As filed with the Securities and Exchange Commission on December 22, 2000
Securities Act File No. 33-72226
Investment Company Act File No. 811-8172
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes)
PILGRIM INTERNATIONAL FUND, INC.
(Exact Name of Registrant Specified in Charter)
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (800) 992-0180
James M. Hennessy, Esq.
ING Pilgrim Investments, Inc.
7337 E. 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
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on March 1, 2001 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designated a new effective date
for a previously filed post-effective amendment.
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<PAGE>
March 1, 2001
Classes A, B, C and M
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth
ING Pilgrim Global Corporate Leaders
ING Pilgrim International Value
ING Pilgrim International
ING Pilgrim International Core Growth
ING Pilgrim International SmallCap Growth
ING Pilgrim Emerging Markets Value
ING Pilgrim Emerging Countries
ING Pilgrim Worldwide Emerging Markets
ING Pilgrim Global Technology
ING Pilgrim Global Communications
ING Pilgrim Global Information Technology
ING Pilgrim Asia-Pacific Equity
ING Pilgrim SmallCap Asia Growth
ING Pilgrim European Equity
ING Pilgrim Troika Dialog Russia
Precious Metals Funds
ING Pilgrim Gold
ING Pilgrim Silver
International Income Fund
ING Pilgrim Global Income
This prospectus contains important information about investing in the ING
Pilgrim Funds. You should read it carefully before you invest, and keep it for
future reference. Please note that your investment: is not a bank deposit, is
not insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
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OBJECTIVE
These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy and risks.
INVESTMENT STRATEGY
You'll also find:
RISKS
HOW THE FUND HAS PERFORMED
How the Fund has performed. A chart that shows the Fund's financial performance
for the past ten years (or since inception, if shorter).
What you pay to invest. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
An Introduction to the ING Pilgrim Funds 1
Funds At A Glance 2
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth 6
ING Pilgrim Global Corporate Leaders 8
ING Pilgrim International Value 10
ING Pilgrim International 12
ING Pilgrim International Core Growth 14
ING Pilgrim International SmallCap Growth 16
ING Pilgrim Emerging Markets Value 18
ING Pilgrim Emerging Countries 20
ING Pilgrim Worldwide Emerging Markets 22
ING Pilgrim Global Technology 24
ING Pilgrim Global Communications 26
ING Pilgrim Global Information Technology 28
ING Pilgrim Asia-Pacific Equity 30
ING Pilgrim SmallCap Asia Growth 32
ING Pilgrim European Equity 34
ING Pilgrim Troika Dialog Russia 36
PRECIOUS METALS FUNDS
ING Pilgrim Gold 38
ING Pilgrim Silver 40
INTERNATIONAL INCOME FUND
ING Pilgrim Global Income 42
What You Pay to Invest 44
Shareholder Guide 48
Management of the Funds 55
Dividends, Distributions and Taxes 59
More Information About Risks 60
Financial Highlights 64
Where To Go For More Information Back cover
<PAGE>
INTRODUCTION TO THE ING PILGRIM FUNDS
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Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
INTERNATIONAL EQUITY FUNDS
ING Pilgrim offers International Equity Funds that emphasize a growth
approach to international investing, as well as International Equity Funds
that apply the technique of "value investing". These Funds focus on
long-term growth by investing primarily in foreign equities.
They may suit you if you:
* are investing for the long-term -- at least several years
* are looking for exposure to international markets
* are willing to accept higher risk in exchange for long-term growth.
PRECIOUS METALS FUNDS
ING Pilgrim's Precious Metals Funds seek long-term growth.
They may suit you if you:
* are investing for the long-term -- at least several years
* are looking for exposure to international markets and precious metals
* are willing to accept higher risk in exchange for long-term growth.
INTERNATIONAL INCOME FUND
ING Pilgrim's Global Income Fund seeks high current income.
It may suit you if you:
* want a regular stream of income
* want greater growth potential than a money market fund
* are willing to accept more risk than a money market fund.
If you have any questions, please call 1-800-992-0180.
1
<PAGE>
Funds At A Glance
This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 6.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
-------------------------------------------------------------------------------
<S> <C> <C>
International Worldwide Growth Fund Long-term capital appreciation
Equity Funds Adviser: ING Pilgrim Investments, Inc.
Global Corporate Leaders Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
International Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Brandes
Investment Partners, L.P.
International Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
International Core Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
International SmallCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Nicholas-Applegate Capital Mgt.
Emerging Markets Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Brandes Investment
Partners, L.P.
