As filed with the Securities and Exchange Commission on December 4, 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, AZ 85258
(Address of Principal Executive Offices) (Zip Code)
(800) 992-0180
(Registrant's Area Code and Telephone Number)
James M. Hennessy
ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz, Esq.
Dechert
1775 Eye Street, N.W.
Washington, DC 20006
------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
--------------------------------------------------------------------------------
It is proposed that this filing will become effective on
January 3, 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>
Pilgrim Emerging Markets Value Fund and
Pilgrim Worldwide Emerging Markets Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
(800) 992-0180
_____________, 2001
Your Board of Directors/Trustees has called a Special Meeting of
Shareholders of Pilgrim Emerging Markets Value Fund ("Emerging Markets Value
Fund") and Pilgrim Worldwide Emerging Markets Fund ("Worldwide Emerging Markets
Fund"), as applicable, each scheduled to be held at _______ [a.m./p.m.], local
time, on ___________, 2001, at 7337 East Doubletree Ranch Road, Scottsdale, AZ
85258.
The Board of Directors/Trustees of Emerging Markets Value Fund and Pilgrim
Worldwide Emerging Markets Fund each have approved a reorganization of each of
these funds into Pilgrim Emerging Countries Fund ("Emerging Countries Fund"),
which is managed by ING Pilgrim Investments, Inc. ("ING Pilgrim Investments")
and is part of the Pilgrim Funds (the "Reorganizations"). If approved by
shareholders, you would become a shareholder of Emerging Countries Fund on the
date that the Reorganizations occur. Emerging Countries Fund has investment
objectives and policies that are similar in many respects to those of Emerging
Markets Value Fund and Worldwide Emerging Markets Fund.
You are being asked to vote to approve Agreements and Plans of
Reorganization. The accompanying documents describe the proposed transactions
and compare the policies and expenses of each of the Funds for your evaluation.
After careful consideration, the Board of Directors/Trustees of Emerging
Markets Value Fund and Worldwide Emerging Markets Fund each unanimously approved
this proposal and recommended that shareholders vote "FOR" the proposal.
A Proxy Statement/Prospectus that describes the Reorganizations 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 Funds are using Shareholder Communications Corporation, a professional
proxy solicitation firm, to assist shareholders in the voting process. As the
date of the meeting approaches, if we have not already heard from you, you may
receive a telephone call from Shareholder Communications Corporation reminding
you to exercise your right to vote.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
Robert W. Stallings
President
<PAGE>
Pilgrim Emerging Markets Value Fund and
Pilgrim Worldwide Emerging Markets Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
(800) 992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
PILGRIM EMERGING MARKETS VALUE FUND
AND PILGRIM WORLDWIDE EMERGING MARKETS FUND
SCHEDULED FOR ___________, 2001
To the Shareholders:
A Special Meeting of Shareholders of both Pilgrim Emerging Markets Value
Fund and Pilgrim Worldwide Emerging Markets Fund ("Special Meeting") is
scheduled for _________, 2001, at _______ [a.m./p.m.], local time, at 7337 East
Doubletree Ranch Road, Scottsdale, AZ 85258.
At the Special Meeting, you will be asked to consider and approve the
following:
1. Emerging Markets Value Fund only. To approve an Agreement and Plan of
Reorganization providing for the acquisition of all of the assets and
liabilities of Pilgrim Emerging Markets Value Fund by Pilgrim Emerging
Countries Fund;
2. Worldwide Emerging Markets Fund only. To approve an Agreement and Plan
of Reorganization providing for the acquisition of all of the assets
and liabilities of Pilgrim Worldwide Emerging Markets Fund by Pilgrim
Emerging Countries Fund; and
3. Both Funds. 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 ___________, 2000, are
entitled to notice of and the right to vote at the Special Meeting. Your
attention is called to the accompanying Proxy Statement/Prospectus. Regardless
of whether you plan to attend the meeting, PLEASE COMPLETE, SIGN AND RETURN
PROMPTLY THE ENCLOSED PROXY CARD so that a quorum will be present and a maximum
number of shares may be voted. If you are present at the meeting, you may change
your vote, if desired, at that time.
By Order of the Board of Directors/Trustees
James M. Hennessy,
Secretary
______________, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION ............................................................. 1
SUMMARY .................................................................. 2
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES ....................... 4
Comparison of Portfolio Characteristics ............................... 5
Relative Performance .................................................. 6
Comparison of Investment Techniques and Risks of the Funds ............ 7
COMPARISON OF FEES AND EXPENSES .......................................... 8
Total Operating Expenses .............................................. 8
Expense Table ......................................................... 9
General Information ................................................... 11
ADDITIONAL INFORMATION ABOUT EMERGING COUNTRIES FUND ..................... 12
Investment Personnel .................................................. 12
Performance of Emerging Countries Fund ................................ 13
INFORMATION ABOUT THE REORGANIZATION ..................................... 15
ADDITIONAL INFORMATION ABOUT THE FUNDS ................................... 17
GENERAL INFORMATION ABOUT THE PROXY STATEMENT ............................ 18
Solicitation of Proxies ............................................... 18
Voting Rights ......................................................... 18
Other Matters to Come Before the Meeting .............................. 19
Shareholder Proposals ................................................. 19
Reports to Shareholders ............................................... 20
APPENDIX A ............................................................... A-1
APPENDIX B ............................................................... B-1
APPENDIX C ............................................................... C-1
APPENDIX D ............................................................... D-1
APPENDIX E ............................................................... E-1
APPENDIX F ............................................................... F-1
<PAGE>
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
_________________, 2001
PILGRIM EMERGING MARKETS VALUE FUND
(a series of Pilgrim Mayflower Trust)
and
PILGRIM WORLDWIDE EMERGING MARKETS FUND
(a series of Pilgrim Worldwide Emerging Markets Fund, Inc.)
Relating to the Reorganizations into
PILGRIM EMERGING COUNTRIES FUND
(a series of Pilgrim Mutual Funds)
(each, a "Fund," and 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 Pilgrim Emerging Markets Value Fund ("Emerging Markets Value
Fund") and Pilgrim Worldwide Emerging Markets Fund ("Worldwide Emerging Markets
Fund") (each a "Disappearing Fund," collectively, the "Disappearing Funds") to
Pilgrim Emerging Countries Fund ("Emerging Countries Fund") in exchange for
shares of Emerging Countries Fund (each, a "Reorganization," and collectively,
the "Reorganizations"). Each Disappearing Fund would then distribute to its
shareholders their portion of the shares of Emerging Countries Fund it receives
in the Reorganizations. The result would be a liquidation of each of the
Disappearing Funds. You would receive shares of Emerging Countries Fund having
an aggregate value equal to the aggregate value of the shares you held of
Emerging Markets Value Fund and/or Worldwide Emerging Markets Fund, as
applicable, as of the close of business on the business day of the closing of
the Reorganizations. You are being asked to vote on the Agreements and Plans of
Reorganization through which these transactions would be accomplished.
Because you, as a shareholder of one or both of the Disappearing Funds, are
being asked to approve transactions that will result in your holding of shares
of Emerging Countries Fund, this Proxy Statement also serves as a Prospectus for
Emerging Countries Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Emerging Countries Fund that you
should know before investing. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of each of the Funds, see the
Prospectus included herewith (the "Pilgrim Prospectus") dated November 1, 2000,
and the Statement of Additional Information for Emerging Markets Value Fund and
Emerging Countries Fund dated November 1, 2000, and for Worldwide Emerging
Markets Fund dated July 31, 2000, which may be obtained, without charge, by
calling (800) 992-0180. Each of the Funds also provides periodic reports to its
shareholders which highlight certain important information about the Funds,
including investment results and financial information. The annual report for
Emerging Countries Fund dated June 30, 2000, is incorporated herein by
reference. You may receive a copy of the most recent annual report for any of
the Funds and a copy of any more recent semi-annual report, without charge, by
calling (800) 992-0180.
You may also obtain proxy materials, reports and other information filed by
Emerging Countries Fund from the Securities and Exchange Commission's ("SEC")
Public Reference Room (1-800-SEC-0330) or from the SEC's internet website at
www.sec.gov.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, and the
Agreements and Plans of Reorganization, which are attached hereto as Appendix B
and Appendix C.
THE PROPOSED REORGANIZATIONS. On November 2, 2000, the Board of Trustees of
Emerging Markets Value Fund and the Board of Directors of Worldwide Emerging
Markets Fund each approved an Agreement and Plan of Reorganization (each a
"Reorganization Agreement" and collectively, the "Reorganization Agreements").
Subject to shareholder approval, each Reorganization Agreement provides for:
* the transfer of all of the assets of the relevant Disappearing Fund to
Emerging Countries Fund, in exchange for shares of Emerging Countries
Fund;
* the assumption by Emerging Countries Fund of all of the liabilities of
the Disappearing Fund;
* the distribution of Emerging Countries Fund shares to the shareholders
of the relevant Disappearing Fund; and
* the complete liquidation of the Disappearing Fund.
The Reorganizations are expected to be effective upon the opening of
business on ___________, 2001, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganizations, each shareholder of Class A,
Class B and Class C, as applicable, shares of the Disappearing Funds would
become a shareholder of the same Class of shares of Emerging Countries Fund.
Each shareholder would hold, immediately after the Closing, shares of each Class
of the Emerging Countries Fund having an aggregate value equal to the aggregate
value of the shares of that same Class of the Emerging Markets Value Fund and/or
the Worldwide Emerging Markets Fund, as applicable, held by that shareholder as
of the close of business on the business day of the Closing.
The Reorganizations are two of many reorganizations that are proposed among
various Pilgrim Funds. The Pilgrim fund complex has grown in recent years
through the addition of many funds. Management of the Pilgrim Funds has proposed
the consolidation of a number of Pilgrim Funds that management believes have
similar or compatible investment policies. The proposed reorganizations are
designed to reduce the overlap in funds in the complex, thereby eliminating
duplication of costs and other inefficiencies arising from having similar
portfolios within the same fund group. ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments") also believes that the reorganizations may benefit fund
shareholders by resulting in surviving funds with a greater asset base. This is
expected to achieve economies of scale for shareholders--here for shareholders
of the Emerging Markets Value Fund--and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions.
Information comparing the Funds follows. A few important points to note
are:
* The Funds have investment objectives and policies that are similar;
* The proposed Reorganizations are expected to result in a reduction of
operating expenses for shareholders of Emerging Markets Value Fund.
They are not expected to result in an immediate reduction in expenses
for shareholders of Worldwide Emerging Markets Fund, although these
shareholders will participate in a larger fund and should enjoy the
benefit of more assets at work, which can result in greater
diversification and/or larger portfolio positions. For example, the
operating expenses, expressed as a percentage of net asset value per
share for Class A shares, are as follows:
2
<PAGE>
* Expenses of Emerging Markets Value Fund (based on the twelve
month period ended June 30, 2000): 2.15%
* Expenses of Worldwide Emerging Markets Fund (based on the twelve
month period ended June 30, 2000):(1) 1.87%
* Expenses of Emerging Countries Fund before management subsidies
(based on the twelve month period ended June 30, 2000): 2.28%
* Expenses of Emerging Countries Fund after management subsidies
(based on the twelve month period ended June 30, 2000): 2.13%
* Projected Expenses of Emerging Countries Fund after the
Reorganizations (PRO FORMA) and before management subsidies:
2.18%
* Projected Expenses of Emerging Countries Fund after the
Reorganizations (PRO FORMA) and after management subsidies: 2.13%
----------
(1) Based upon expenses incurred by the Fund for the 12 month period ended June
30, 2000, adjusted for current expenses of contracts and 12b-1 plans which
became effective when ING Pilgrim Investments became adviser to the Fund on
July 26, 2000.
* Each Fund has an investment objective that emphasizes long-term
capital appreciation. Each Fund invests at least 65% of its total
assets in emerging markets; however, the Funds differ in some aspects
of the strategy described in the prospectus to attain their objective.
Worldwide Emerging Markets Funds says it follows a "top-down"
approach. Emerging Markets Value Fund says it follows a value
approach. Emerging Countries Fund says it follows a growth approach.
Approval of a Reorganization Agreement by a Disappearing Fund requires a
quorum of the outstanding shares and the affirmative vote of a majority of the
outstanding shares of the pertinent Disappearing Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF EMERGING MARKETS
VALUE FUND AND THE BOARD OF DIRECTORS OF WORLDWIDE EMERGING MARKETS FUND
UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATIONS. THE BOARDS RECOMMEND THAT YOU
VOTE "FOR" THE PROPOSED REORGANIZATIONS.
3
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
EMERGING MARKETS VALUE FUND WORLDWIDE EMERGING MARKETS FUND EMERGING COUNTRIES FUND
--------------------------- ------------------------------- -----------------------
<S> <C> <C> <C>
INVESTMENT OBJECTIVE Seeks long-term capital Seeks long-term growth of capital Seeks maximum long-term capital
appreciation. primarily though investment in appreciation.
equity securities and equity
equivalents of emerging market
companies.
INVESTMENT STRATEGIES * Normally invests at least 65% of * Normally invests at least 65% of * Invests at least 65% of its net
its total assets in securities of its total assets in equity assets in securities of issuers
issuers located in countries with securities and equity equivalents located in at least three countries
emerging markets, including of emerging market companies. with emerging securities markets.
companies that may be smaller and Countries with emerging securities
lesser known. * Emerging markets include markets are those countries which
countries in Africa, Asia, Europe, generally are considered to be
* Applies the techniques of "value the Middle East and Latin America. emerging market countries by the
investing" by seeking stocks that An emerging market company is any international financial community.
research indicates are priced below company domiciled in an emerging
their long-term value. market country or any company that * May invest up to 35% of its total
derives 50% or more of its total assets in securities of U.S. and
* May invest up to the greater of: revenue from either goods or other developed market issuers,
20% of its assets in any one services produced or sold in including investment-grade debt
country or industry; or 150% of the countries with emerging markets. securities of U.S. issuers.
weighting of the country or
industry in the Morgan Stanley * May invest 35% of its assets in * Normally invests at least 75% of
Capital International Emerging equity securities of non-emerging its total assets in common and
Markets Free (MSCI EMF) Index. market companies, investment grade preferred stock, warrants and
debt securities denominated in the convertible securities.
* May invest in common stocks; currency of an emerging market
preferred stocks; American, country or issued or guaranteed by * In selecting securities of
European and Global depositary an emerging market company or the issuers located in emerging market
receipts; shares of closed-end government of an emerging market countries, the Adviser uses a
investment companies; and country, short-term or medium-term "bottom-up" fundamental analysis to
convertible securities. debt securities or other types of identify companies which it
securities. believes have good earnings growth
prospects and that can be bought at
* Uses a "top-down" approach that a price which seems reasonable. The
compares macro trends, such as Adviser seeks securities of
economics, politics, industry emerging market issuers which are
trends and commodity trends. relatively liquid and covered by
Countries are grouped regionally professional securities analysts.
and globally and ranked based on
their macro scores. Companies in * In selecting stocks listed in
countries receiving higher scores developed markets, the portfolio
are selected as investments based managers seek the most attractive
on fundamental research, industry opportunities in such markets. For
themes and identifying specific such securities, the portfolio
catalysts for growth. managers use "bottom-up" analysis
to choose companies which offer
good value relative to their peers
in the same industry, sector or
region. They also use "top-down"
analysis to identify important
themes or issues which may affect
the investment environment in
certain regions or sectors and to
estimate regional market risks. In
conducting their fundamental
analysis, the portfolio managers
focus on various matters, including
valuation of the companies,
potential catalysts to stock price
appreciation, quality of management
and financial measures, especially
cash flow and cash flow return on
capital.
* May lend portfolio securities on
a short-term or long-term basis, up
to 30% of its total assets.
INVESTMENT ADVISER ING Pilgrim Investments ING Pilgrim Investments ING Pilgrim Investments
SUB-ADVISER Brandes Investment None None
Partners, L.P.
PORTFOLIO MANAGERS Charles Brandes and Ian Richard T. Saler, Phillip A. Richard T. Saler, Phillip A.
Saunder Schwartz, Jan Wim Derks, Eric Schwartz, Jan Wim Derks, Eric
Anderson and Bratin Sanyal Anderson and Bratin Sanyal
</TABLE>
4
<PAGE>
As you can see from the chart above, the investment objectives and strategies of
the Funds are similar.
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:(1)
<TABLE>
<CAPTION>
EMERGING MARKETS VALUE FUND WORLDWIDE EMERGING MARKETS FUND EMERGING COUNTRIES FUND
--------------------------- ------------------------------- -----------------------
<S> <C> <C> <C>
Net Assets $15,141,786 $123,664,711 $254,493,959
Number of Holdings 58 57 82
As a percentage of net assets:
Equity Securities (including
convertibles) 97.59% 79.30% 98.92%
Foreign Securities
Emerging Markets 63.96% 57.20% 68.63%
Developed Markets 33.20% 22.10% 28.74%
U.S. Securities 0.43% 0.00% 1.55%
Foreign Debt Instruments 0.00% 0.00% 0.00%
Short-term U.S. Debt
Instruments 0.00% 13.26% 0.48%
Average market capitalization
of companies in portfolio: $4.3 billion $3.7 billion $10.2 billion
Market capitalization range of
companies in portfolio: $54.2 million to $66.8 billion $7.2 million to $30.2 billion $87.2 million to $55.6 billion
Portfolio Turnover Rate(1) 135.30% 343.64% 211.00%
Top 10 Countries Brazil 20.13% Mexico 13.92% South Korea 16.51%
(as of % of net assets) China 9.84% South Korea 11.63% Mexico 15.70%
Mexico 7.23% India 10.27% Brazil 11.72%
Israel 6.62% Brazil 9.41% Taiwan 11.55%
Argentina 6.22% Turkey 8.57% India 6.69%
South Korea 5.91% Portugal 5.27% Israel 6.28%
Chile 5.39% South Africa 5.05% Hong Kong 5.20%
Hong Kong 5.19% Hong Kong 4.29% Singapore 4.43%
South Africa 4.80% Taiwan 3.06% Turkey 4.01%
Spain 4.10% Greece 2.39% Malaysia 3.87%
Top 5 Industries Telephone-Integrated 16.13% Telecommunications 17.99% Semiconductors 10.40%
(as a % of net assets) Banks 13.23% Computer Software 14.18% Telecommunication-Services 8.64%
Electric-Integrated 11.66% Electrical & Electronics 9.83% Telephone-Integrated 7.66%
Brewery 7.19% Banking 8.65% Electric 7.01%
Oil Components-Integrated 6.53% Media 7.31% Cellular
Telecommunications 5.91%
Top 10 Holdings Telefonica SA 4.10% Pararede Rts 5.54% Samsung Electronics 6.89%
(as a % of net assets) Telefonos de Mexico SA 3.24% Korea Electric Power Corp. 3.60% Telefonos de Mexico SA 5.27%
Korea Electric Power Corp. 3.23% Yuxing Infotech Hldgs. 3.54% Taiwan Semiconductor
South African Dimension Data Hldgs. Manufacturing Co. 3.99%
Breweries, PLC 3.05% Wal-Mart De Mexico 3.10% United Microelectronics
Korea Telecom 2.68% HCL Technologies 3.08% Corp. Ltd. 3.62%
CIA Paranaease De Enelgia 2.64% Alcatel Teletas 3.03% China Mobile
Telecom Argentina SA 2.53% Centrais Eletrica Bras. 2.96% (Hong Kong), Ltd. 3.62%
ECI Telecom Ltd. 2.51% Banco Bradesco Pfd. 2.96% Datacraft Asia, Ltd. 3.10%
DeBeers Consolidated Mines 2.47% Cemex CPO 2.94% Korea Electric
Panamerican Power Corp. 3.04%
Beverages, Inc. 2.37% SK Telecom Co. Ltd. 2.76%
Infosys Technologies Ltd. 2.50%
Corp Interamericana
de Entretenmiento SA 2.30%
</TABLE>
----------
(1) For the 12 month period ended June 30, 2000.
5
<PAGE>
RELATIVE PERFORMANCE
The following table shows, for certain periods, the average annual
total return for: (a) Class A shares of Emerging Markets Value Fund; (b) Class A
shares of Worldwide Emerging Markets Fund; (c) Class A shares of Emerging
Countries Fund; and (d) the Morgan Stanley Capital International Emerging
Markets Free ("MSCI EMF") Index. Performance of the Funds in the table does not
reflect the deduction of sales charges, and would be lower if it did. The index
has an inherent performance advantage over the Funds since it has no cash,
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.
<TABLE>
<CAPTION>
CALENDAR EMERGING MARKETS WORLDWIDE EMERGING EMERGING COUNTRIES MSCI EMF
YEAR/PERIOD ENDED VALUE FUND(1) MARKETS FUND(2) FUND(3) INDEX(4)
----------------- ------------- --------------- ------- --------
<S> <C> <C> <C> <C>
12/31/95 N/A -5.93% 6.34% -5.19%
12/31/96 N/A 7.38% 27.50% 6.03%
12/31/97 N/A -11.40% 9.44% -11.58%
12/31/98 -22.58% -29.06% -22.19% -25.34%
12/31/99 67.11% 112.58% 75.80% 66.41%
1/1/00-9/30/00 -8.65% -35.83% -20.85% -19.95%
</TABLE>
----------
1. Emerging Markets Value Fund commenced operations on January 1, 1998.
2. Prior to July 26, 2000, the Fund was advised by Lexington Management
Corporation, which was acquired by the parent to ING Pilgrim Investments on
July 26, 2000. ING Pilgrim Investments became the adviser on that same
date.
