As filed with the Securities and Exchange Commission on December 18, 2000
Securities Act File No. ________
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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 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz Steven R. Howard
Dechert Paul, Weiss, Rifkind, Wharton & Garrison
1775 Eye Street, N.W. 1285 Avenue of the Americas
Washington, DC 20006 New York, NY 10019
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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 17, 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 Focus Fund and
ING Large Cap Growth 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 Focus Fund and the ING Large Cap Growth Fund, as applicable, each scheduled
to be held at _______ [a.m./p.m.], local time, on February ____, 2001 at 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258.
The Board of Trustees of ING Funds Trust, on behalf of the ING Focus Fund
and the ING Large Cap Growth Fund (each a series of ING Funds Trust), has
approved a reorganization of each of these Funds, both of which are managed by
ING Mutual Funds Management Co. LLC, into the Pilgrim LargeCap Growth Fund,
which is managed by ING Pilgrim Investments, Inc. and is part of the Pilgrim
Funds (the "Reorganization"). If approved by shareholders, you would become a
shareholder of the Pilgrim LargeCap Growth Fund on the date that the
Reorganization occurs. The Pilgrim LargeCap Growth Fund has investment
objectives and policies that are comparable in many respects to those of ING
Focus Fund and ING Large Cap Growth Fund, and the Reorganization is expected to
result in operating expenses that are lower for shareholders after fee waivers.
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 __________, 2001.
The ING Large Cap Growth Fund may use Shareholder Communications
Corporation, a professional proxy solicitation firm, to assist shareholders in
the voting process. As the date of the Special Meeting approaches, if we have
not already heard from you, you may receive a telephone call from Shareholder
Communications Corporation reminding you to exercise your right to vote.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
Robert W. Stallings,
President
<PAGE>
ING Focus Fund and
ING Large Cap Growth Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
ING FOCUS FUND AND ING LARGE CAP GROWTH FUND
SCHEDULED FOR FEBRUARY __, 2001
To the Shareholders:
A Special Meeting of Shareholders of both the ING Focus Fund and the ING
Large Cap Growth Fund ("Special Meeting") is scheduled for February ___, 2001 at
_______ [a.m./p.m.], local time, at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258.
At the Special Meeting you will be asked to consider and approve the
following:
1. ING Focus Fund only:
To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets and liabilities of each Class of ING
Focus Fund by Pilgrim LargeCap Growth Fund in exchange for shares in
the corresponding Class of Pilgrim LargeCap Growth Fund and the
subsequent liquidation of ING Focus Fund; and
2. ING Large Cap Growth Fund only:
To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets and liabilities of each class of ING
Large Cap Growth Fund by Pilgrim LargeCap Growth Fund in exchange for
shares in the corresponding Class of Pilgrim LargeCap Growth Fund and
the subsequent liquidation of ING Large Cap Growth Fund; and
3. 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 __, 2000
are entitled to notice of, and to vote at, the meeting. Your attention
is called to the accompanying Proxy Statement/Prospectus. Regardless
of whether you plan to attend the meeting, PLEASE COMPLETE, SIGN AND
RETURN PROMPTLY THE ENCLOSED PROXY CARD so that a quorum will be
present and a maximum number of shares may be voted. If you are
present at the meeting, you may change your vote, if desired, at that
time.
By Order of the Board of Trustees
James M. Hennessy
Secretary
December __, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION.............................................................. 1
SUMMARY................................................................... 3
Comparison of Investment Objectives and Strategies.................... 4
Comparison of Portfolio Characteristics............................... 5
Relative Performance.................................................. 6
Comparison of Investment Techniques and Risks of the Funds............ 7
COMPARISON OF FEES AND EXPENSES........................................... 8
Annual Fund Operating Expenses........................................ 9
General Information................................................... 12
Special Rules for Class A Shares of ING Focus Fund and
ING Large Cap Growth Fund .......................................... 13
ADDITIONAL INFORMATION ABOUT PILGRIM LARGECAP GROWTH FUND................. 13
Investment Personnel.................................................. 13
Performance of Pilgrim LargeCap Growth Fund........................... 13
INFORMATION ABOUT THE REORGANIZATION...................................... 15
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................... 18
GENERAL INFORMATION ABOUT THE PROXY STATEMENT............................. 19
Solicitation of Proxies............................................... 19
Voting Rights......................................................... 20
Other Matters to Come Before the Special Meeting...................... 20
Shareholder Proposals................................................. 21
Reports to Shareholders............................................... 21
APPENDIX A................................................................ A-1
APPENDIX B-1.............................................................. B-1-1
APPENDIX B-2.............................................................. B-2-1
APPENDIX C................................................................ C-1
APPENDIX D................................................................ D-1
APPENDIX E................................................................ E-1
<PAGE>
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
FEBRUARY __, 2001
ING FOCUS FUND
(a series of ING Funds Trust)
ING LARGE CAP GROWTH FUND
(a series of ING Funds Trust)
Relating to the Reorganization into
PILGRIM LARGECAP GROWTH FUND
(a series of Pilgrim Mutual Funds)
(COLLECTIVELY, THE "FUNDS")
INTRODUCTION
This Proxy Statement/Prospectus provides you with information about two
proposed transactions. These transactions involve the transfer of all the assets
and liabilities of ING Focus Fund and ING Large Cap Growth Fund (each a
"Disappearing Fund" and collectively, the "Disappearing Funds") to Pilgrim
LargeCap Growth Fund in exchange for shares of Pilgrim LargeCap Growth Fund
(each a "Reorganization", and collectively, the "Reorganizations"). ING Focus
Fund and ING Large Cap Growth Fund would each then distribute to its respective
shareholders their portion of the shares of Pilgrim LargeCap Growth Fund it
receives in the Reorganization. The result would be a liquidation of ING Focus
Fund and ING Large Cap Growth Fund. You would receive shares of Pilgrim LargeCap
Growth Fund having an aggregate value equal to the aggregate value of the shares
you held of ING Focus Fund and/or ING Large Cap Growth Fund, as of the close of
business on the business day of the closing of the Reorganization. You are being
asked to vote on the Agreement and Plan of Reorganization through which these
transactions would be accomplished.
Because you, as shareholders of ING Focus Fund and/or ING Large Cap Growth
Fund, are being asked to approve a transaction that will result in your holding
of shares of Pilgrim LargeCap Growth Fund, this Proxy Statement also serves as a
Prospectus for Pilgrim LargeCap Growth Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Pilgrim LargeCap Growth Fund
that you should know. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of the Pilgrim LargeCap Growth
Fund, see the Prospectus (the "Pilgrim Prospectus") and the Statement of
Additional Information ("SAI") for Pilgrim Funds each dated November 1, 2000,
which are incorporated 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 each of the Disappearing Funds,
see the ING Trust's Prospectus (the "ING Prospectus") and the SAI, each dated
November 6, 2000, and each of which are incorporated by reference herein and
both may be obtained without charge by calling 1-800-992-0180. Each of the Funds
also provides periodic reports to its shareholders which highlight certain
important information about the Funds, including investment results and
financial information. The annual report for Pilgrim LargeCap Growth 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, without charge, by calling
1-800-992-0180.
You can copy and review information about each Fund (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. You may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available on the EDGAR Database on the Commission's Internet site
at http://www.sec.gov. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, the ING
Prospectus, and the Agreement and Plan of Reorganization, which is attached
hereto as Appendix B.
THE PROPOSED REORGANIZATION. On November 16, 2000, the Board of Trustees of
ING Funds Trust, on behalf of ING Focus Fund and ING Large Cap Growth Fund,
approved an Agreement and Plan of Reorganization with respect to each
Disappearing Fund (each, a "Reorganization Agreement"). Subject to shareholder
approval, each Reorganization Agreement provides for:
* the transfer of all of the assets of the Disappearing Fund to Pilgrim
LargeCap Growth Fund, in exchange for shares of Pilgrim LargeCap
Growth Fund;
* the assumption by Pilgrim LargeCap Growth Fund of all of the
liabilities of the Disappearing Fund;
* the distribution of Pilgrim LargeCap Growth Fund shares to the
shareholders of the Disappearing Fund; and
* the complete liquidation of the Disappearing Fund.
The Reorganization is expected to be effective upon the opening of business
on February __, 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 each Disappearing Fund, would become a shareholder of the
following Class of shares of Pilgrim LargeCap Growth Fund.
DISAPPEARING FUND Pilgrim LargeCap Growth Fund
----------------- ----------------------------
Class A Class A
Class B Class B
Class C Class C
Class I Class Q
Each shareholder would hold, immediately after the Closing, shares of each Class
of Pilgrim LargeCap Growth Fund having an aggregate value equal to the aggregate
value of the shares of the corresponding Class of ING Focus Fund or ING Large
Cap Growth Fund held by that shareholder as of the close of business on the
business day of the Closing.
The Reorganization is one of many reorganizations that are proposed among
various ING Funds and various Pilgrim Funds. These reorganizations are occurring
in connection with the integration of the ING Funds and Pilgrim Funds, as part
of which the distributor, administrator, and other service providers of the ING
Funds have been changed to those of the Pilgrim Funds. In September 2000, ING
Groep N.V., the indirect parent company of ING Mutual Funds Management Co. LLC
("IMFC"), the investment adviser to the ING Funds, acquired ReliaStar Financial
Corp., the indirect parent company of ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments"), the investment adviser to the Pilgrim Funds. Management
of the ING Funds and the Pilgrim Funds have proposed the consolidation of a
number of the ING Funds and Pilgrim Funds that they believe have similar or
compatible investment policies. The proposed reorganizations are designed to
reduce the substantial overlap in funds offered by both the ING Funds and
Pilgrim Funds, thereby eliminating duplication of costs and other inefficiencies
arising from having similar portfolios within the same fund group. IMFC and ING
Pilgrim Investments also believe that the reorganizations may benefit fund
shareholders by resulting in surviving funds with a greater asset base. This is
expected to achieve economies of scale for shareholders and may provide greater
investment opportunities for the surviving funds or the potential to take larger
2
<PAGE>
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 comparable
in many respects;
* Pilgrim LargeCap Growth Fund normally invests in some equity
securities of the largest U.S. companies (i.e. companies with market
capitalizations in the top 90% of the S&P 500 Stock Price Index). ING
Focus Fund invests in large, mid-size and small companies; and ING
Large Cap Growth Fund invests in large companies (i.e., companies with
market capitalizations in excess of $1 billion);
* Before giving effect to expense subsidies by management, expenses of
the Pilgrim LargeCap Growth Fund are less than those of the ING Focus
Fund and the ING Large Cap Growth Fund; and
* The proposed Reorganization is expected to result in a reduction in
total operating expenses for shareholders of the Disappearing Funds,
before giving effect to the operation of the expense limitation
contract of the ING Large Cap Growth Fund, and even after giving
effect to the operation of the expense limitation contract of the ING
Focus Fund. For example, the operating expenses, expressed as a
percentage of net asset value per share for Class A shares, are as
follows:
* Expenses of ING Focus Fund and ING Large Cap Growth Fund - before
expense reimbursement by management (based on the year ended June 30,
2000)(1): 1.92% and 1.65%, respectively.
* Expenses of ING Focus Fund and ING Large Cap Growth Fund - after
expense reimbursement by management (based on the year ended June 30,
2000)(1)(2): 1.40% and 1.29%, respectively.
* Expenses of Pilgrim LargeCap Growth Fund (based on the year ended June
30, 2000): 1.36%
* Expenses of Pilgrim LargeCap Growth Fund after the reorganization (PRO
FORMA): 1.30%
* The Funds have affiliated management. ING Pilgrim Investments, 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
investment manager to Pilgrim LargeCap Growth Fund. IMFC, also located
at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
investment manager to the Disappearing Funds. 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 LargeCap Growth Fund, which would include the assets from the
Disappearing Funds.
Approval of a Reorganization Agreement, with respect to ING Focus Fund and
ING Large Cap Growth Fund, requires the vote of a majority of the shares present
in person or by proxy of that Fund.
----------
(1) Based upon expenses incurred by the Disappearing Funds for the 12-month
period ended June 30, 2000, adjusted for current expenses of contracts and
12b-1 plans which were in effect on November 6, 2000.
(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.
3
<PAGE>
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF ING FUNDS TRUST, ON
BEHALF OF THE DISAPPEARING FUNDS, UNANIMOUSLY APPROVED EACH PROPOSED
REORGANIZATION. THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" EACH
PROPOSED REORGANIZATION.
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
ING FOCUS FUND ING LARGE CAP GROWTH FUND PILGRIM LARGECAP GROWTH FUND
-------------- ------------------------- ----------------------------
<S> <C> <C> <C>
INVESTMENT Seeks long-term capital Seeks long-term capital Seeks long-term capital
OBJECTIVE appreciation. appreciation. appreciation
INVESTMENT * Under normal market conditions, * Under normal market conditions, * Normally invests at least 65% of
STRATEGIES invests in a portfolio of 20 to invests at least 65% of its its net assets in equity
40 equity securities of large, total assets in equity securities of large U.S.
medium and small U.S. companies. securities of U.S. companies companies that the portfolio
with a market capitalization in managers feel have above-average
* Invests in growth companies that excess of $1 billion (at the prospects for growth. The equity
are positioned to benefit from time of acquisition). securities in which the Fund may
capitalizing on significant invest include common and
industry, regulatory, * The Sub-Adviser employs a highly preferred stocks, warrants and
technological and ownership disciplined, four-step convertible securities. The Fund
changes. investment process that seeks to considers a company to be large
identify unrecognized growth and if its market capitalization
* Investment selections focus on value in large capitalization corresponds at the time of
entrepreneurial management teams stocks. purchase to the upper 90% of the
who focus on industries expected S&P 500 Index, which as of
to drive change in other * First, the universe of companies October 19, 2000, meant market
industries (for example, is screened using models capitalizations in the range of
technology and financial developed by the Sub-Adviser to $10 billion to $571 billion.
services). create a list of possible
investments. * The portfolio managers emphasize
* Investments may include equity a growth approach by searching
securities that the investment * Second, the Sub-Adviser for companies that they believe
adviser believes have growth researches the companies are managing change
potential because they represent identified by the screening advantageously and may be poised
an attractive value. models. This research includes a to exceed growth expectations.
review of company management and The portfolio managers focus on
* Normally operates as a other factors that are more a "bottom up" analysis that
non-diversified fund. subjective and require the evaluates the financial
extensive practical experience condition and competitiveness of
* The Sub-Adviser's investment of the portfolio managers. individual companies and a "top
strategy incorporates several investments against a defined down" thematic approach and a
elements to identify companies peer group. sell discipline. The portfolio
that offer growth at a managers seek to identify themes
reasonable price. * Third, the Sub-Adviser evaluates that reflect the major, social,
the return, valuation and risk economic and technological
* First, the Sub-Adviser performs of the remaining potential trends that they believe are
fundamental economic and investments against a defined likely to shape the future of
business research to identify peer group. business and commerce over the
investment themes expected to next three to five years, and
improve returns on capital and * Fourth, in-house traders use seek to provide a framework for
drive earnings growth within specially developed computer identifying the industries and
industries. programs to efficiently purchase companies they believe may
targeted securities. benefit most. This "top down"
* Second, the Sub-Adviser next approach is combined with
analyzes individual companies rigorous fundamental research (a
to identify favorable business "bottom up" approach) to guide
characteristics, including stock selection and portfolio
structure and trends, financial structure.
performance, both historical and
projected, and valuations in both
absolute and relative terms.
* Third, the Sub-Adviser continues
to monitor previously identified
companies to track changes in
critical variables as well as
price fluctuations.
* Fourth, the Sub-Adviser sets
specific limits on individual
holdings and sector
concentrations.
INVESTMENT ING Mutual Funds Management Co. LLC ING Mutual Funds Management Co. LLC ING Pilgrim Investments, Inc.
ADVISOR
SUB-ADVISER Furman Selz Capital Management, LLC Baring Asset Management, Inc. N/A
PORTFOLIO Adrian Jones and Michael Kass William H. Thomas and a nine member Mary Lisanti and Thomas J.
MANAGERS team Sullivan
</TABLE>
As you can see from the chart above, the investment objectives and
strategies of the Funds are compatable.
4
<PAGE>
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
ING FOCUS FUND ING LARGE CAP GROWTH FUND PILGRIM LARGECAP GROWTH FUND
-------------- ------------------------- ----------------------------
<S> <C> <C> <C>
Net Assets $66,416,848 $93,874,022 $697,037,752
Number of Holdings 40 60 31
Portfolio Turnover Rate(1) 49% 65% 139%
Average market capitalization
(dollar weighted) $2.9 billion $3.8 billion $6.4 billion
As a percentage of net assets:
Equity Securities 92.30% 97.94% 99.28%
Holdings in companies with
market capitalization over
$10 billion 71.44% 90.22% 74.77%
Holdings in companies with
market capitalization
between $5 and $10
billion 10.93% 3.99% 19.03%
Holdings in companies with
market capitalization
under $5 billion 9.93% 3.73% 5.48%
Foreign Securities 3.60% 0.00% 6.80%
Convertible Securities 0.00% 0.00% 0.00%
Preferred Securities 0.00% 0.00% 0.00%
Short-Term Debt Investments 8.91% 2.16% 2.22%
Top 5 industries
(as a % of net assets)
Medical-Hospitals - 7.20% Electronic Components- Computers - 16.39%
Telecommunication Semiconductors - 12.60% Fiber Optics - 12.09%
Equipment - 7.20% Medical-Drugs - 10.40% Media - 10.73%
Medical Products - 5.40% Networking Products - 6.60% Semiconductors - 10.43%
Multimedia - 5.00% Applications Software - 5.90% Telecommunication
Internet Software - 4.40% Diversified Manufacturing - 5.40% Equipment - 6.80%
Top 10 holdings
(as a % of net assets)
ADC Telecommunications, Cisco Systems, Inc. - 6.57% Corning, Inc. - 4.23%
Inc. - 4.81% Intel Corp. - 5.77% Intel Corp. - 4.21%
Viacom, Inc. - 3.46% General Electric Co. - 5.35% MGM Grand, Inc. - 4.18%
PepsiCo, Inc. - 3.28% Microsoft Corp. - 5.13% Ciena Corp. - 4.04%
AT & T Corp. - 3.26% Pfizer, Inc. - 5.03% JDS Uniphase Corp. - 3.82%
Baxter International, Eli Lilly & Co. - 3.45% Nortel Networks Corp. - 3.78%
Inc. - 3.24% American Express Co. - 2.83% Oracle Corp. - 3.71%
Verio, Inc. - 3.21% Morgan Stanley Dean Witter
American Int'l Group, & Co. - 2.45% Wal-Mart Stores, Inc. - 3.66%
Inc. - 3.20% EMC Corp. - 2.33% Sun Microsystems - 3.58%
HCA - 2.86% Johnson & Johnson - 2.27% Applied Materials, Inc. - 3.55%
The Chubb Corp. - 2.82%
Siebel Systems, Inc. - 2.81%
</TABLE>
----------
(1) For the year ended June 30, 2000.
