. Gosule Trustee December 20, 2000
------------------------------
Alan L. Gosule*
/s/ Walter H. May Trustee December 20, 2000
------------------------------
Walter H. May*
/s/ Jock Patton Trustee December 20, 2000
------------------------------
Jock Patton*
C-8
<PAGE>
/s/ David W.C. Putnam Trustee December 20, 2000
------------------------------
David W.C. Putnam*
/s/ John R. Smith Trustee December 20, 2000
------------------------------
John R. Smith*
/s/ David W. Wallace Trustee December 20, 2000
------------------------------
David W. Wallace*
/s/ Michael J. Roland Senior Vice President December 20, 2000
------------------------------ and Principal Financial
Michael J. Roland* Officer
* By: /s/ James M. Hennessy
------------------------
James M. Hennessy
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
C-9
<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 Mutual Funds and any amendment or supplement thereto, and to file the
same with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: November 10, 2000
/s/ John G. Turner /s/ Alan L. Gosule
----------------------------------- ---------------------------------------
John G. Turner Alan L. Gosule
/s/ Robert W. Stallings /s/ Walter H. May
----------------------------------- ---------------------------------------
Robert W. Stallings Walter H. May
/s/ Al Burton /s/ Jock Patton
----------------------------------- ---------------------------------------
Al Burton Jock Patton
/s/ Paul S. Doherty /s/ David W.C. Putnam
----------------------------------- ---------------------------------------
Paul S. Doherty David W.C. Putnam
/s/ Robert B. Goode, Jr. /s/ John R. Smith
----------------------------------- ---------------------------------------
Robert B. Goode, Jr. John R. Smith
/s/ David W. Wallace
-----------------------------------
David W. Wallace
C-10
<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
the Pilgrim Mutual Funds 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
C-11
<PAGE>
EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between ING Funds Trust, on
behalf of ING Emerging Markets Equity Fund, and Pilgrim Mutual Funds, on
behalf of Pilgrim Emerging Countries Fund.
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc.
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(14) Consent of Independent Auditor
<PAGE>
ING EMERGING MARKETS EQUITY FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) ___________________ and ________________ any
one or more of them, proxies, with full power of substitution, to vote all
shares of ING Emerging Markets Equity Fund (the "Fund") which the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Fund to be held
at the offices of the Fund at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258 on ________ ___, 2000 at ______ a.m., local time, and at any
adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF 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
Emerging Markets Equity Fund by Pilgrim Emerging Countries Fund in exchange for
Class A, Class B, and Class C shares of beneficial interest of Pilgrim Emerging
Countries Fund, respectively, and the assumption by Pilgrim Emerging Countries
Fund of all of the liabilities of ING Emerging Markets Equity Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
----------------------------- --------------
Signature Date
----------------------------- --------------
Signature (if held jointly) Date