3. Emerging Countries Fund commenced operations on November 28, 1994. Prior to
October 1, 2000, the Fund was managed by a sub-adviser to the adviser, ING
Pilgrim Investments. Prior to May 24, 1999, the prior sub-adviser was the
adviser, rather than sub-adviser, to the Fund. For more information about
the performance of Emerging Countries Fund, see "Additional Information
about Pilgrim Emerging Countries Fund."
4. The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS
Because the Funds have investment objectives and policies that are similar
in many respects, many of the risks of investing in Emerging Countries Fund are
similar to the risks of investing in the Disappearing Funds. A principal risk of
an investment in any of the Funds is that you may lose money on your investment.
Each Fund's shares may go up or down, sometimes rapidly and unpredictably.
Market conditions, financial conditions of issuers represented in the portfolio,
investment policies, portfolio management, and other factors affect the
volatility of each Fund's shares.
EQUITY SECURITIES. Each Fund is subject to risks associated with investing
primarily in equity securities, including market risks, issuer risk (including
credit risks), price volatility risks, and market trend risks. Market risk is
the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer,
6
<PAGE>
such as changes in the financial condition of the issuer. Credit risk is the
risk that an issuer may not be able to meet its financial obligations when due,
including payments on outstanding debt. Market trend risk is the risk that the
market may not favor the investment approach followed by each Fund, or may not
favor equities at all. While equities may offer the potential for greater
long-term growth than most debt securities, they generally have higher
volatility. Small and medium-sized companies may be more susceptible to greater
price swings than larger companies because they have fewer financial resources,
they have more limited product and market diversification, and many are
dependent on a few key managers. Smaller companies also may experience
relatively high growth rates and higher failure rates than do larger companies.
The securities of smaller companies may trade in lower volumes and may be less
liquid than the securities of larger, more established companies. A Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
RISKS OF FOREIGN INVESTING. The Funds invest in foreign securities. Foreign
investments may be riskier than U.S. investments for many reasons. There are
certain risks in owning foreign securities, including: (i) fluctuations in
currency exchange rates; (ii) devaluation of currencies; (iii) political or
economic developments and the possible imposition of currency exchange blockages
or other foreign governmental laws or restrictions; (iv) reduced availability of
public information concerning issuers; (v) accounting, auditing and financial
reporting standards or other regulatory practices and requirements that are not
uniform when compared to those applicable to domestic companies; and (vi)
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of the Funds, including the withholding of
dividends.
RISKS OF EMERGING MARKET INVESTMENTS. Because of less developed markets and
economies and, in some countries, less mature governments and governmental
institutions, the risks of investing in foreign securities can be intensified in
the case of investments in issuers domiciled or doing substantial business in
emerging market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete or unseasonal financial systems; environmental problems; less
well-developed legal systems; and less reliable custodial services and
settlement practices.
CHANGE IN PORTFOLIO MANAGEMENT. The Emerging Countries Fund recently
underwent a change in portfolio management. Since October 1, 2000, ING Pilgrim
Investments has managed the Emerging Countries Fund directly; prior to that
date, another investment adviser served as sub-adviser to the Fund. The current
portfolio management structure was not in place 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.
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 Emerging
Countries Fund, see "Appendix D: Additional Information Regarding Pilgrim
Emerging Countries Fund."
TOTAL OPERATING EXPENSES
The operating expenses of Emerging Countries Fund expressed as a ratio of
expenses to average daily net assets ("expense ratio") for the year ended June
30, 2000, were slightly lower than those of Emerging Markets Value Fund, but
higher than those of Worldwide Emerging Markets Fund, after giving effect to the
expense limitation agreement for Emerging Countries Fund, described below. The
operating expenses for Worldwide Emerging Markets Fund are based upon expenses
incurred by the Fund for the 12 month period ended June 30, 2000, adjusted for
current expenses of contracts and distribution plans which became effective when
ING Pilgrim Investments became adviser to the Fund on July 26, 2000.
EXPENSE LIMITATION ARRANGEMENTS. Expense limitation arrangements are in
place for Emerging Countries Fund and Worldwide Emerging Markets Fund. Under the
terms of the expense limitation agreements, ING Pilgrim Investments has agreed
to limit the expenses of each Fund, excluding interest, taxes, brokerage and
extraordinary expenses, subject to possible recoupment to ING Pilgrim
Investments within three years. The current expense limitation agreement for
Emerging Countries Fund will remain in effect through at least October 31, 2001.
The expense limitations for Classes A, B and C shares of Emerging Countries Fund
are 2.25%, 2.90% and 2.90%, respectively. The current expense limitation
agreement for Worldwide Emerging Markets Fund will remain in effect through at
least July 26, 2002. The expense limitation for Class A shares of Worldwide
Emerging Markets Fund is 2.75%. Although ING Pilgrim Investments has implemented
an expense limitation agreement for the Worldwide Emerging Markets Fund, the
Fund's actual expenses are lower than the expense limitation contained in the
agreement. There can be no assurance that the expense limitation agreements will
be continued after the dates provided. An expense limitation agreement is not in
place for Emerging Markets Value Fund. This information and similar information
for the other classes is shown in the table below entitled "Annual Fund
Operating Expenses."
It is expected that the expense ratios of the Emerging Countries Fund after
the Reorganizations will be 2.18%, 2.83% and 2.83%, for Classes A, B and C
shares respectively, without taking into account any expense subsidies from
management.
MANAGEMENT FEE. Each Disappearing Fund has an annual management fee of
1.00% of the Fund's average daily net assets. Emerging Countries Fund has a
higher annual management fee of 1.25%.
DISTRIBUTION AND SERVICE FEES. For Emerging Countries Fund, the
distribution (12b-1) and service fees for Class A shares are 0.35%, while for
Class B and Class C shares, the distribution (12b-1) and service fees are 1.00%.
For Emerging Markets Value Fund, the distribution (12b-1) and service fees for
Class A shares are 0.30%, and for Class B and Class C shares, the distribution
(12b-1) and service fees are 1.00%. For Worldwide Emerging Markets Fund, the
distribution (12b-1) and service fees for Class A shares are 0.25% (and there
are no Class B or Class C shares).
EXPENSE TABLE
The current expenses of each of the Funds and estimated PRO FORMA expenses
giving effect to the proposed Reorganizations are shown in the following table.
Expenses for the Funds are annualized based upon the operating expenses incurred
by Class A, Class B and Class C shares, as applicable, of the Funds for the
period twelve month period ended June 30, 2000. PRO FORMA fees show estimated
fees of Emerging Countries Fund after giving effect to the proposed
Reorganizations, as adjusted to reflect changes in contractual changes. PRO
FORMA numbers are estimated in good faith and are hypothetical, and reflect
adjustments in anticipated applicable contractual charges.
8
<PAGE>
ANNUAL FUND OPERATING EXPENSES (1) (UNAUDITED)
(expenses that are deducted from Fund assets, shown as a ratio
of expenses to average daily net assets)
<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
Emerging Markets Value Fund 1.00% 0.30% 0.85% 2.15% -- 2.15%
Worldwide Emerging
Markets Fund(4) 1.00% 0.25% 0.62% 1.87% -- 1.87%
Emerging Countries Fund 1.25% 0.35% 0.68% 2.28% -0.15% 2.13%
Surviving Fund after
Reorganizations (PRO FORMA) 1.25% 0.35% 0.58% 2.18% -0.05% 2.13%
CLASS B
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% -- 2.85%
Worldwide Emerging
Markets Fund N/A N/A N/A N/A N/A N/A
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Surviving Fund after
Reorganizations (PRO FORMA) 1.25% 1.00% 0.58% 2.83% -0.05% 2.78%
CLASS C
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% -- 2.85%
Worldwide Emerging
Markets Fund N/A N/A N/A N/A N/A N/A
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15 2.78%
Surviving Fund after
Reorganizations (PRO FORMA) 1.25% 1.00% 0.58% 2.83% -0.05% 2.78%
</TABLE>
----------
1. The Emerging Countries Fund's, the Emerging Markets Value Fund's and the
Worldwide Emerging Markets Fund's fiscal years end are June 30, October 31
and December 31, respectively. Expenses of the Emerging Countries Fund and
Emerging Markets Value Fund are based upon expenses incurred by each Fund
for the twelve month period ended June 30, 2000. Expenses for the Worldwide
Emerging Markets Fund are based upon expenses incurred by the Fund for the
12 month period ended June 30, 2000, adjusted for current expenses of
contracts and 12b-1 plans which became effective when ING Pilgrim
Investments became adviser to the Fund on July 26, 2000. Pro forma expenses
have been adjusted for anticipated applicable 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 Emerging Countries Fund to 2.25%, 2.90%, and
2.90% for Class A, Class B and Class C shares, respectively, subject to
possible later recoupment. The expense limitation applies until October 31,
2001. ING Pilgrim Investments has an expense limitation agreement with
Worldwide Emerging Markets Fund that limits expenses of Class A shares to
2.75%. The expense limitation applies until July 26, 2002. The Emerging
Markets Value Fund is not subject to an expense limitation agreement.
4. Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
9
<PAGE>
Following the Reorganizations and in the ordinary course of business as a
mutual fund, certain holdings of Emerging Markets Value Fund and Worldwide
Emerging Markets Fund that will be transferred to Emerging Countries Fund in
connection with the Reorganizations may be sold. Such sales may result in
increased transactional costs for Emerging Countries Fund, and the realization
of taxable gains or losses for Emerging Countries Fund.
EXAMPLES. The examples are intended to help you compare the cost of
investing in the each of the Funds and in the combined Fund on a PRO FORMA
basis. The examples assume that you invest $10,000 in each Fund and in the
combined Fund after the Reorganization 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.
You would pay the following expenses if you do redeem your shares:
<TABLE>
<CAPTION>
EMERGING MARKETS WORLDWIDE EMERGING EMERGING PRO FORMA
VALUE FUND MARKETS FUND COUNTRIES FUND THE FUNDS COMBINED
---------------------------- ---------------------------- --------------------------- ---------------------------
1 3 5 10 1 3 5 10 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $781 $1,209 $1,663 $2,915 $754 $1,129 $1,528 $2,639 $779 $1,233 $1,712 $3,029 $779 $1,213 $1,673 $2,940
Class B $788 $1,183 $1,704 $3,010* N/A N/A N/A N/A $781 $1,193 $1,730 $3,088* $781 $1,172 $1,689 $2,999*
Class C $388 $ 883 $1,504 $3,176 N/A N/A N/A N/A $381 $ 893 $1,530 $3,241 $381 $ 872 $1,489 $3,153
</TABLE>
----------
* The ten-year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the seventh year, for Emerging
Countries Fund, or eighth year, for the Disappearing Funds, following the
date of purchase.
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
EMERGING MARKETS WORLDWIDE EMERGING EMERGING PRO FORMA
VALUE FUND MARKETS FUND COUNTRIES FUND THE FUNDS COMBINED
---------------------------- ---------------------------- --------------------------- ---------------------------
1 3 5 10 1 3 5 10 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $781 $1,209 $1,663 $2,915 $754 $1,129 $1,528 $2,639 $779 $1,233 $1,712 $3,029 $779 $1,213 $1,673 $2,940
Class B $288 $ 883 $1,504 $3,010* N/A N/A N/A N/A $281 $ 893 $1,530 $3,088* $281 $ 872 $1,489 $2,999*
Class C $288 $ 883 $1,504 $3,176 N/A N/A N/A N/A $281 $ 893 $1,530 $3,241 $281 $ 872 $1,489 $3,153
</TABLE>
----------
* The ten-year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the seventh year, for Emerging
Countries Fund, or eighth year, for the Disappearing Funds, following the
date of purchase.
10
<PAGE>
GENERAL INFORMATION
Class A, Class B and Class C shares of Emerging Countries Fund issued to a
shareholder in connection with the Reorganizations will be subject to the same
contingent deferred sales charge, if any, applicable to the corresponding shares
of Emerging Markets Value Fund or Worldwide Emerging Markets Fund held by that
shareholder immediately prior to the Reorganizations.
In addition, the period that a shareholder held shares of Emerging Markets
Value Fund or Worldwide Emerging Markets Fund will be included in the holding
period of Emerging Countries Fund shares for purposes of calculating any
contingent deferred sales charge. The Funds are subject to the sales load
structure described in the table below.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
CLASS A CLASS B CLASS C
------- ------- -------
Maximum sales charge (load) imposed on
purchases (as a percentage of
offering price) 5.75%(1) None None
Maximum deferred sales charge (load)
(as a percentage of the lower of
original purchase price or
redemption proceeds) None (2) 5.00% (3) 1.00% (4)
----------
(1) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" in Appendix D.
(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 D.
(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 D and "Shareholder's Guide--Sales Charge
Calculation" in the Pilgrim Prospectus.
(4) Imposed upon redemptions within 1 year from purchase.
Neither Emerging Countries Fund nor the Disappearing Funds have any
redemption fees, exchange fees or sales charges on reinvested dividends.
ADDITIONAL INFORMATION ABOUT EMERGING COUNTRIES FUND
INVESTMENT PERSONNEL. Effective October 1, 2000, Richard T. Saler, Philip
A. Schwartz, Jan Wim Derks, Eric Anderson and Bratin Sanyal share responsibility
for managing the Emerging Countries Fund.
Richard T. Saler has served as a member of the portfolio management team
that manages the Fund since June 2000. Mr. Saler has over 13 years of experience
in international investments. He is Senior Vice President of ING Pilgrim
Investments, and was Vice President with Lexington Management Corporation
("Lexington") prior to that firm's acquisition by the parent company of ING
Pilgrim Investments in July, 2000. Mr. Saler has focused on international
markets since joining Lexington in 1986.
Phillip A . Schwartz has served as a member of the portfolio management
team that manages the Fund since June 2000. Mr. Schwartz has over 12 years
experience in international investments. He is a Senior Vice President at ING
Pilgrim Investments, and held the same position with Lexington prior to that
firm's recent acquisition. Prior to joining Lexington in 1993, he was Vice
President of European Research Sales with Cheuvreux De Virieu in Paris and New
York, serving the institutional market. Prior to Cheuvreux, Mr. Schwartz was
affiliated with Olde and Co, and Kidder, Peabody as a stockbroker. He is also a
Chartered Financial Analyst and a member of the New York Society of Security
Analysts.
11
<PAGE>
Effective October 1, 2000, the following individuals also serve as
portfolio managers of the Fund:
Jan Wim Derks is a Vice President of ING Pilgrim Investments, Inc. In
additional to his role with ING Pilgrim Investments, Mr. Derks serves as
Director, Global Emerging Markets Equities at ING Investment Management - Europe
("IIM-Europe"). Prior to joining IIM - Europe in 1997, Mr. Derks managed a Latin
American equity fund with ABN AMRO. He has a degree in economics from Tilburg
University and has the Dutch equivalent of the CFA, (VBA).
Eric Anderson, CFA, is a Vice President of ING Pilgrim Investments. In
addition to his role with ING Pilgrim Investments, Mr. Anderson also serves as
Senior Portfolio Manager, Global Emerging Markets Equities at ING Investment
Management - Americas ("IIM - Americas"). Prior to joining IIM - Americas in
1997, Mr. Anderson managed a Latin America equity portfolio and participated in
the management of an emerging market debt portfolio at Offitbank in New York.
Bratin Sanyal is a Vice President of ING Pilgrim Investments. In addition
to his role with ING Pilgrim Investments, Mr. Sanyal serves as Senior Portfolio
Manager, Global Emerging Markets Equities at IIM - Europe. Mr. Sanyal has held
several positions with IIM - Europe, most recently as an Asian equity fund
manager. Prior to joining IIM - Europe in 1993, he was an economist at the World
Bank where he structured debt workouts for Highly Indebted Countries. Mr. Sanyal
holds a Masters of Science in Physics from IIT, India and attained his PhD (ABD
status) from Rutgers University, USA. He also received an MBA from Rutgers.
PERFORMANCE OF EMERGING COUNTRIES FUND. The bar chart and table that follow
provide an indication of the risks of investing in Emerging Countries Fund by
showing (on a calendar year basis) changes in Emerging Countries Fund's annual
total return from year to year and by showing (on a calendar year basis) how
Emerging Countries Fund's average annual returns for one year, five years, ten
years and since inception compare to those of the MSCI EMF Index. The
information in the bar chart is based on the performance of the Class A shares
of Emerging Countries Fund although the bar chart does not reflect the deduction
of the sales load on Class A shares. If the bar chart included the sales load,
returns would be lower than those shown. The Emerging Countries Fund's past
performance is not necessarily an indication of how the Fund will perform in the
future. Total returns include reinvestment of dividends and capital gains
distribution, if any. All indices are unmanaged.
CALENDAR YEAR-BY-YEAR RETURNS(1)(2)
1995 1996 1997 1998 1999(3)
---- ---- ---- ---- -------
6.34% 27.50% 9.44% -22.19% 75.80%
----------
(1) The chart indicates performance of the Fund up to the calendar year ended
December 31, 1999. For the period January 1, 2000 to September 30, 2000,
the Fund's year-to-date return was down 20.85%. The data does not reflect
sales charges and would be lower if it did.
(2) During the period shown in the chart, the Fund's best quarterly performance
was up 36.28% for the quarter ended December 31, 1999 and the Fund's worst
quarterly performance was down 26.06% for the quarter ended September 30,
1998.
(3) Returns in 1999 were primarily achieved during unusually favorable
conditions in the market, particularly for emerging market companies. (See
"Comparison of Investment Techniques and Risks of the Funds" above.) You
should not expect that such favorable returns can consistently be achieved.
12
<PAGE>
The table below shows what the average annual total returns of Emerging
Countries Fund would equal if you averaged out actual performance over various
lengths of time, compared to the MSCI EMF Index. The MSCI EMF Index has inherent
performance advantages over Emerging Countries Fund since it has no cash in its
portfolio, imposes no sales charges, and incurs no operating expenses. An
investor cannot invest directly in an index. Emerging Countries Fund's
performance reflected in the table assumes the deduction of the maximum sales
charge in all cases.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
SINCE
1 YEAR 5 YEARS INCEPTION
------ ------- ---------
Emerging Countries Fund - Class A (1) (2) 65.74% 13.85% 12.58%
Emerging Countries Fund - Class B (1) (3) 69.71% N/A 14.66%
Emerging Countries Fund - Class C (1) (4) 73.71% 14.38% 12.89%
MSCI EMF Index(5)(6) 66.41% 2.00% 0.30%
----------
(1) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1.00% for the 1-year
return.
(5) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(6) Since-inception performance for the index is shown from 12/01/94.
The table below shows the performance of Emerging Countries Fund if sales
charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
SINCE
1 YEAR 5 YEARS INCEPTION
------ ------- ---------
Emerging Countries Fund - Class A (1) (2) 75.80% 15.21% 13.89%
Emerging Countries Fund - Class B (1) (3) 74.71% N/A 14.93%
Emerging Countries Fund - Class C (1) (4) 74.71% 14.38% 12.89%
MSCI EMF Index(5)(6) 66.41% 2.00% 0.30%
----------
(1) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1.00% for the 1-year
return.
(5) MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(6) Since-inception performance for the index is shown from 12/01/94.
13
<PAGE>
For a discussion by the former sub-adviser regarding the performance of
Emerging Countries Fund for the year ended June 30, 2000, see Appendix A to this
Proxy Statement/Prospectus. Additional information about Emerging Countries Fund
is included in Appendix D to this Proxy Statement/Prospectus. Additional
information about the Disappearing Funds is included in the Pilgrim Prospectus
dated November 1, 2000.
INFORMATION ABOUT THE REORGANIZATIONS
THE REORGANIZATION AGREEMENTS. The Reorganization Agreements provide for
the transfer of all of the assets and liabilities of the Disappearing Funds to
Emerging Countries Fund in exchange for shares of Emerging Countries Fund. The
Disappearing Funds will distribute the shares of Emerging Countries Fund
received in the exchange to the shareholders of the Disappearing Funds and then
each of the Disappearing Funds will be liquidated.
After the Reorganizations, each shareholder of the Disappearing Funds will
own shares in Emerging Countries Fund having an aggregate value equal to the
aggregate value of each respective Class of shares in either Emerging Markets
Value Fund or Worldwide Emerging Markets Fund held by that shareholder as of the
close of business on the business day of the Closing. Shareholders of each Class
of shares of the Disappearing Funds will receive shares of the corresponding
Class of Emerging Countries Fund. In the interest of economy and convenience,
shares of Emerging Countries Fund generally will not be represented by physical
certificates unless requested in writing.
Until the Closing, shareholders of the Disappearing Funds will continue to
be able to redeem their shares. Redemption requests received after the Closing
will be treated as requests received by Emerging Countries Fund for the
redemption of its shares received by the shareholder in the Reorganization.
The obligations of the Funds under the Reorganization Agreements are
subject to various conditions, including approval of the shareholders of the
Disappearing Funds. The Reorganization Agreements also require that each of the
Funds take, or cause to be taken, all action, and do or cause to be done, all
things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Reorganization Agreements. A
Reorganization Agreement may be terminated by mutual agreement of the parties to
the agreement or on certain other grounds. Please refer to Appendix B and
Appendix C to review the terms and conditions of the Reorganization Agreements.