5
<PAGE>
RELATIVE PERFORMANCE
The following table shows, for the periods shown, the average annual total
return for: (a) Class A shares of ING Focus Fund; (b) Class A shares of ING
Large Cap Growth Fund; (c) Class A shares of Pilgrim LargeCap Growth Fund; (d)
the Russell 1000 Growth Index ("Russell Index") and (e) the Standard & Poor's
500 Stock Price Index ("S&P 500 Index"). Performance of the Funds in the table
does not reflect the deduction of sales loads, and would be lower if it did. The
Russell 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.
<TABLE>
<CAPTION>
CALENDAR ING ING PILGRIM RUSSELL 1000
YEAR ENDED/ FOCUS LARGE CAP LARGECAP GROWTH GROWTH S&P 500
PERIOD FUND(1) GROWTH FUND(2) FUND(3)(4) INDEX(5) INDEX(6)
------ ------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
12/31/99 28.58% 23.03% 96.41% 33.16% 21.04%
1/1/00-9/30/00 5.13% 0.00% 5.35% 1.50% -1.39%
</TABLE>
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(1) The ING Focus Fund commenced operations on December 15, 1998.
(2) The ING Large Cap Growth Fund commenced operations on December 15, 1998.
(3) Pilgrim LargeCap Growth Fund commenced operations on July 21, 1997. ING
Pilgrim Investments has been the Pilgrim LargeCap Growth Fund's investment
adviser since May 24, 1999; however, prior to October 1, 2000, another firm
served as the investment sub-adviser. For more information about the
performance of Pilgrim LargeCap Growth Fund, see "Additional Information
about Pilgrim LargeCap Growth Fund."
(4) Prior to November 2, 2000, the Pilgrim LargeCap Growth Fund's portfolio
manager employed different stock selection criteria emphasizing a
"bottom-up" analysis of companies combined with a "top-down" thematic
approach.
(5) The Russell 1000 Growth Index is an unmanaged index that measures the
performance of those companies among the Russell 1000 Index with higher
than average price-to-book ratios and forecasted growth.
(6) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
6
<PAGE>
COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS
Because the Funds have investment objectives and policies that are
compatable in several respects, many of the risks of investing in Pilgrim
LargeCap Growth Fund are similar to the risks of investing in ING Focus Fund or
ING Large Cap Growth Fund. A principal risk of an investment in each Fund is
that you may lose money on your investment. Each Fund's shares may go up or
down, sometimes rapidly and unpredictably. Market conditions, financial
conditions of issuers represented in the portfolio, investment policies,
portfolio management, and other factors affect the volatility of each Fund's
shares.
EQUITY SECURITIES. The Funds are subject to risks associated with investing
primarily in equity securities, including market risks, issuer risks including
credit risks, price volatility risks and market trends risks. Market risk is the
risk that securities may decline in value due to factors affecting securities
markets generally or particular industries. Issuer risk is the risk that the
value of a security may decline for reasons relating to the issuer, such as
changes in the financial condition of the issuer. Credit risk is the risk that
an issuer may not be able to meet its financial obligations when due, including
payments on outstanding debt. While equities may offer the potential for greater
long-term growth than most debt securities, they generally have higher
volatility. Each Fund may invest, to some degree, in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
LACK OF DIVERSIFICATION. ING Focus Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940, which means that,
compared with other funds, it may invest a greater percentage of its assets in a
particular issuer. The investment of a large percentage of a Fund's assets in
the securities of a small number of issuers may cause that Fund's share price to
fluctuate more than that of a diversified company.
CHANGE IN PORTFOLIO MANAGER. The Pilgrim LargeCap Growth Fund recently
underwent a change in portfolio management. Since October 1, 2000, ING Pilgrim
Investments has managed the Pilgrim LargeCap Growth 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 LargeCap Growth 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 distributions as a result of the turnover.
PORTFOLIO TURNOVER. Each Fund is generally expected to engage in frequent
and active trading of portfolio securities to achieve its investment objective.
A high portfolio turnover rate involves greater expenses to a Fund, including
brokerage commissions and other transaction costs, and is likely to generate
more taxable short-term gains for shareholders, which may have an adverse effect
on the performance of the Fund.
LENDING PORTFOLIO SECURITIES. In order to generate additional income,
Pilgrim LargeCap Growth Fund may lend up to 33-1/3% of total Fund assets to
broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. In addition, while not a primary investment strategy,
the Disappearing Funds are permitted to lend up to 33 1/3% of total Fund assets.
The Pilgrim LargeCap Growth Fund may lend securities only to financial
institutions such as banks, broker-dealers and other recognized institutional
investors in amounts up to 30% of the Fund's total assets. 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 each Fund, when the adviser to the Fund
anticipates unusual market or other conditions, the Fund may temporarily depart
from its principal investment strategies as a defensive measure. To the extent a
Fund is engaged in temporary defensive investments, it will not be pursuing its
investment objective.
7
<PAGE>
COMPARISON OF FEES AND EXPENSES
The following discussion describes and compares the fees and expenses of
the Funds. For further information on the fees and expenses of Pilgrim LargeCap
Growth Fund, see "Additional Information Regarding Pilgrim LargeCap Growth
Fund."
TOTAL OPERATING EXPENSES. The operating expenses of Pilgrim LargeCap Growth
Fund, expressed as a ratio of expenses to average daily net assets ("expense
ratio"), are lower than those of ING Focus Fund, even after giving effect to the
expense limitation contract for ING Focus Fund described below. For the 12 month
period ending June 30, 2000, the net expenses for Class A, Class B, and Class C
shares of Pilgrim LargeCap Growth Fund are 0.04%, 0.04%, and 0.04%,
respectively, lower than those of the corresponding classes of ING Focus Fund.
Without the expense limitation contracts, the differences would have been
greater.
The operating expenses of Pilgrim LargeCap Growth Fund, expressed as a
ratio of expenses to average daily net assets ("expense ratio"), are lower than
those of ING Large Cap Growth Fund, before giving effect to the expense
limitation contract for ING Large Cap Growth Fund described below. After giving
effect to the expense limitation contract, the net expenses for Class A, Class
B, Class C, and Class I shares of ING Large Cap Growth Fund for the 12 month
period ending June 30, 2000 were 0.07%, 0.07%, 0.07% and 0.52%, respectively,
lower than those of the corresponding Classes of shares of Pilgrim LargeCap
Growth Fund. Without the expense limitation contract, the total operating
expenses for Class A, Class B, Class C, and Class I of the ING Large Cap Growth
Fund would have been 0.29%, 0.29%, 0.29% and 0.04%, respectively, higher than
those of the corresponding Classes of shares of Pilgrim LargeCap Growth Fund.
MANAGEMENT FEE. ING Focus Fund has an annual management fee equal to 1.00%
of the Fund's average daily net assets. ING Large Cap Growth Fund has an annual
management fee equal to 0.75% of the Fund's average daily net assets. Pilgrim
LargeCap Growth Fund has an annual management fee equal to 0.75% of the Fund's
average daily net assets. In addition, Pilgrim LargeCap Growth Fund's management
fee is subject to the following breakpoint fee structure:
Assets to Which Fee Applies Management Fee
--------------------------- --------------
First $500 million 0.75%
Next $500 million 0.675%
Assets over $1 billion 0.65%
DISTRIBUTION FEES. The distribution (12b-1) and shareholder servicing fees
for Class A, Class B and Class C shares of ING Focus Fund and ING Large Cap
Growth Fund, in the aggregate, are the same as those of the corresponding Class
of Pilgrim LargeCap Growth Fund.
8
<PAGE>
EXPENSE LIMITATION ARRANGEMENTS. ING Pilgrim Investments has entered into
an expense limitation contract with respect to Pilgrim LargeCap Growth Fund,
pursuant to which ING Pilgrim Investments has agreed to waive or limit its fees
and to assume other expenses through at least October 31, 2001 so that total
annual ordinary operating expenses of the Fund (excluding interest, taxes,
brokerage commissions, extraordinary expenses such as litigation, other expenses
not incurred in the ordinary course of the Fund's business, and expenses of any
counsel or other persons or services retained by the Fund's trustees who are not
"interested persons" of ING Pilgrim Investments) do not exceed 1.60%, 2.25%,
2.25% and 1.25% for Class A, Class B, Class C and Class Q shares, respectively,
subject to possible recoupment within three years. There can be no assurances
that the expense limitation contract will remain in effect after October 31,
2001. Although ING Pilgrim Investments has implemented an expense limitation
contract for the Pilgrim LargeCap Growth Fund, the Fund's actual expenses are
lower than the expense limitations contained in the contract.
Expense limitation contracts are in place for the ING Focus Fund and ING
Large Cap Growth Fund. Under the terms of each expense limitation contract, IMFC
has agreed to limit the expenses of each Fund, excluding interest, taxes,
brokerage and extraordinary expenses. The current expense limitation contract
for each Disappearing Fund provides that it will remain in effect until February
28, 2001. There can be no assurances that the expense limitation contract will
be continued after that date. The expense limitations for Class A, Class B and
Class C shares of ING Focus Fund are 1.40%, 2.05% and 2.05%, respectively. The
expense limitations for Class A, Class B, Class C and Class I shares of ING
Large Cap Growth Fund are 1.29%, 1.94%, 1.94% and 0.74%, respectively.
EXPENSE TABLE. The current expenses of each of the Funds and estimated PRO
FORMA expenses giving effect to the proposed Reorganization are shown in the
following table. Expenses for the Funds are annualized based upon the operating
expenses incurred by Classes A, B, C, I and Q shares for the 12 month period
ended June 30, 2000. PRO FORMA fees show estimated fees of Pilgrim LargeCap
Growth Fund after giving effect to the proposed Reorganization as adjusted to
reflect changes in contractual charges. Pro forma numbers are estimated in good
faith and are hypothetical.
9
<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 Focus Fund 1.00% 0.35%(4) 0.57% 1.92% -0.52% 1.40%
ING Large Cap Growth Fund 0.75% 0.35%(4) 0.55% 1.65% -0.36% 1.29%
Pilgrim LargeCap Growth Fund 0.75% 0.35% 0.26% 1.36% -- 1.36%
Surviving Fund after
Reorganizations (PRO FORMA) 0.75% 0.35% 0.20% 1.30% -- 1.30%
CLASS B
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% -- 2.01%
Surviving Fund after
Reorganizations (PRO FORMA) 0.75% 1.00% 0.20% 1.95% -- 1.95%
CLASS C
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% -- 2.01%
Surviving Fund after
Reorganizations (PRO FORMA) 0.75% 1.00% 0.20% 1.95% -- 1.95%
CLASS I (ING)/CLASS Q (PILGRIM)
ING Large Cap Growth Fund 0.75% 0.00% 0.55% 1.30% -0.56% 0.74%
Pilgrim LargeCap Growth Fund 0.75% 0.25% 0.26% 1.26% -- 1.26%
Surviving Fund after
Reorganizations (PRO FORMA) 0.75% 0.25% 0.20% 1.20% -- 1.20%
</TABLE>
----------
(1) The fiscal year end for Pilgrim LargeCap Growth Fund is June 30. The fiscal
year end for ING Focus Fund and ING Large Cap Growth Fund is October 31.
Expenses of the Pilgrim LargeCap Growth Fund are based upon expenses
incurred by the Fund for the 12 month period ended June 30, 2000. The
expenses of the Disappearing Funds are based upon the expenses incurred by
the Funds for the 12 month period ended June 30, 2000, as adjusted for
current expenses of contracts and 12b-1 plans which were in effect on
November 6, 2000. PRO FORMA expenses are adjusted for anticipated
contractual changes.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into an expense limitation agreement
that limits expenses (excluding interest, taxes, brokerage and
extraordinary expenses) for Pilgrim LargeCap Growth Fund to 1.60%, 2.25%,
2.25% and 1.25% for Class A, Class B, Class C and Class Q shares,
respectively, subject to possible later recoupment. ING Pilgrim Investments
has agreed that the expense limitations shown in the table will apply to
Pilgrim LargeCap Growth Fund until at least October 31, 2001. There can be
no assurances that the expense limitation contract will remain in effect
after that date.
IMFC has entered into an expense limitation contract that limits expenses
(excluding interest, taxes, brokerage and extraordinary expenses) for ING
Focus Fund to annual rates of 1.40%, 2.05% and 2.05% for Class A, Class B
and Class C shares, respectively. IMFC has also entered into an expense
limitation contract that limits expenses (excluding interest, taxes,
brokerage and extraordinary expenses) for ING Large Cap Growth Fund to
1.29%, 1.94%,1.94% and 0.74% for Class A, Class B, Class C and Class I
shares, respectively. IMFC has agreed that the expense limitations shown in
the table will apply to the Disappearing Funds until at least February 28,
2001. There can be no assurance that the expense limitation contract will
remain in effect after that date.
(4) Prior to November 6, 2000, the Class A distribution fee was 0.50% and the
shareholder servicing fee was 0.25% of net assets.
10
<PAGE>
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of ING Focus Fund and ING Large Cap Growth Fund
that are transferred to Pilgrim LargeCap Growth Fund in connection with the
Reorganization may be sold. Such sales may result in increased transaction costs
for Pilgrim LargeCap Growth Fund, and the realization of taxable gains or
losses for Pilgrim LargeCap Growth Fund.
EXAMPLES. The examples are intended to help you compare the cost of
investing in the 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.
ING FOCUS FUND ING LARGE CAP GROWTH FUND
CLASS CLASS
-------------------------- ------------------------------------
A B C A B C I
------ ------ ------ ------ ------ ------ ------
1 year $ 759 $ 760 $ 360 $ 733 $ 733 $ 333 $ 132
3 years 1,143 1,099 799 1,065 1,018 718 412
5 years 1,552 1,565 1,365 1,420 1,430 1,230 713
10 years 2,689 *2,747 2,905 2,417 *2,473 2,636 1,568
PRO FORMA:
PILGRIM LARGECAP GROWTH FUND THE FUNDS COMBINED**
CLASS CLASS
------------------------------- --------------------------------
A B C Q A B C Q
------ ------ ------ ---- ------ ------ ------ ----
1 year $ 706 $ 704 $ 304 $ 128 $ 700 $ 698 $ 298 $ 122
3 years 981 930 630 400 963 912 612 381
5 years 1,277 1,283 1,083 692 1,247 1,252 1,052 660
10 years 2,116 *2,170 2,338 1,523 2,053 *2,107 2,275 1,455
----------
* The ten year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the following the date of
purchase.
** Estimated.
You would pay the following expenses if you did not redeem your shares:
ING FOCUS FUND ING LARGE CAP GROWTH FUND
CLASS CLASS
-------------------------- ------------------------------------
A B C A B C I
------ ------ ------ ------ ------ ------ ------
1 year $ 759 $ 260 $ 260 $ 733 $ 233 $ 233 $ 132
3 years 1,143 799 799 1,065 718 718 412
5 years 1,552 1,365 1,365 1,420 1,230 1,230 713
10 years 2,689 *2,747 2,905 2,417 *2,473 2,636 1,568
PRO FORMA:
PILGRIM LARGECAP GROWTH FUND THE FUNDS COMBINED**
CLASS CLASS
-------------------------------- -------------------------------
A B C Q A B C Q
------ ------ ------ ---- ------ ------ ------ ----
1 year $ 706 $ 204 $ 204 $ 128 $ 700 $ 198 $ 198 $ 122
3 years 981 630 630 400 963 612 612 381
5 years 1,277 1,083 1,083 692 1,247 1,052 1,052 660
10 years 2,116 *2,170 2,338 1,523 2,053 *2,107 2,275 1,455
----------
* 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.
11
<PAGE>
GENERAL INFORMATION
All shares of Pilgrim LargeCap Growth 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
Focus Fund and ING Large Cap Growth Fund held by that shareholder immediately
prior to the Reorganization.
In addition, the period that the shareholder held shares of ING Focus Fund
and ING Large Cap Growth Fund will be included in the holding period of Pilgrim
LargeCap Growth Fund shares for purposes of calculating any contingent deferred
sales charge. Similarly, Class B shares of Pilgrim LargeCap Growth 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 Focus Fund and
ING Large Cap Growth Fund were purchased by the shareholder. Pilgrim LargeCap
Growth Fund, ING Focus Fund and ING Large Cap Growth 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 Q/
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price) 5.75%(1) None 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) None
----------
(1) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" in Appendix C.
(2) A contingent deferred sales charge of no more than 1.00% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. See "Class A Shares:
Initial Sales Charge Alternative" in Appendix C.
(3) Imposed upon redemptions within 6 years of purchase. The fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in Appendix C and "Shareholders Guide -- Sales Charge
Calculation" in the Pilgrim Prospectus.
(4) Imposed upon redemptions within 1 year from purchase.
Pilgrim LargeCap Growth Fund, ING Focus Fund and ING Large Cap Growth Fund
each does not have any redemption fees, exchange fees or sales charges on
reinvested dividends.