REASONS FOR THE REORGANIZATIONS. The Reorganizations are two of many
reorganizations that are proposed among various Pilgrim Funds. The Pilgrim Fund
complex has grown in recent years through the addition of many funds. Management
of the Pilgrim Funds has proposed the consolidation of a number of Pilgrim Funds
that management believes have similar or compatible investment policies. The
proposed reorganizations are designed to reduce the overlap in funds in the
complex, thereby eliminating duplication of costs and other inefficiencies
arising from having similar portfolios within the same fund group. ING Pilgrim
Investments also believes that the reorganizations may benefit fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders--here for shareholders of the
Emerging Markets Value Fund--and may provide greater investment opportunities
for the surviving funds or the potential to take larger portfolio positions.
The proposed Reorganizations were presented to the Board of Trustees of
Pilgrim Mayflower Trust and the Board of Directors of Pilgrim Worldwide Emerging
Markets Fund, Inc., on behalf of Emerging Markets Value Fund and Worldwide
Emerging Markets Fund, respectively, for consideration and approval at a meeting
held on November 2, 2000. For the reasons discussed below, the
Trustees/Directors, including all of the Trustees/Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of
Pilgrim Mayflower Trust and Worldwide Emerging Markets Funds, Inc., determined
that the interests of the shareholders of each of the Disappearing Funds will
not be diluted as a result of the proposed Reorganizations, and that the
proposed Reorganizations are in the best interests of the Disappearing Funds and
their shareholders.
14
<PAGE>
The Reorganizations will allow the shareholders of the Disappearing Funds
to continue to participate in a professionally managed portfolio which seeks to
achieve an objective of appreciation or growth of capital. As shareholders of
Emerging Countries Fund, these shareholders will continue to be able to exchange
into other mutual funds in the group of Pilgrim Funds or ING Funds that offer
the same Class of shares in which such shareholder is currently invested. A list
of the Pilgrim Funds and Classes available after the Reorganizations is
contained in Appendix E.
BOARD CONSIDERATIONS. The Board of Trustees of Pilgrim Mayflower Trust and
the Board of Directors of Pilgrim Worldwide Emerging Markets Fund, Inc., on
behalf of Emerging Markets Value Fund and Worldwide Emerging Markets Fund,
respectively, in recommending the proposed transactions, considered a number of
factors, including the following:
(1) the plans of management to reduce overlapping funds in the Pilgrim Fund
complex;
(2) expense ratios and information regarding fees and expenses of the
Disappearing Funds and Emerging Countries Fund;
(3) estimates that show that combining the Funds is expected to result in a
lower expense ratio for shareholders of the Emerging Markets Value Fund
because of economies of scale expected to result from an increase in the
asset size of the Emerging Countries Fund;
(4) whether the Reorganizations would dilute the interests of the Disappearing
Funds' current shareholders;
(5) the relative investment performance and risks of Emerging Countries Fund as
compared to the Disappearing Funds;
(6) the similarity of Emerging Countries Fund's investment objectives,
policies, and restrictions with those of the Disappearing Funds; and
(7) the tax-free nature of the Reorganizations to the Disappearing Funds and
their shareholders.
The Boards also considered the future potential benefits to ING Pilgrim
Investments in that its costs to administer the Funds and to limit the expenses
of the Emerging Countries Fund will be reduced if the Reorganizations are
approved.
THE BOARD OF TRUSTEES OF EMERGING MARKETS VALUE FUND AND THE BOARD OF DIRECTORS
OF WORLDWIDE EMERGING MARKETS FUND RECOMMEND THAT SHAREHOLDERS APPROVE THE
REORGANIZATIONS WITH EMERGING COUNTRIES FUND.
TAX CONSIDERATIONS. The Reorganizations are intended to qualify for Federal
income tax purposes as tax-free reorganizations under Section 368 of the
Internal Revenue Code of 1986, as amended. Accordingly, pursuant to this
treatment, neither the Disappearing Funds nor their shareholders nor Emerging
Countries Fund is expected to recognize any gain or loss for federal income tax
purposes from the transactions contemplated by the Reorganization Agreements. As
a condition to the Closing of the Reorganizations, the Funds will receive an
opinion from the law firm of Dechert to the effect that the Reorganizations will
qualify as tax-free reorganizations for Federal income tax purposes. That
opinion will be based in part upon certain assumptions and upon certain
representations made by Pilgrim Mayflower Trust, Pilgrim Worldwide Emerging
Markets, Inc. and Pilgrim Mutual Funds.
Immediately prior to the Reorganizations, each Disappearing Fund will pay a
dividend or dividends which, together with all previous dividends, will have the
effect of distributing to its shareholders all of the Disappearing Fund's
investment company taxable income for taxable years ending on or prior to the
Reorganizations (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 Reorganizations (after reduction for any available capital loss
carryforward). Such dividends will be included in the taxable income of the
Disappearing Funds' shareholders.
15
<PAGE>
As of December 31, 1999, Worldwide Emerging Markets Fund had accumulated
capital loss carryforwards of approximately $36,059,469. As of June 30, 2000,
Emerging Countries Fund had accumulated capital loss carryforwards of
approximately $32,840,931. Emerging Markets Value Fund did not have any capital
loss carryforwards as of October 31, 1999. After the Reorganizations, the losses
of Emerging Countries Fund will be available to Emerging Countries Fund to
offset its capital gains. Also, after the Reorganizations, the losses of
Worldwide Emerging Markets Fund will be available to Emerging Countries Fund to
offset its capital gains, although the amount of these losses which may offset
Emerging Countries Fund's future capital gains in any given year will be
limited. As a result of this limitation, it is possible that Emerging Countries
Fund may not be able to use losses as rapidly as it might have had the
Reorganizations not occurred, and part of these losses may not be useable at
all. The ability of Emerging Countries Fund to absorb losses in the future
depends upon a variety of factors that cannot be known in advance, including the
existence of capital gains against which these losses may be offset. In
addition, the benefits of any of Emerging Countries Fund's capital loss
carryforwards or those of Worldwide Emerging Markets Fund currently are
available only to pre-reorganization shareholders of those Funds. After the
Reorganizations, however, these benefits will inure to the benefit of all
post-reorganization shareholders of Emerging Countries Fund.
EXPENSES OF THE REORGANIZATIONS. ING Pilgrim Investments, adviser to the
Funds, will bear half the cost of the Reorganizations. The Funds will bear the
other half of the expenses relating to the respective 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. Emerging Countries Fund is a series of Pilgrim Mutual
Funds, which is a Delaware business trust. Emerging Markets Value Fund is a
series of Pilgrim Mayflower Trust, which is a Massachusetts business trust.
Worldwide Emerging Markets Fund, Inc. is a corporation organized under the laws
of the state of Maryland. Pilgrim Mutual Funds and Pilgrim Mayflower Trust are
each governed by a Board of Trustees. Worldwide Emerging Markets Fund is
governed by a Board of Directors. Each Board has eleven directors or trustees.
The members of all Boards are identical.
DISTRIBUTOR. ING Pilgrim Securities, Inc. (the "Distributor"), whose
address is 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258, is the
principal distributor for each of the Funds. The Emerging Countries Fund also
offers other Classes of shares, which may have different sales charges and other
expenses that may affect their performance. You can obtain more information
about these other share Classes by calling (800) 992-0980.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Funds 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 a Reorganization Agreement is approved by a Disappearing Fund's
shareholders then as soon as practicable before the Closing, the Disappearing
Fund will pay its shareholders a cash distribution of substantially all
undistributed net investment income and undistributed realized net capital
gains.
16
<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 Reorganizations:
<TABLE>
<CAPTION>
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
<S> <C> <C> <C>
EMERGING MARKETS VALUE FUND
Class A $ 5,675,000 $ 11.34 500,586
Class B $ 4,610,210 $ 11.26 409,401
Class C $ 4,856,576 $ 11.21 433,081
WORLDWIDE EMERGING MARKETS FUND
Class A $123,664,711 $ 11.88 10,410,493
EMERGING COUNTRIES FUND
Class A $ 75,311,162 $ 20.17 3,734,633
Class B $ 30,321,732 $ 20.30 1,493,431
Class C $ 29,610,258 $ 19.56 1,513,876
Class Q $119,250,807 $ 20.74 5,749,575
PRO FORMA - EMERGING COUNTRIES FUND
INCLUDING EMERGING MARKETS VALUE FUND
AND WORLDWIDE EMERGING MARKETS FUND
Class A $204,650,873 $ 20.17 10,146,300
Class B $ 34,931,942 $ 20.30 1,720,785
Class C $ 34,466,834 $ 19.56 1,762,108
Class Q $119,250,807 $ 20.74 5,749,575
</TABLE>
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES. Solicitation of proxies is being made primarily by
the mailing of this Notice and Proxy Statement with its enclosures on or about
_______, 2001. Shareholders of the Disappearing Funds whose shares are held by
nominees, such as brokers, can vote their proxies by contacting their respective
nominee. In addition to the solicitation of proxies by mail, employees of ING
Pilgrim Investments and its affiliates, without additional compensation, may
solicit proxies in person or by telephone, telegraph, facsimile, or oral
communication. Pilgrim Mayflower Trust and Pilgrim Worldwide Emerging Markets
Fund, Inc., on behalf of the Disappearing Funds, have retained Shareholder
Communications Corporation, a professional proxy solicitation firm, to assist
with any necessary solicitation of proxies. Shareholders of the Disappearing
Funds 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 Emerging Markets Value Fund or Worldwide Emerging Markets
Fund, as applicable, 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 will vote as directed by the
proxy, but in the absence of voting directions in any proxy that is signed and
returned, they intend to vote "FOR" the Reorganization proposals and may vote in
their discretion with respect to other matters not now known to the Board of
Directors/Trustees, as applicable, of the Disappearing Funds that may be
presented at the Special Meeting.
17
<PAGE>
VOTING RIGHTS. Shareholders of the Disappearing Funds 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 the Disappearing Funds at the close of business on
_________, 2000 (the "Record Date") will be entitled to be present and give
voting instructions for the Disappearing Funds at the Special Meeting with
respect to their shares owned as of that Record Date. As of the Record Date,
______ shares of Emerging Markets Value Fund were outstanding and entitled to
vote and _______ shares of Worldwide Emerging Markets Fund were outstanding and
entitled to vote.
Approval of a Reorganization requires the affirmative vote of a majority of
the outstanding shares of the pertinent Disappearing Fund. In the event that
shareholders of only one of these Funds approve the Reorganization, that
particular Fund whose shareholders approved the Reorganization could be
reorganized into the Emerging Countries Fund. The Fund not approving the
Reorganization may continue to operate as a separate entity.
For Emerging Markets Value Fund, the holders of a majority of the
outstanding shares shall constitute a quorum. For Worldwide Emerging Markets
Fund, the holders of one-third of the outstanding shares present in person or
represented by proxy shall constitute a quorum. In the absence of a quorum, a
majority of outstanding shares entitled to vote present in person or by proxy
may adjourn the meeting from time to time until a quorum is present.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the meeting for purposes of determining a quorum. However, abstentions and
broker non-votes will not be deemed represented at the meeting for purposes of
calculating the vote on any matter. As a result, an abstention or broker
non-vote will have the same effect as a vote against the Reorganization. The
Disappearing Funds expect that, before the meeting, broker-dealer firms holding
shares of the 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 meeting on behalf of their customers and beneficial owners under the rules
of the New York Stock Exchange.
To the knowledge of Pilgrim Mayflower Trust, as of November 1, 2000, no
current Trustee owns 1% or more of the outstanding shares of Emerging Markets
Value Fund, and the officers and Trustees own, as a group, less than 1% of the
shares of Emerging Markets Value Fund.
To the knowledge of Pilgrim Worldwide Emerging Markets Fund, Inc., as of
November 1, 2000, no current Director owns 1% or more of the outstanding shares
of Worldwide Emerging Markets Fund, and the officers and Directors own, as a
group, less than 1% of the shares of Worldwide Emerging Markets Fund.
Appendix F hereto lists the persons that, as of November 1, 2000, owned
beneficially or of record 5% or more of the outstanding shares of any Class of
the Disappearing Funds or Emerging Countries Fund.
OTHER MATTERS TO COME BEFORE THE MEETING. Pilgrim Mayflower Trust and
Pilgrim Worldwide Emerging Markets Fund, Inc. do not know of any matters to be
presented at the meeting other than those described in this Proxy
Statement/Prospectus. If other business should properly come before the meeting,
the proxyholders will vote thereon in accordance with their best judgment.
18
<PAGE>
SHAREHOLDER PROPOSALS. Pilgrim Mayflower Trust and Pilgrim Worldwide
Emerging Markets Fund, Inc. are not required to hold regular annual meetings
and, in order to minimize their costs, do not intend to hold meetings of
shareholders unless so required by applicable law, regulation, regulatory policy
or if otherwise deemed advisable by management of either Disappearing Fund.
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 Pilgrim Investments will furnish, without
charge, a copy of the most recent Annual Report for each Disappearing Fund and
the most recent Semi-Annual Report succeeding the Annual Report, if any, on
request. Requests for such reports should be directed to Pilgrim at 7337 East
Doubletree Ranch Road, Scottsdale, AZ 85258.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
James M. Hennessy,
Secretary
________, 2000
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
19
<PAGE>
APPENDIX A
Set forth is an excerpt from Emerging Countries Fund's (the "Fund") Annual
Report, dated June 30, 2000, regarding the Fund's performance, including a
report from the former sub-adviser to the Fund--Nicholas-Applegate Capital
Management.
PILGRIM EMERGING COUNTRIES FUND
PORTFOLIO MANAGER'S REPORT
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT - PORTFOLIO MANAGEMENT TEAM.
Catherine Somhegyi, Chief Investment Officer; Pedro V. Marcal, Partner,
Portfolio Manager; Ernesto Ramos, Ph.D., Portfolio Manager; Lawrence S.
Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and
Research; Jessica Goncalves, Portfolio Manager; Jason Campbell, Portfolio
Manager; Theodora Jamison, Investment Analyst; John Mazur, Investment Analyst;
Andrew Parmet, Investment Analyst.
GOAL. The Fund seeks to provide long-term capital appreciation through
investing in companies of developing countries around the world.
MARKET OVERVIEW. Stocks in the world's emerging countries trekked higher
during the fiscal year ended June 30, 2000. The MSCI Emerging Markets Free Index
increased 8.8%, largely due to impressive fourth quarter 1999 gains in the
Europe, Middle East, and Africa (EMEA) region and Latin America.
Gains in EMEA markets were attributable to the improvement in macroeconomic
conditions in the region, such as strength in manufacturing output, a massive
decrease in inflation, robust consumption and robust export growth.
The MSCI Turkey Index turned in a stellar performance, up 118.0% for the
12-month period. Returns were driven by many factors, including:
* Strong capital inflows resulting from the country's privatization program
* The Central Bank of Turkey's adoption of a new exchange rate regime in
support of the government's disinflation program
* An upgrade in Turkey's long-term credit rating by Standard & Poor's
Israel and Russian markets also posted significant gains. The MSCI Israel
Index advanced 60.9%. The election of reform-minded Vladimir Putin as Russia's
prime minister buoyed stocks in the country, as did massive foreign currency
reserves, a revival in domestic industry, and a boom in the price of
oil-Russia's chief export. The MSCI Russia index rose 40.2% for the fiscal year.
The MSCI EMF Latin America Index returned 16.7% in the period amid the
continued strength in the region's economies. Strong fundamentals, such as
increases in commodity prices, exports and industrial production boosted Latin
American economies. Brazil was the region's top-performing market, with the MSCI
Brazil Index advancing 52.2% during the period.
Stocks in emerging Asian countries dipped slightly during the fiscal year
as strength in Indian and Malaysian markets was offset by losses in Indonesia,
the Philippines and Thailand. Nevertheless, Asian markets continued to benefit
from the prevalent themes of strong earnings growth, increased exports to the
United States and improving domestic economies.
A-1
<PAGE>
PERFORMANCE: The Fund's Class A shares, excluding sales charges, and Class
Q shares provided a total return of 20.49% and 20.58%, respectively,
substantially outperforming the MSCI EMF Index, which was up 9.47% for the same
period.
PORTFOLIO SPECIFICS: The Fund's relative outperformance was primarily
attributable to stock selection in India and Mexico, as well as being in
Singapore. The Fund's overweighting in technology also contributed to
performance during the period.
Among the Fund's best-performing stocks were Infosys Technologies, an
Indian IT consulting and software services firm; SK Telecoms, a provider of
cellular services in South Korea; Brazil's Petrobras, an integrated oil company;
Dimension Data of South Africa, a systems integrator company; and China Telecom,
a provider of cellular telecommunications to many of China's most economically
developed provinces.
On a bottom-up, fundamental basis, we increased the Fund's exposure to the
technology stocks, while paring back holdings in the financial services and
manufacturing sectors.
MARKET OUTLOOK: We remain enthusiastic about the investment prospects for
the world's emerging markets, particularly within the technology sector. We
believe that technology will be at the core of the improvements in healthcare,
education and business that these developing countries are seeking.
<TABLE>
<CAPTION>
11/28/94 6/95 6/96 6/97 6/98 6/99 6/30/00
-------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Emerging Countries Fund
Class A With Sales Charge $10,000 $ 9,534 $11,724 $15,260 $12,265 $13,903 $16,751
Pilgrim Emerging Countries Fund
Class A Without Sales Charge $10,000 $10,114 $12,437 $16,187 $13,011 $14,748 $17,770
MSCI EMF Index $10,000 $ 8,896 $ 9,649 $10,887 $ 6,632 $ 8,536 $ 9,344
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2000
SINCE INCEPTION SINCE INCEPTION
OF CLASS A AND C OF CLASS B
1 YEAR 11/28/94 5/31/95
------ -------- -------
Including Sales Charge:
Class A(1) 13.56% 9.67% --
Class B(2) 14.55% -- 11.23%
Class C(3) 18.63% 9.87% --
Excluding Sales Charge:
Class A 20.49% 10.83% --
Class B 19.55% -- 11.35%
Class C 19.63% 9.87% --
MSCI EMF Index 9.47% -1.21%(4) 1.03%(5)
Based on an initial investment, the graph and table above illustrate the
total return of Pilgrim Emerging Countries Fund against the Morgan Stanley
Capital International Emerging Markets Free (MSCI EMF) Index. The Index has an
inherent performance advantage over the Fund since it has no cash in its
portfolio, imposes no sales charges and incurs no operating expenses. An
investor cannot invest directly in an index. The Fund's performance is shown
both with and without the imposition of sales charges.
A-2
<PAGE>
<TABLE>
<CAPTION>
8/31/95 6/96 6/97 6/98 6/99
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pilgrim Emerging Countries
Fund Class Q $10,000 $11,624 $15,200 $12,351
Q MSCI EMF Index $10,000 $10,865 $12,258 $ 7,467
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2000
SINCE INCEPTION
OF CLASS Q
1 YEAR 8/31/95
------ -------
20.58% 11.51%
9.47% 1.06%
Total returns reflect the fact that the Investment Adviser has
contractually agreed to waive or defer its management fee and to pay other
operating expenses otherwise payable by the Fund, subject to possible later
reimbursement during a three-year period. Total returns would have been lower
had there been no deferral to the Fund
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements.
Actual results may differ materially from those projected in the
"forward-looking" statements.
The views expressed in this report reflect those of the portfolio manager,
only through the end of the period as stated on the cover. The portfolio
manager's views are subject to change at any time based on market and other
conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflect deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for
the 1 year return.
(4) Since inception performance for index is shown from 12/01/94.
(5) Since inception performance for index is shown from 06/01/95.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including currency fluctuation, economic and political risks not found in
investments that are solely domestic. Risks of foreign investing are generally
intensified for investments in emerging markets.
A-3
<PAGE>
APPENDIX B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2001, by and between Pilgrim Mutual Funds, a
Delaware business trust ("Mutual Funds Trust") with its principal place of
business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf
of its series, Pilgrim Emerging Countries Fund (the "Acquiring Fund"), and
Pilgrim Mayflower Trust, a Massachusetts business trust ("Mayflower Trust") with
its principal place of business at 7337 E. Doubletree Ranch Road, Scottsdale,
Arizona 85258, on behalf of its series, Pilgrim Emerging Markets Value Fund (the
"Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B and
Class C voting shares of beneficial interest (no par value per share) of the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of all liabilities of the Acquired Fund, and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type or a series thereof and the Acquired
Fund owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Trustees of the Mutual Funds 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 Mayflower Trust, have determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B
and Class C Acquiring Fund Shares determined by dividing the value of the
Acquired Fund's net assets with respect to each class, computed in the manner
and as of the time and date set forth in paragraph 2.1, by the net asset value
of one Acquiring Fund Share of the same class, computed in the manner and as of
the time and date set forth in paragraph 2.2; and (ii) to assume all liabilities
of the Acquired Fund as set forth in paragraph 1.3. Such transactions shall take
place at the closing provided for in paragraph 3.1 (the "Closing").
B-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 and Class C Acquiring Fund Shares to be so credited to Class A,
Class B and Class C Acquired Fund Shareholders shall, with respect to each
class, be equal to the aggregate net asset value of the Acquired Fund shares of
that same class owned by such shareholders on the Closing Date. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund, although share certificates representing interests
in Class A, Class B and Class C shares of the Acquired Fund will represent a
number of the same class of Acquiring Fund Shares after the Closing Date, as
determined in accordance with Section 2.3. The Acquiring Fund shall not issue
certificates representing the Class A, Class B and Class C Acquiring Fund Shares
in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value of such assets computed as
of immediately after the close of business of the New York Stock Exchange and
after the declaration of any dividends on the Closing Date (such time and date
being hereinafter called the "Valuation Date"), using the valuation procedures
and then-current prospectus and statement of additional information with respect
to the Acquiring Fund, and valuation procedures established by the Acquiring
Fund's Board of Trustees.
2.2 The net asset value of a Class A, Class B and Class C Acquiring Fund
Share shall be the net asset value per share computed with respect to that class
as of the Valuation Date, using the valuation procedures set forth in the
then-current prospectus and statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Trustees.
B-2
<PAGE>
2.3 The number of the Class A, Class B and Class C Acquiring Fund Shares to
be issued (including fractional shares, if any) in exchange for the Acquired
Fund's assets shall be determined with respect to each such class by dividing
the value of the net assets with respect to the Class A, Class B and Class C
shares of the Acquired Fund, as the case may be, determined using the same
valuation procedures referred to in paragraph 2.1, by the net asset value of an
Acquiring Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by the
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 to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time.
The Closing shall be held at the offices of the Acquiring Fund or at such other
time and/or place as the parties may agree.
3.2 The Acquired Fund shall direct State Street as custodian for the
Acquired Fund (the "Custodian"), to deliver, at the Closing, a certificate of an
authorized officer stating that (i) the Assets shall have been delivered in
proper form to the Acquiring Fund within two business days prior to or on the
Closing Date, and (ii) all necessary taxes in connection with the delivery of
the Assets, including all applicable federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made. The Acquired Fund's
portfolio securities represented by a certificate or other written instrument
shall be presented by the Acquired Fund Custodian to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date, and shall be transferred and delivered by the Acquired Fund as of
the Closing Date for the account of the Acquiring Fund duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof. The
Custodian shall deliver as of the Closing Date by book entry, in accordance with
the customary practices of any securities depository, as defined in Rule 17f-4
under the Investment Company Act of 1940, as amended (the "1940 Act"), in which
the Acquired Fund's Assets are deposited and the Custodian, the Acquired Fund's
Assets deposited with such depositories. The cash to be transferred by the
Acquired Fund shall be delivered by wire transfer of federal funds on the
Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, Class B and Class C shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue and
deliver a confirmation evidencing the Acquiring Fund Shares to be credited on
the Closing Date to the Secretary of the Acquiring Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
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 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.
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES
4.1 Except has been disclosed to the Acquiring Fund in a written instrument
executed by an officer of the Mayflower Trust, the Mayflower Trust, on behalf of
the Acquired Fund, represents and warrants to the Mutual Funds Trust as follows:
(a) The Acquired Fund is duly organized as a series of Pilgrim Mayflower
Trust, which is a business trust duly organized, validly existing and in good
standing under the laws of the State of Massachusetts with power under Mayflower
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 Mayflower Trust is a registered investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and the registration of
shares of the Acquired Fund under the Securities Act of 1933, as amended ("1933
Act"), is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title 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 Mayflower Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Mayflower 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 Mayflower Trust, on behalf of the Acquired Fund, is a
party or by which it is bound;
(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts including options, futures,
and forward contracts) will terminate without liability to the Acquired Fund on
or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the Mutual
Funds 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 Acquired Fund's financial condition or the conduct of its
business. The Mayflower 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 the Acquired Fund's ability to consummate the transactions herein
contemplated;
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<PAGE>
(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 PricewaterhouseCoopers 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 the requirements of
Subchapter M of the Code for qualification as a regulated investment company,
has been (or will be) eligible to and has computed (or will compute) its federal
income tax under Section 852 of the Code, and will have distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
that has accrued through the Closing Date, and before the Closing Date will have
declared dividends sufficient to distribute all of its investment company
taxable income and net capital gain for the period ending on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Mayflower Trust (recognizing that, under Massachusetts
law, it is theoretically possible that shareholders of the Acquired Fund could,
under certain circumstances, be held personally liable for obligations of the
Acquired Fund) and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. 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 Mayflower 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;
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<PAGE>
(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 has been disclosed to the Acquiring Fund in a written instrument
executed by an officer of Mutual Funds Trust, Mutual Funds Trust, on behalf of
the Acquiring Fund, represents and warrants to the Mayflower Trust as follows:
(a) The Acquiring Fund is duly organized as a series of Mutual Funds 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 Mutual Funds 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) Mutual Funds 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 Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(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 Mutual Funds Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
Mutual Funds 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 Mutual Funds Trust, on behalf of the Acquiring Fund, is a
party or by which it is bound;
B-6
<PAGE>
(g) Except as otherwise disclosed in writing to and accepted by Mayflower
Trust, on behalf of the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquiring Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect the Acquiring Fund's financial condition or the conduct of
its business. Mutual Funds 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 ability to consummate the transactions herein
contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Portfolio of Investments of the Acquiring Fund at June
30, 2000, have been audited by KPMG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since June 30, 2000, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business, other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquired Fund. For purposes of this subparagraph (i), a decline in net asset
value per share of the Acquiring Fund due to declines in market values of
securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by shareholders of the
Acquiring Fund, shall not constitute a material adverse change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, and has been eligible to and has computed (or will compute)
its federal income tax under Section 852 of the Code;
(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 Mutual Funds 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 Mutual Funds 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;
B-7
<PAGE>
(n) The Class A, Class B and Class C 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 Mutual Funds
Trust;
(o) The information to be furnished by the Mutual Funds Trust for use in
the registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B and Class C
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(p), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
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<PAGE>
5.7 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A, Class B and Class C Acquiring Fund Shares received at the Closing.
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 Mayflower Trust, on behalf of the Acquired Fund, covenants that
Mayflower 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 Mutual Funds Trust, on behalf of the Acquiring Fund, may
reasonably deem necessary or desirable in order to vest in and confirm (a)
Mayflower Trust's, on behalf of the Acquired Fund's, title to and possession of
the Acquiring Fund shares to be delivered hereunder, and (b) Mutual Funds
Trust's, on behalf of the Acquiring Fund's, title to and possession of all the
assets and otherwise to carry out the intent and purpose of this Agreement.
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of Mayflower Trust, on behalf of the Acquired Fund, to
consummate the transactions provided for herein shall be subject, at the
Mayflower Trust's election, to the performance by Mutual Funds 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 Mutual Funds 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 Mutual Funds Trust shall have delivered to the Mayflower 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
Mayflower Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Mutual Funds 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 Mayflower Trust shall
reasonably request;
6.3 Mutual Funds 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 Mutual Funds 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.
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<PAGE>
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of Mutual Funds Trust, on behalf of the Acquiring Fund, to
complete the transactions provided for herein shall be subject, at Mutual Funds
Trust's election, to the performance by Mayflower 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 Mayflower 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 Mayflower 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 Mayflower Trust;
7.3 Mayflower 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 Mutual Funds Trust and dated as of the Closing Date, to the
effect that the representations and warranties of Mayflower Trust, on behalf of
the Acquired Fund, made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as Mutual Funds Trust shall
reasonably request;
7.4 Mayflower 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 Mayflower 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 Mayflower Trust, on behalf of the
Acquired Fund, or Mutual Funds 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 Mayflower Trust's Declaration
of Trust, By-Laws, applicable Massachusetts 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
Mutual Funds Trust nor Mayflower Trust may waive the conditions set forth in
this paragraph 8.1;
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<PAGE>
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
Mutual Funds Trust or Mayflower Trust to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert addressed to
Mutual Funds Trust and Mayflower 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 Mutual Funds Trust and
Mayflower Trust. Notwithstanding anything herein to the contrary, neither Mutual
Funds Trust nor Mayflower Trust may waive the condition set forth in this
paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 Mutual Funds Trust, on behalf of the Acquiring Fund, and Mayflower
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.
9.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquired
and Acquiring Funds, and (2) half are borne by the Acquired and Acquiring Funds
and will be paid by the Acquired Fund and Acquiring Fund pro rata based upon the
relative net assets of the Acquiring Fund and Acquired Fund as of the close of
business on the record date for determining the shareholders of the Acquired
Fund entitled to vote on the Reorganization. The costs of the Reorganization
shall include, but not be limited to, costs associated with obtaining any
necessary order of exemption from the 1940 Act, preparation of the Registration
Statement, printing and distributing the Acquiring Fund's prospectus and the
Acquired Fund's proxy materials, legal fees, accounting fees, securities
registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 Mutual Funds Trust and Mayflower 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.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
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11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by resolution of the Board of Trustees of the Acquired Fund or the
Board of Trustees of the Acquiring Fund at any time prior to the Closing Date,
if circumstances should develop that, in the opinion of the Board, make
proceeding with the Agreement inadvisable.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of Mutual Funds
Trust and Mayflower Trust; provided, however, that following the meeting of the
shareholders of the Acquired Fund called by Mayflower Trust pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Class A, Class B and
Class C Acquiring Fund Shares to be issued to the Acquired Fund Shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to Mutual
Funds Trust or Mayflower 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.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 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 Mutual Funds Trust or Mayflower Trust personally, but
shall bind only the trust property of such the Acquiring Fund or the Acquired
Fund as provided in the Declaration of Trust of Mutual Funds Trust or Mayflower
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 each party as provided in
the Declaration of Trust of each party.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President and its seal to be affixed thereto
and attested by its Secretary or Assistant Secretary.
PILGRIM MUTUAL FUNDS, on behalf of its
Attest: PILGRIM EMERGING COUNTRIES FUND series
_______________________________
SECRETARY By: _______________________________
Its: ______________________________
PILGRIM MAYFLOWER TRUST, on behalf of its
Attest: PILGRIM EMERGING MARKETS VALUE FUND series
_______________________________
SECRETARY By: _______________________________
Its: ______________________________
B-13
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APPENDIX C
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 "Trust") with its principal place of business at
7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf of its
series, Pilgrim Emerging Countries Fund (the "Acquiring Fund"), and Worldwide
Emerging Markets Fund, Inc., a corporation (the "Company") organized under the
laws of the state of Maryland with its principal place of business at 7337 E.
Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf of its sole series,
the Pilgrim Worldwide Emerging Markets 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 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 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 Directors of the Company, have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A Acquiring
Fund Shares determined by dividing the value of the Acquired Fund's net assets
with respect to each class, computed in the manner and as of the time and date
set forth in paragraph 2.1, by the net asset value of one Acquiring Fund Share
of the same class, computed in the manner and as of the time and date set forth
in paragraph 2.2; and (ii) to assume all liabilities of the Acquired Fund as set
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
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1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests and dividends or interests
receivable that are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing date
provided for in paragraph 3.1 (the "Closing Date") (collectively, "Assets").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
also assume all of the liabilities of the Acquired Fund, whether accrued or
contingent, known or unknown, existing at the Valuation Date (collectively,
"Liabilities"). On or as soon as practicable prior to the Closing Date, the
Acquired Fund will declare and pay to its shareholders of record one or more
dividends and/or other distributions so that it will have distributed
substantially all (and in no event less than 98%) of its investment company
taxable income (computed without regard to any deduction for dividends paid) and
realized net capital gain, if any, for the current taxable year through the
Closing Date.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to Class A shares, determined as of immediately after the close of
business on the Closing Date (the "Acquired Fund Shareholders"), on a pro rata
basis within that class, the Acquiring Fund Shares of the same class received by
the Acquired Fund pursuant to paragraph 1.1, and will completely liquidate. Such
distribution and liquidation will be accomplished, with respect to each class of
the Acquired Fund's shares, by the transfer of the Acquiring Fund Shares then
credited to the account of the Acquired Fund on the books of the Acquiring Fund
to open accounts on the share records of the Acquiring Fund in the names of the
Acquired Fund Shareholders. The aggregate net asset value of Class A Acquiring
Fund Shares to be so credited to Class A Acquired Fund Shareholders shall be
equal to the aggregate net asset value of the 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
shares of the Acquired Fund will represent a number of the same class of
Acquiring Fund Shares after the Closing Date, as determined in accordance with
Section 2.3. The Acquiring Fund shall not issue certificates representing the
Class A Acquiring Fund Shares in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value of such assets computed as
of immediately after the close of business of the New York Stock Exchange and
after the declaration of any dividends on the Closing Date (such time and date
being hereinafter called the "Valuation Date"), using the valuation procedures
in the then-current prospectus and statement of additional information with
respect to the Acquiring Fund, and valuation procedures established by the
Acquiring Fund's Board of Trustees.
2.2 The net asset value of a Class A 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 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
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assets with respect to the Class A shares of the Acquired Fund, as the case may
be, determined using the same valuation procedures referred to in paragraph 2.1,
by the net asset value of an Acquiring Fund Share, determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by the
Acquiring Fund's record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time.
The Closing shall be held at the offices of the Acquiring Fund or at such other
time and/or place as the parties may agree.
3.2 The Acquired Fund shall direct Brown Brothers Harriman & Co. as
custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets shall have been
delivered in proper form to the Acquiring Fund within two business days prior to
or on the Closing Date, and (ii) all necessary taxes in connection with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented by the Acquired Fund Custodian to the
custodian for the Acquiring Fund for examination no later than five business
days preceding the Closing Date, and shall be transferred and delivered by the
Acquired Fund as of the Closing Date for the account of the Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Custodian shall deliver as of the Closing Date by book
entry, in accordance with the customary practices of any securities depository,
as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended
(the "1940 Act"), in which the Acquired Fund's Assets are deposited and the
Custodian, the Acquired Fund's Assets deposited with such depositories. The cash
to be transferred by the Acquired Fund shall be delivered by wire transfer of
federal funds on the Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the Acquiring Fund, or provide evidence satisfactory to
the Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the Closing each
party shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund, respectively, shall be closed to trading or trading
thereupon shall be restricted, or (b) trading or the reporting of trading on
such Exchange or elsewhere shall be disrupted so that, in the judgment of the
Board of Directors of the Acquired Fund or the Board of Trustees of the
Acquiring Fund, accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund 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.
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES
4.1 Except has been disclosed to the Acquiring Fund in a written instrument
executed by an officer of the Company, the Company, on behalf of the Acquired
Fund, represents and warrants to the Trust as follows:
(a) The Acquired Fund is a series of the Company, which is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland with power under its Articles of Incorporation to own all of
its properties and assets and to carry on its business as it is now being
conducted;
(b) The Acquired Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and the registration of
shares of the Acquired Fund under the Securities Act of 1933, as amended ("1933
Act"), is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title to the Assets and full right, power, and authority to sell, assign,
transfer and deliver such Assets hereunder free of any liens or other
encumbrances, and upon delivery and payment for such Assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material violation
of the Company's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Company, on behalf of the Acquired Fund, is a party or by which it is bound, or
(ii) the acceleration of any obligation, or the imposition of any penalty, under
any agreement, indenture, instrument, contract, lease, judgment or decree to
which the Company, on behalf of the Acquired Fund, is a party or by which it is
bound;
(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts including options, futures,
and forward contracts) will terminate without liability to the Acquired Fund on
or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the 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. The
Company, on behalf of the Acquired Fund, knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
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(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Portfolio of Investments of the Acquired Fund at
December 31, 1999, have been audited by KPMG LLP, independent auditors, and
are in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) present fairly, in all material respects, the financial
condition of the Acquired Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquired Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(j) Since December 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. All of the issued and
outstanding shares of the Acquired Fund will, at the time of Closing, be held by
the persons and in the amounts set forth in the records of the Transfer Agent,
on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund
does not have outstanding any options, warrants or other rights to subscribe for
or purchase any of the shares of the Acquired Fund, nor is there outstanding any
security convertible into any of the Acquired Fund shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Directors of the Company, on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
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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 has been disclosed to the Acquired Fund in a written instrument
executed by an officer of the Trust, the Trust, on behalf of the Acquiring Fund,
represents and warrants to the Company as follows:
(a) The Acquiring Fund is a series of the 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 Trust's Declaration of Trust to own all
of its properties and assets and to carry on its business as it is now being
conducted;
(b) the 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
Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(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 Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the 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 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
Company, on behalf of the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Trust, on behalf
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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. The 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 KPMG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since June 30, 2000, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business, other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquired Fund. For purposes of this subparagraph (i), a decline in net asset
value per share of the Acquiring Fund due to declines in market values of
securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by shareholders of the
Acquiring Fund, shall not constitute a material adverse change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
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, and will do so for the taxable
year including the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the 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 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 Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
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the terms of this Agreement, will on the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable by the Trust;
(o) The information to be furnished by the Trust for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
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 Acquiring Fund Shares to
be issued hereunder are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(p), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
5.7 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A Acquiring Fund Shares received at the Closing.
C-8
<PAGE>
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 The Company, on behalf of the Acquired Fund, covenants that the Company
will, from time to time, as and when reasonably requested by the Trust, on
behalf of the Acquiring Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action as the Trust may reasonably deem necessary or
desirable in order to vest in and confirm (a) the Company's, on behalf of the
Acquired Fund's, title to and possession of the Acquiring Fund Shares to be
delivered hereunder, and (b) the Trust's, on behalf of the Acquiring Fund's,
title to and possession of all the assets and otherwise to carry out the intent
and purpose of this Agreement.
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Company to consummate the transactions provided for
herein shall be subject, at the Company's election, to the performance by the
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 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 Trust shall have delivered to the Company 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 Company and dated as of the
Closing Date, to the effect that the representations and warranties of the
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
Company shall reasonably request;
6.3 The 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 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 Trust, on behalf of the Acquiring Fund, to complete
the transactions provided for herein shall be subject, at the Trust's election
to the performance by the Company, on behalf of the Acquired Fund, of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations and warranties of the Company, on behalf of the
Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
C-9
<PAGE>
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 Company shall have delivered to the Acquiring Fund a statement of
the Company's assets and liabilities, as of the Closing Date, certified by the
Treasurer of the Company;
7.3 The Company shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Trust and dated as of the Closing Date, to the effect that the representations
and warranties of the Company, on behalf of the Acquired Fund, made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Trust shall reasonably request;
7.4 The Company, on behalf of the Acquired Fund, shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by the Company, 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;
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 Company, on behalf of the Acquired
Fund, or the Trust, on behalf of the Acquiring Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Company's Articles of
Incorporation, By-Laws, applicable Maryland law and the 1940 Act, and certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Trust nor the Company may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Trust or the Company to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund, provided that either party hereto may for itself waive any of
such conditions;
C-10
<PAGE>
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert addressed to the
Company and the 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 Trust and the Company. Notwithstanding
anything herein to the contrary, neither the Trust nor the Company may waive the
condition set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust, on behalf of the Acquiring Fund, and the Company, on behalf
of the Acquired Fund, represent and warrant to each other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquired
and Acquiring Funds, and (2) half are borne by the Acquiring Fund and the
Acquired Fund and will be paid by the Acquired Fund and Acquiring Fund pro rata
based upon the relative net assets of the Acquiring Fund and the Acquired Fund
as of the close of business on the record date for determining the shareholders
of the Acquired Fund entitled to vote on the Reorganization. The costs of the
Reorganization shall include, but not be limited to, costs associated with
obtaining any necessary order of exemption from the 1940 Act, preparation of the
Registration Statement, printing and distributing the Acquiring Fund's
prospectus and the Acquired Fund's proxy materials, legal fees, accounting fees,
securities registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust and the Company agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by resolution of the Board of Directors of the Acquired Fund or
the Board of Trustees of the Acquiring Fund at any time prior to the Closing
Date, if circumstances should develop that, in the opinion of the Board, make
proceeding with the Agreement inadvisable.
C-11
<PAGE>
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of the Company
and the 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 Acquiring Fund Shares to be issued to
the Acquired Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the Trust
or to the Company, 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258,
attn: James M. Hennessy, in each case with a copy to Dechert, 1775 Eye Street,
N.W., Washington, D.C. 20006, attn: Jeffrey S. Puretz.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 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 Trust personally, but shall bind only the trust
property of the Acquiring Fund, as provided in the Declaration of Trust of the
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 the Acquiring Fund as
provided in the Declaration of Trust of the Trust.
C-12
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
PILGRIM MUTUAL FUNDS, on behalf of its
Attest: PILGRIM EMERGING COUNTRIES FUND series
_______________________________
SECRETARY By: _______________________________
Its: ______________________________
PILGRIM WORLDWIDE EMERGING MARKETS FUND,
INC., on behalf of its sole series,
PILGRIM WORLDWIDE EMERGING MARKETS FUND
Attest:
_______________________________
SECRETARY By: _______________________________
Its: ______________________________
C-13
<PAGE>
APPENDIX D
ADDITIONAL INFORMATION REGARDING PILGRIM EMERGING COUNTRIES FUND
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to three separate Classes of the
Pilgrim Emerging Countries Fund (the "Fund"): Classes A, B and C, each of which
represents an identical interest in the Fund's investment portfolio, but are
offered with different sales charges and distribution (Rule 12b-1) and service
fee arrangements. As described below and elsewhere in this Proxy
Statement/Prospectus, the contingent deferred sales load structure and
conversion characteristics of the Fund shares that will be issued to you in the
reorganizations of Pilgrim Emerging Markets Value Fund ("Emerging Markets Value
Fund") and Pilgrim Worldwide Emerging Markets Fund ("Worldwide Emerging Markets
Fund") (each, a "Reorganization," and collectively, the "Reorganizations") will
be the same as those that apply to Emerging Markets Value Fund and Worldwide
Emerging Markets Fund shares held by you immediately prior to the
Reorganizations, and the period that you held shares of Emerging Markets Value
Fund and Worldwide Emerging Markets Fund will be included in the holding period
of the Fund for purposes of calculating contingent deferred sales charges and
determining conversion rights. Purchases of the shares of the Fund after the
Reorganizations will be subject to the sales load structure and conversion
rights discussed below.