12
<PAGE>
SPECIAL RULES FOR CLASS A SHARES OF ING FOCUS FUND AND ING LARGE CAP GROWTH FUND
Prior to November 6, 2000, the contingent deferred sales charge on
purchases of Class A shares of ING Focus Fund and ING Large Cap Growth Fund in
excess of $1 million was different than the contingent deferred sales charge on
similar purchases of Pilgrim LargeCap Growth Fund. Shareholders of ING Focus
Fund and ING Large Cap Growth Fund that purchased Class A shares subject to a
contingent deferred sales charge prior to November 6, 2000 will continue to be
subject to the contingent deferred sales charge in place when those shares were
purchased. The contingent deferred sales charge on such purchases before and
after November 6, 2000 were as follows:
Time Period During
CDSC Which CDSC Applies
-------------------- ----------------------
11/06/00 Before 11/06/00 Before
and After 11/06/00 and After 11/06/00
--------- -------- --------- --------
CDSC on Purchases of:
$1,000,000 to $2,499,999 1.00% 1.00% 24 Months 12 Months
$2,500,000 to $4,999,999 0.50% 1.00% 12 Months 12 Months
$5,000,000 and over 0.25% 1.00% 12 Months 12 Months
ADDITIONAL INFORMATION ABOUT PILGRIM LARGECAP GROWTH FUND
INVESTMENT PERSONNEL
Mary Lisanti and Thomas J. Sullivan share the day-to-day responsibility for
management of the Pilgrim LargeCap Growth Fund. Ms. Lisanti, Executive Vice
President and Chief Investment Officer - Domestic Equities of ING Pilgrim
Investments, has served as Senior Portfolio Manager of the LargeCap Growth Fund
since October 1, 2000. Prior to joining ING Pilgrim Investments in October 1999,
Ms. Lisanti was Executive Vice President and Chief Investment Officer - Domestic
Equities with Northstar Investment Management Corp., which subsequently merged
into ING Pilgrim Investments. Ms. Lisanti was a Portfolio Manager at Strong
Capital Management. From 1993 to 1996, Ms. Lisanti was a Managing Director and
Head of Small- and Mid-Capitalization Equity Strategies at Bankers Trust Corp.
Thomas J. Sullivan, Vice President of ING Pilgrim Investments, has served
as a Portfolio Manager of LargeCap Growth Fund since October 1, 2000. Prior to
joining ING Pilgrim Investments in September 2000, Mr. Sullivan was a Partner
and Equity Trader for First NY Securities, LLC. From April 1994 to March 2000,
Mr. Sullivan was Vice President and portfolio manager at Nicholas-Applegate
Capital Management.
13
<PAGE>
PERFORMANCE OF PILGRIM LARGECAP GROWTH FUND
The bar chart and table that follow provide an indication of the risks of
investing in Pilgrim LargeCap Growth Fund by showing (on a calendar year basis)
changes in Pilgrim LargeCap Growth Fund's annual total return from year to year
and by showing (on a calendar year basis) how Pilgrim LargeCap Growth Fund's
average annual returns for one year and since inception compare to those of the
Russell Index and the S&P 500. The information in the bar chart is based on the
performance of the Class A shares of Pilgrim LargeCap Growth Fund although the
bar chart does not reflect the deduction of the sales load on Class A shares. If
the bar chart included the sales load, returns would be less than those shown.
The Fund's past performance is not necessarily an indication of how the Fund
will perform in the future. Total returns include reinvestment of dividends and
capital gains distributions, if any. All indices are unmanaged.
Investors should note that prior to October 1, 2000, another firm served as
the sub-adviser to Pilgrim LargeCap Growth Fund and the performance and
investment strategies were indicative of another firm's style of management. The
Fund is now managed by Mary Lisanti and Thomas J. Sullivan, who share the
day-to-day responsibility for management of the Fund. Prior to November 2, 2000,
the Pilgrim LargeCap Growth Fund's portfolio manager employed different stock
selection criteria emphasizing a "bottom-up" analysis of companies combined with
a "top-down" thematic approach.
CALENDAR YEAR-BY-YEAR RETURNS %(1)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(2)
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
59.45% 96.41%
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was 45.04% for the quarter ended December 31, 1999, and the Fund's worst
quarterly performance was 8.50% for the quarter ended September 30, 1998.
The Fund's year-to-date return as of September 30, 2000 was 5.35%.
(2) Returns in 1999 were primarily achieved during unusually favorable
conditions in the market, particularly for information technology
companies. (See "Comparison of Investment Techniques and Risks of the
Funds" above.) You should not expect that such favorable returns can
consistently be achieved.
The table below shows what the average annual total returns of Pilgrim
LargeCap Growth Fund would equal if you averaged out actual performance over
various lengths of time, compared to the Russell Index. The Russell Index has an
inherent performance advantage over Pilgrim LargeCap Growth 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 LargeCap
Growth Fund's performance reflected in the table assumes the deduction of the
maximum sales charge in all cases.
14
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
SINCE
1 Year INCEPTION(1)
------ ------------
Pilgrim LargeCap Growth Fund - Class A(2) 85.11% 60.23%
Pilgrim LargeCap Growth Fund - Class B(3) 90.23% 62.51%
Pilgrim LargeCap Growth Fund - Class C(4) 94.18% 63.11%
Pilgrim LargeCap Growth Fund - Class Q 96.93% 64.14%
Russell 1000 Growth Index(5) 33.16% 29.05%
S&P 500 Index(6) 21.04% 12.28%
----------
(1) The Pilgrim LargeCap Growth Fund commenced operations on July 21, 1997.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 2% for the 1 year and
since inception returns, respectively.
(4) Reflects deduction of sales charge of 3.50%.
(5) The Russell 1000 Growth Index is an unmanaged index that measures the
performance of those companies among the Russell 1000 Index with higher
than average price-to-book ratios and forecasted growth.
(6) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
The table below shows the performance of Pilgrim LargeCap Growth Fund if
sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999
SINCE
1 Year INCEPTION(1)
------ ------------
Pilgrim LargeCap Growth Fund - Class A 96.41% 64.13%
Pilgrim LargeCap Growth Fund - Class B 95.23% 63.11%
Pilgrim LargeCap Growth Fund - Class C 95.17% 63.11%
Pilgrim LargeCap Growth Fund - Class Q 96.93% 64.14%
----------
(1) The Pilgrim LargeCap Growth Fund commenced operations on July 21, 1997.
For a discussion by the adviser regarding the performance of Pilgrim
LargeCap Growth Fund for the year ended June 30, see Appendix A to this Proxy
Statement/Prospectus. Additional information about Pilgrim LargeCap Growth Fund
is included in Appendix C to this Proxy Statement/Prospectus.
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENTS. The Reorganization Agreements provide for
the transfer of all of the assets and liabilities of ING Focus Fund and ING
Large Cap Growth Fund to Pilgrim LargeCap Growth Fund in exchange for shares of
Pilgrim LargeCap Growth Fund. ING Focus Fund and ING Large Cap Growth Fund will
distribute the shares of Pilgrim LargeCap Growth Fund received in the exchange
to the shareholders of ING Focus Fund and ING Large Cap Growth Fund and then ING
Focus Fund and ING Large Cap Growth Fund will be liquidated.
15
<PAGE>
After the Reorganizations, each shareholder of ING Focus Fund and ING Large
Cap Growth Fund will own shares in Pilgrim LargeCap Growth Fund having an
aggregate value equal to the aggregate value of each respective class of shares
in ING Focus Fund and ING Large Cap Growth Fund held by that shareholder as of
the close of business on the business day of the Closing. Shareholders of the
following Classes of shares of each Disappearing Fund will receive shares of the
corresponding Class of Pilgrim LargeCap Growth Fund.
Disappearing Fund Pilgrim LargeCap Growth Fund
----------------- ----------------------------
Class A Class A
Class B Class B
Class C Class C
Class I Class Q
In the interest of economy and convenience, shares of Pilgrim LargeCap Growth
Fund will not be represented by physical certificates, unless you request a
certificate in writing.
In the event that the shareholders of only one of the Disappearing Funds
were to approve the Reorganization, the Disappearing Fund approving the
Reorganization would be reorganized into Pilgrim LargeCap Growth Fund. The
Disappearing Fund not approving the Reorganization may continue to operate as a
separate entity.
Until the Closing, shareholders of ING Focus Fund and ING Large Cap Growth
Fund will continue to be able to redeem their shares. Redemption requests
received after the Closing will be treated as requests received by Pilgrim
LargeCap Growth Fund for the redemption of its shares.
The obligations of the Funds under each Reorganization Agreement are
subject to various conditions, including approval of the shareholders of the
relevant Disappearing Fund. Each Reorganization Agreement also requires that the
relevant Disappearing Fund 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. Each Reorganization Agreement may be terminated by
mutual agreement of the parties or on certain other grounds. Please refer to
Appendices B-1 and B-2 to review the terms and conditions of each Reorganization
Agreement.
REASONS FOR THE REORGANIZATION. The Reorganization is one of many
reorganizations that are proposed among various ING Funds and various 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.
These reorganizations are occurring in connection with the integration of the
ING Funds and Pilgrim Funds. In September, 2000, ING Groep N.V., the indirect
parent company of IMFC, the investment adviser to the ING Funds, acquired
ReliaStar Financial Corp., the indirect parent company of ING Pilgrim
Investments, the investment adviser to the Pilgrim Funds. Management of the ING
Funds and the Pilgrim Funds have proposed the consolidation of a number of the
ING Funds and Pilgrim Funds that they believe have similar or compatible
investment policies. The proposed Reorganizations are designed to reduce the
substantial overlap in funds offered by both the ING Funds and Pilgrim Funds,
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios within the same fund group. IMFC and ING Pilgrim
Investments also believe that the Reorganizations may benefit fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions. The integration of the ING Funds and the Pilgrim Funds is expected to
provide further benefits to shareholders of the ING Funds because shareholders
will have the ability to exchange into Pilgrim Funds that offer the same Class
of shares. For information about a Pilgrim Fund, call the Pilgrim Funds at
1-800-992-0180 to request a prospectus. You should read a fund's prospectus
before investing in the fund.
Each proposed Reorganization was presented to the Board of Trustees of ING
Funds Trust, on behalf of ING Focus Fund and ING Large Cap Growth 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 Focus Fund and ING Large Cap
Growth Fund will not be diluted as a result of the proposed Reorganizations, and
that each proposed Reorganization is in the best interests of the shareholders
of the relevant Disappearing Fund.
16
<PAGE>
The Reorganization will allow ING Focus Fund's and ING Large Cap Growth
Fund's shareholders to continue to participate in a professionally-managed
portfolio which seeks to achieve an objective of long-term capital appreciation.
As shareholders of Pilgrim LargeCap Growth Fund, these shareholders will be able
to exchange into other mutual funds in the group of Pilgrim Funds that offer the
same Class of shares in which such shareholder is currently invested. A list of
the Pilgrim Funds, and Classes available after the Reorganization is contained
in Appendix D.
BOARD CONSIDERATIONS. The Board of Trustees of ING Funds Trust, on behalf
of ING Focus Fund and ING Large Cap Growth Fund, in recommending the proposed
transaction, considered a number of factors, including the following:
(1) the plans of management to integrate the ING Funds and the Pilgrim
Funds;
(2) expense ratios and information regarding fees and expenses of ING
Focus Fund and ING Large Cap Growth Fund and Pilgrim LargeCap Growth
Fund, including the expense limitation contracts offered by IMFC for
ING Focus Fund and ING Large Cap Growth Fund;
(3) estimates that show that combining the Funds is expected to result in
lower 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 Focus Fund's
and ING Large Cap Growth Fund's current shareholders;
(5) the relative investment performance and risks of Pilgrim LargeCap
Growth Fund as compared to ING Focus Fund and ING Large Cap Growth
Fund;
(6) the similarity or compatability of Pilgrim LargeCap Growth Fund's
investment objectives, policies and restrictions with those of ING
Focus Fund and ING Large Cap Growth Fund;
(7) the investment resources of ING Pilgrim Investments, and the
distribution capabilities of ING Pilgrim Securities, Inc., distributor
of the Pilgrim LargeCap Growth Fund;
(8) the quality and caliber of services that have been enjoyed by
shareholders of the Pilgrim LargeCap Growth Fund;
(9) alternatives to combining the Funds; and
(10) the tax-free nature of the Reorganization to ING Focus Fund and ING
Large Cap Growth Fund and its shareholders.
The Board of Trustees also considered the future potential benefits to ING
Pilgrim Investments in that its costs to limit the expenses of Pilgrim LargeCap
Growth Fund are likely to be reduced if the Reorganization is approved.
THE TRUSTEES OF ING FUNDS TRUST, ON BEHALF OF ING FOCUS FUND AND ING LARGE CAP
GROWTH FUND, RECOMMEND THAT SHAREHOLDERS APPROVE EACH REORGANIZATION WITH
PILGRIM LARGECAP GROWTH FUND.
TAX CONSIDERATIONS. Each 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 Focus Fund, ING Large Cap Growth Fund nor their
shareholders nor Pilgrim LargeCap Growth Fund is expected to recognize any gain
or loss for federal income tax purposes from the transactions contemplated by
either of the Reorganization Agreements. 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.
17
<PAGE>
Immediately prior to the Reorganization, ING Focus Fund and ING Large Cap
Growth Fund will each pay a dividend or dividends which, together with all
previous dividends, will have the effect of distributing to their shareholders
all of ING Focus Fund's and ING Large Cap Growth Fund's investment company
taxable income for taxable years ending on or prior to the Reorganization
(computed without regard to any deduction for dividends paid) and all of its net
capital gain, if any, realized in taxable years ending on or prior to the
Reorganization (after reduction for any available capital loss carryforward).
Such dividends will be included in the taxable income of ING Focus Fund's and
ING Large Cap Growth Fund's shareholders.
As of October 31, 1999, ING Large Cap Growth Fund had accumulated a capital
loss carryforward in the amount of approximately $1,396,880. After the
Reorganization, this loss carryforward will be available to Pilgrim LargeCap
Growth Fund to offset its capital gains, although the amount of these losses
which may offset Pilgrim LargeCap Growth Fund's future capital gains in any
given year may be limited. As a result of this limitation, it is possible that
Pilgrim LargeCap Growth Fund may not be able to use such losses as rapidly as it
might have had the Reorganization not occurred, and part of these losses may not
be useable at all. The ability of Pilgrim LargeCap Growth Fund to absorb losses
in the future depends upon a variety of factors that cannot be known in advance,
including the existence of capital gains against which these losses may be
offset. In addition, the benefits of any of ING Large Cap Growth Fund's capital
loss carryforwards currently are available only to pre-Reorganization
shareholders of that Fund. After the Reorganization, however, these benefits
will inure to the benefit of all post-Reorganization shareholders of Pilgrim
LargeCap Growth Fund.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, adviser to Pilgrim
LargeCap Growth Fund, will bear half the cost of the Reorganizations. The Funds
will bear the other half of the expenses relating to the proposed
Reorganizations, 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 LargeCap Growth Fund is a series of Pilgrim
Mutual Funds, which is a Delaware business trust. ING Focus Fund and ING Large
Cap Growth Fund are both series of ING Funds Trust which is a Delaware business
trust. Pilgrim Mutual Funds is governed by a Board of Trustees consisting of
eleven members. ING Funds Trust is governed by a Board of Trustees consisting of
four members.
DISTRIBUTOR. ING Pilgrim Securities, Inc. (the "Distributor"), whose
address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
principal distributor for each of the Funds.
DIVIDENDS AND OTHER DISTRIBUTIONS. Pilgrim LargeCap Growth Fund pays
dividends from net investment income and net capital gains, if any, on an annual
basis. ING Focus Fund and ING Large Cap Growth Fund also 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 each Reorganization Agreement is approved by the relevant Disappearing
Fund's shareholders, then as soon as practicable before the Closing, each
Disappearing Fund will pay its shareholders a cash distribution of substantially
all undistributed net investment income and undistributed realized net capital
gains.
18
<PAGE>
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of each of the Funds as of June 30, 2000 and on a PRO FORMA basis
as of June 30, 2000 giving effect to the Reorganization:
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
ING FOCUS FUND
Class A $ 57,012,974 $13.87 4,111,627
Class B $ 4,914,349 $13.74 357,596
Class C $ 2,578,552 $13.73 187,839
Class X(1) $ 1,910,973 $13.72 139,330
ING LARGE CAP GROWTH FUND
Class A $ 61,103,600 $13.73 4,451,225
Class B $ 7,409,958 $13.61 544,457
Class C $ 17,846,845 $13.60 1,312,281
Class I(2) $ 184,974 $13.79 13,411
Class X(1) $ 7,328,645 $13.59 539,454
PILGRIM LARGECAP GROWTH FUND
Class A $186,261,267 $43.12 4,319,579
Class B $333,256,132 $42.94 7,760,157
Class C $152,682,354 $42.82 3,565,404
Class Q $ 24,837,999 $43.71 568,240
PRO FORMA - PILGRIM LARGECAP GROWTH FUND INCLUDING ING FOCUS FUND AND
ING LARGE CAP GROWTH FUND
Class A $304,377,841 $43.12 7,058,832
Class B $354,820,057 $42.94 8,262,344
Class C $173,107,752 $42.82 4,042,410
Class Q $ 25,022,973 $43.71 572,472
----------
(1) Class X shares merged into Class B shares effective November 16, 2000.
(2) Class I shares will merge into Class Q shares.
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about December __, 2000.
Shareholders of ING Focus Fund and ING Large Cap Growth Fund whose shares are
held by nominees, such as brokers, can vote their proxies by contacting their
respective nominee. In addition to the solicitation of proxies by mail,
employees of ING Funds Trust and its affiliates, without additional
compensation, may solicit proxies in person or by telephone, telegraph,
facsimile, or oral communication. ING Funds Trust, on behalf of ING Focus Fund
and ING Large Cap Growth Fund, has retained Shareholder Communications
Corporation, a professional proxy solicitation firm, to assist with any
necessary solicitation of proxies. Shareholders of ING Focus Fund and ING Large
Cap Growth Fund may receive a telephone call from the professional proxy
solicitation firm asking the shareholder to vote.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with ING Focus Fund and ING Large Cap Growth Fund, a written
revocation or duly executed proxy bearing a later date. In addition, any
shareholder who attends the Special Meeting in person may vote by ballot at the
Special Meeting, thereby canceling any proxy previously given. The persons named
in the accompanying proxy card will vote as directed by the proxy card, but in
the absence of voting directions in any proxy card that is signed and returned,
they intend to vote "FOR" the Reorganization proposal and may vote in their
discretion with respect to other matters not now known to the Board of Trustees
of ING Funds Trust that may be presented at the Special Meeting.
19
<PAGE>
VOTING RIGHTS
Shareholders of ING Focus Fund and ING Large Cap Growth Fund are entitled
to one vote for each share held as to any matter on which they are entitled to
vote and each fractional share shall be entitled to a proportionate fractional
vote. Shares have no preemptive or subscription rights.