The sales charges and fees for each Class of shares of the Fund involved in
the Reorganizations are shown and contrasted in the chart below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge on Purchases 5.75%(1) None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00(4)
Annual Distribution (12b-1) and Service Fees (5) 0.35% 1.00% 1.00%
Maximum Purchase Unlimited $250,000 Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A
</TABLE>
----------
(1) Reduced for purchases of $50,000 and over.
(2) For investments of $1 million or more, a CDSC of no more than 1% may be
assessed on redemptions of shares. See "Class A Shares: Initial Sales
Charge Alternative" in this Appendix D.
(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 D.
(4) Imposed upon redemption within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund purchased when the Fund was part of the
Nicholas-Applegate Mutual Funds will convert to Class A shares after seven
years from the date of the original purchase.
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.
D-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 Reorganizations
with respect to Class A shares of Emerging Markets Value Fund and Worldwide
Emerging Markets Fund that were subject to a CDSC at the time of the
Reorganizations, will be subject to a CDSC of up to 1% from the date of purchase
of the original shares of Emerging Markets Value Fund and Worldwide Emerging
Markets Fund.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced
sales charge on a purchase of Class A shares of the Fund or other open-end funds
in the Pilgrim funds or ING funds which offer Class A shares, or shares with
front-end sales charges ("Participating Funds") by completing the Letter of
Intent section of an Application to purchase Fund shares. Executing the Letter
of Intent expresses an intention to invest during the next 13 months a specified
amount, which, if made at one time, would qualify for a reduced sales charge. An
amount equal to the Letter of Intent amount multiplied by the maximum sales
charge imposed on purchases of the Fund and Class will be restricted within your
account to cover additional sales charges that may be due if your actual total
investment fails to qualify for the reduced sales charges. See the Statement of
Additional Information for the Fund for details on the Letter of Intent option
or contact the Shareholder Servicing Agent at (800) 992-0180 for more
information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
Funds (excluding Pilgrim Money Market Fund) and ING Funds ("Rights of
Accumulation"). The reduced sales charges apply to quantity purchases made at
one time or on a cumulative basis over any period of time. See the Statement of
Additional Information for the Fund for details or contact the Shareholder
Servicing Agent at (800) 992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim funds or ING funds which
impose a CDSC may be combined with Class A shares for a reduced sales charge but
will not affect any CDSC which may be imposed upon the redemption of shares of
the Fund which imposes a CDSC.
SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at (800) 992-0180, or see
the Statement of Additional Information for the Fund.
D-2
<PAGE>
CLASS B SHARES: DEFERRED SALES CHARGE ALTERNATIVE. Class B shares are
offered at their NAV per share without any initial sales charge. Class B shares
that are redeemed within six years of purchase, however, will be subject to a
CDSC as described in the table that follows. Class B shares of the Fund are
subject to distribution and service fees at an annual rate of 1.00% of the
average daily net assets of the Class, which is higher than the distribution and
service fees of Class A shares. The higher distribution and service fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower NAV than Class A shares. Orders for Class B shares in excess of
$250,000 will be accepted as orders for Class A shares or declined. The amount
of the CDSC is based on the lesser of the NAV of the Class B shares at the time
of purchase or redemption. There is no CDSC on Class B shares acquired through
the reinvestment of dividends and capital gains distributions. The CDSCs are as
follows:
YEAR OF REDEMPTION AFTER PURCHASE CDSC
--------------------------------- ----
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
After Sixth Year None
Generally, 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 Emerging
Markets Value Fund will convert to Class A shares eight years after the purchase
of the original shares of Emerging Markets Value Fund. Class B shares acquired
when the Fund was a part of Nicholas-Applegate Mutual Funds will convert after
seven years from the date of original purchase. For additional information on
the CDSC and the conversion of Class B, see the Fund's Statement of Additional
Information.
CLASS C SHARES. Class C shares are offered at their NAV per share without
an initial sales charge. Class C shares may be subject to a CDSC of 1% if
redeemed within one year of purchase. The amount of the CDSC is based on the
lesser of the NAV of the Class C shares at the time of purchase or redemption.
There is no CDSC on Class C shares acquired through the reinvestment of
dividends and capital gains distributions.
WAIVERS OF CDSC. The CDSC will be waived in the following cases. In
determining whether a CDSC is applicable, it will be assumed that shares held in
the shareholder's account that are not subject to such charge are redeemed
first.
1) The CDSC will be waived in the case of redemption following the death
or permanent disability of a shareholder if made within one year of
death or initial determination of permanent disability. The waiver is
available only for those shares held at the time of death or initial
determination of permanent disability.
2) The CDSC also may be waived for Class B shares redeemed pursuant to a
Systematic Withdrawal Plan, up to a maximum of 12% per year of a
shareholder's account value based on the value of the account at the
time the plan is established and annually thereafter, provided all
dividends and distributions are reinvested and the total redemptions
do not exceed 12% annually.
3) The CDSC also will be waived in the case of mandatory distributions
from a tax-deferred retirement plan or an IRA.
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at (800) 992-0180.
D-3
<PAGE>
REINSTATEMENT PRIVILEGE. Class B and Class C shareholders who have redeemed
their shares in any open-end Pilgrim fund or ING fund may reinvest some or all
of the proceeds in the same share Class within 90 days without a sales charge.
Reinstated Class B and Class C shares will retain their original cost and
purchase date for purposes of the CDSC. This privilege can be used only once per
calendar year. See the Statement of Additional Information for the Fund for
details or contact the Shareholder Servicing Agent at (800) 992-0180 for more
information.
RULE 12B-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 applicable to each Class of shares of
the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, ING Pilgrim Securities,
Inc. (the "Distributor"), may receive from the Fund an annual fee in connection
with the offering, sale and shareholder servicing of the Fund's Class A, Class B
and Class C shares.
DISTRIBUTION AND SERVICING FEES. As compensation for services rendered and
expenses borne by the Distributor in connection with the distribution of shares
of the Fund and in connection with services rendered to shareholders of the
Fund, the Fund pays the Distributor servicing fees and distribution fees up to
the annual rates set forth below (calculated as a percentage of the Fund's
average daily net assets attributable to that Class):
SERVICING FEE DISTRIBUTION FEE
------------- ----------------
Class A 0.25% 0.10%
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Fees paid under the Rule 12b-1 Plan may be used to cover the expenses of
the Distributor from the sale of Class A, Class B and Class C shares of the
Fund, including payments to Authorized Dealers, and for shareholder servicing.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
OTHER EXPENSES. In addition to the management fee and other fees described
previously, the Fund pays other expenses, such as legal, audit, transfer agency
and custodian fees, proxy solicitation costs, and the compensation of Trustees
who are not affiliated with ING Pilgrim Investments, Inc. ("ING Pilgrim
Investments"). Most Fund expenses are allocated proportionately among all of the
outstanding shares of that Fund. However, the Rule 12b-1 Plan fees for each
Class of shares are charged proportionately only to the outstanding shares of
that Class.
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 ($250 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 for a
pre-authorized retirement plan is $100, and the minimum for additional
investment is $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable
sales charge. When you sell shares, you receive the NAV minus any applicable
deferred sales charge. Exchange orders are effected at NAV.
D-4
<PAGE>
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. New York City time) on each day that it is
open for business. The NAV of each Class represents that Class' pro rata share
of that Fund's net assets as adjusted for any Class specific expenses (such as
fees under a Rule 12b-1 plan), and divided by that Class' outstanding shares. In
general, the value of the Fund's assets is based on actual or estimated market
value, with special provisions for assets not having readily available market
quotations, and short-term debt securities, and for situations where market
quotations are deemed unreliable. The NAV per share of each Class of the Fund
will fluctuate in response to changes in market conditions and other factors.
Portfolio securities for which market quotations are readily available are
stated at market value. Short-term debt securities having a maturity of 60 days
or less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Trustees. Valuing securities at fair
value involves greater reliance on judgment then valuing securities that have
readily available market quotations. For information on valuing foreign
securities, see the Fund's Statement of Additional Information.
PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized
investment plan to purchase shares with automatic bank account debiting. For
further information on pre-authorized investment plans, contact the Shareholder
Servicing Agent at (800) 992-0180.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company ("SSB") acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB
currently receives a $12 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the NAV
next determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth above under "Purchase of Shares" have been
completed. If you purchase by wire, however, the order will be deemed to be in
proper form after the telephone notification and the federal funds wire have
been received. If you purchase by wire, you must submit an application form in a
timely fashion. If an order or payment by wire is received after the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time), the shares will not be credited until the next business day.
You will receive a confirmation of each new transaction in your account,
which also will show you the number of shares of the Fund you own including the
number of shares being held in safekeeping by the Transfer Agent for your
account. You may rely on these confirmations in lieu of certificates as evidence
of your ownership. Certificates representing shares of the Fund will not be
issued unless you request them in writing.
TELEPHONE ORDERS. The Fund and its Transfer Agent will not be responsible
for the authenticity of phone instructions or losses, if any, resulting from
unauthorized shareholder transactions if they reasonably believe that such
instructions were genuine. The Fund and its Transfer Agent have established
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include recording telephone instructions for exchanges
and expedited redemptions, requiring the caller to give certain specific
identifying information, and providing written confirmation to shareholders of
record not later than five days following any such telephone transactions. If
the Fund and its Transfer Agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Telephone redemptions may be executed on all accounts other than retirement
accounts.
D-5
<PAGE>
EXCHANGE PRIVILEGES AND RESTRICTIONS
An exchange privilege is available. Exchange requests may be made in
writing to the Transfer Agent or by calling the Shareholder Servicing Agent at
(800) 992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
than four per year). ING Pilgrim Investments reserves the right, upon 60 days'
prior notice, to restrict the frequency of, otherwise modify, or impose charges
of up to $5.00 upon exchanges. The total value of shares being exchanged must at
least equal the minimum investment requirement of the Fund into which they are
being exchanged.
The Fund may change or cancel its exchange policies at any time, upon 60
days' written notice to shareholders.
Shares of one Class of the Fund generally may be exchanged for shares of
that same Class of any other open-end Pilgrim Fund or ING Fund without payment
of any additional sales charge. In most instances, if you exchange and
subsequently redeem your shares, any applicable CDSC will be based on the full
period of the share ownership. Shareholders exercising the exchange privilege
with any other open-end Pilgrim Fund or ING Fund should carefully review the
prospectus of that fund. Exchanges of shares are sales and may result in a gain
or loss for federal and state income tax purposes. You will automatically be
assigned the telephone exchange privilege unless you mark the box on the Account
Application that signifies you do not wish to have this privilege. The exchange
privilege is only available in states where shares of the Fund being acquired
may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent at (800) 992-0180 unless you mark the box on the
Account Application that indicates that you do not wish to have the telephone
exchange privilege.
SYSTEMATIC EXCHANGE PRIVILEGE. With an initial account balance of at least
$5,000 and subject to the information and limitations outlined above, you may
elect to have a specified dollar amount of shares systematically exchanged,
monthly, quarterly, semi-annually or annually (on or about the 10th of the
applicable month), from your account to an identically registered account in the
same Class of any other open-end Pilgrim Fund or ING Fund. This exchange
privilege may be modified at any time or terminated upon 60 days' written notice
to shareholders.
SMALL ACCOUNTS. Due to the relatively high cost of handling small
investments, the Fund reserves the right upon 30 days' written notice to redeem,
at NAV, the shares of any shareholder whose account (except for IRAs) has a
value of less than $1,000, other than as a result of a decline in the NAV per
share.
HOW TO REDEEM SHARES
Shares of the Fund will be redeemed at the NAV (less any applicable CDSC
and/or federal income tax withholding) next determined after receipt of a
redemption request in good form on any day the New York Stock Exchange is open
for business.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to have monthly, quarterly,
semi-annual or annual payments in any fixed amount of $100 or more made to
yourself, or to anyone else you properly designate, as long as the account has a
current value of at least $10,000. For additional information, contact the
Shareholder Servicing Agent at (800) 992-0180, or see the Fund's Statement of
Additional Information.
D-6
<PAGE>
PAYMENTS. Payment to shareholders for shares redeemed or repurchased
ordinarily will be made within three days after receipt by the Transfer Agent of
a written request in good order. The Fund may delay the mailing of a redemption
check until the check used to purchase the shares being redeemed has cleared
which may take up to 15 days or more. To reduce such delay, all purchases should
be made by bank wire or federal funds. The Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
Rules of the Securities and Exchange Commission. The Fund intends to pay in cash
for all shares redeemed, but under abnormal conditions that make payment in cash
harmful to the Fund, the Fund may make payment wholly or partly in securities at
their then current market value equal to the redemption price. In such case, the
Fund could elect to make payment in securities for redemptions in excess of
$250,000 or 1% of its net assets during any 90-day period for any one
shareholder. An investor may incur brokerage costs in converting such securities
to cash.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund. ING
Pilgrim Investments provides the Fund with office space, equipment and personnel
necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of Trustees of the Fund upon 60 days' written notice.
Organized in December 1994, ING Pilgrim Investments is registered as an
investment adviser with the Securities and Exchange Commission. As of September,
30, 2000, ING Pilgrim Investments managed over $20.7 billion in assets. ING
Pilgrim Investments bears its expenses of providing the services described
above. Investment management fees are computed and accrued daily and paid
monthly.
PARENT COMPANY AND DISTRIBUTOR. ING Pilgrim Investments and the Distributor
are indirect, wholly owned subsidiaries of ING Groep N.V. (NYSE: ING) ("ING
Group"). ING Group is a global financial institution active in the field of
insurance, banking and asset management in more than 65 countries, with almost
100,000 employees.
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.
D-7
<PAGE>
DIVIDENDS, DISTRIBUTIONS & TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund generally distributes most or all of
its net earnings in the form of dividends. The Fund pays dividends and capital
gains, if any, annually. Dividends and distributions will be determined on a
Class basis.
Any dividends and distributions paid by the Fund will be automatically
reinvested in additional shares of the respective Class of that fund, unless you
elect to receive distributions in cash. When a dividend or distribution is paid,
the NAV per share is reduced by the amount of the payment. You may, upon written
request or by completing the appropriate section of the Account Application in
the Pilgrim Prospectus, elect to have all dividends and other distributions paid
on a Class A account in the Fund invested into a Pilgrim fund or ING fund which
offers Class A shares.
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's Statement of Additional Information for
additional information. You should rely your own tax adviser for advice about
the particular federal, state and local tax consequences to you of investing in
the Fund.
The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, most shareholders will be taxed on amounts they receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held your Fund
shares or whether you elect to receive your distributions in cash or reinvest
them in additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid
during the following January may be treated as having been received by
shareholders in the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital
gains distributions.
If you invest through a tax-deferred account, such as a retirement plan,
you generally will not have to pay tax on dividends until they are distributed
from the account. These accounts are subject to complex tax rules, and you
should consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You
will generally have a capital gain or loss, which will be long-term or
short-term, generally depending on how long you hold those shares. If you
exchange shares, you may be treated as if you sold them. You are responsible for
any tax liabilities generated by your transactions.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
D-8
<PAGE>
FINANCIAL HIGHLIGHTS
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00
Income from investment operations:
Net investment income (loss) $ (0.20) (0.05) (0.06) 0.03 (0.06) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.63 3.36 (3.81) 1.22 3.51 3.15
Total from investment operations $ 3.43 3.31 (3.87) 1.25 3.45 3.11
Less distributions from:
Net investment income $ -- -- 0.02 -- -- 0.02
Net realized gains on investments $ -- -- 0.07 1.06 0.28 0.06
Net asset value, end of period $ 20.17 16.74 13.43 17.39 17.20 14.03
Total Return(3): % 20.49 24.65 (22.23) 8.06 24.79 28.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,311 53,483 47,180 71,014 38,688 4,718
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.19 2.13 2.27 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.34 2.66 2.56 2.48 3.08 6.72
Net investment income (loss) after
expense reimbursement(4)(5) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35)
Portfolio turnover % 211 67 213 243 176 118
Class B
------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(1) to
June 30, June 30, Year Ended March 31, March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.98 13.64 17.64 17.29 14.02 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.07) (0.22) (0.07) (0.11) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.67 3.41 (3.70) 1.26 3.47 1.56
Total from investment operations $ 3.32 3.34 (3.92) 1.19 3.36 1.52
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.84 0.09 --
Net asset value, end of period $ 20.30 16.98 13.64 17.64 17.29 14.02
Total Return(3): % 19.55 24.49 (22.23) 7.47 24.00 12.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 30,322 26,342 22,338 38,796 24,558 3,557
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.91 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.20 3.06 3.66 7.58
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.80) (0.20) (1.77) (1.05)
Portfolio turnover % 211 67 213 243 176 118
Class C
-----------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79
Income from investment operations:
Net investment income (loss) $ (0.32) (0.07) (0.27) (0.12) (0.10) (0.05)
Net realized and unrealized gains
(loss) on investments $ 3.53 3.28 (3.49) 1.26 3.37 2.97
Total from investment operations $ 3.21 3.21 (3.76) 1.14 3.27 2.92
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.97 0.17 --
Net asset value, end of period $ 19.56 16.35 13.14 16.98 16.81 13.71
Total Return(3): % 19.63 24.43 (22.21) 7.47 23.94 27.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 29,610 24,230 19,246 36,986 29,376 4,345
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.90 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.19 3.09 3.12 6.23
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06)
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
D-9
<PAGE>
<TABLE>
<CAPTION>
Class Q
---------------------------------------------------------------
Year Three months August 31,
ended ended Year Ended March 31, 1995(1) to
June 30, June 30, ------------------------- March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.20 13.79 17.76 16.47 13.18 12.50
Income from investment operations:
Net investment income (loss) $ (0.16) (0.04) (0.01) 0.07 (0.04) 0.01
Net realized and unrealized gains (loss)
on investments $ 3.70 3.45 (3.78) 1.33 3.37 0.67
Total from investment operations $ 3.54 3.41 (3.79) 1.40 3.33 0.68
Less distributions from:
Net investment income $ -- -- 0.18 -- -- --
Net realized gains on investments $ -- -- -- 0.11 0.04 --
Net asset value, end of $ 20.74 17.20 13.79 17.76 16.47 13.18
Total Return(3): % 20.58 24.73 (21.42) 8.60 25.29 5.44
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 119,251 79,130 53,125 46,711 8,660 350
Ratio to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.09 1.90 1.94 1.91 1.91 1.90
Gross expenses prior to expense
reimbursement(4) % 2.24 2.43 2.23 2.43 4.20 44.24
Net investment income (loss) after expense
reimbursement(4)(5) % (1.05) (1.07) (0.01) 1.06 (0.87) 0.47
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
(1) Commencement of offering shares.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-advisor and the Fund changed its year end
to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
D-10
<PAGE>
APPENDIX E
The following is a list of the ING Funds, which are managed by an affiliate of
ING Pilgrim Investments, and the Pilgrim Funds, and the classes of shares of
each Fund that are expected to be offered at or shortly after the
Reorganization:
FUND CLASSES OFFERED
---- ---------------
ING FUNDS
U.S. EQUITY
Internet Fund A, B and C
Tax Efficient Equity Fund A, B and C
GLOBAL/INTERNATIONAL EQUITY
European Equity Fund A, B and C
Global Communications Fund A, B and C
Global Information Technology Fund A, B and C
FIXED INCOME
High Yield Bond Fund A, B and C
Intermediate Bond Fund A, B and C
Money Market Fund A, B, C and I
National Tax-Exempt Bond Fund A, B and C
PILGRIM FUNDS
U.S. EQUITY
Balanced Fund A, B, C, Q and T
Bank and Thrift Fund A and B
Convertible Fund A, B, C and Q
Corporate Leaders Trust Fund A
Growth and Income Fund A, B, C and Q
Growth + Value Fund A, B, C and Q
Growth Opportunities Fund A, B, C, Q, I and T
LargeCap Growth Fund A, B, C and Q
MagnaCap Fund A, B, C, Q and M
MidCap Growth Fund A, B, C and Q
MidCap Opportunities Fund A, B, C, Q and I
Research Enhanced Index Fund A, B, C, Q and I
SmallCap Growth Fund A, B, C and Q
SmallCap Opportunities Fund A, B, C, Q, I and T
GLOBAL/INTERNATIONAL EQUITY
Asia-Pacific Equity Fund A, B and M
Emerging Countries Fund A, B, C and Q
Gold Fund (to be renamed Precious Metals Fund) A
International Fund A, B, C and Q
International Core Growth Fund A, B, C and Q
International SmallCap Growth Fund A, B, C and Q
International Value Fund A, B, C and Q
Troika Dialog Russia Fund A
Worldwide Growth Fund A, B, C and Q
FIXED INCOME
GNMA Income Fund A, B, C, Q, M and T
High Yield Fund A, B, C, Q and M
High Yield Fund II A, B, C, Q and T
Lexington Money Market Trust A
Pilgrim Money Market Fund A, B and C
Strategic Income Fund A, B, C and Q
E-1
<PAGE>
APPENDIX F
As of November 1, 2000, the no person owned beneficially or of record 5% or
more of the outstanding shares any Class of Emerging Countries Fund.