Shareholders of ING Focus Fund and ING Large Cap Growth Fund at the close
of business on December __, 2000 (the "Record Date") will be entitled to be
present and give voting instructions for ING Focus Fund and ING Large Cap Growth
Fund at the Special Meeting with respect to their shares owned as of that Record
Date. As of the Record Date, ______ shares of ING Focus Fund and _______ shares
of ING Large Cap Growth Fund were outstanding and entitled to vote.
Approval of the Reorganization Agreement, with respect to ING Focus Fund
and ING Large Cap Growth Fund, requires the vote of a majority of the shares
present in person or by proxy of that Fund.
The holders of one-third of the outstanding shares present in person or
represented by proxy shall constitute a quorum. In the absence of a quorum, a
majority of outstanding shares entitled to vote present in person or by proxy
may adjourn the meeting from time to time until a quorum is present.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the Special Meeting for purposes of determining a quorum. However, abstentions
and broker non-votes will not be deemed represented at the Special Meeting for
purposes of calculating the vote on any matter. As a result, an abstention or
broker non-vote will have the same effect as a vote against the Reorganization.
The Disappearing Funds expect that, before the Special Meeting,
broker-dealer firms holding shares of the Disappearing Funds in "street name"
for their customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date specified
in the broker-dealer firms' proxy solicitation materials, the Funds understand
that the broker-dealers that are members of the New York Stock Exchange may vote
on the items to be considered at the Special Meeting on behalf of their
customers and beneficial owners under the rules of the New York Stock Exchange.
As of December 1, 2000, ING America Insurance Holdings, Inc. ("ING") owns
52.71% of the outstanding voting shares of the ING Focus Fund, and therefore
controls the Fund. ING intends to vote its shares in favor of the
Reorganization, in which case the Reorganization for this Fund will be approved.
As of December 1, 2000, ING owns 35.49% of the outstanding voting shares of
the ING Large Cap Growth Fund, and therefore may control the Fund. ING intends
to vote its shares in favor of the Reorganization.
To the knowledge of ING Funds Trust, as of December 1, 2000, no current
Trustee owns 1% or more of the outstanding shares of ING Focus Fund or ING Large
Cap Growth Fund, and the officers and trustees own, as a group, less than 1% of
the shares of ING Focus Fund and ING Large Cap Growth Fund.
Appendix E hereto lists the persons that, as of December 1, 2000, owned
beneficially or of record 5% or more of the outstanding shares of any Class of
ING Focus Fund, ING Large Cap Growth Fund or Pilgrim LargeCap Growth Fund.
20
<PAGE>
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 Focus Fund's and ING Large Cap Growth Fund's
management. Therefore it is not practicable to specify a date by which
shareholder proposals must be received in order to be incorporated in an
upcoming proxy statement for an annual meeting.
REPORTS TO SHAREHOLDERS
ING Funds Trust will furnish, without charge, a copy of the most recent
Annual Report regarding ING Focus Fund and ING Large Cap Growth Fund and the
most recent Semi-Annual Report succeeding the Annual Report, if any, on request.
Requests for such reports should be directed to ING Funds Trust at 7337
Doubletree Ranch Road, Scottsdale, Arizona 85258 or at 1-800-920-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING MAY BE
ASSURED, PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
James M. Hennessy,
Secretary
December __, 2000
7337 Doubletree Ranch Road
Scottsdale, Arizona 85258
21
<PAGE>
APPENDIX A
PILGRIM LARGE CAP GROWTH FUND
Set forth below is an excerpt from Pilgrim LargeCap Growth Fund's Annual
Report, dated June 30, 2000, regarding the Fund's performance.
Management Team: Catherine Somhegyi, Chief Investment Officer; Andrew B.
Gallagher, Partner, Portfolio Manager; William H. Chenoweth, CFA, Partner,
Portfolio Manager; Kenneth H. Lee, Portfolio Manager; Trisha C. Schuster, CFA,
Portfolio Manager; Evan C. Lundquist, Portfolio Manager; Michael P. Carroll,
Portfolio Manager; Thomas J. Smith, CFA, Investment Analyst; Lianne Nelson,
Investment Analyst.
Goal: The Large Cap Growth Fund (the "Fund" or "Large Cap Growth") seeks to
maximize long-term capital appreciation by investing primarily in stocks from a
universe of US companies with market capitalizations corresponding to the upper
90% of the Russell 1000 Growth Index.
Market Overview: Despite rising interest rates and market volatility, strong
corporate profits and investor confidence in the durability of the economic
expansion propelled US stocks higher during the fiscal year. For the twelve
months ended June 30, 2000, the S&P 500 Index rose 7.2% and the tech-heavy
Nasdaq Composite Index advanced 47.7%.
Most of the market's gains were concentrated in the fourth quarter of 1999 and
the first quarter of 2000 when the S&P 500 Index and Nasdaq increased 17.5% and
66.5%, respectively. Concerns over rising interest rates and the threat of
inflation sent equities lower in the third quarter of 1999. These same factors,
along with worries over lofty valuations among technology stocks, negatively
impacted equity performance in the second quarter of 2000.
In response to booming GDP growth, the Federal Reserve Bank raised short-term
interest rates a total of 1.75% on six separate occasions from June 1999 through
May 2000. Renewed optimism that the Federal Reserve Bank may be close to
completing its round of rate hikes drove equity prices higher in June 2000.
During the month, most US stock indexes posted gains, led by the Nasdaq, which
was up 16.6%.
Growth stocks substantially outperformed value stocks this period, mainly due to
strength in the technology sector. The Russell 1000 Growth Index advanced 25.7%
during the twelve months ended June 30, 2000 while the Russell 1000 Value Index
declined 8.9%. This was a continuation of 1999 when the difference between the
Russell 1000 Growth and Russell 1000 Value indexes was 25.8%--the largest
performance divergence ever recorded for any single calendar year.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 55.35%, significantly
outperforming the Russell 1000 Growth Index, which was up 25.67% for the same
period.
Portfolio Specifics: The Fund's outperformance during the period was primarily
attributable to stock selection in the technology and health technology sectors.
Among the Fund's top-performing holdings were semiconductor equipment
manufacturer Applied Materials, software developer Oracle Corporation,
telecommunications equipment providers Qualcomm and Nokia, and biotechnology
companies Genentech and Amgen. As of June 30, 2000, 54.7% of the Fund's assets
were in technology stocks, comparable to the 55.0% weighting of its Russell 1000
Growth Index benchmark.
Market Outlook: Robust corporate earnings, strong cash flows into mutual funds,
and optimism that the Federal Reserve Bank series of rate increases has started
to cool the overheated US economy provide a positive backdrop for large-cap
growth stocks. In addition, market volatility and the recent technology
correction have created a more discriminating environment-one that is conducive
to our bottom-up, fundamentally driven investment process.
A-1
<PAGE>
7/21/97 6/98 6/99 6/30/00
------- ---- ---- -------
Pilgrim LargeCap Growth Fund
Class A With Sales Charge 10,000 12,810 21,842 33,919
Pilgrim LargeCap Growth Fund
Class A Without Sales Charge 10,000 13,589 23,170 35,981
Russell 1000 Growth Index 10,000 12,072 15,363 19,306
Average Annual Total Returns for
the periods ended June 30, 2000
--------------------------------
Since Inception
1 Year 7/21/97
------ -------
Including Sales Charge:
Class A (1) 46.42% 51.29%
Class B (2) 50.37% 52.92%
Class C (3) 53.38% 53.37%
Excluding Sales Charge:
Class A 55.35% 54.35%
Class B 55.37% 53.37%
Class C 54.38% 53.37%
Russell 1000 Growth Index 25.67% 25.30%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth
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.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees 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 has 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) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the Index is shown from 8/1/97.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
A-2
<PAGE>
APPENDIX B-1
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 (the "Pilgrim Trust"), with its principal place of
business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf
of its series, Pilgrim LargeCap Growth Fund (the "Acquiring Fund"), and ING
Funds Trust, a Delaware business trust (the "ING Trust") with its principal
place of business at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380, on
behalf of its series, ING Focus 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,
Class C, and Class Q voting shares of beneficial interest (no par value per
share) of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by
the Acquiring Fund of all liabilities of the Acquired Fund, and the distribution
of the Acquiring Fund Shares to the shareholders of the Acquired Fund in
complete liquidation of the Acquired Fund as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type or a series thereof and the Acquired
Fund owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Trustees of the Pilgrim Trust have determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Trustees of the ING Trust have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B,
Class C, and Class Q Acquiring Fund Shares determined by dividing the value of
the Acquired Fund's net assets with respect to each class, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one Acquiring Fund Share of the same class, computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to assume all
liabilities of the Acquired Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
B-1-1
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1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests and dividends or interests
receivable, that are owned by the Acquired Fund, and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund, on the closing
date provided for in paragraph 3.1 (the "Closing Date") (collectively,
"Assets").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
also assume all of the liabilities of the Acquired Fund, whether accrued or
contingent, known or unknown, existing at the Valuation Date (collectively,
"Liabilities"). On or as soon as practicable prior to the Closing Date, the
Acquired Fund will declare and pay to its shareholders of record one or more
dividends and/or other distributions so that it will have distributed
substantially all (and in no event less than 98%) of its investment company
taxable income (computed without regard to any deduction for dividends paid) and
realized net capital gain, if any, for the current taxable year through the
Closing Date.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to each class of its shares, determined as of immediately after the
close of business on the Closing Date (the "Acquired Fund Shareholders"), on a
pro rata basis within that class, the Acquiring Fund Shares of the same class
received by the Acquired Fund pursuant to paragraph 1.1, and will completely
liquidate. Such distribution and liquidation will be accomplished, with respect
to each class of the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A, Class B, Class C, and Class Q Acquiring Fund Shares to be so credited
to Class A, Class B, Class C, and Class I 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, Class C, and Class I 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. Class I
shares of the Acquired Fund will represent a number of the Acquiring Fund Class
Q 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, Class C, and Class Q Acquiring Fund Shares in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures instead
in the then-current prospectus and statement of additional information with
respect to the Acquiring Fund, and valuation procedures by the Acquiring Fund's
Board of Trustees.
B-1-2
<PAGE>
2.2 The net asset value of a Class A, Class B, Class C, and Class Q
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, Class C, and Class Q 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, Class
C, and Class I shares of the Acquired Fund, as the case may be, determined using
the same valuation procedures referred to in paragraph 2.1, by the net asset
value of an Acquiring Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by
Acquiring Fund's record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of immediately after the close of business on the
Closing Date unless otherwise agreed to by the parties. The close of business on
the Closing Date shall be as of 4:00 p.m., Eastern Time. The Closing shall be
held at the offices of the Acquiring Fund or at such other time and/or place as
the parties may agree.
3.2 The Acquired Fund shall direct State Street Bank and Trust Company, as
custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets shall have been
delivered in proper form to the Acquiring Fund within two business days prior to
or on the Closing Date, and (ii) all necessary taxes in connection with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented for examination by the Acquired Fund
Custodian to the custodian for the Acquiring Fund no later than five business
days preceding the Closing Date, and shall be transferred and delivered by the
Acquired Fund as of the Closing Date for the account of the Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Custodian shall deliver as of the Closing Date by book
entry, in accordance with the customary practices of each securities depository,
as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended
(the "1940 Act") in which the Acquired Fund's Assets are deposited and the
Custodian, the Acquired Fund's Assets deposited with such depositories. The cash
to be transferred by the Acquired Fund shall be delivered by wire transfer of
federal funds on the Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, Class B, Class C, and Class I 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, respectively, that such Acquiring
Fund Shares have been credited to the Acquired Fund's account on the books of
the Acquiring Fund. At the Closing each party shall deliver to the other such
bills of sale, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
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3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board of Trustees
of the Acquired Fund or the Board of Trustees of the Acquiring Fund, accurate
appraisal of the value of the net assets of the Acquiring Fund or the Acquired
Fund, respectively, is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading shall have been fully resumed
and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as has been disclosed to the Acquiring Fund in a written
instrument executed by an officer of the ING Trust, the ING Trust on behalf of
the Acquired Fund represents and warrants to the Pilgrim Trust as follows:
(a) The Acquired Fund is duly organized as a series of ING Trust, which is
a business trust duly organized, validly existing and in good standing under the
laws of the State of Delaware, with power under ING Trust's Declaration of Trust
to own all of its properties and assets and to carry on its business as it is
now being conducted;
(b) ING Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of shares of the
Acquired Fund under the Securities Act of 1933, as amended ("1933 Act"), is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used at any time prior 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;
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<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 Schedule of Investments of the Acquired Fund at
October 31, 1999 have been audited by Ernst & Young LLP, independent
accountants, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which have been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquired Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(j) Since October 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
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<PAGE>
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the ING Trust and have been offered and sold in every state
and the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
All of the issued and outstanding shares of the Acquired Fund will, at the time
of Closing, be held by the persons and in the amounts set forth in the records
of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph
3.3. The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the shares of the Acquired Fund, nor
is there outstanding any security convertible into any of the Acquired Fund
shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the ING Trust on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.6, insofar as
it relates to the Acquired Fund, will, on the effective date of the Registration
Statement and on the Closing Date (i) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading provided, however,
that the representations and warranties in this subparagraph (p) shall not apply
to statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished by the Acquiring Fund for use therein, and (ii) comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder.
4.2 Except as has been disclosed to the Acquired Fund in a written
instrument executed by an officer of the Pilgrim Trust, the Pilgrim Trust on
behalf of the Acquiring Fund represents and warrants to the ING Trust as
follows:
(a) The Acquiring Fund is duly organized as a series of 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 the Pilgrim Trust's
Declaration of Trust to own all of its properties and assets and to carry on its
business as it is now being conducted;
(b) Pilgrim Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act and the registration of
the shares of the Acquired Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
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<PAGE>
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of 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 the Acquiring Fund's 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 its business. 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 its
ability to consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Portfolio of Investments of the Acquiring Fund at June
30, 2000 have been audited by KMPG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since 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
B-1-7
<PAGE>
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year that
includes the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable [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, Class C, and Class Q 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 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;
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading, provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder; and
(q) Either the Acquiring Fund or ING Pilgrim Investments, Inc. shall
purchase and maintain a Directors and Officers errors and omissions insurance
policy ("D&O/E&O Policy") for the benefit of Joseph Hankin and Jack Rehm
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<PAGE>
containing substantially the same form and amount of coverage as each had under
a D&O/E&O Policy of the Acquired Fund, such D&O/E&O Policy to be effective as of
the Closing Date and continuing until the sixth (6th) anniversary of the Closing
Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B, Class C, and
Class Q 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, Class C, and Class Q Acquiring Fund Shares received at the
Closing.
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 ING Trust on behalf of the Acquired Fund covenants that ING Trust will,
from time to time, as and when reasonably requested by the Acquiring Fund,
execute and deliver or cause to be executed and delivered all such assignments
and other instruments, and will take or cause to be taken such further action as
the Pilgrim Trust on behalf of the Acquiring Fund may reasonably deem necessary
or desirable in order to vest in and confirm (a) ING Trusts on behalf of the
Acquired Funds, title to and possession of the Acquiring Fund Shares to be
delivered hereunder, and (b) Pilgrim Trusts on behalf of the Acquiring Funds,
title to and possession of all the assets, and otherwise to carry out the intent
and purpose of this Agreement.
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<PAGE>
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the ING Trust on behalf of the Acquired Fund to
consummate the transactions provided for herein shall be subject, at ING'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,
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<PAGE>
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;
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 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
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<PAGE>
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.
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 the Pilgrim 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
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(s) to the
Acquired and Acquiring Funds, and (2) half are borne by the Acquired and
Acquiring Funds and will be paid by the Acquired Fund and Acquiring Fund pro
rata based upon the relative net assets of the Acquired Fund and Acquiring Fund
as of the close of business on the record date for determining the shareholders
of the Acquired Fund entitled to vote on the Reorganization. The costs of the
Reorganization shall include, but not be limited to, costs associated with
obtaining any necessary order of exemption from the 1940 Act, preparation of the
Registration Statement, printing and distributing the Acquiring Fund's
prospectus and the Acquired Fund's proxy materials, legal fees, accounting fees,
securities registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
B-1-12
<PAGE>
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.
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 Acquired Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Class A, Class B, and
Class C, Acquiring Fund Shares to be issued to the Acquired Fund Shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the ING
Trust, 7337 East Doubletree Ranch Road, Arizona 85258, attn: Louis S. Citron, in
each case with a copy to Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue
of the Americas, New York, New York 10169, attn: Steven R. Howard; and to the
Pilgrim Trust, 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, attn:
James M. Hennessy, in each case with a copy to Dechert, 1775 Eye Street, N.W.,
Washington, D.C. 20006, attn: Jeffrey S. Puretz.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
B-1-13
<PAGE>
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.
15.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Pilgrim Trust or ING Trust personally, but shall
bind only the trust property of the Acquiring Fund or the Acquired Fund, as
provided in the Declaration of Trust of the Pilgrim Trust or 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.
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 LARGECAP GROWTH FUND series
By:
---------------------------------- ------------------------------------
SECRETARY
Its:
-----------------------------------
Attest: ING FUNDS TRUST on behalf of its ING
FOCUS FUND series
By:
---------------------------------- ------------------------------------
SECRETARY
Its:
-----------------------------------
B-1-14
<PAGE>
APPENDIX B-2
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 (the "Pilgrim Trust"), with its principal place of
business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf
of its series, Pilgrim LargeCap Growth Fund (the "Acquiring Fund"), and ING
Funds Trust, a Delaware business trust (the "ING Trust") with its principal
place of business at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380, on
behalf of its series, ING Large Cap Growth Fund (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B,
Class C and Class Q voting shares of beneficial interest (no par value per
share) of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by
the Acquiring Fund of all liabilities of the Acquired Fund, and the distribution
of the Acquiring Fund Shares to the shareholders of the Acquired Fund in
complete liquidation of the Acquired Fund as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type or a series thereof and the Acquired
Fund owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Trustees of the Pilgrim Trust have determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Trustees of the ING Trust have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B,
Class C and Class Q Acquiring Fund Shares determined by dividing the value of
the Acquired Fund's net assets with respect to each class, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one Acquiring Fund Share of the same class, computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to assume all
liabilities of the Acquired Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
B-2-1
<PAGE>
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, Class C and Class Q Acquiring Fund Shares to be so credited to
Class A, Class B, Class C and Class I 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. Class I shares
of the Acquired Fund will represent a number of the Acquiring Fund Class Q
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,
Class C and Class Q Acquiring Fund Shares in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures instead
in the then-current prospectus and statement of additional information with
respect to the Acquiring Fund, and valuation procedures established by the
Acquiring Fund's Board of Trustees.
B-2-2
<PAGE>
2.2 The net asset value of a Class A, Class B, Class C and Class Q
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, Class C and Class Q 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, Class
C and Class I shares of the Acquired Fund, as the case may be, determined using
the same valuation procedures referred to in paragraph 2.1, by the net asset
value of an Acquiring Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by
Acquiring Fund's record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of immediately after the close of business on the
Closing Date unless otherwise agreed to by the parties. The close of business on
the Closing Date shall be as of 4:00 p.m., Eastern Time. The Closing shall be
held at the offices of the Acquiring Fund or at such other time and/or place as
the parties may agree.
3.2 The Acquired Fund shall direct State Street Bank and Trust Company, as
custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets shall have been
delivered in proper form to the Acquiring Fund within two business days prior to
or on the Closing Date, and (ii) all necessary taxes in connection with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented for examination by the Acquired Fund
Custodian to the custodian for the Acquiring Fund no later than five business
days preceding the Closing Date, and shall be transferred and delivered by the
Acquired Fund as of the Closing Date for the account of the Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Custodian shall deliver as of the Closing Date by book
entry, in accordance with the customary practices of each securities depository,
as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended
(the "1940 Act") in which the Acquired Fund's Assets are deposited and the
Custodian, the Acquired Fund's Assets deposited with such depositories. The cash
to be transferred by the Acquired Fund shall be delivered by wire transfer of
federal funds on the Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, Class B, Class C, and Class I 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-2-3
<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 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 at any time prior 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-2-4
<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 Schedule of Investments of the Acquired Fund at
October 31, 1999 have been audited by Ernst & Young LLP, independent
accountants, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which have been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquired Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(j) Since October 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
B-2-5
<PAGE>
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the ING Trust and have been offered and sold in every state
and the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
All of the issued and outstanding shares of the Acquired Fund will, at the time
of Closing, be held by the persons and in the amounts set forth in the records
of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph
3.3. The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the shares of the Acquired Fund, nor
is there outstanding any security convertible into any of the Acquired Fund
shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the ING Trust on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.6, insofar as
it relates to the Acquired Fund, will, on the effective date of the Registration
Statement and on the Closing Date (i) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading provided, however,
that the representations and warranties in this subparagraph (p) shall not apply
to statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished by the Acquiring Fund for use therein, and (ii) comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder.
4.2 Except as has been disclosed to the Acquired Fund in a written
instrument executed by an officer of the Pilgrim Trust, the Pilgrim Trust on
behalf of the Acquiring Fund represents and warrants to the ING Trust as
follows:
(a) The Acquiring Fund is duly organized as a series of 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;
B-2-6
<PAGE>
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of 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 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 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 Acquired Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the Acquiring Fund's knowledge, threatened against the 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 its business. Pilgrim
Trust on behalf of the Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or 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 KMPG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since 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
B-2-7
<PAGE>
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year that
includes the Closing Date) the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable [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, Class C and Class Q 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 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;
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading, provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder; and
(q) Either the Acquiring Fund or ING Pilgrim Investments, Inc. shall
purchase and maintain a Directors and Officers errors and omissions insurance
policy ("D&O/E&O Policy") for the benefit of Joseph Hankin and Jack Rehm
B-2-8
<PAGE>
containing substantially the same form and amount of coverage as each had under
a D&O/E&O Policy of the Acquired Fund, such D&O/E&O Policy to be effective as of
the Closing Date and continuing until the sixth (6th) anniversary of the Closing
Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B, Class C and
Class Q 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, Class C and Class Q Acquiring Fund Shares received at the
Closing.
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 ING Trust on behalf of the Acquired Fund covenants that ING Trust will,
from time to time, as and when reasonably requested by the Acquiring Fund,
execute and deliver or cause to be executed and delivered all such assignments
and other instruments, and will take or cause to be taken such further action as
the Pilgrim Trust on behalf of the Acquiring Fund may reasonably deem necessary
or desirable in order to vest in and confirm (a) the ING Trust's on behalf of
the Acquired Fund's, title to and possession of the Acquiring Fund 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.
B-2-9
<PAGE>
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the ING Trust on behalf of the Acquired Fund to
consummate the transactions provided for herein shall be subject, at ING Trust's
election, to the performance by the 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,
B-2-10
<PAGE>
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;
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 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
B-2-11
<PAGE>
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.
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 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(s) to the
Acquired and Acquiring Funds, and (2) half are borne by the Acquired and
Acquiring Funds and will be paid by the Acquired Fund and Acquiring Fund pro
rata based upon the relative net assets of the Acquired Fund and Acquiring Fund
as of the close of business on the record date for determining the shareholders
of the Acquired Fund entitled to vote on the Reorganization. The costs of the
Reorganization shall include, but not be limited to, costs associated with
obtaining any necessary order of exemption from the 1940 Act, preparation of the
Registration Statement, printing and distributing the Acquiring Fund's
prospectus and the Acquired Fund's proxy materials, legal fees, accounting fees,
securities registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
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<PAGE>
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.
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 Acquired Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Class A, Class B,
Class C, and Class Q Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders under this Agreement to the detriment of such shareholders without
their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the ING
Trust, 7337 East Doubletree Ranch Road, Arizona 85258, attn: Louis S. Citron, in
each case with a copy to Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue
of the Americas, New York, New York 10169, attn: Steven R. Howard; and to the
Pilgrim Trust, 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, attn:
James M. Hennessy, in each case with a copy to Dechert, 1775 Eye Street, N.W.,
Washington, D.C. 20006, attn: Jeffrey S. Puretz.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
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<PAGE>
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.
15.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Pilgrim Trust or ING Trust personally, but shall
bind only the trust property of the Acquiring Fund or the Acquired Fund, as
provided in the Declaration of Trust of the Pilgrim Trust or 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.
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 LARGECAP GROWTH FUND series
By:
---------------------------------- ------------------------------------
SECRETARY
Its:
-----------------------------------
Attest: ING FUNDS TRUST on behalf of its ING
LARGE CAP GROWTH FUND series
By:
---------------------------------- ------------------------------------
SECRETARY
Its:
-----------------------------------
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<PAGE>
APPENDIX C
ADDITIONAL INFORMATION REGARDING PILGRIM LARGECAP GROWTH FUND
(THE "FUND")
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to four separate Classes of the
Pilgrim LargeCap Growth Fund: Class A, Class B, Class C and Class Q, 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 Focus Fund and ING
Large Cap Growth Fund shares held by you immediately prior to the
Reorganization, and the period that you held shares of these Funds 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 CLASS Q
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Initial Sales Charge on Purchases 5.75%(1) None None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00%(4) None
Annual Service and Distribution (12b-1) Fees (5) 0.35% 1.00% 1.00% 0.25%
Maximum Purchase Unlimited $250,000 Unlimited Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A 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 made within one year of purchase of shares that
were part of the Nicholas-Applegate Mutual Funds without an initial sales
charge. See "Class A Shares: Initial Sales Charge Alternative" in this
Appendix C.
(3) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in this Appendix C.
(4) Imposed upon redemptions within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund issued to shareholders of ING Focus Fund or ING
Large Cap Growth Fund in the Reorganization will convert to Class A shares
in the eighth year from the original date of purchase of the Class B shares
of ING Focus Fund or ING Large Cap Growth Fund.
The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Orders for Class B
shares in excess of $250,000 will be accepted as orders for Class A shares or
declined.
C-1
<PAGE>
CLASS A SHARES: INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the
Fund are sold at the net asset value ("NAV") per share in effect plus a sales
charge as described in the following table. For waivers or reductions of the
Class A shares sales charges, see "Special Purchases without a Sales Charge" and
"Reduced Sales Charges" below.
AS A % OF THE AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV
--------------- -------------- ------
Less than $50,000 5.75% 6.10%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $1,000,000 2.00% 2.04%
There is no initial sales charge on purchases of $1,000,000 or more.
However, the shares will be subject to a CDSC if they are redeemed within one or
two years of purchase, depending on the amount of the purchase, as follows:
PERIOD DURING
YOUR INVESTMENT CDSC WHICH CDSC APPLIES
--------------- ---- ------------------
$1,000,000 - $2,499,999 1.00% 2 years
$2,500,000 - $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
Class A shares of the Fund issued in connection with the Reorganization
with respect to Class A shares of ING Focus Fund and ING Large Cap Growth Fund
that were subject to a CDSC at the time of the Reorganization, will be subject
to a CDSC of up to 1% for a period of 12 months from the date of purchase of the
original shares of ING Focus Fund and ING Large Cap Growth Fund.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced
sales charge on a purchase of Class A shares of the Fund or other open-end funds
in the Pilgrim Funds which offer Class A shares, or shares with front-end sales
charges ("Participating Funds") by completing the Letter of Intent section of an
Application to purchase Fund shares. Executing the Letter of Intent expresses an
intention to invest during the next 13 months a specified amount, which, if made
at one time, would qualify for a reduced sales charge. An amount equal to the
Letter of Intent amount multiplied by the maximum sales charge imposed on
purchases of the Fund and Class will be restricted within your account to cover
additional sales charges that may be due if your actual total investment fails
to qualify for the reduced sales charges. See the Statement of Additional
Information for the Fund for details on the Letter of Intent option or contact
the Shareholder Servicing Agent at 1-800-992-0180 for more information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
Funds (excluding Pilgrim Money Market Fund) ("Rights of Accumulation"). The
reduced sales charges apply to quantity purchases made at one time or on a
cumulative basis over any period of time. See the Statement of Additional
Information for the Fund for details or contact the Shareholder Servicing Agent
at 1-800-992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim Funds which impose a CDSC may
be combined with Class A shares for a reduced sales charge but will not affect
any CDSC which may be imposed upon the redemption of shares of the Fund which
imposes a CDSC.
C-2
<PAGE>
SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at 1-800-992-0180, or see
the Statement of Additional Information for the Fund.
CLASS B SHARES: DEFERRED SALES CHARGE ALTERNATIVE. Class B shares are
offered at their NAV per share without any initial sales charge. Class B shares
that are redeemed within six years of purchase, however, will be subject to a
CDSC as described in the table that follows. Class B shares of the Fund are
subject to a distribution fee at an annual rate of 1.00% of the average daily
net assets of the Class, which is higher than the distribution fees of Class A
shares. The higher distribution fees mean a higher expense ratio, so Class B
shares pay correspondingly lower dividends and may have a lower NAV than Class A
shares. Orders for Class B shares in excess of $250,000 will be accepted as
orders for Class A shares or declined. The amount of the CDSC is based on the
lesser of the NAV of the Class B shares at the time of purchase or redemption.
There is no CDSC on Class B shares acquired through the reinvestment of
dividends and capital gains distributions. The CDSCs are as follows:
YEAR OF REDEMPTION AFTER PURCHASE CDSC
--------------------------------- ----
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
After Sixth Year None
Class B shares will automatically convert into Class A shares approximately
eight years after purchase. Class B shares of the Fund issued in connection with
the Reorganization with respect to Class B shares of ING Focus Fund and ING
Large Cap Growth Fund will convert to Class A shares eight years after the
purchase of the original shares of ING Focus Fund and ING Large Cap Growth Fund.
For additional information on the CDSC and the conversion of Class B, see the
Fund's Statement of Additional Information.
CLASS C SHARES. Class C shares are offered at their NAV per share without
an initial sales charge. Class C shares may be subject to a CDSC of 1% if
redeemed within one year of purchase. The amount of the CDSC is based on the
lesser of the NAV of the Class C shares at the time of purchase or redemption.
There is no CDSC on Class C shares acquired through the reinvestment of
dividends and capital gains distributions.
CLASS Q SHARES. Class Q shares are offered at NAV without a sales charge to
qualified retirement plans, financial and other institutions and "wrap
accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment is $10,000. The Distributor may waive these minimums from
time to time.
WAIVERS OF CDSC. The CDSC will be waived in the following cases. In
determining whether a CDSC is applicable, it will be assumed that shares held in
the shareholder's account that are not subject to such charge are redeemed
first.
1) The CDSC will be waived in the case of redemption following the death or
permanent disability of a shareholder if made within one year of death or
initial determination of permanent disability. The waiver is available only for
those shares held at the time of death or initial determination of permanent
disability.
2) The CDSC also may be waived for Class B shares redeemed pursuant to a
Systematic Withdrawal Plan, 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.
C-3
<PAGE>
3) The CDSC also will be waived in the case of mandatory distributions from
a tax-deferred retirement plan or an IRA.
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at 1-800-992-0180.
REINSTATEMENT PRIVILEGE. Class B and Class C shareholders who have redeemed
their shares in any open-end Pilgrim Fund may reinvest some or all of the
proceeds in the same share class within 90 days without a sales charge.
Reinstated Class B and Class C shares will retain their original cost and
purchase date for purposes of the CDSC. This privilege can be used only once per
calendar year. See the Statement of Additional Information for the Fund for
details or contact the Shareholder Servicing Agent at 1-800-992-0180 for more
information.
RULE 12b-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 applicable to each class of shares of
the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the Distributor may
receive from the Fund an annual fee in connection with the offering, sale and
shareholder servicing of the Fund's Class A, Class B, Class C and Class Q
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%
Class Q 0.25% None
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, Class C or Class Q 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. Most Fund expenses are
allocated proportionately among all of the outstanding shares of that Fund.
However, the Rule 12b-1 Plan fees for each Class of shares are charged
proportionately only to the outstanding shares of that Class.
PURCHASING SHARES. The Fund reserves the right to liquidate sufficient
shares to recover annual Transfer Agent fees should the investor fail to
maintain his/her account value at a minimum of $1,000.00 ($250.00 for IRAs). The
minimum initial investment in the Fund is $1,000 ($250 for IRAs), and the
minimum for additional investment in the Fund is $100. The minimum initial
investment for a pre-authorized retirement plan is $100, plus monthly
investments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
C-4
<PAGE>
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable
sales charge. When you sell shares, you receive the NAV minus any applicable
deferred sales charge. Exchange orders are effected at NAV.
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. Eastern Time) on each day that it is open
for business. The NAV of each Class represents that Class' pro rata share of
that Fund's net assets as adjusted for any Class specific expenses (such as fees
under a Rule 12b-1 plan), and divided by that Class' outstanding shares. In
general, the value of the Fund's assets is based on actual or estimated market
value, with special provisions for assets not having readily available market
quotations, and short-term debt securities, and 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. For information on valuing
foreign securities, see the Fund's Statement of Additional Information.
PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized
investment plan to purchase shares with automatic bank account debiting. For
further information on pre-authorized investment plans, contact the Shareholder
Servicing Agent at 1-800-992-0180.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company ("SSB") acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at 1-800-992-0180. SSB
currently receives a $12 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the next
NAV determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth above under "Purchase of Shares" have been
completed. If you purchase by wire, however, the order will be deemed to be in
proper form after the telephone notification and the federal funds wire have
been received. If you purchase by wire, you must submit an application form in a
timely fashion. If an order or payment by wire is received after the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time), the shares will not be credited until the next business day.
You will receive a confirmation of each new transaction in your account,
which also will show you the number of shares of the Fund you own including the
number of shares being held in safekeeping by the Transfer Agent for your
account. You may rely on these confirmations in lieu of certificates as evidence
of your ownership. Certificates representing shares of the Fund will not be
issued unless you request them in writing.
TELEPHONE ORDERS. The Fund and its Transfer Agent will not be responsible
for the authenticity of phone instructions or losses, if any, resulting from
unauthorized shareholder transactions if they reasonably believe that such
instructions were genuine. The Fund and its Transfer Agent have established
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include recording telephone instructions for exchanges
C-5
<PAGE>
and expedited redemptions, requiring the caller to give certain specific
identifying information, and providing written confirmation to shareholders of
record not later than five days following any such telephone transactions. If
the Fund and its Transfer Agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Telephone redemptions may be executed on all accounts other than retirement
accounts.
EXCHANGE PRIVILEGES AND RESTRICTIONS
An exchange privilege is available. Exchange requests may be made in
writing to the Transfer Agent or by calling the Shareholder Servicing Agent at
1-800-992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
than four per year). ING Pilgrim Investments reserves the right, upon 60 days'
prior notice, to restrict the frequency of, otherwise modify, or impose charges
of up to $5.00 upon exchanges. The total value of shares being exchanged must at
least equal the minimum investment requirement of the Fund into which they are
being exchanged. The Fund may change or cancel its exchange policies at any
time, upon 60 days' written notice to shareholders.
Shares of one Class of the Fund generally, may be exchanged for shares of
that same Class of any other open-end Pilgrim Fund or ING Fund without payment
of any additional sales charge. In most instances, if you exchange and
subsequently redeem your shares, any applicable CDSC will be based on the full
period of the share ownership. Shareholders exercising the exchange privilege
with any other open-end Pilgrim Fund or ING Fund should carefully review the
Prospectus of that Fund. Exchanges of shares are sales and may result in a gain
or loss for federal and state income tax purposes. You will automatically be
assigned the telephone exchange privilege unless you mark the box on the Account
Application that signifies you do not wish to have this privilege. The exchange
privilege is only available in states where shares of the Fund being acquired
may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent at 1-800-992-0180 unless you mark the box on the
Account Application that indicates that you do not wish to have the telephone
exchange privilege.
SYSTEMATIC EXCHANGE PRIVILEGE. With an initial account balance of at least
$5,000 and subject to the information and limitations outlined above, you may
elect to have a specified dollar amount of shares systematically exchanged,
monthly, quarterly, semi-annually or annually (on or about the 10th of the
applicable month), from your account to an identically registered account in the
same Class of any other open-end Pilgrim Fund. 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.
With respect to Class Q shares, if you draw down a non-retirement account
so that its total value is less than the Fund minimum, you may be asked to
purchase more shares within 60 days'. If you do not take action, the Fund may
close out your account and mail you the proceeds. Your account will not be
closed if its drop in value is due to the Fund's performance.
C-6
<PAGE>
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. With respect to Class Q Shares, you may elect
to have monthly, quarterly, semi-annual or annual payments in any fixed amount
of $1,000 or more made to yourself or to anyone else you properly designate, as
long as the account has a current value of at least $250,000. For additional
information, contact the Shareholder Servicing Agent at 1-800-992-0180, or see
the Fund's Statement of Additional Information.