As of November 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of Emerging
Markets Value Fund:
CLASS AND TYPE PERCENTAGE OF PERCENTAGE OF
ADDRESS OF OWNERSHIP CLASS FUND
------- ------------ ----- ----
PaineWebber FBO Class A
Margo Schwartz Annity Trust Record Holder 11.96% 4.10%
19 Rural Drive
Scarsdale, NY 10583
PaineWebber FBO Class A
Larry Schwartz Record Holder 7.20% 2.47%
125 Lorraine Ave
Upper Montclair, NJ 07043
PaineWebber FBO Class A
Jack Schwartz Record Holder 7.33% 2.51%
PO Box 3321
Weehawken, NJ 07087
As of November 1, 2000, the following person owned beneficially or of record 5%
or more of the outstanding shares of the specified Class of Worldwide Emerging
Markets Fund:
CLASS AND TYPE PERCENTAGE OF PERCENTAGE OF
ADDRESS OF OWNERSHIP CLASS FUND
------- ------------ ----- ----
Salomon Smith Barney FBO Class A 19.58 19.58
#00109801250 Record Holder
388 Greenwich Street
New York, NY 10013
F-1
<PAGE>
PART B
PILGRIM MUTUAL FUNDS
--------------------------------------------------------------------------------
Statement of Additional Information
________ ___, 2001
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Acquisition of the Assets and Liabilities of By and in Exchange for Shares of
Pilgrim Emerging Markets Value Fund Pilgrim Emerging Countries Fund
(a series of Pilgrim Mayflower Trust) (a series of Pilgrim Mutual Funds)
and 7337 East Doubletree Ranch Road
Pilgrim Worldwide Emerging Markets Fund Scottsdale, AZ 85258
(a series of Pilgrim Worldwide Emerging Markets Fund, Inc.)
7337 East Doubletree Ranch Road, Scottsdale, AZ 85258
</TABLE>
This Statement of Additional Information is available to the Shareholders
of Pilgrim Emerging Markets Value Fund and Pilgrim Worldwide Emerging Markets
Fund in connection with proposed transactions whereby all of the assets and
liabilities of Pilgrim Emerging Markets Value Fund, a series of Pilgrim
Mayflower Trust, and Pilgrim Worldwide Emerging Markets Fund, a series of
Pilgrim Worldwide Emerging Markets Fund, Inc., will be transferred to Pilgrim
Emerging Countries Fund, a series of Pilgrim Mutual Funds, in exchange for
shares of Pilgrim Emerging Countries Fund.
This Statement of Additional Information of 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 Emerging Countries Fund
and Pilgrim Emerging Markets Value Fund dated November 1, 2000, as filed on
November 1, 2000, and for Pilgrim Worldwide Emerging Markets Fund dated
July 31, 2000, as filed on July 26, 2000.
2. The Financial Statements of Pilgrim Emerging Countries Fund are included in
the Annual Report of Pilgrim Mutual Funds, dated June 30, 2000, as filed on
September 7, 2000.
3. The Financial Statements of Pilgrim Emerging Markets Value Fund are
included in the Semi-Annual Report of Pilgrim Mayflower Trust dated April
30, 2000, as filed on June 23, 2000.
4. The Financial Statements of Pilgrim Emerging Markets Value Fund are
included in the Annual Report of Pilgrim Mayflower Trust dated October 31,
1999, as filed on December 16, 1999.
5. The Financial Statements of Pilgrim Worldwide Emerging Markets Fund are
included in the Annual Report of Pilgrim Worldwide Emerging Markets Fund,
Inc. dated December 31, 1999, as filed on February 29, 2000.
6. The Financial Statements of Pilgrim Worldwide Emerging Markets Fund are
included in the Semi-Annual Report of Pilgrim Worldwide Emerging Markets
Fund, Inc. dated June 30, 2000, as filed on August 31, 2000.
This Statement of Additional Information is not a Prospectus. A Proxy
Statement/Prospectus dated ______, 2001 relating to the reorganizations of
Pilgrim Emerging Markets Value Fund and Pilgrim Worldwide Emerging Markets Fund
may be obtained, without charge, by writing to Pilgrim at 7337 East Doubletree
Ranch Road, Scottsdale, AZ 85258 or calling (800) 992-0180. This Statement of
Additional Information should be read in conjunction with the Proxy
Statement/Prospectus.
1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and PRO FORMA financial
statements for the combined Fund, assuming the Reorganizations are 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>
Emerging Worldwide
Emerging Markets Emerging Pro Forma Pro Forma
Countries Value Markets Adjustments Combined
------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at market value* $251,751,858 $ 14,777,222 $101,552,444 $368,210,704
Short-term investments at amortized cost 1,218,000 -- 16,394,096 17,618,000
Foreign currency at value ** 3,713,846 135,084 40,383 3,754,229
Cash 10,779 154,570 85,529 250,878
Receivables:
Fund shares sold 1,950,335 22,007 304,287 2,276,629
Dividends and interest 438,193 74,831 126,552 639,576
Investment securities sold 6,248,100 -- 6,954,497 13,202,597
Other 40,470 55,700 7,267 103,437
Prepaid expenses 19,893 10,548 -- 30,441
------------ ------------ ------------ ---------- ------------
Total Assets 265,391,474 15,229,962 125,465,055 406,086,491
------------ ------------ ------------ ---------- ------------
LIABILITIES:
Payable for investment securities purchased 8,312,796 -- 964,336 9,277,132
Payable for fund shares redeemed 1,000,921 22,360 544,533 1,567,814
Payable to affiliate 349,236 -- 104,869 454,105
Estimated tax liability on Indian investments 860,486 7,465 -- 867,951
Other accrued expenses and liabilities 374,076 58,351 186,606 619,033
------------ ------------ ------------ ---------- ------------
Total Liabilities 10,897,515 88,176 1,800,344 12,786,035
------------ ------------ ------------ ---------- ------------
NET ASSETS $254,493,959 $ 15,141,786 $123,664,711 $393,300,456
============ ============ ============ ========== ============
NET ASSETS CONSIST OF:
Paid-in capital $253,790,102 $ 11,270,767 $145,802,782 $410,863,651
Undistributed net investment income (loss) -- 133,823 (4,735,856) (4,602,033)
Accumulated net realized gain (loss) on investments
and foreign currency transactions (38,373,471) 2,967,129 (8,336,213) (43,742,555)
Net unrealized appreciation (depreciation) of investments
and other assets, liabilities and forward contracts
denominated in foreign currencies 39,077,328 770,067 (9,066,002) 30,781,393
------------ ------------ ------------ ---------- ------------
Net Assets $254,493,959 $ 15,141,786 $123,664,711 $393,300,456
============ ============ ============ ========== ============
CLASS A:
Net Assets $ 75,311,162 $ 5,675,000 $123,664,711 $204,650,873
Shares outstanding 3,734,633 500,586 10,410,493 (4,499,412)(A) 10,146,300
Net asset value and redemption price per share $ 20.17 $ 11.34 $ 11.88 $ 20.17
Maximum offering price per share $ 21.40 $ 12.00 $ 11.88 $ 21.40
CLASS B:
Net Assets $ 30,321,732 $ 4,610,210 N/A $ 34,931,942
Shares outstanding 1,493,431 409,401 N/A (182,047)(A) 1,720,785
Net asset value and redemption price per share (1) $ 20.30 $ 11.26 N/A $ 20.30
Maximum offering price per share $ 20.30 $ 11.26 N/A $ 20.30
CLASS C:
Net Assets $ 29,610,258 $ 4,856,576 N/A $ 34,466,834
Shares outstanding 1,513,876 433,081 N/A (184,849)(A) 1,762,108
Net asset value and redemption price per share $ 19.56 $ 11.21 N/A $ 19.56
Maximum offering price per share $ 19.56 $ 11.21 N/A $ 19.56
CLASS Q:
Net Assets $119,250,807 N/A N/A $119,250,807
Shares outstanding 5,749,575 N/A N/A 5,749,575
Net asset value and redemption price per share $ 20.74 N/A N/A $ 20.74
Maximum offering price per share $ 20.74 N/A N/A $ 20.74
* Cost of securities $211,815,346 $ 14,007,156 $110,613,354 $336,435,856
** Cost of foreign currency $ 3,714,465 $ 135,083 $ 42,064 $ 3,891,612
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(1) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
See Accompanying Notes to Unaudited Proforma Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Emerging Worldwide
Emerging Markets Emerging Pro Forma Pro Forma
Countries Value Markets 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 $ 1,758,417 $ 651,893 $ (2,929,833) $ (519,523)
Interest 283,787 23,481 187,624 494,892
----------- ----------- ------------ ---------- ------------
Total investment income (loss) 2,042,204 675,374 (2,742,209) -- (24,631)
----------- ----------- ------------ ---------- ------------
EXPENSES:
Investment management fees 2,773,339 195,637 1,254,717 361,093 (A) 4,584,786
Distribution expenses
Class A 226,595 27,236 283,653 159,619 (A) 697,103
Class B 295,635 41,971 -- 337,606
Class C 276,850 62,879 -- 339,729
Class Q 249,693 -- -- 249,693
Transfer agent and registrar fees 517,621 22,453 137,031 677,105
Shareholder Reporting 81,878 3,209 44,089 (23,649)(B) 105,527
Registration and filing fees 77,620 34,909 21,986 (45,516)(B) 88,999
Recordkeeping and pricing fees 40,236 -- -- 40,236
Professional fees 39,069 22,409 31,315 (42,980)(B) 49,813
Custodian fees 642,280 20,993 329,335 992,608
Shareholder servicing fees 14,946 241 -- 15,187
Directors' fees 15,000 9,996 105,806 (106,005)(B) 24,797
Insurance 2,182 46 -- 2,228
Accounting expense -- -- 84,949 (84,949)(C) --
Computer processing fees -- -- 20,679 (20,679)(C) --
Miscellaneous 23,960 27,428 50,197 101,585
Administrative fee -- 25,244 -- (25,244)(C) --
Interest and credit facility fee 63,592 -- -- 63,592
----------- ----------- ------------ ---------- ------------
Total expenses 5,340,496 494,651 2,363,757 171,690 8,370,594
----------- ----------- ------------ ---------- ------------
Less:
Waived and reimbursed fees 346,154 -- -- (128,427)(C) 217,727
----------- ----------- ------------ ---------- ------------
Net expenses 4,994,342 494,651 2,363,757 300,117 8,152,867
----------- ----------- ------------ ---------- ------------
Net investment gain (loss) (2,952,138) 180,723 (5,105,966) (300,117) (8,177,498)
----------- ----------- ------------ ---------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments (net of foreign tax on sale of
Indian investments) 39,798,714 3,188,204 43,152,031 86,138,949
Foreign currency transactions (303,058) (137,951) (545,705) (986,714)
Net change in unrealized (depreciation) of:
Investments (net of change in estimated tax
liability on Indian investments) (3,923,323) (1,166,502) (12,095,873) (17,185,698)
Translation of other assets, liabilities and forward
contracts denominated in foreign currencies 72,100 (16) 18,322 90,406
----------- ----------- ------------ ---------- ------------
Net gain from investments and foreign currencies 35,644,433 1,883,735 30,528,775 -- 68,056,943
----------- ----------- ------------ ---------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,692,295 $ 2,064,458 $ 25,422,809 $ (300,117) $ 59,879,445
=========== =========== ============ ========== ============
</TABLE>
(A) Reflects adjustment in expenses due to effects of proposed contract rate.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
(C) Reflects adjustment to concur with Pilgrim expense structure.
See Accompanying Notes to Unaudited Proforma Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
<TABLE>
<CAPTION>
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Shares Shares Shares Shares
---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS: 89.50%
ARGENTINA: 0.23%
40,500 40,500 Massalin Particulares
73,348 73,348 Bco De Galicia Ba
13,930 13,930 Telecom Argentina Stet France
BERMUDA: 0.07%
398,884 398,884 First Pacific Co
31,938 31,938 Jardine Matheson
BRAZIL: 7.23%
6,500 6,500 Centrais Electricas De Santa
33,900 169,400,000 169,433,900 Centrais Eletricas Brasileiras SA
37,490 37,490 Centrais Geradoras Sul Do Bras
-- Companhia Brasileira de Distribuicao
16,600 16,600 Companhia Cerveja Ria Brahma
17,790 17,790 Companhia Energetica De Minas
41,370 41,370 Companhia Paranaense De Energ
10,300 10,300 Copene Petroq Do Nordeste Sa
41,300 41,300 Grupo Pao de Acucar ADR
199,600 100,000 299,600 Embratel Participacoes SA ADR
43,600 43,600 Globo Cabo SA ADR
11,230 11,230 Petroleo Brasileiro Sa Petro
29,200 29,200 Tele Celular Sul Participacoes ADR
1,880 1,880 Tele Centro Sul Participacoes
-- -- Tele Nordeste Celular Particip
-- -- Tele Norte Celular Participaco
113,610 3,239 50,000 166,849 Tele Norte Leste Participacoes ADR
26,600 -- 26,600 Telecomunicacoes Brasileiras SA ADR
-- -- Teleste Celular Participacoes
-- -- Telemig Celular Participacoes
47,500 25,000 72,500 Telesp Celular Participacoes SA ADR
65,100 12,110 77,210 Unibanco - Uniao de Bancos Brasilieros GDR
36,300 36,300 Usinas Siderurgicas De Minas
CHILE: 0.21%
10,900 10,900 Administradora De Fondas De Pensiones Provida
13,400 13,400 Banco Santiago
35,200 35,200 Quinenco Sa
CHINA: 1.59%
1,407,000 1,407,000 Beijing Datang Pow
1,426,000 1,426,000 Beijing Yanhua Pet
25,630 25,630 Beijing Yanhua Petrochemical
472,000 472,000 Guangdong Kelon El
17,377,000 1,508,000 18,885,000 @ PetroChina Co., Ltd.
71,520 71,520 Shandong Huaneng Pwr Dev Ltd
5,801,000 5,801,000 Yizheng Chemical Fibre Co.
COLUMBIA: 0.03%
34,700 34,700 Banco Ganadero S A
CZECH REPUBLIC: 0.91%
115,800 115,800 @ Cesky Telecom AS GDR
36,480 36,480 @ # Cesky Radiokomunikace GDR
EGYPT: 0.47%
45,500 45,500 Al-Ahram Beverages Co. GDR
33,200 33,200 @ Mobinil - Egyptian Mobile Services
GREECE: 0.87%
74,700 74,700 Alpha Bank SA
14,100 14,100 Hellenic Telecommunications
11,400 11,400 Ote (Hellenic Tlcm)
HONG KONG: 4.83%
1,043,400 1,043,400 @ China Mobile (Hong Kong), Ltd.
73,000 73,000 @ China Unicom ADR
24,500,000 24,500,000 Chinastar Entertainment, Ltd.
45,900 45,900 Dairy Farm Intl Hldgs Ltd
-- First Pacific Co
1,036,000 1,036,000 Giordano Int'l, Ltd.
-- Jardine Matheson
936,000 936,000 Legend Holdings, Ltd.
-- Pacific + Orient
262,000 262,000 Shangri La Asia Ltd
7,605,000 7,605,000 Yuxing Infotech Holdings, Ltd.
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Value Value Value Value
------------ ------------ ------------ ------------
COMMON STOCKS: 89.50%
ARGENTINA: 0.23%
Massalin Particulares $ 283,653 $ 283,653
Bco De Galicia Ba 275,204 275,204
Telecom Argentina Stet France 383,075 383,075
------------ ------------ ------------ ------------
-- 941,932 -- 941,932
------------ ------------ ------------ ------------
BERMUDA: 0.07%
First Pacific Co 135,597 135,597
Jardine Matheson 139,888 139,888
------------ ------------ ------------ ------------
-- 275,485 -- 275,485
------------ ------------ ------------ ------------
BRAZIL: 7.23%
Centrais Electricas De Santa 237,812 237,812
Centrais Eletricas Brasileiras SA 344,834 $ 3,474,486 3,819,320
Centrais Geradoras Sul Do Bras 227,564 227,564
Companhia Brasileira de Distribuicao --
Companhia Cerveja Ria Brahma 282,200 282,200
Companhia Energetica De Minas 307,783 307,783
Companhia Paranaense De Energ 385,257 385,257
Copene Petroq Do Nordeste Sa 192,702 192,702
Grupo Pao de Acucar ADR $ 1,326,762 1,326,762
Embratel Participacoes SA ADR 4,715,550 2,362,500 7,078,050
Globo Cabo SA ADR 604,950 604,950
Petroleo Brasileiro Sa Petro 339,275 339,275
Tele Celular Sul Participacoes ADR 1,321,300 1,321,300
Tele Centro Sul Participacoes 137,358 137,358
Tele Nordeste Celular Particip -- --
Tele Norte Celular Participaco -- --
Tele Norte Leste Participacoes ADR 2,684,028 76,521 1,181,250 3,941,799
Telecomunicacoes Brasileiras SA ADR 2,583,525 2,583,525
Teleste Celular Participacoes -- --
Telemig Celular Participacoes -- --
Telesp Celular Participacoes SA ADR 2,131,563 1,121,875 3,253,438
Unibanco - Uniao de Bancos Brasilieros GDR 1,871,625 348,163 2,219,788
Usinas Siderurgicas De Minas 168,022 168,022
------------ ------------ ------------ ------------
17,239,303 3,047,491 8,140,111 28,426,905
------------ ------------ ------------ ------------
CHILE: 0.21%
Administradora De Fondas De Pensiones Provida 232,988 232,988
Banco Santiago 239,525 239,525
Quinenco Sa 343,200 343,200
------------ ------------ ------------ ------------
-- 815,713 -- 815,713
------------ ------------ ------------ ------------
CHINA: 1.59%
Beijing Datang Pow 315,855 315,855
Beijing Yanhua Pet 164,633 164,633
Beijing Yanhua Petrochemical 140,965 140,965
Guangdong Kelon El 255,814 255,814
PetroChina Co., Ltd. 3,611,153 313,381 3,924,534
Shandong Huaneng Pwr Dev Ltd 299,490 299,490
Yizheng Chemical Fibre Co. 1,153,428 1,153,428
------------ ------------ ------------ ------------
4,764,581 1,490,138 -- 6,254,719
------------ ------------ ------------ ------------
COLUMBIA: 0.03%
Banco Ganadero S A 136,631 136,631
------------ ------------ ------------ ------------
CZECH REPUBLIC: 0.91%
Cesky Telecom AS GDR 1,945,440 1,945,440
Cesky Radiokomunikace GDR 1,623,360 1,623,360
------------ ------------ ------------ ------------
3,568,800 -- -- 3,568,800
------------ ------------ ------------ ------------
EGYPT: 0.47%
Al-Ahram Beverages Co. GDR 786,272 786,272
Mobinil - Egyptian Mobile Services 1,080,464 1,080,464
------------ ------------ ------------ ------------
1,866,736 -- -- 1,866,736
------------ ------------ ------------ ------------
GREECE: 0.87%
Alpha Bank SA 2,958,934 2,958,934
Hellenic Telecommunications 171,844 171,844
Ote (Hellenic Tlcm) 279,321 279,321
------------ ------------ ------------ ------------
-- 451,165 2,958,934 3,410,099
------------ ------------ ------------ ------------
HONG KONG: 4.83%
China Mobile (Hong Kong), Ltd. 9,201,943 9,201,943
China Unicom ADR 1,551,250 1,551,250
Chinastar Entertainment, Ltd. 1,131,490 1,131,490
Dairy Farm Intl Hldgs Ltd 137,700 137,700
First Pacific Co --
Giordano Int'l, Ltd. 1,574,832 1,574,832
Jardine Matheson --
Legend Holdings, Ltd. 906,523 906,523
Pacific + Orient --
Shangri La Asia Ltd 307,524 307,524
Yuxing Infotech Holdings, Ltd. 4,170,781 4,170,781
------------ ------------ ------------ ------------
13,234,548 445,224 5,302,271 18,982,043
------------ ------------ ------------ ------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Shares Shares Shares Shares
---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HUNGARY: 0.94%
23,300 23,300 EGIS Rt.
53,900 53,900 Matav Rt. ADR
140,000 140,000 @ Uproar, Ltd.
INDIA: 7.56%
59,511 59,511 BFL Software, Ltd.
100 100 DSQ Software, Ltd.
216,600 216,600 @ Fujitsu ICIM
125,850 125,850 HCL Technologies, Ltd.
40,400 40,400 Himachal Futuristic Communications, Ltd.
34,180 34,180 @ Infosys Technologies, Ltd.
54,900 54,900 NIIT, Ltd.
485,000 485,000 @ Reliance Industries, Ltd.
44,300 50,000 94,300 Satyam Computer Services, Ltd.
1,000 1,000 Silverline Industries, Ltd.
42,400 42,400 Television Eighteen India, Ltd.
120,000 120,000 Videsh Sanchar Nigam, Ltd.
INDONESIA: 0.10%
55,500 55,500 PT Telekomunikasi Indonesia ADR
ISRAEL: 4.69%
671,900 671,900 Bank Hapoalim, Ltd.
140,700 140,700 Bank Leumi Le Israel
24,100 24,100 @ Check Point Software Technologies, Ltd.
10,640 10,640 ECI Telecom Ltd
16,300 16,300 @ Gilat Satellite Networks, Ltd.
15,610 15,610 Koors Industry Ltd.
25,200 25,200 @ M-Systems Flash Disk Pioneers, Ltd.
31,300 48,500 79,800 @ Orckit Communications, Ltd.
88,400 88,400 Teva Pharmaceutical ADR
LUXEMBOURG: 0.09%
30,860 30,860 Quilmes Indl Quinsa Societe An
MALAYSIA: 2.57%
502,000 502,000 AMMB Holdings Berhad
612,000 612,000 Malayan Banking Berhad
247,700 247,700 Pacific + Orient
1,743,000 1,743,000 Tenaga Nasional Berhad
MEXICO: 14.81%
739,000 739,000 Cemex SA de C.V. CPO
128,700 171,900 300,600 Coca-Cola Femsa SA ADR
1,494,430 1,494,430 @ Corp. Interamericana de Entretenmiento SA
28,100 28,100 Fomento Economico Mexicano SA ADR de CV
1,178,000 14,470 781,000 1,973,470 @ Grupo Financiero Banamex Accival SA de CV
127,200 127,200 Grupo Radio Centro SA ADR de CV
44,700 44,700 Grupo Televisa SA GDR
24,050 24,050 Panamerican Beverages Inc
234,931 8,600 243,531 Telefonos de Mexico SA ADR
325,000 254,500 579,500 TV Azteca SA de CV ADR
15,910 15,910 # TV Azteca SA de CV ADR
526,000 526,000 TV Azteca SA de CV
1,212,000 1,557,000 2,769,000 @ Wal-Mart De Mexico SA de CV
PANAMA: 0.09%
12,800 12,800 Banco Latinoamericano De Exportaciones, SA
PHILIPPINES: 0.10%
10,000 10,000 Philippine Long Dist Tel Co
3,993,595 3,993,595 RFM Corp.
POLAND: 0.62%
21,200 21,200 Prokom Software SA
25,500 25,500 Softbank SA GDR
PORTUGAL: 1.66%
1,005,995 1,005,995 ParaRede, SGPS SA Rights
RUSSIA: 2.06%
20,360 20,360 Gazprom O A O
26,000 26,000 @ Golden Telecom, Inc.
68,700 68,700 Lukoil-Holding ADR
212,500 212,500 @ Mosco Telephone Systems
2,900 2,900 Oil Co Lukoil
157,800 157,800 Surgutneftegaz ADR
6,000 6,000 @ Vimpelcom ADR
SINGAPORE: 3.55%
37,600 37,600 @ Chartered Semiconductor Mfg., Ltd. ADR
27,916 27,916 DBS Group Holdings
-- Dairy Farm Intl
897,624 897,624 Datacraft Asia, Ltd.
90,000 90,000 ST Assembly Test Services, Ltd. ADR
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Value Value Value Value
------------ ------------ ------------ ------------
HUNGARY: 0.94%
EGIS Rt. 974,842 974,842
Matav Rt. ADR 1,856,181 1,856,181
Uproar, Ltd. 879,026 879,026
------------ ------------ ------------ ------------
2,831,023 -- 879,026 3,710,049
------------ ------------ ------------ ------------
INDIA: 7.56%
BFL Software, Ltd. 679,491 679,491
DSQ Software, Ltd. 2,128 2,128
Fujitsu ICIM 1,210,013 1,210,013
HCL Technologies, Ltd. 3,629,759 3,629,759
Himachal Futuristic Communications, Ltd. 1,284,747 1,284,747
Infosys Technologies, Ltd. 6,368,159 6,368,159
NIIT, Ltd. 2,717,765 2,717,765
Reliance Industries, Ltd. 3,702,945 3,702,945
Satyam Computer Services, Ltd. 2,958,922 3,338,068 6,296,990
Silverline Industries, Ltd. 9,733 9,733
Television Eighteen India, Ltd. 576,758 576,758
Videsh Sanchar Nigam, Ltd. 3,249,890 3,249,890
------------ ------------ ------------ ------------
17,032,538 -- 12,695,840 29,728,378
------------ ------------ ------------ ------------
INDONESIA: 0.10%
PT Telekomunikasi Indonesia ADR 385,031 385,031
------------ ------------ ------------ ------------
ISRAEL: 4.69%
Bank Hapoalim, Ltd. 1,948,395 1,948,395
Bank Leumi Le Israel 290,497 290,497
Check Point Software Technologies, Ltd. 5,103,175 5,103,175
ECI Telecom Ltd 380,380 380,380
Gilat Satellite Networks, Ltd. 1,130,812 1,130,812
Koors Industry Ltd. 331,713 331,713
M-Systems Flash Disk Pioneers, Ltd. 1,962,450 1,962,450
Orckit Communications, Ltd. 942,913 1,455,000 2,397,913
Teva Pharmaceutical ADR 4,900,675 4,900,675
------------ ------------ ------------ ------------
15,988,420 1,002,590 1,455,000 18,446,010
------------ ------------ ------------ ------------
LUXEMBOURG: 0.09%
Quilmes Indl Quinsa Societe An 343,318 343,318
------------ ------------ ------------ ------------
MALAYSIA: 2.57%
AMMB Holdings Berhad 1,677,737 1,677,737
Malayan Banking Berhad 2,480,211 2,480,211
Pacific + Orient 247,700 247,700
Tenaga Nasional Berhad 5,687,684 5,687,684
------------ ------------ ------------ ------------
9,845,632 247,700 -- 10,093,332
------------ ------------ ------------ ------------
MEXICO: 14.81%
Cemex SA de C.V. CPO 3,464,818 3,464,818
Coca-Cola Femsa SA ADR 2,429,213 3,244,613 5,673,826
Corp. Interamericana de Entretenmiento SA 5,843,546 5,843,546
Fomento Economico Mexicano SA ADR de CV 1,210,056 1,210,056
Grupo Financiero Banamex Accival SA de CV 4,953,199 244,028 3,284,851 8,482,078
Grupo Radio Centro SA ADR de CV 1,446,900 1,446,900
Grupo Televisa SA GDR 3,081,506 3,081,506
Panamerican Beverages Inc 359,247 359,247
Telefonos de Mexico SA ADR 13,420,433 491,275 13,911,708
TV Azteca SA de CV ADR 4,285,938 3,356,219 7,642,157
TV Azteca SA de CV ADR 209,813 209,813
TV Azteca SA de CV 430,587 430,587
Wal-Mart De Mexico SA de CV 2,843,510 3,653,969 6,497,479
------------ ------------ ------------ ------------
39,944,888 1,094,550 17,214,283 58,253,721
------------ ------------ ------------ ------------
PANAMA: 0.09%
Banco Latinoamericano De Exportaciones, SA 354,400 354,400
------------ ------------ ------------ ------------
PHILIPPINES: 0.10%
Philippine Long Dist Tel Co 177,500 177,500
RFM Corp. 212,376 212,376
------------ ------------ ------------ ------------
-- 389,876 -- 389,876
------------ ------------ ------------ ------------
POLAND: 0.62%
Prokom Software SA 1,110,050 1,110,050
Softbank SA GDR 1,323,353 1,323,353
------------ ------------ ------------ ------------
2,433,403 -- -- 2,433,403
------------ ------------ ------------ ------------
PORTUGAL: 1.66%
ParaRede, SGPS SA Rights 6,538,196 6,538,196
------------ ------------ ------------ ------------
RUSSIA: 2.06%
Gazprom O A O 145,065 145,065
Golden Telecom, Inc. 773,500 773,500
Lukoil-Holding ADR 3,511,944 3,511,944
Mosco Telephone Systems 1,275,000 1,275,000
Oil Co Lukoil 148,248 148,248
Surgutneftegaz ADR 2,102,685 2,102,685
Vimpelcom ADR 132,750 132,750
------------ ------------ ------------ ------------
6,520,879 293,313 1,275,000 8,089,192
------------ ------------ ------------ ------------
SINGAPORE: 3.55%
Chartered Semiconductor Mfg., Ltd. ADR 3,384,000 3,384,000
DBS Group Holdings 358,851 358,851
Dairy Farm Intl --
Datacraft Asia, Ltd. 7,899,091 7,899,091
ST Assembly Test Services, Ltd. ADR 2,323,125 2,323,125
------------ ------------ ------------ ------------
11,283,091 358,851 2,323,125 13,965,067
------------ ------------ ------------ ------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Shares Shares Shares Shares
---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SOUTH AFRICA: 3.57%
15,400 15,400 De Beers Centenary
376,565 500,000 876,565 @ Dimension Data Holdings, Ltd.
75,500 75,500 Impala Platinum Holdings, Ltd.
96,800 96,800 Iscor
671,900 671,900 @ Ixchange Technology Holdings, Ltd.
240,300 240,300 M-Cell, Ltd.
2,649,000 2,649,000 Metropolis Transactive Holdings, Ltd.
5,100,000 5,100,000 @ Paradigm Capital Holdings, Ltd.
28,000 28,000 Sasol
2,085,100 2,085,100 @ Union Allian Media, Ltd.
SOUTH KOREA: 14.57%
526,837 526,837 C&TEL Company, Ltd.
40,264 40,264 Dreamline Corporation
74,000 74,000 @ Hyundai Electronics Industries Company
249,720 26,530 137,000 413,250 Korea Electric Power Corp.
58,780 8,400 55,000 122,180 Korea Telecom Corp.
23,610 23,610 @ Korea Telecom Freetel
67,450 67,450 LG Electronics
16,000 16,000 LG Information & Communication, Ltd.
264,300 264,300 Mirae Company
123,000 123,000 Pohang Iron & Steel Co. ADR
52,981 52,981 Samsung Electronics
21,450 21,450 SK Telecom Co., Ltd.
836 836 Telson Electronics Company, Ltd.
18,788 18,788 Tongyang Merchant Bank Bond
SPAIN: 0.16%
9,694 9,694 Telefonica SA
TAIWAN: 8.43%
269,982 269,982 Cosmo Electronics Corporation
-- GigaMedia, Ltd
435,600 435,600 Hon Hai Precision Industry
764 764 Macronix Int'l ADR
896,090 896,090 @ Macronix Int'l
2,855,000 2,855,000 RF-Link System, Inc.
672,600 672,600 @ Systex Corp.
2,138,120 2,138,120 Taiwan Semiconductor Manufacturing Co.
3,313,600 3,313,600 United Microelectronics Corp., Ltd.
70,000 70,000 @ Via Technologies, Inc.
11,946 754,000 765,946 @ # Winbond Electronics Corp. GDR
THAILAND: 0.42%
3,493,293 3,493,293 K.R. Precision Public Company, Ltd.
TURKEY: 5.29%
60,000,000 60,000,000 Akbank T.A.S.
16,438,000 16,438,000 Alcatel Teletas Telekomunikasyn Endustri ve Ticaret AS
2,737,200 12,000,000 14,737,200 Arcelik AS
28,200,000 28,200,000 Beko Elektronik AS
40,600,000 40,600,000 Dogan Sirketler Grubo Holding AS
12,776,820 192,758,000 205,534,820 @ Dogan Yayin Holding AS
13,022,170 13,022,170 Hurriyet Gazetecilik ve Matbaaccilik AS
4,000,000 4,000,000 Logo Yazilim
7,400,000 7,400,000 Netas Northern Electric Telekomunikasyon AS
7,472,500 7,472,500 Tofas Turk Otomobil Fabrikasi AS
22,872,269 22,872,269 Turkiye Garanti Bankasi AS
455,400 455,400 @ Vestel Elektronik Sanayi Ve Ticaret AS
UNITED KINGDOM: 0.68%
149,000 149,000 Flag Telecom Holdings, Ltd. ADR
63,300 63,300 South African Brewery
UNITED STATES: 1.02%
17,100 17,100 @ Amdocs, Ltd.
108,900 108,900 Dairy Farm Intl
171,600 171,600 @ Tricom SA ADR
VENEZUELA: 0.08%
11,680 11,680 Compania Anonima Nacional Telefonos de Venezuela
TOTAL COMMON STOCKS (Cost: $203,519,435,
$14,007,156, $107,502,491 $325,029,082)
PREFERRED STOCKS: 4.09%
BRAZIL: 4.09%
250,663 401,500,000 401,750,663 Banco Bradesco SA
-- Centrais Electricas De Santa
-- Companhia Cerveja Ria Brahma
-- Companhia Paranaense De Energy
50,700 50,700 Companhia Vale Do Rio Doce
-- Copene Petroq Do Nordeste Sa
62,599 62,599 Electropaulo Metropolitana
151,074 151,074 Petroleo Brasileiro SA
-- Tele Centro Sul Participacoes
-- Tele Norte Leste Participacoes
12,110 12,110 Unibanco Uniao De Barncos Bras
-- Usinas Siderurgicas De Minas
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Value Value Value Value
------------ ------------ ------------ ------------
SOUTH AFRICA: 3.57%
De Beers Centenary 374,503 374,503
Dimension Data Holdings, Ltd. 3,113,530 4,137,306 7,250,836
Impala Platinum Holdings, Ltd. 2,806,352 2,806,352
Iscor 164,781 164,781
Ixchange Technology Holdings, Ltd. 1,313,123 1,313,123
M-Cell, Ltd. 1,163,427 1,163,427
Metropolis Transactive Holdings, Ltd. 429,793 429,793
Paradigm Capital Holdings, Ltd. 285,850 285,850
Sasol 187,767 187,767
Union Allian Media, Ltd. 83,038 83,038
------------ ------------ ------------ ------------
7,083,309 727,051 6,249,110 14,059,470
------------ ------------ ------------ ------------
SOUTH KOREA: 14.57%
C&TEL Company, Ltd. 1,025,334 1,025,334
Dreamline Corporation 1,108,626 1,108,626
Hyundai Electronics Industries Company 1,460,105 1,460,105
Korea Electric Power Corp. 7,748,985 489,147 4,251,345 12,489,477
Korea Telecom Corp. 5,176,741 406,350 2,660,625 8,243,716
Korea Telecom Freetel 1,573,259 1,573,259
LG Electronics 1,887,410 1,887,410
LG Information & Communication, Ltd. 899,741 899,741
Mirae Company 1,077,360 1,077,360
Pohang Iron & Steel Co. ADR 2,952,000 2,952,000
Samsung Electronics 17,533,229 17,533,229
SK Telecom Co., Ltd. 7,021,591 7,021,591
Telson Electronics Company, Ltd. 8,885 8,885
Tongyang Merchant Bank Bond 6,740 6,740
------------ ------------ ------------ ------------
42,005,805 895,497 14,386,171 57,287,473
------------ ------------ ------------ ------------
SPAIN: 0.16%
Telefonica SA 621,014 621,014
------------ ------------ ------------ ------------
TAIWAN: 8.43%
Cosmo Electronics Corporation 674,977 674,977
GigaMedia, Ltd -
Hon Hai Precision Industry 3,941,312 3,941,312
Macronix Int'l ADR 19,517 19,517
Macronix Int'l 2,245,693 2,245,693
RF-Link System, Inc. 926,978 926,978
Systex Corp. 2,364,225 2,364,225
Taiwan Semiconductor Manufacturing Co. 10,159,985 10,159,985
United Microelectronics Corp., Ltd. 9,220,922 9,220,922
Via Technologies, Inc. 1,082,181 1,082,181
Winbond Electronics Corp. GDR 345,204 2,178,837 2,524,041
------------ ------------ ------------ ------------
29,379,039 -- 3,780,792 33,159,831
------------ ------------ ------------ ------------
THAILAND: 0.42%
K.R. Precision Public Company, Ltd. 1,647,623 1,647,623
------------ ------------ ------------ ------------
TURKEY: 5.29%
Akbank T.A.S. 464,400 464,400
Alcatel Teletas Telekomunikasyn Endustri ve Ticaret AS 3,579,210 3,579,210
Arcelik AS 1,345,625 590,280 1,935,905
Beko Elektronik AS 477,708 477,708
Dogan Sirketler Grubo Holding AS 982,114 982,114
Dogan Yayin Holding AS 2,162,369 3,265,321 5,427,690
Hurriyet Gazetecilik ve Matbaaccilik AS 1,259,367 1,259,367
Logo Yazilim 419,360 419,360
Netas Northern Electric Telekomunikasyon AS 823,546 823,546
Tofas Turk Otomobil Fabrikasi AS 1,294,768 1,294,768
Turkiye Garanti Bankasi AS 2,764,956 2,764,956
Vestel Elektronik Sanayi Ve Ticaret AS 1,376,297 1,376,297
------------ ------------ ------------ ------------
10,203,382 -- 10,601,939 20,805,321
------------ ------------ ------------ ------------
UNITED KINGDOM: 0.68%
Flag Telecom Holdings, Ltd. ADR 2,225,688 2,225,688
South African Brewery 462,374 462,374
------------ ------------ ------------ ------------
-- 462,374 2,225,688 2,688,062
------------ ------------ ------------ ------------
UNITED STATES: 1.02%
Amdocs, Ltd. 1,312,425 1,312,425
Dairy Farm Intl 65,360 65,360
Tricom SA ADR 2,627,625 2,627,625
------------ ------------ ------------ ------------
3,940,050 65,360 -- 4,005,410
------------ ------------ ------------ ------------
VENEZUELA: 0.08%
Compania Anonima Nacional Telefonos de Venezuela 317,550 317,550
------------ ------------ ------------ ------------
TOTAL COMMON STOCKS (Cost: $203,519,435,
$14,007,156, $107,502,491 $325,029,082) 239,165,427 14,777,222 98,058,140 352,000,789
------------ ------------ ------------ ------------
PREFERRED STOCKS: 4.09%
BRAZIL: 4.09%
Banco Bradesco SA 2,182,097 3,494,304 5,676,401
Centrais Electricas De Santa --
Companhia Cerveja Ria Brahma --
Companhia Paranaense De Energy --
Companhia Vale Do Rio Doce 1,430,901 1,430,901
Copene Petroq Do Nordeste Sa --
Electropaulo Metropolitana 4,408,125 4,408,125
Petroleo Brasileiro SA 4,565,308 4,565,308
Tele Centro Sul Participacoes --
Tele Norte Leste Participacoes --
Unibanco Uniao De Barncos Bras --
Usinas Siderurgicas De Minas --
------------ ------------ ------------ ------------
12,586,431 -- 3,494,304 16,080,735
------------ ------------ ------------ ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Shares Shares Shares Shares
---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
TOTAL PREFERRED STOCKS (Cost $8,295,911,
$0, $3,110,863, $11,406,774)
TOTAL LONG-TERM INVESTMENTS (Cost $211,815,346,
$14,007,156, $110,613,354, $336,435,856)
SHORT-TERM INVESTMENTS: 4.48%
REPURCHASE AGREEMENTS: 0.31%
State Street Repurchase Agreement,
1,218,000 1,218,000 6.20% due 07/03/00 (Collateralized by $1,120,000
U.S. Treasury Bonds, 8.5% Due 05/15/16, Market
Value $1,247,400)
U.S. GOVERNMENT OBLIGATIONS: 4.17%
16,400,000 16,400,000 Federal Home Loan Bank (cost $16,394,096)
TOTAL SHORT-TERM INVESTMENTS
TOTAL INVESTMENTS IN SECURITIES (Cost $213,033,346,
$14,007,156, $127,013,354, $354,053,856)
OTHER ASSETS AND LIABILITIES - NET
NET ASSETS
Emerging Worldwide
Emerging Markets Emerging
Countries Values Markets Pro Forma
Value Value Value Value
------------ ------------ ------------ ------------
TOTAL PREFERRED STOCKS (Cost $8,295,911,
$0, $3,110,863, $11,406,774) 12,586,431 -- 3,494,304 16,080,735
------------ ------------ ------------ ------------
TOTAL LONG-TERM INVESTMENTS (Cost $211,815,346,
$14,007,156, $110,613,354, $336,435,856) 251,751,858 14,777,222 101,552,444 368,081,524
------------ ------------ ------------ ------------
SHORT-TERM INVESTMENTS: 4.48%
REPURCHASE AGREEMENTS: 0.31%
State Street Repurchase Agreement,
6.20% due 07/03/00 (Collateralized by $1,120,000
U.S. Treasury Bonds, 8.5% Due 05/15/16, Market
Value $1,247,400) 1,218,000 1,218,000
U.S. GOVERNMENT OBLIGATIONS: 4.17%
Federal Home Loan Bank (cost $16,394,096) 16,394,096 16,394,096
------------ ------------ ------------ ------------
TOTAL SHORT-TERM INVESTMENTS 1,218,000 16,394,096 17,612,096
------------ ------------ ------------ ------------
TOTAL INVESTMENTS IN SECURITIES (Cost $213,033,346,
$14,007,156, $127,013,354, $354,053,856) 98.07% 252,969,858 14,777,222 117,946,540 385,693,620
OTHER ASSETS AND LIABILITIES - NET 1.93% 1,524,101 364,563 5,718,171 7,606,835
------ ------------ ------------ ------------ ------------
NET ASSETS 100.00% $254,493,959 $ 15,141,785 $123,664,711 $393,300,455
====== ============ ============ ============ ============
</TABLE>
@ Non-income producing security
# Illiquid security
ADR American Depository Receipt
GDR Global Depository Receipt
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On November 2, 2000, the Boards of Pilgrim Emerging Countries Fund
("Emerging Countries Fund"), Pilgrim Emerging Markets Fund ("Emerging Markets
Fund") and Pilgrim Worldwide Emerging Markets Fund ("Worldwide Emerging Markets
Fund"), approved an Agreement and Plan of Reorganization (the "Plan") whereby,
subject to approval by the shareholders of Emerging Markets Fund and Worldwide
Emerging Markets Fund, Emerging Countries Fund will acquire all of the assets of
the Emerging Markets Fund and Worldwide Emerging Markets 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 Emerging Countries Fund (the "Merger").