PAYMENTS. Payment to shareholders for shares redeemed or repurchased
ordinarily will be made within three days after receipt by the Transfer Agent of
a written request in good order. The Fund may delay the mailing of a redemption
check until the check used to purchase the shares being redeemed has cleared
which may take up to 15 days or more. To reduce such delay, all purchases should
be made by bank wire or federal funds. The Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
Rules of the Securities and Exchange Commission. Due to the relatively high cost
of handling small investments, the Fund reserves the right upon 30 days' written
notice to redeem, at NAV, the shares of any shareholder whose account (except
for IRAs) has a value of less than $1,000, other than as a result of a decline
in the NAV per share. The Fund intends to pay in cash for all shares redeemed,
but under abnormal conditions that make payment in cash harmful to the Fund, the
Fund may make payment wholly or partly in securities at their then current
market value equal to the redemption price. In such case, the Fund could elect
to make payment in securities for redemptions in excess of $250,000 or 1% of its
net assets during any 90-day period for any one shareholder. An investor may
incur brokerage costs in converting such securities to cash.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund. The
agreement also requires ING Pilgrim Investments to assist in managing and
supervising all aspects of the general day-to-day business activities and
operations of the Fund, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services. ING Pilgrim
Investments provides the Fund with office space, equipment and personnel
necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of 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 ING
Pilgrim Investments is satisfied that the Fund would receive best execution of
the transaction from that broker.
DIVIDENDS, DISTRIBUTIONS & TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund generally distributes most or all of
its net earnings in the form of dividends. The Fund pays dividends and capital
gains, if any, annually. Dividends and distributions will be determined on a
Class basis.
Any dividends and distributions paid by the Fund will be automatically
reinvested in additional shares of the respective Class of that Fund, unless you
elect to receive distributions in cash. When a dividend or distribution is paid,
the NAV per share is reduced by the amount of the payment. You may, upon written
request or by completing the appropriate section of the Account Application in
the Pilgrim Prospectus, elect to have all dividends and other distributions paid
on a Class A, B, C or Q account in the Fund invested into a Pilgrim Fund which
offers Class A, B, C or Q shares. Both accounts must be of the same Class.
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's Statement of Additional Information for
additional information. You should rely on your own tax adviser for advice about
the particular federal, state and local tax consequences to you of investing in
the Fund.
The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, most shareholders will be taxed on amounts they receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held your Fund
shares or whether you elect to receive your distributions in cash or reinvest
them in additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid
during the following January may be treated as having been received by
shareholders in the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital
gains distributions.
If you invest through a tax-deferred account, such as a retirement plan,
you generally will not have to pay tax on dividends until they are distributed
from the account. These accounts are subject to complex tax rules, and you
should consult your tax adviser about investment through a tax-deferred account.
C-8
<PAGE>
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 another independent auditor.
<TABLE>
<CAPTION>
Class A Class B
--------------------------------------------- -------------------------------------------
Year Three months Year July 21, Year Three months Year July 21,
Ended ended ended 1997(1) to Ended ended ended 1997(1) to
June 30, June 30, March 31, March 31, June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998 2000 1999(2) 1999 1998
---- ------- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 28.09 24.94 15.73 12.50 28.15 25.04 15.64 12.50
Income from investment operations:
Net investment income (loss) $ (0.22) (0.02) (0.08) (0.03) (0.39) (0.05) (0.08) (0.07)
Net realized and unrealized gains
on investments $ 15.63 3.17 9.77 3.29 15.56 3.16 9.71 3.24
Total from investment operations $ 15.41 3.15 9.69 3.26 15.17 3.11 9.63 3.17
Less distributions from:
Net investment income $ -- -- -- -- -- -- -- --
Net realized gains on investments $ 0.38 -- 0.48 0.03 0.38 -- 0.23 0.03
Net asset value, end of period $ 43.12 28.09 24.94 15.73 42.94 28.15 25.04 15.64
Total Return(3): % 55.35 12.63 63.06 62.35 55.37 12.42 62.28 61.08
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 186,261 30,108 12,445 4,742 333,256 49,057 20,039 3,187
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.43 1.59 1.60 2.01 2.08 2.24 2.25
Gross expenses prior to expense
reimbursement(4) % 1.36 1.45 2.24 4.70 2.01 2.10 2.89 4.78
Net investment income (loss) after
expense reimbursement(4)(5) % (0.87) (0.56) (0.65) (0.87) (1.52) (1.21) (1.28) (1.36)
Portfolio turnover % 139 27 253 306 139 27 253 306
Class C Class Q
-------------------------------------------- -------------------------------------------
Year Three months Year July 21, Year Three months Year July 21,
Ended ended ended 1997(1) to ended ended ended 1997(1) to
June 30, June 30, March 31, March 31, June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998 2000 1999(2) 1999 1998
---- ------- ---- ---- ---- ------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 28.07 24.97 15.63 12.50 28.43 25.24 15.66 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.06) (0.07) (0.05) (0.20) (0.03) (0.02) (0.01)
Net realized and unrealized gains
on investments $ 15.48 3.16 9.65 3.24 15.86 3.22 9.87 3.26
Total from investment operations $ 15.13 3.10 9.58 3.19 15.66 3.19 9.85 3.25
Less distributions from:
Net investment income $ -- -- -- -- -- -- -- 0.01
Net realized gains on investments $ 0.38 -- 0.24 0.06 0.38 -- 0.27 0.08
Net asset value, end of period $ 42.82 28.07 24.97 15.63 43.71 28.43 25.24 15.66
Total Return(3): % 54.38 12.41 61.97 61.38 55.57 12.64 63.76 62.47
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 152,682 17,755 8,004 960 24,838 6,044 4,908 799
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.08 2.25 2.25 1.26 1.23 1.26 1.25
Gross expenses prior to expense
reimbursement(4) % 2.01 2.10 2.90 7.79 1.26 1.25 1.91 10.45
Net investment income (loss) after
expense reimbursement(4)(5) % (1.52) (1.21) (1.26) (1.49) (0.77) (0.36) (0.28) (0.62)
Portfolio turnover % 139 27 253 306 139 27 253 306
</TABLE>
----------
(1) The Fund commenced operations on July 21, 1997.
(2) Effective May 24, 1999, Pilgrim Investment 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-10
<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 M
Bank and Thrift Fund A and B
Convertible Fund A, B, C and Q
Corporate Leaders Trust Fund A
Growth and Income Fund A, B, C and Q
Growth + Value Fund A, B, C and Q
Growth Opportunities Fund A, B, C, Q, I and T
LargeCap Growth Fund A, B, C and Q
MagnaCap Fund A, B, C, Q and M
MidCap Growth Fund A, B, C and Q
MidCap Opportunities Fund A, B, C, Q and I
Research Enhanced Index Fund A, B, C, Q and I
SmallCap Growth Fund A, B, C, and Q
SmallCap Opportunities Fund A, B, C, Q, I and T
GLOBAL/INTERNATIONAL EQUITY
Asia-Pacific Equity Fund A, B and M
Emerging Countries Fund A, B, C and Q
Gold Fund (to be renamed Precious Metals Fund) A
International Fund A, B, C and Q
International Core Growth Fund A, B, C and Q
International SmallCap Growth Fund A, B, C and Q
International Value Fund A, B, C and Q
Troika Dialog Russia Fund A
Worldwide Growth Fund A, B, C and Q
FIXED INCOME
GNMA Income Fund A, B, C, Q, M and T
High Yield Fund A, B, C, Q and M
High Yield Fund II A, B, C, Q and T
Lexington Money Market Trust A
Pilgrim Money Market Fund A, B and C
Strategic Income Fund A, B, C and Q
D-1
<PAGE>
APPENDIX E
As of December 1, 2000, no person owned beneficially or of record 5% or
more of the outstanding shares of the specified Class of Pilgrim LargeCap Growth
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 Focus
Fund:
<TABLE>
<CAPTION>
% OF CLASS % OF FUND % OF FUND
BEFORE BEFORE AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C> <C>
First Clearing Corp. Class B 7.91% 0.87%
Gary Oliver Trust, Acct. #5946-6875 Record
1004 Sand Hill Dr Holder
St. Albans, WV 25177-3941
Carn & Co. #02265101 Class A 21.85% 18.53%
ING Savings Plan Record
P.O. Box 96211 Holder
Washington, DC 20090-6211
ING America Insurance Holdings, Inc. Class A 62.17% 52.71%
Investment Accounts Record
5780 Powers Ferry Rd, NW Holder
Atlanta, GA 30327
</TABLE>
As of December 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of ING Large
Cap Growth Fund:
<TABLE>
<CAPTION>
% OF CLASS % OF FUND % OF FUND
BEFORE BEFORE AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Carn & Co. #02265101 Class A 20.44% 12.74%
ING Savings Plan Record
P.O. Box 96211 Holder
Washington, DC 20090-6211
ING America Insurance Holdings, Inc. Class A 56.95% 35.49%
Investment Accounts Record
5780 Powers Ferry Rd, NW Holder
Atlanta, GA 30327
Tribal Government Class C 76.85% 16.58%
Forest County Potawatomi Children Record
P.O. Box 340 Holder
Crandon, WI 54520
</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 Focus Fund and ING Large Cap Growth Fund Pilgrim LargeCap Growth Fund
(series of ING Funds Trust) (a series of Pilgrim Mutual Funds)
1475 Dunwoody Drive 7337 East Doubletree Ranch Road
West Chester, Pennsylvania 19380 Scottsdale, Arizona 85258.
</TABLE>
This Statement of Additional Information is available to the Shareholders of ING
Focus Fund and Large Cap Growth Fund in connection with a proposed transaction
whereby all of the assets and liabilities of ING Large Cap Growth Fund and Focus
Fund, series of ING Funds Trust, will be transferred to Pilgrim LargeCap Growth
Fund, a series of Pilgrim Mutual Funds, in exchange for shares of Pilgrim
LargeCap Growth Fund.
This Statement of Additional Information of the Pilgrim Mutual Funds consists of
this cover page and the following documents, each of which was filed
electronically with the Securities and Exchange Commission and is incorporated
by reference herein:
1. The Statement of Additional Information for Pilgrim LargeCap Growth Fund,
dated November 1, 2000 and as filed on August 25, 2000 and ING Funds Trust
dated November 6, 2000 as filed on September 7, 2000.
2. The Financial Statements of Pilgrim LargeCap Growth Fund are included in
the Annual Report of Pilgrim Mutual Funds dated June 30, 2000, as filed on
September 7, 2000.
3. The Financial Statements of Pilgrim LargeCap Growth Fund are included in
the Semi-Annual Report of Pilgrim Mutual Funds dated December 31, 1999, as
filed on March 6, 2000.
4. The Financial Statements of ING Focus Fund and Large Cap Growth Fund are
included in the Annual Report of ING Funds Trust dated October 31, 1999, as
filed on December 29, 1999.
5. The Financial Statement of ING Focus Fund and Large Cap Growth Fund are
included in the Semi-Annual Report of ING Funds Trust dated April 30, 2000,
as filed on July 7, 2000.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated ________ ___, 2000 relating to the reorganization of
ING Focus Fund and Large Cap Growth Fund may be obtained, without charge, by
writing to ING Funds Trust at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258 or calling 1-800-992-0180. This Statement of Additional
Information should be read in conjunction with the Proxy Statement/Prospectus.
1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and pro forma financial
statements for the combined Fund, assuming the reorganization is consummated, as
of June 30, 2000. The first table presents Statements of Assets and Liabilities
(unaudited) for each Fund and pro forma figures for the combined Fund. The
second table presents Statements of Operations (unaudited) for each Fund and pro
forma figures for the combined Fund. The third table presents Portfolio of
Investments (unaudited) for each Fund and pro forma figures for the combined
Fund. The tables are followed by the Notes to the Pro Forma Financial Statements
(unaudited).
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------- ------------
ASSETS:
<S> <C> <C> <C> <C> <C>
Investments in securities at market value* $692,005,187 $ 61,301,421 $ 91,944,152 $ 845,250,760
Repurchase Agreements 15,448,000 5,920,000 2,032,000 23,400,000
Cash 48,707 23,365 1,607 73,679
Receivables:
Fund shares sold 4,625,769 -- 22,728 4,648,497
Dividends and interest 68,627 47,167 8,526 124,320
Investment securities sold 13,331,522 -- -- 13,331,522
Other -- 29,451 21,921 51,372
Prepaid expenses 41,055 16,688 17,553 75,296
------------ ------------ ------------ ------------- -------------
Total Assets 725,568,867 67,338,092 94,048,487 886,955,446
------------ ------------ ------------ ------------- -------------
LIABILITIES:
Payable for investment securities purchased 26,495,350 807,115 19,947 27,322,412
Payable for fund shares redeemed 982,741 -- 100 982,841
Payable to affiliate 857,695 -- -- 857,695
Other accrued expenses and liabilities 195,329 114,129 154,418 463,876
------------ ------------ ------------ ------------- -------------
Total Liabilities 28,531,115 921,244 174,465 29,626,824
------------ ------------ ------------ ------------- -------------
NET ASSETS $697,037,752 $ 66,416,848 $ 93,874,022 $ 857,328,622
============ ============ ============ ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $526,337,994 $ 54,815,686 $ 77,336,260 $ 658,489,940
Accumulated net investment loss -- (110,762) (610,808) (721,570)
Accumulated net realized gain on investments 7,618,306 2,052,605 2,084,198 11,755,109
Net unrealized appreciation of investments 163,081,452 9,659,319 15,064,372 187,805,143
------------ ------------ ------------ ------------- -------------
Net Assets $697,037,752 $ 66,416,848 $ 93,874,022 $ 857,328,622
============ ============ ============ ============= =============
CLASS A:
Net Assets $186,261,267 $ 57,012,974 $ 61,103,600 $ 304,377,841
Shares outstanding 4,319,579 4,111,627 4,451,225 (5,823,599)(A) 7,058,832
Net asset value and redemption price per share $ 43.12 $ 13.87 $ 13.73 $ 43.12
Maximum offering price per share $ 45.75 $ 14.72 $ 14.57 $ 45.75
CLASS B:
Net Assets $333,256,132 $ 4,914,349 $ 7,409,958 $ 9,239,618 (B) $ 354,820,057
Shares outstanding 7,760,157 357,596 544,457 (399,866)(B) 8,262,344
Net asset value and redemption price per share $ 42.94 $ 13.74 $ 13.61 $ 42.94
Maximum offering price per share $ 42.94 $ 13.74 $ 13.61 $ 42.94
CLASS C:
Net Assets $152,682,354 $ 2,578,552 $ 17,846,845 $ 173,107,751
Shares outstanding 3,565,404 187,839 1,312,281 (1,023,114)(A) 4,042,410
Net asset value and redemption price per share $ 42.82 $ 13.73 $ 13.60 $ 42.82
Maximum offering price per share $ 42.82 $ 13.73 $ 13.60 $ 42.82
CLASS I:
Net Assets N/A N/A $ 184,974 $ (184,974)(C) N/A
Shares outstanding N/A N/A 13,411 (13,411)(C) N/A
Net asset value and redemption price per share N/A N/A $ 13.79 N/A
Maximum offering price per share N/A N/A $ 13.79 N/A
CLASS X:
Net Assets N/A $ 1,910,973 $ 7,328,645 $ (9,239,618)(B) N/A
Shares outstanding N/A 139,330 539,454 (678,784)(B) N/A
Net asset value and redemption price per share N/A $ 13.72 $ 13.59 N/A
Maximum offering price per share N/A $ 13.72 $ 13.59 N/A
CLASS Q:
Net Assets $ 24,837,999 N/A N/A $ 184,974(C) $ 25,022,973
Shares outstanding 568,240 N/A N/A 4,232(C) 572,472
Net asset value and redemption price per share $ 43.71 N/A N/A $ 43.71
Maximum offering price per share $ 43.71 N/A N/A $ 43.71
*Cost of Securities $528,923,735 $ 51,642,102 $ 76,879,779 $ 657,445,616
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(B) Reflects the merging of Class X into Class B.
(C) Reflects the merging of Class I into Class Q.
See Accompanying Notes to Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS COMBINED
------------- ----------- ------------ ------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 2000 2000 2000 2000
------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 979,861 $ 359,760 $ 348,841 $ 1,688,462
Interest 1,001,252 315,534 141,377 1,458,163
------------- ----------- ------------ ------------- -------------
Total investment income 1,981,113 675,294 490,218 3,146,625
------------- ----------- ------------ ------------- -------------
EXPENSES:
Investment management fees 2,997,541 511,501 516,736 (109,220)(A) 3,916,558
Distribution expenses
Class A 375,756 337,246 350,682 (366,269)(A) 697,415
Class B 1,990,735 33,478 47,543 70,178 (C) 2,141,935
Class C 824,123 14,164 115,541 953,828
Class Q 38,960 -- -- 38,960
Class X -- 13,536 56,642 (70,178)(C) --
Transfer agent and registrar fees 638,226 192,751 288,143 (332,107)(A) 787,013
Shareholder Reporting 145,839 14,784 28,970 189,593
Registration and filing fees 87,246 50,682 58,470 (87,322)(B) 109,076
Recordkeeping and pricing fees 66,942 45,900 46,934 (74,267)(B) 85,509
Professional fees 39,618 30,109 30,794 (48,722)(B) 51,799
Custodian fees 45,643 14,093 20,183 79,919
Shareholder servicing fees 27,554 -- -- 27,554
Directors' fees 16,842 228 369 (478)(B) 16,961
Insurance 998 -- -- 998
Miscellaneous 7,788 12,305 18,137 (24,354)(B) 13,876
Interest and credit facility fee 15,244 -- -- 15,244
------------- ----------- ------------ ------------- -------------
Total expenses 7,319,055 1,270,777 1,579,144 (1,042,738) 9,126,238
------------- ----------- ------------ ------------- -------------
Less:
Waived and reimbursed fees -- 514,137 551,956 (1,066,093)(A) --
Earnings credits 19,972 19,972
------------- ----------- ------------ ------------- -------------
Net expenses 7,299,083 756,640 1,027,188 23,355 9,106,266
------------- ----------- ------------ ------------- -------------
Net investment income (loss) (5,317,970) (81,346) (536,970) (23,355) (5,959,641)
------------- ----------- ------------ ------------- -------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from:
Investments 13,498,698 3,302,397 2,153,519 18,954,614
Net change in unrealized appreciation of:
Investments 147,558,169 3,934,204 10,084,216 161,576,589
------------- ----------- ------------ ------------- -------------
Net gain from investments 161,056,867 7,236,601 12,237,735 180,531,203
------------- ----------- ------------ ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 155,738,897 $ 7,155,255 $ 11,700,765 $ (23,355) $ 174,571,562
============= =========== ============ ============= =============
</TABLE>
(A) Reflects adjustment in expenses due to effects of proposed contract rate.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
(C) Reflects merging of Class X into Class B.
See Accompanying Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
COMMON STOCKS: 98.59%
ADVERTISING: 0.36%
19,900 19,900 Interpublic Group Cos. Inc.
20,000 20,000 Omnicom Group
7,900 7,900 Young & Rubicam Inc.
AEROSPACE/DEFENSE: 0.31%
33,100 33,100 Boeing Co.
23,900 23,900 General Dynamics Corp
AUTOMOBILE MANUFACTURING: 0.18%
27,217 27,217 General Motors Corp
BANKS: 0.46%
36,100 36,100 Bank of New York Co Inc
14,700 14,700 Northern Trust Corp.
33,200 33,200 Wells Fargo & Company
BEVERAGES, FOOD & TOBACCO: 0.88%
22,500 22,500 Anheuser-Busch Companies Inc.
68,900 68,900 Kroger Co.
49,000 49,000 Pepsico, Inc.
17,400 17,400 Safeway Inc.
33,600 33,600 Sysco Corp.
BIOTECHNOLOGY: 4.33%
249,100 249,100 @ Amgen, Inc.
109,500 4,700 114,200 @ Genentech, Inc.
CELLULAR TELECOMMUNICATIONS: 2.80%
357,800 357,800 @ Nextel Communications, Inc.
21,600 21,600 @ Sprint Corp. (PCS Group)
18,950 18,950 Vodafone Group PLC-SP ADR
COMMUNICATIONS - INTERNET: 0.84%
19,600 19,600 @ America Online Inc.
6,600 6,600 Inktomi Corp.
33,500 33,500 Psinet Inc.
22,500 22,500 Schwab (Charles) Corp.
7,800 7,800 TMP Worldwide Inc.
38,450 38,450 Verio Inc.
8,900 8,900 @ Yahoo Inc
COMMUNICATIONS - WIRELESS: 0.20%
57,915 57,915 Motorola Inc.
COMPUTERS: 14.19%
363,900 97,000 460,900 @ Cisco Systems
411,000 411,000 @ Dell Computer Corp.
15,000 28,400 43,400 @ EMC Corp-Mass
13,200 13,200 Hewlett-Packard Co
307,900 307,900 @ Oracle Corp.
274,100 21,500 295,600 @ Sun Microsystems
177,250 4,100 181,350 @ Veritas Software Corp.
DIVERSIFIED FINANCIAL SERVICES: 3.69%
51,000 51,000 American Express Company
396,400 27,500 423,900 Citigroup, Inc.
13,800 27,600 41,400 Morgan Stanley Dean Witter & Company
ELECTRIC - GENERATION: 0.31%
35,400 35,400 @ AES Corp.
16,400 16,400 @ Calpine Corp.
ELECTRONICS: 0.07%
4,900 4,900 Waters Corp.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
FIBER OPTICS: 10.11%
168,900 168,900 @ Ciena Corp.
109,300 4,900 114,200 Corning, Inc.
222,300 9,100 231,400 @ JDS Uniphase Corp.
HEALTHCARE - PRODUCTS & SERVICES: 1.59%
19,000 19,000 Bausch & Lomb Inc
30,600 30,600 Baxter International Inc.
14,400 20,900 35,300 Johnson & Johnson
62,600 62,600 HCA - The Healthcare Company
87,800 87,800 Health Management Associates Inc
32,100 32,100 Medtronic Inc.
65,100 65,100 Tenet Healthcare Corporation
INSURANCE: 3.05%
298,300 298,300 Aetna, Inc.
18,073 14,450 32,523 American International Group
40,700 40,700 AON Corp.
30,500 30,500 Chubb Corp.
LODGING: 3.40%
907,300 907,300 MGM Grand, Inc.
MANUFACTURING - MISC: 0.68%
94,800 94,800 General Electric Company
25,112 25,112 Honeywell International Inc
MEDIA: 9.47%
831,024 89,250 920,274 @ AT&T-Liberty Media Corp.
284,600 284,600 @ Cablevision Systems - Class A
407,600 407,600 @ Infinity Broadcasting Corp.
8,700 8,700 Univision Communications Inc.
13,600 13,600 Time Warner Inc
299,400 33,689 333,089 @ Viacom, Inc. - Class B
OIL & GAS PRODUCERS: 2.30%
13,300 13,300 Anadarko Petroleum Corp.
11,700 11,700 Apache Corp.
13,600 13,600 EOG Resources Inc.
467,500 467,500 Santa Fe Int'l Corp.
30,500 30,500 Texaco Inc
OIL & GAS SERVICES: 2.71%
28,800 28,800 Halliburton Co
549,300 549,300 @ Weatherford Int'l, Inc.
PHARMACEUTICALS: 1.41%
31,600 31,600 Bristol-Myers Squibb Co.
17,000 17,000 Cardinal Health Inc.
32,400 32,400 Eli Lilly & Co.
16,100 16,100 Express Scripts Inc.
98,325 98,325 Pfizer Inc
PIPELINES: 2.84%
355,100 355,100 Enron
34,100 34,100 Williams Cos. Inc.
REITS: - OFFICE PROPERTY: 0.16%
50,900 50,900 Equity Office Properties Trust
RETAIL: 3.35%
69,300 69,300 TJX Companies Inc.
442,400 33,900 476,300 Wal-Mart Stores, Inc.
SATELLITE TELECOMMUNICATIONS: 2.35%
229,500 229,500 @ General Motors Corp. - Class H
SEMICONDUCTOR: 9.93%
273,100 14,700 287,800 @ Applied Materials, Inc.
6,000 6,000 @ Broadcom Corp
219,700 40,500 260,200 Intel Corp.
5,400 5,400 @ Kla-Tencor Corp.
9,400 9,400 Linear Technology Corp.
8,400 8,400 @ Novellus Systems Inc.
270,500 30,000 300,500 Texas Instruments, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
11,400 11,400 @ Xilinx Inc.
SOFTWARE: 3.06%
37,400 37,400 First Data Corp.
6,300 6,300 @ Mercury Interactive Corp.
60,200 60,200 @ Microsoft Corp
11,400 4,400 15,800 @ Siebel Systems Inc
92,903 92,903 VeriSign, Inc.
TELECOMMUNICATION SERVICES: 4.44%
7,350 7,350 @ Allegiance Telecom Inc
22,329 22,329 AT&T Corp.
10,700 10,700 Hughes Electronics Corp.
26,800 26,800 Lucent Technologies Inc.
20,500 20,500 @ McLeodUSA Inc.
9,200 9,200 @ Metromedia Fiber Network Inc.
19,875 19,875 NTL Incorporated
17,800 17,800 Nextlink Communications
413,700 413,700 @ Qwest Communications Int'l
29,300 29,300 SBC Communications Inc
34,100 34,100 Verizon Communications
43,300 43,300 @ WorldCom Inc
TELECOMMUNICATION EQUIPMENT: 6.44%
38,100 38,100 ADC Telecommunications Inc.
6,200 6,200 @ Comverse Technology Inc.
422,500 422,500 Nokia Corp. ADR
385,700 385,700 Nortel Networks Corp.
80,400 80,400 Telefonaktiebolaget LM Ericsson
TRANSPORTATION: 0.09%
13,500 13,500 United Parcel Service Inc.
WIRELESS EQUIPMENT: 2.85%
119,300 119,300 @ Aether Systems, Inc.
TOTAL COMMON STOCKS (COST: $528,923,735,
$51,642,102, $76,879,779, $657,445,616)
TOTAL LONG-TERM INVESTMENTS (COST: $528,923,735,
$51,642,102, $76,879,779, $657,445,616)
PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS: 2.73%
-----------------------------------------------------
Repurchase Agreement: 2.73%
State Street Bank & Trust Repurchase Agreement,
$15,448,000 $15,448,000 6.200%, due 07/03/00
State Street Bank & Trust Repurchase Agreement,
$5,920,000 2,032,000 7,952,000 6.550%, due 07/03/00
TOTAL SHORT-TERM INVESTMENTS (COST: $15,448,000,
$5,920,000, $2,032,000, $23,400,000)
TOTAL INVESTMENTS IN SECURITIES (COST: $544,371,735,
$57,562,102, $78,911,779, $680,845,616)
OTHER ASSETS AND LIABILITIES-NET
NET ASSETS
</TABLE>
@ Non-income producing security
ADR American Depository Receipt
See Accompanying Notes to Financial Statements
5
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
COMMON STOCKS: 98.59%
ADVERTISING: 0.36%
Interpublic Group Cos. Inc. $ 855,700 $ 855,700
Omnicom Group 1,781,250 1,781,250
Young & Rubicam Inc. 451,781 451,781
------------ ----------- ----------- ------------
-- -- 3,088,731 3,088,731
------------ ----------- ----------- ------------
AEROSPACE/DEFENSE: 0.31%
Boeing Co. $1,383,994 1,383,994
General Dynamics Corp 1,248,775 1,248,775
------------ ----------- ----------- ------------
-- 2,632,769 -- 2,632,769
------------ ----------- ----------- ------------
AUTOMOBILE MANUFACTURING: 0.18%
General Motors Corp 1,580,287 1,580,287
------------ ----------- ----------- ------------
BANKS: 0.46%
Bank of New York Co Inc 1,678,650 1,678,650
Northern Trust Corp. 956,419 956,419
Wells Fargo & Company 1,286,500 1,286,500
------------ ----------- ----------- ------------
-- 1,678,650 2,242,919 3,921,569
------------ ----------- ----------- ------------
BEVERAGES, FOOD & TOBACCO: 0.88%
Anheuser-Busch Companies Inc. 1,680,469 1,680,469
Kroger Co. 1,520,106 1,520,106
Pepsico, Inc. 2,177,437 2,177,437
Safeway Inc. 785,175 785,175
Sysco Corp. 1,415,400 1,415,400
------------ ----------- ----------- ------------
-- 3,697,543 3,881,044 7,578,587
------------ ----------- ----------- ------------
BIOTECHNOLOGY: 4.33%
Amgen, Inc. $ 17,499,275 17,499,275
Genentech, Inc. 18,834,000 808,400 19,642,400
------------ ----------- ----------- ------------
36,333,275 -- 808,400 37,141,675
------------ ----------- ----------- ------------
CELLULAR TELECOMMUNICATIONS: 2.80%
Nextel Communications, Inc. 21,892,888 21,892,888
Sprint Corp. (PCS Group) 1,285,200 1,285,200
Vodafone Group PLC-SP ADR 785,241 785,241
------------ ----------- ----------- ------------
21,892,888 785,241 1,285,200 23,963,329
------------ ---------- ----------- -----------
COMMUNICATIONS - INTERNET: 0.84%
America Online Inc. 1,033,900 1,033,900
Inktomi Corp. 780,450 780,450
Psinet Inc. 841,687 841,687
Schwab (Charles) Corp. 756,562 756,562
TMP Worldwide Inc. 575,738 575,738
Verio Inc. 2,133,374 2,133,374
Yahoo Inc 1,102,488 1,102,488
------------ ----------- ----------- ------------
-- 2,975,061 4,249,138 7,224,199
------------ ----------- ----------- ------------
COMMUNICATIONS - WIRELESS: 0.20%
Motorola Inc. 1,683,155 1,683,155
------------ ----------- ----------- ------------
COMPUTERS: 14.19%
Cisco Systems 23,130,394 6,165,562 29,295,956
Dell Computer Corp. 20,267,437 20,267,437
EMC Corp-Mass 1,154,063 2,185,025 3,339,088
Hewlett-Packard Co 1,648,350 1,648,350
Oracle Corp. 25,882,844 25,882,844
Sun Microsystems 24,925,969 1,955,156 26,881,125
Veritas Software Corp. 20,032,020 463,364 20,495,384
------------ ----------- ----------- ------------
114,238,664 1,154,063 12,417,457 127,810,183
------------ ----------- ----------- ------------
DIVERSIFIED FINANCIAL SERVICES: 3.69%
American Express Company 2,658,375 2,658,375
Citigroup, Inc. 23,883,100 1,656,875 25,539,975
Morgan Stanley Dean Witter & Company 1,148,850 2,297,700 3,446,550
------------ ----------- ----------- ------------
23,883,100 1,148,850 6,612,950 31,644,900
------------ ----------- ----------- ------------
ELECTRIC - GENERATION: 0.31%
AES Corp. 1,615,125 1,615,125
Calpine Corp. 1,078,300 1,078,300
------------ ----------- ----------- ------------
-- -- 2,693,425 2,693,425
------------ ----------- ----------- ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ELECTRONICS: 0.07%
Waters Corp. 611,581 611,581
------------ ----------- ----------- ------------
FIBER OPTICS: 10.11%
Ciena Corp. 28,153,518 28,153,518
Corning, Inc. 29,497,337 1,322,387 30,819,724
JDS Uniphase Corp. 26,648,213 1,090,862 27,739,075
------------ ----------- ----------- ------------
84,299,068 -- 2,413,249 86,712,317
------------ ----------- ----------- ------------
HEALTHCARE - PRODUCTS & SERVICES: 1.59%
Bausch & Lomb Inc 1,470,125 1,470,125
Baxter International Inc. 2,151,562 2,151,562
Johnson & Johnson 1,467,000 2,129,188 3,596,188
HCA - The Healthcare Company 1,901,475 1,901,475
Health Management Associates Inc 1,146,888 1,146,888
Medtronic Inc. 1,598,981 1,598,981
Tenet Healthcare Corporation 1,757,700 1,757,700
------------ ----------- ----------- ------------
-- 9,894,750 3,728,169 13,622,919
------------ ----------- ----------- ------------
INSURANCE: 3.05%
Aetna, Inc. 19,147,131 19,147,131
American International Group 2,123,577 1,697,875 3,821,452
AON Corp. 1,264,244 1,264,244
Chubb Corp. 1,875,750 1,875,750
------------ ----------- ----------- ------------
19,147,131 5,263,571 1,697,875 26,108,577
------------ ----------- ----------- ------------
LODGING: 3.40%
MGM Grand, Inc. 29,147,013 29,147,013
------------ ----------- ----------- ------------
MANUFACTURING - MISC: 0.68%
General Electric Company 5,024,400 5,024,400
Honeywell International Inc 845,961 845,961
------------ ----------- ----------- ------------
-- 845,961 5,024,400 5,870,361
------------ ----------- ----------- ------------
MEDIA: 9.47%
AT&T-Liberty Media Corp. 20,152,331 2,164,312 22,316,643
Cablevision Systems - Class A 19,317,225 19,317,225
Infinity Broadcasting Corp. 14,851,925 14,851,925
Univision Communications Inc. 900,450 900,450
Time Warner Inc 1,033,600 1,033,600
Viacom, Inc. - Class B 20,471,475 2,297,169 22,768,644
------------ ----------- ----------- ------------
74,792,956 5,495,081 900,450 81,188,487
------------ ----------- ----------- ------------
OIL & GAS PRODUCERS: 2.30%
Anadarko Petroleum Corp. 655,856 655,856
Apache Corp. 688,106 688,106
EOG Resources Inc. 455,600 455,600
Santa Fe Int'l Corp. 16,333,281 16,333,281
Texaco Inc 1,624,125 1,624,125
------------ ----------- ----------- ------------
16,333,281 1,624,125 1,799,562 19,756,968
------------ ----------- ----------- ------------
OIL & GAS SERVICES: 2.71%
Halliburton Co 1,359,000 1,359,000
Weatherford Int'l, Inc. 21,869,006 21,869,006
------------ ----------- ----------- ------------
21,869,006 1,359,000 -- 23,228,006
------------ ----------- ----------- ------------
PHARMACEUTICALS: 1.41%
Bristol-Myers Squibb Co. 1,840,700 1,840,700
Cardinal Health Inc. 1,258,000 1,258,000
Eli Lilly & Co. 3,235,950 3,235,950
Express Scripts Inc. 1,000,212 1,000,212
Pfizer Inc 4,719,600 4,719,600
------------ ----------- ----------- ------------
-- 1,000,212 11,054,250 12,054,462
------------ ----------- ----------- ------------
PIPELINES: 2.84%
Enron 22,903,950 22,903,950
Williams Cos. Inc. 1,421,544 1,421,544
------------ ----------- ----------- ------------
22,903,950 1,421,544 -- 24,325,494
------------ ----------- ----------- ------------
REITS: - OFFICE PROPERTY: 0.16%
Equity Office Properties Trust 1,402,931 1,402,931
------------ ----------- ----------- ------------
RETAIL: 3.35%
TJX Companies Inc. 1,299,375 1,299,375
Wal-Mart Stores, Inc. 25,493,300 1,953,488 27,446,788
------------ ----------- ----------- ------------
25,493,300 1,299,375 1,953,488 28,746,163
------------ ----------- ----------- ------------
SATELLITE TELECOMMUNICATIONS: 2.35%
General Motors Corp. - Class H 20,138,625 20,138,625
------------ ----------- ----------- ------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PILGRIM ING
LARGECAP ING LARGE CAP
GROWTH FOCUS GROWTH PRO FORMA
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SEMICONDUCTOR: 9.93%
Applied Materials, Inc. 24,749,687 1,332,187 26,081,874
Broadcom Corp 1,313,625 1,313,625
Intel Corp. 29,371,144 5,414,344 34,785,488
Kla-Tencor Corp. 316,237 316,237
Linear Technology Corp. 601,013 601,013
Novellus Systems Inc. 475,125 475,125
Texas Instruments, Inc. 18,579,969 2,060,625 20,640,594
Xilinx Inc. 941,213 941,213
------------ ----------- ----------- ------------
72,700,800 -- 12,454,369 85,155,169
------------ ----------- ----------- ------------
SOFTWARE: 3.06%
First Data Corp. 1,855,975 1,855,975
Mercury Interactive Corp. 609,525 609,525
Microsoft Corp 4,816,000 4,816,000
Siebel Systems Inc 1,864,613 719,675 2,584,288
VeriSign, Inc. 16,397,291 16,397,291
------------ ----------- ----------- ------------
16,397,291 3,720,588 6,145,200 26,263,079
------------ ----------- ----------- ------------
TELECOMMUNICATION SERVICES: 3.72%
Allegiance Telecom Inc 470,400 470,400
AT&T Corp. 706,155 706,155
Hughes Electronics Corp. 938,925 938,925
Lucent Technologies Inc. 1,587,900 1,587,900
McLeodUSA Inc. 424,094 424,094
Metromedia Fiber Network Inc. 365,125 365,125
NTL Incorporated 1,190,016 1,190,016
Nextlink Communications 675,288 675,288
Qwest Communications Int'l 20,555,719 20,555,719
SBC Communications Inc 1,267,225 1,267,225
Verizon Communications 1,732,706 1,732,706
WorldCom Inc 1,986,388 1,986,388
------------ ----------- ----------- ------------
20,555,719 5,835,027 5,509,195 31,899,941
------------ ----------- ----------- ------------
TELECOMMUNICATION EQUIPMENT: 6.16%
ADC Telecommunications Inc. 3,195,637 3,195,637
Comverse Technology Inc. 576,600 576,600
Nokia Corp. ADR 21,098,595 21,098,595
Nortel Networks Corp. 26,324,025 26,324,025
Telefonaktiebolaget LM Ericsson 1,608,000 1,608,000
------------ ----------- ----------- ------------
47,422,620 4,803,637 576,600 52,802,857
------------ ----------- ----------- ------------
TRANSPORTATION: 0.09%
United Parcel Service Inc. 796,500 796,500
------------ ----------- ----------- ------------
WIRELESS EQUIPMENT: 2.85%
Aether Systems, Inc. 24,456,500 24,456,500
------------ ----------- ----------- ------------
TOTAL COMMON STOCKS (COST: $528,923,735,
$51,642,102, $76,879,779, $657,445,616) 692,005,187 61,301,421 91,944,152 845,250,760
------------ ----------- ----------- ------------
TOTAL LONG-TERM INVESTMENTS (COST: $528,923,735,
$51,642,102, $76,879,779, $657,445,616) 692,005,187 61,301,421 91,944,152 845,250,760
------------ ----------- ----------- ------------
SHORT-TERM INVESTMENTS: 2.73%
Repurchase Agreement: 2.73%
State Street Bank & Trust Repurchase Agreement,
6.200%, due 07/03/00 15,448,000 15,448,000
State Street Bank & Trust Repurchase Agreement,
6.550%, due 07/03/00 5,920,000 2,032,000 7,952,000
TOTAL SHORT-TERM INVESTMENTS (COST: $15,448,000,
$5,920,000, $2,032,000, $23,400,000) 15,448,000 5,920,000 2,032,000 23,400,000
------------ ----------- ----------- ------------
TOTAL INVESTMENTS IN SECURITIES (COST: $544,371,735,
$57,562,102, $78,911,779, $680,845,616) 101.32% 707,453,187 67,221,421 93,976,152 868,650,760
OTHER ASSETS AND LIABILITIES-NET -1.32% (10,415,435) (804,573) (102,130) (11,322,138)
------ ------------ ----------- ----------- ------------
NET ASSETS 100.00% $697,037,752 $66,416,848 $93,874,022 $857,328,622
====== ============ =========== =========== ============
</TABLE>
See Accompanying Notes to Financial Statements
8
<PAGE>
Shown below are presentations of Annual Fund Operating Expenses on a PRO
FORMA basis. The table PRO FORMA I presents annual fund operating expenses
assuming that the reorganization with the ING Focus Fund is consummated, but not
the reorganization with the ING Large Cap Growth Fund. The table PRO FORMA II
presents annual fund operating expenses assuming that the reorganization with
the ING Large Cap Growth Fund is consummated, but not the ING Focus Fund. The
table PRO Forma III presents annual fund operating expenses assuming that the
reorganizations with both the ING Large Cap Growth Fund and the ING Focus Fund
are consummated. PRO FORMA tables I and II are presented in case one of the
reorganizations is not consummated, which could occur if the reorganization is
cancelled or because shareholders do not approve it. These abbreviated PRO FORMA
presentations are presented, and not full PRO FORMA presentations of financial
statements, because the latter are not practicable and may be of limited
utility.