The Merger will be accounted for as a tax free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be representative of
what the actual combined financial statements would have been had the
reorganization occurred at June 30, 2000. The unaudited pro forma portfolio of
investments and statement of assets and liabilities reflect the financial
position of Emerging Countries Fund, Emerging Markets Fund and Worldwide
Emerging Markets Fund at June 30, 2000. The unaudited pro forma statement of
operations reflects the results of operations of Emerging Countries Fund,
Emerging Markets Fund and Worldwide Emerging Markets Fund for the year ended
June 30, 2000. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the dates
indicated above for Emerging Countries Fund, Emerging Markets Fund and Worldwide
Emerging Markets Fund under generally accepted accounting principles. The
historical cost of investment securities will be carried forward to the
surviving entity and results of operations of Emerging Countries Fund for
pre-combination periods will not be restated.
The unaudited pro forma portfolio of investments and unaudited statements
of assets and liabilities and operations should be read in conjunction with the
historical financial statements of the Funds incorporated by reference in the
Statements of Additional Information.
NOTE 2 - SECURITY VALUATION:
Investments in equity securities traded on a national securities exchange
or included on the NASDAQ National Market System are valued at the last reported
sale price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market are valued at the
mean between the last reported bid and ask prices. All investments quoted in
foreign currencies will be valued daily in U.S. Dollars on the basis of the
foreign currency exchange rates prevailing at the time such valuation is
determined by each Fund's Custodian. Securities for which market quotations are
not readily available are valued at their respective fair values as determined
in good faith and in accordance with policies set by the Board of Directors.
Investments in securities maturing in less than 60 days are valued at cost,
which, when combined with accrued interest, approximates market value.
NOTE 3 - FOREIGN CURRENCY TRANSACTIONS:
The books and records of the funds are maintained in U.S. dollars. Any foreign
currency amounts are translated into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
8
<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, 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 U.S. companies and the U.S.
Government. These risks include but are not limited to re-evaluation of
currencies and future adverse political and economic developments which could
cause securities and their markets to be less liquid and prices more volatile
than those of the comparable U.S. Government.
NOTE 4 - CAPITAL SHARES:
The unaudited pro forma net asset value per share assumes additional shares
of common stock issued in connection with the proposed acquisition of Emerging
Markets Fund and Worldwide Emerging Markets Fund by Emerging Countries Fund as
of June 30, 2000. The number of additional shares issued was calculated by
dividing the net asset value of each class of Emerging Markets Fund and
Worldwide Emerging Markets Fund by the respective class net asset value per
share of Emerging Countries Fund.
NOTE 5 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on June 30, 2000. Emerging
Markets Fund and Worldwide Emerging Markets Fund expenses were adjusted assuming
Emerging Countries Fund's fee structure was in effect for the year ended June
30, 2000.
NOTE 6 - MERGER COSTS:
Merger costs are estimated at approximately $125,000 and are not included
in the unaudited pro forma statement of operations since these costs are not
reccurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger. ING Pilgrim Investments, Investment Adviser to the Funds, will
bear half the cost of the Reorganization. The Funds will bear the other half of
the expenses relating to the proposed Reorganization.
NOTE 7 - FEDERAL INCOME TAXES:
It is the policy of the Funds, to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Fund intends not to be subject to any federal excise tax.
The Board of Directors intends to offset any net capital gains with any
available capital loss carryforward until each carryforward has been fully
utilized or expires. In addition, no capital gain distribution shall be made
until the capital loss carryforward has been fully utilized or expires.
9
<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 Emerging Markets Value Fund is
consummated, but not the reorganization with the Worldwide Emerging Markets
Fund. The table PRO FORMA II presents annual fund operating expenses assuming
that the reorganization with the Worldwide Emerging Markets Fund is consummated,
but not the reorganization with the Emerging Markets Value Fund. The table PRO
FORMA III presents annual fund operating expenses assuming that the
reorganizations with both the Emerging Markets Value Fund and the Worldwide
Emerging Markets 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.
PRO FORMA I: Proposed Reorganization of Emerging Markets Value Fund into
Emerging Countries Fund (assumes reorganization of Worldwide Emerging Markets
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
Emerging Markets Value Fund 1.00% 0.30% 0.85% 2.15% 0.00% 2.15%
Emerging Countries Fund 1.25% 0.35% 0.68% 2.28% -0.15% 2.13%
Pro Forma 1.25% 0.35% 0.60% 2.20% -0.07% 2.13%
Class B
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% 0.00% 2.85%
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Pro Forma 1.25% 1.00% 0.60% 2.85% -0.07% 2.78%
Class C
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% 0.00% 2.85%
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Pro Forma 1.25% 1.00% 0.60% 2.85% -0.07% 2.78%
</TABLE>
----------
(1) The fiscal year end for the Disappearing Fund is October 31. The fiscal
year end for the Emerging Countries Fund is June 30. Expenses of the Funds
are estimated based upon expenses incurred by each Fund for the 12 month
period ended June 30, 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
with Emerging Countries Fund under which it will limit expenses of the
Fund(excluding interest, taxes, brokerage and extraordinary expenses) to
2.25%, 2.90% and 2.90% for Classes A, B and C, respectively. ING Pilgrim
Investments has agreed that the expense limitations shown in the table will
apply to Pilgrim Emerging Countries Fund until October 31, 2001. The
Emerging Markets Value Fund is not subject to an expense limitation
agreement.
10
<PAGE>
PRO FORMA II: Proposed Reorganization of Worldwide Emerging Markets Fund into
Emerging Countries Fund (assumes reorganization of Emerging Markets Value 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
Worldwide Emerging Markets Fund 1.00% 0.25% 0.62% 1.87% 0.00% 1.87%
Emerging Countries Fund 1.25% 0.35% 0.68% 2.28% -0.15% 2.13%
Pro Forma 1.25% 0.35% 0.60% 2.20% -0.07% 2.13%
</TABLE>
----------
(1) The fiscal year end for the Disappearing Fund is December 31. The fiscal
year end for the Emerging Countries 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
Worldwide Emerging Markets Fund have been adjusted for current contractual
operating expenses which began when ING Pilgrim Investments became the
adviser to the Fund effective July 26, 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 Emerging Countries Fund under which it will limit expenses of the
Fund(excluding interest, taxes, brokerage and extraordinary expenses) to
2.25%, 2.90% and 2.90% for Classes A, B and C, respectively. ING Pilgrim
Investments has agreed that the expense limitations shown in the table will
apply to Pilgrim Emerging Countries Fund until October 31, 2001. ING
Pilgrim Investments has an expense limitation agreement with Worldwide
Emerging Markets Fund that limits expenses of Class A shares to 2.75%. The
expense limitation applies until July 26, 2002.
11
<PAGE>
PROFORMA III: Proposed Reorganization of Emerging Markets Value Fund and
Worldwide Emerging Markets Fund into Emerging Countries 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
Emerging Markets Value Fund 1.00% 0.30% 0.85% 2.15% 0.00% 2.15%
Worldwide Emerging Markets Fund 1.00% 0.25% 0.62% 1.87% 0.00% 1.87%
Emerging Countries Fund 1.25% 0.35% 0.68% 2.28% -0.15% 2.13%
Pro Forma 1.25% 0.35% 0.60% 2.20% -0.07% 2.13%
Class B
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% 0.00% 2.85%
Worldwide Emerging Markets Fund N/A N/A N/A N/A N/A N/A
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Pro Forma 1.25% 1.00% 0.60% 2.85% -0.07% 2.78%
Class C
Emerging Markets Value Fund 1.00% 1.00% 0.85% 2.85% 0.00% 2.85%
Worldwide Emerging Markets Fund N/A N/A N/A N/A N/A N/A
Emerging Countries Fund 1.25% 1.00% 0.68% 2.93% -0.15% 2.78%
Pro Forma 1.25% 1.00% 0.60% 2.85% -0.07% 2.78%
</TABLE>
----------
(1) The Emerging Countries Fund's, the Emerging Markets Value Fund's and the
Worldwide Emerging Markets Fund's fiscal years end are June 30, October 31
and December 31, respectively. 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 Worldwide Emerging
Markets Fund have been adjusted for current contractual operating expenses
which began when ING Pilgrim Investments became adviser to the Fund
effective July 26, 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 Emerging Countries Fund under which it will limit expenses of the
Fund(excluding interest, taxes, brokerage and extraordinary expenses) to
2.25%, 2.90% and 2.90% for Classes A, B and C, respectively. ING Pilgrim
Investments has agreed that the expense limitations shown in the table will
apply to Pilgrim Emerging Countries Fund until October 31, 2001. ING
Pilgrim Investments has an expense limitation agreement with Worldwide
Emerging Markets Fund that limits expenses of Class A shares to 2.75%. The
expense limitation applies until July 26, 2002. The Emerging Markets Value
Fund is not subject to an expense limitation agreement.
12
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article 5.2 of the Amended and Restated Declaration of Trust provides for
the indemnification of Registrant's trustees, officers, employees and agents
against liabilities incurred by them in connection with the defense or
disposition of any action or proceeding in which they may be involved or with
which they may be threatened, while in office or thereafter, by reason of being
or having been in such office, except with respect to matters as to which it has
been determined that they acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office ("disabling conduct").
Section 8 of Registrant's Administration Agreement provides for the
indemnification of Registrant's Administrator against all liabilities incurred
by it in performing its obligations under the agreement, except with respect to
matters involving its disabling conduct. Section 9 of Registrant's Distribution
Agreement provides for the indemnification of Registrant's Distributor against
all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its disabling conduct.
Section 4 of the Shareholder Service Agreement provides for the indemnification
of Registrant's Distributor against all liabilities incurred by it in performing
its obligations under the Agreement, except with respect to matters involving
its disabling conduct.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS
(1) (A) Form of Certificate of Trust of Registrant - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference
(B) Form of Certificate of Amendment of Certificate of Trust - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference
(C) Form of Amended and Restated Declaration of Trust - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference
1
<PAGE>
(D) Form of Establishment of Additional Series - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference
(E) Form of Establishment of Additional Series- Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference
(F) Form of Amendment No. 2 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(G) Form of Amendment No. 3 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(H) Form of Amendment No. 4 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(I) Form of Amendment No. 5 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(J) Form of Amendment No. 6 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(K) Form of Amendment No. 7 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(L) Form of Amendment No. 8 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(M) Form of Amendment No. 9 to Amended and Restated Declaration of Trust -
Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
(N) Form of Amendment No. 10 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 29 to
Registrant's Form N-1A Registration Statement on May 3, 1996 and
incorporated herein by reference
(O) Form of Amendment No. 11 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 38 to
Registrants Form N-1A Registration Statement of January 3, 1997 and
incorporated herein by reference
(P) Form of Amendment No. 12 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 38 to
Registrants Form N-1A Registration Statement of January 3, 1997 and
incorporated herein by reference
(Q) Form of Amendment No. 13 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 30 to the
Registrant's Form N-1A Registration Statement on June 4, 1996 and
incorporated herein by reference
2
<PAGE>
(R) Form of Amendment No. 14 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 40 to
Registrants form N-1A Registration Statement on May 2, 1997 and
incorporated herein by reference
(S) Form of Amendment No. 15 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 43 to
Registrant's Form N-1A Registration Statement on July 14, 1997 and
incorporated herein by reference
(T) Form of Amendment No. 16 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference
(U) Form of Amendment No. 17 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference
(V) Form of Amendment No. 18 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997 and
incorporated herein by reference
(W) Form of Amendment No. 19 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 63 to
Registrant's Form N-1A Registration Statement on July 21, 1998 and
incorporated herein by reference.
(X) Form of Amendment No. 20 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 63 to
Registrant's Form N-1A Registration Statement on July 21, 1998 and
incorporated herein by reference
(Y) Form of Amendment No. 21 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 66 to
Registrant's Form N-1A Registration Statement on August 14, 1998 and
incorporated herein by reference
(Z) Form of Certificate of Amendment to Certificate of Trust - Filed as an
exhibit to Post-Effective Amendment No. 67 to the Registrant's Form
N-1A Registration Statement on March 25, 1999 and incorporated herein
by reference
(AA) Form of Amendment No. 22 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference
(BB) Form of Amendment No. 23 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference
(CC) Form of Amendment No. 24 to Amended and Restated Declaration of Trust
- Filed as an exhibit to Post-Effective Amendment No. 75 to the
Registrant's Form N-1A Registration Statement on January 4, 2000 and
incorporated herein by reference
(2) (A) Form of Amended Bylaws of Registrant - Filed as an exhibit to
Post-Effective Amendment No. 30 to the Registrant's Form N-1A
Registration Statement on June 4, 1996 and incorporated herein by
reference
(B) Form of Amendment to Section 2.5 of Bylaws of Registrant - Filed as an
exhibit to Post-Effective Amendment No. 30 to the Registrant's Form
N-1A Registration Statement on June 4, 1996 and incorporated herein by
reference
(3) Not Applicable
3
<PAGE>
(4) (A) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim Emerging Countries Fund, and Pilgrim
Mayflower Trust on behalf of Pilgrim Emerging Markets Value Fund
(B) Form of Agreement and Plan of Reorganization between Pilgrim Mutual
Funds on behalf of Pilgrim Emerging Countries Fund, and Worldwide
Emerging Markets Fund, Inc., on behalf of Pilgrim Worldwide Emerging
Markets Fund
(5) See Exhibits 1 and 2
(6) Form of Investment Management Agreement between the Registrant and Pilgrim
Investments, Inc.- Filed as an exhibit to Post-Effective Amendment No. 80
to the Registrant's Form N-1A Registration Statement on November 1, 2000
and incorporated herein by reference
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc
(8) Not Applicable
(9) (A) Form of Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. dated as of June 1, 1998. - Filed as an exhibit to
Post-Effective Amendment No. 66 to Registrant's Form N-1A Registration
Statement on August 14, 1998 and incorporated herein by reference
(B) Form of Amendment to Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 66 to Registrant's Form N-1A Registration Statement on
August 14, 1998 and incorporated herein by reference
(C) Form of Foreign Custody Manager Delegation Agreement between
Registrant and Brown Brothers Harriman & Co. dated as of June 1, 1998
- Filed as an exhibit to Post-Effective Amendment No. 66 to
Registrant's Form N-1A Registration Statement on August 14, 1998 and
incorporated herein by reference
(D) Form of Novation Agreement to Custody Agreement with Brown Brothers
Harriman & Co. - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference
(E) Form of Appendix C to Custody Agreement with Brown Brothers Harriman &
Co. - Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference
(F) Form of Novation Agreement to Foreign Custody Manager Delegation
Agreement with Brown Brothers Harriman & Co. - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference
(G) Form of Appendix C to Foreign Custody Manager Delegation Agreement
with Brown Brothers Harriman & Co. - Filed as an exhibit to
Post-Effective Amendment No. 68 to the Registrant's Form N-1A
Registration Statement on May 24, 1999 and incorporated herein by
reference
(H) Form of Custodian Agreement with Investors Fiduciary Trust Company -
Filed as an exhibit to Post-Effective Amendment No. 68 to the
Registrant's Form N-1A Registration Statement on May 24, 1999 and
incorporated herein by reference
(10) (A) Form of Amended and Restated Service and Distribution Plan for Class A
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference
(B) Form of Amended and Restated Service and Distribution Plan for Class B
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference
4
<PAGE>
(C) Form of Amended and Restated Service and Distribution Plan for Class C
- Filed as an exhibit to Post-Effective Amendment No. 67 to the
Registrant's Form N-1A Registration Statement on March 25, 1999 and
incorporated herein by reference
(D) Form of Amended and Restated Service Plan for Class Q - Filed as an
exhibit to Post-Effective Amendment No. 67 to the Registrant's Form
N-1A Registration Statement on March 25, 1999 and incorporated herein
by reference
(E) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class B - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference
(F) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class C - Filed as an exhibit to Post-Effective Amendment No.
68 to the Registrant's Form N-1A Registration Statement on May 24,
1999 and incorporated herein by reference
(G) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class A - Filed as an exhibit to Post-Effective Amendment No.
73 to the Registrant's Form N-1A Registration Statement on October 29,
1999 and incorporated herein by reference
(H) Form of Amendment to Amended and Restated Service and Distribution
Plan for Class T - Filed as an exhibit to Post-Effective Amendment No.
74 to the Registrant's Form N-1A Registration Statement on November 5,
1999 and incorporated herein by reference
(I) Form of Multiple Class Plan Pursuant to Rule 18f-3 - Filed as an
exhibit to Post-Effective Amendment No. 74 to the Registrant's Form
N-1A Registration Statement on November 5, 1999 and incorporated
herein by reference
(11) Form of Opinion and Consent of Dechert
(12) (A) Form of Opinion and Consent of Dechert supporting tax matters and
consequences regarding Reorganization of Pilgrim Emerging Markets
Value Fund into Pilgrim Emerging Countries Fund
(B) Form of Opinion and Consent of Dechert supporting tax matters and
consequences regarding Reorganization of Pilgrim Worldwide Emerging
Markets Fund into Pilgrim Emerging Countries Fund
(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) (A) Consent of KPMG LLP, Independent Auditors
(B) Consent of PricewaterhouseCoopers LLP, Independent Auditors
(15) Not Applicable
(16) Filed herewith
(17) Not Applicable
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act [17 CFR
230.145(c)], the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
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 4th 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 4, 2000
------------------------------
John G. Turner*
/s/ Robert W. Stallings Trustee and President December 4, 2000
------------------------------ (Chief Executive Officer)
Robert W. Stallings*
/s/ Michael J. Roland Senior Vice President and December 4, 2000
------------------------------ Principal Financial Officer
Michael J. Roland*
/s/ Al Burton Trustee December 4, 2000
------------------------------
Al Burton*
/s/ Paul S. Doherty Trustee December 4, 2000
------------------------------
Paul S. Doherty*
/s/ Robert B. Goode Trustee December 4, 2000
------------------------------
Robert B. Goode*
7
<PAGE>
/s/ Alan L. Gosule Trustee December 4, 2000
------------------------------
Alan L. Gosule*
/s/ Walter H. May Trustee December 4, 2000
------------------------------
Walter H. May*
/s/ Jock Patton Trustee December 4, 2000
------------------------------
Jock Patton*
/s/ David W.C. Putnam Trustee December 4, 2000
------------------------------
David W.C. Putnam*
/s/ John R. Smith Trustee December 4, 2000
------------------------------
John R. Smith*
/s/ David W. Wallace Trustee December 4, 2000
------------------------------
David W. Wallace*
* 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 /s/ John R. Smith
----------------------------- -----------------------------
Robert B. Goode John R. Smith
/s/ David W. Wallace
-----------------------------
David W. Wallace
9
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Robert W. Stallings, James M. Hennessy, Jeffrey S. Puretz and Karen L.
Anderberg, and each of them his true and lawful attorney-in-fact as agent with
full power of substitution and resubstitution of him in his name, place, and
stead, to sign any and all registration statements on Form N-14 applicable to
Pilgrim Mutual Funds and any amendment or supplement thereto, and to file the
same with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: November 14, 2000 /s/ Michael J. Roland
-----------------------------
Michael J. Roland
10
<PAGE>
EXHIBIT INDEX
(4) (A) Form of Agreement and Plan of Reorganization between Pilgrim Mayflower
Trust, on behalf of Pilgrim Emerging Markets Value Fund, and Pilgrim
Mutual Funds, on behalf of Pilgrim Emerging Countries Fund
(B) Form of Agreement and Plan of Reorganization between Pilgrim Worldwide
Emerging Markets Fund, Inc., on behalf of Pilgrim Worldwide Emerging
Markets Fund, and Pilgrim Mutual Funds, on behalf of Pilgrim Emerging
Countries Fund
(7) Form of Underwriting Agreement between Registrant and Pilgrim
Securities, Inc
(11) Form of Opinion and Consent of Dechert
(12)(A) Form of Opinion and Consent of Dechert supporting tax matters and
consequences regarding Reorganization of Pilgrim Emerging Markets
Value Fund into Pilgrim Emerging Countries Fund
(B) Form of Opinion and Consent of Dechert supporting tax matters and
consequences regarding Reorganization of Pilgrim Worldwide Emerging
Markets Fund into Pilgrim Emerging Countries Fund
(14)(A) Consent of KPMG LLP, Independent Auditors
(B) Consent of PricewaterhouseCoopers LLP, Independent Auditors
<PAGE>
PILGRIM EMERGING MARKETS VALUE FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) Robert W. Stallings and James M. Hennessy or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the Pilgrim Emerging Markets Value Fund (the "Fund") which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Fund to be held at the offices of the Fund at 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258 on ________ ___, 2001s 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 Pilgrim Emerging Markets Value Fund by
Pilgrim Emerging Countries Fund in exchange for shares of common stock of
Pilgrim Emerging Countries Fund and the assumption by Pilgrim Emerging
Countries Fund of all of the liabilities of Pilgrim Emerging Markets Value
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>
PILGRIM WORLDWIDE EMERGING MARKETS FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ___________, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) Robert W. Stallings and James M. Hennessy or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the Pilgrim Worldwide Emerging Markets Fund (the "Fund") which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Fund to be held at the offices of the Fund at 7337 East Doubletree Ranch Road,
Scottsdale, AZ 85258 on ________ ___, 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 DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Pilgrim Worldwide Emerging Markets Fund
by Pilgrim Emerging Countries Fund in exchange for shares of common stock
of Pilgrim Emerging Countries Fund and the assumption by Pilgrim Emerging
Countries Fund of all of the liabilities of Pilgrim Worldwide Emerging
Markets 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