PROFORMA I: Proposed Reorganization of ING Focus Fund into Pilgrim LargeCap
Growth Fund (assumes reorganization of ING Large Cap Growth Fund does not occur)
(1)
<TABLE>
<CAPTION>
Distribution
and Shareholder Total Fund
Management Servicing (12b-1) 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 Focus Fund 1.00% 0.35%(4) 0.57% 1.92% -0.52% 1.40%
Pilgrim LargeCap Growth Fund 0.75% 0.35% 0.26% 1.36% 0.00% 1.36%
Pro Forma 0.75% 0.35% 0.25% 1.35% 0.00% 1.35%
Class B
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.25% 2.00% 0.00% 2.00%
Class C
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.25% 2.00% 0.00% 2.00%
</TABLE>
----------
(1) The fiscal year end for the ING Focus Fund is October 31. The fiscal year
end for the Pilgrim LargeCap Growth Fund is June 30. Expenses of the Funds
and Pro forma expenses are estimated based upon expenses incurred by each
Fund for the twelve month period ended June 30, 2000. The expenses for ING
Focus Fund have been adjusted for current expenses of contracts and 12b-1
plans which were in effect on November 6, 2000. Pro forma results are
adjusted for anticipated contractual changes.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into an expense limitation agreement
with Pilgrim LargeCap Growth Fund under which it will limit expenses of the
Fund (excluding interest, taxes, brokerage and extraordinary expenses) to
1.60%, 2.25% and 2.25% for Classes A, B and C, respectively. IMFC has
entered into an expense limitation contract that limits expenses(excluding
interest, taxes, brokerage and extraordinary expenses) for ING Focus Fund
to annual rates of 1.40%, 2.05% and 2.05% for Class A, Class B and Class C
shares, respectively.
(4) Prior to November 6, 2000, the Class A distribution fee was 0.50% and the
shareholder servicing fee was 0.25% of net assets.
See Accompanying Notes to Financial Statements
9
<PAGE>
PROFORMA II: Proposed Reorganization of ING Large Cap Growth Fund into Pilgrim
LargeCap Growth Fund (assumes reorganization of ING Focus Fund does not occur)
(1)
<TABLE>
<CAPTION>
Distribution
and Shareholder Total Fund
Management Servicing (12b-1) 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 Large Cap Growth Fund 0.75% 0.35%(4) 0.55% 1.65% -0.36% 1.29%
Pilgrim LargeCap Growth Fund 0.75% 0.35% 0.26% 1.36% 0.00% 1.36%
Pro Forma 0.75% 0.35% 0.25% 1.35% 0.00% 1.35%
Class B
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.25% 2.00% 0.00% 2.00%
Class C
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.25% 2.00% 0.00% 2.00%
Class I (ING)/Class Q (Pilgrim)
ING Large Cap Growth Fund 0.75% 0.00% 0.55% 1.30% -0.56% 0.74%
Pilgrim LargeCap Growth Fund 0.75% 0.25% 0.26% 1.26% 0.00% 1.26%
Pro Forma 0.75% 0.25% 0.25% 1.25% 0.00% 1.25%
</TABLE>
----------
(1) The fiscal year end for the ING Large Cap Growth Fund is October 31. The
fiscal year end for the Pilgrim LargeCap Growth Fund is June 30. Expenses
of the Funds and Pro forma expenses are estimated based upon expenses
incurred by each Fund for the twelve month period ended June 30, 2000. The
expenses for ING Large Cap Growth Fund have been adjusted for current
expenses of contracts and 12b-1 plans which were in effect on November 6,
2000. Pro forma results are adjusted for anticipated contractual changes.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into an expense limitation agreement
with Pilgrim LargeCap Growth Fund under which it will limit expenses of the
Fund (excluding interest, taxes, brokerage and extraordinary expenses) to
1.60%, 2.25%, 2.25% and 1.25% for Classes A, B, C and Q respectively. IMFC
has entered into an expense limitation contract that limits expenses
(excluding interest, taxes, brokerage and extraordinary expenses) for ING
Large Cap Fund to annual rates of 1.29%, 1.94%, 1.94% and 0.74% for Class
A, Class B, Class C and Class I shares, respectively.
(4) Prior to November 6, 2000, the Class A distribution fee was 0.50% and the
shareholder servicing fee was 0.25% of net assets.
See Accompanying Notes to Financial Statements
10
<PAGE>
PROFORMA III: Proposed Reorganization of ING Focus Fund and ING Large Cap Growth
Fund into Pilgrim LargeCap Growth Fund.
<TABLE>
<CAPTION>
Distribution
and Shareholder Total Fund
Management Servicing (12b-1) 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 Focus Fund 1.00% 0.35%(4) 0.57% 1.92% -0.52% 1.40%
ING Large Cap Growth Fund 0.75% 0.35%(4) 0.55% 1.65% -0.36% 1.29%
Pilgrim LargeCap Growth Fund 0.75% 0.35% 0.26% 1.36% 0.00% 1.36%
Pro Forma 0.75% 0.35% 0.20% 1.30% 0.00% 1.30%
Class B
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.20% 1.95% 0.00% 1.95%
Class C
ING Focus Fund 1.00% 1.00% 0.57% 2.57% -0.52% 2.05%
ING Large Cap Growth Fund 0.75% 1.00% 0.55% 2.30% -0.36% 1.94%
Pilgrim LargeCap Growth Fund 0.75% 1.00% 0.26% 2.01% 0.00% 2.01%
Pro Forma 0.75% 1.00% 0.20% 1.95% 0.00% 1.95%
Class I (ING)/Class Q (Pilgrim)
ING Focus Fund N/A N/A N/A N/A N/A N/A
ING Large Cap Growth Fund 0.75% 0.00% 0.55% 1.30% -0.56% 0.74%
Pilgrim LargeCap Growth Fund 0.75% 0.25% 0.26% 1.26% 0.00% 1.26%
Pro Forma 0.75% 0.25% 0.20% 1.20% 0.00% 1.20%
</TABLE>
----------
(1) The fiscal year end for the Disappearing Funds is October 31. The fiscal
year end for the Pilgrim LargeCap Growth Fund is June 30. Expenses of the
Funds and Pro forma expenses are estimated based upon expenses incurred by
each Fund for the twelve month period ended June 30, 2000. The expenses for
the Disappearing Funds have been adjusted for current expenses of contracts
and 12b-1 plans which were in effect on November 6, 2000. Pro forma results
are adjusted for anticipated contractual changes.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into an expense limitation agreement
with Pilgrim LargeCap Growth Fund under which it will limit expenses of the
Fund (excluding interest, taxes, brokerage and extraordinary expenses) to
1.60%, 2.25%, 2.25% and 1.25% for Classes A, B, C and Q respectively. IMFC
has entered into an expense limitation contract that limits expenses
(excluding interest, taxes, brokerage and extraordinary expenses) for ING
Focus Fund to annual rates of 1.40%, 2.05% and 2.05% for Class A, Class B
and Class C shares, respectively. IMFC has also entered into an expense
limitation contract that limits expenses (excluding interest, taxes,
brokerage and extraordinary expenses) for ING Large Cap Growth Fund to
1.29%, 1.94%, 1.94% and 0.74% for Class A, Class B, Class C and Class I
shares, respectively. IMCF has agreed that the expense limitations shown in
the table will apply to the Disappearing Funds until at least February 28,
2001.
(4) Prior to November 6, 2000, the Class A distribution fee was 0.50% and the
shareholder servicing fee was 0.25% of net assets.
See Accompanying Notes to Financial Statements
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On November 2, 2000, the Board of Pilgrim LargeCap Growth Fund and on
November 16, 2000 the Boards of ING Focus Fund ("Focus Fund") and ING Large Cap
Growth Fund, approved an Agreement and Plan of Reorganization (the "Plan")
whereby, subject to approval by the shareholders of Focus Fund and ING Large Cap
Growth Fund, Pilgrim LargeCap Growth Fund will acquire all of the assets of the
Focus Fund and ING Large Cap Growth Fund subject to the liabilities of such
Funds, in exchange for a number of shares equal to the pro rata net assets of
shares of the Pilgrim LargeCap Growth Fund (the "Merger").
The Merger will be accounted for as a tax free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be representative of
what the actual combined financial statements would have been had the
reorganization occurred at June 30, 2000. The unaudited pro forma portfolio of
investments, and unaudited pro forma statement of assets and liabilities reflect
the financial position of Pilgrim LargeCap Growth Fund, Focus Fund and ING Large
Cap Growth Fund at June 30, 2000. The unaudited pro forma statement of
operations reflects the results of operations of Pilgrim LargeCap Growth Fund,
Focus Fund and ING Large Cap Growth Fund for the year ended June 30, 2000. These
statements have been derived from the Funds' respective books and records
utilized in calculating daily net asset value at the dates indicated above for
Pilgrim LargeCap Growth Fund, Focus Fund and ING Large Cap Growth Fund under
generally accepted accounting principles. The historical cost of investment
securities will be carried forward to the surviving entity and results of
operations of Pilgrim LargeCap Growth Fund for pre-combination periods will not
be restated.
The unaudited pro forma portfolio of investments, and unaudited pro forma
statements of assets and liabilities and operations should be read in
conjunction with the historical financial statements of the Funds incorporated
by reference in the Statements of Additional Information.
NOTE 2 - SECURITY VALUATION:
Investments in equity securities traded on a national securities exchange
or included on the NASDAQ National Market System are valued at the last reported
sale price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market are valued at the
mean between the last reported bid and ask prices. U.S. Government obligations
are valued by using market quotations or independent pricing services which use
prices provided by market-makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
All investments quoted in foreign currencies will be valued daily in U.S.
Dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined by each Fund's Custodian. Securities for which
market quotations are not readily available are valued at their respective fair
values as determined in good faith and in accordance with policies set by the
Board of Directors. Investments in securities maturing in less than 60 days are
valued at cost, which, when combined with accrued interest, approximates market
value.
NOTE 3 - 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.
12
<PAGE>
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.
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
Focus Fund and ING Large Cap Growth Fund by Pilgrim LargeCap Growth Fund as of
June 30, 2000. The number of additional shares issued was calculated by dividing
the net asset value of each Class of Focus Fund and ING Large Cap Growth Fund by
the respective Class net asset value per share of Pilgrim LargeCap Growth 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. Focus Fund and
ING Large Cap Growth Fund expenses were adjusted assuming Pilgrim LargeCap
Growth 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
recurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger.
NOTE 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. In
addition, no capital gain distribution shall be made until the capital loss
carryforward has been fully utilized or expires.
13
<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 ("1933 Act") 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 1933 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 1933 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) (A) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim LargeCap Growth Fund, and ING Funds Trust
on behalf of ING Large Cap Growth Fund.
(B) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim LargeCap Growth Fund, and ING Funds Trust
on behalf of ING Focus 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-14 Registration Statement as filed on November
1, 2000 and incorporated herein by reference.
(7) Form of Underwriting Agreement between the Trust and Pilgrim Securities,
Inc.- Filed as an exhibit to the Registrant's Form N-14 Registration
Statement on November 29, 2000 and incorporated herein by reference.
(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.
4
<PAGE>
(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.
(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 Opinions and Consents 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.
5
<PAGE>
(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.
(G) Form of Agreement among Reserve Institutional Trust; Reserve
Management Company, Inc.; Reserve 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) Consents of Independent Auditors
(15) Not Applicable
(16) Powers of Attorney
(17) Not Applicable
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the 1933 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 15th 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 December 15, 2000
------------------------------
John G. Turner
/s/ Robert W. Stallings Trustee and President December 15, 2000
------------------------------ (Chief Executive Officer)
Robert W. Stallings*
/s/ Al Burton Trustee December 15, 2000
------------------------------
Al Burton*
/s/ Paul S. Doherty Trustee December 15, 2000
------------------------------
Paul S. Doherty*
/s/ Robert B. Goode Trustee December 15, 2000
------------------------------
Robert B. Goode*
/s/ Alan L. Gosule Trustee December 15, 2000
------------------------------
Alan L. Gosule*
/s/ Walter H. May Trustee December 15, 2000
------------------------------
Walter H. May
/s/ Jock Patton Trustee December 15, 2000
------------------------------
Jock Patton*
7
<PAGE>
/s/ David W.C. Putnam Trustee December 15, 2000
------------------------------
David W.C. Putnam
/s/ John R. Smith Trustee December 15, 2000
------------------------------
John R. Smith*
/s/ David W. Wallace Trustee December 15, 2000
------------------------------
David W. Wallace
/s/ Michael J. Roland Senior Vice President December 15, 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.
8
<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
<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
<PAGE>
EXHIBIT INDEX
(4)(A) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim LargeCap Growth Fund, and ING Funds Trust
on behalf of ING Large Cap Growth Fund.
(4)(B) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim LargeCap Growth Fund, and ING Funds Trust
on behalf of ING Focus Fund.
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinions and Consents of Counsel supporting tax matters and
consequences
(14) Consents of Independent Auditors
<PAGE>
ING FOCUS FUND
(a series of ING Funds Trust)
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) [__________________] and [_______________] or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the ING Focus Fund (the "Fund") a series of ING Funds Trust, which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Funds to be held at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258
on ________ ___, 2001 at ______ a.m., local time, and at any adjournment
thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Class A, Class B and Class C shares of ING
Focus Fund by Pilgrim LargeCap Growth Fund in exchange for Class A, Class B, and
Class C shares of beneficial interest of Pilgrim LargeCap Growth Fund,
respectively, and the assumption by Pilgrim LargeCap Growth Fund of all of the
liabilities of ING Focus 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
<PAGE>
ING LARGE CAP GROWTH FUND
(a series of ING Funds Trust)
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) [__________________] and [_______________] or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the ING Large Cap Growth Fund (the "Fund") a series of ING Funds
Trust, which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the Funds to be held at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258 on ________ ___, 2001 at ______ a.m., local time, and
at any adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Class A, Class B, Class C and Class I shares
of ING Large Cap Growth Fund by Pilgrim LargeCap Growth Fund in exchange for
Class A, Class B, Class C, and Class Q shares of beneficial interest of Pilgrim
LargeCap Growth Fund, respectively, and the assumption by Pilgrim LargeCap
Growth Fund of all of the liabilities of ING Large Cap Growth Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
----------------------------- --------------
Signature Date
----------------------------- --------------
Signature (if held jointly) Date