Emerging Countries Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Worldwide Emerging Markets Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
Global Technology Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
ING Global Communications Fund Long-term capital appreciation
Adviser: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
ING Global Information Technology Fund Long-term capital appreciation
Adviser: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
Asia-Pacific Equity Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
</TABLE>
2
<PAGE>
MAIN INVESTMENTS MAIN RISKS
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Equity securities of companies Price volatility and other risks
located in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility and other risks
equivalents of foreign and U.S. that accompany an investment in
companies. [growth-oriented] foreign equities.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility and other risks
located in countries outside the that accompany an investment in
U.S., believed to have prices below foreign equities. Sensitive to
their long-term value. currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility and other risks
equivalents of companies outside of that accompany an investment in
the U.S. [growth-oriented] foreign equities.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of larger Price volatility and other risks
companies in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of small-sized Price volatility, liquidity and
companies in countries around the other risks that accompany an
world, which may include the U.S., investment in equity securities of
believed to have growth potential. foreign, small-sized companies.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility, liquidity and
located in countries with emerging other risks that accompany an
securities markets believed to have investment in equities from
prices below their long-term value. emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility, liquidity and
located in countries with emerging other risks that accompany an
securities markets believed to have investment in equities from
growth potential. emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility, liquidity and
equivalents of emerging market other risks that accompany an
companies. investment in equities from
emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities or equity Price volatility due to
equivalents of technology or non-diversification and
information infrastructure related concentration in stocks in the
companies. technology sector. May be sensitive
to currency exchange rates,
international, political and
economic conditions and other risks
that affect foreign securities.
Equity securities of communications Price volatility and risks related
companies located throughout the to investments in equity
world, including the United States. securities. Sensitive to currency
exchange rates, international,
political and economic conditions
and other risks that affect foreign
securities. Products and services
of companies engaged in the
communications sector are subject
to relatively high risks of rapid
obsolescence caused by scientific
and technological advances.
Equity securities of information Price volatility and risks related
technology companies located to investments in equity
throughout the world, including the securities. Products and services
United States. of companies engaged in the
information technology sector are
subject to relatively high risks of
rapid obsolescence caused by
scientific and technological
advances.
Equity securities of companies Price volatility and other risks
based in the Asia-Pacific region, that accompany an investment in
excluding Australia and Japan. foreign equities and in securities
of issuers in a single region.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
3
<PAGE>
Funds At A Glance
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
<S> <C> <C>
International SmallCap Asia Growth Fund Long-term capital appreciation
Equity Funds Adviser: ING Pilgrim Investments, Inc.
ING European Equity Fund Long-term capital appreciation
Advisor: ING Mutual Funds Management Co. LLC
Sub-Adviser: ING Investment Management Advisors B.V.
Troika Dialog Russia Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Precious Metals Gold Fund Capital appreciation and a hedge against the loss of
Funds Adviser: ING Pilgrim Investments, Inc. buying power of the U.S. Dollar
Silver Fund Maximum total return from long-term growth of capital
Adviser: ING Pilgrim Investments, Inc. and income
International Global Income Fund High current income, with capital appreciation as a
Income Fund Adviser: ING Pilgrim Investments, Inc. secondary objective
</TABLE>
4
<PAGE>
MAIN INVESTMENTS MAIN RISKS
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Equity securities and equity Price volatility, liquidity and
equivalents of companies in the other risks that accompany an
Asia region having market investment in equity securities of
capitalizations of less than $1 issuers in a single region.
billion. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers which Price volatility and risks related
are principally traded in the to investments in equity
European capital markets, or that securities. Sensitive to currency
derive a majority of their total exchange rates, international,
revenues from either goods produced political and economic conditions
or services rendered within Europe, and other risks that affect foreign
or that are organized under the securities of companies in a single
laws of and have a principal office region.
in a European country.
Equity securities of Russian Risk due to extremely volatile and
companies. often illiquid nature of the
Russian securities markets, and
volatility due to
non-diversification of investments.
Particularly sensitive to Russian
political and economic conditions,
currency exchange rates, and other
risks that affect funds investing
in securities of a single country.
Potential for expropri- ation,
dilution, devaluation, default or
excessive taxation by the Russian
government.
Gold and securities of companies Price volatility due to
engaged in mining or processing non-diversification and
gold throughout the world. concentration in the gold/precious
metals industry. The market for
gold and other precious metals is
widely unregulated and is located
in foreign countries that have the
potential for instability. Precious
metals earn no income, have higher
transaction/storage costs, and
realize gain only with an increase
in market price.
Securities of companies which are Price volatility due to
engaged in the exploration, mining, non-diversification and
processing, fabrication or concentration in stocks in the
distribution of silver and in silver industry. The market for
silver bullion. silver is limited and widely
unregulated and is located in
foreign countries that have the
potential for instability. Precious
metals earn no income, have higher
transaction/storage costs, and
realize gain only with an increase
in market price.
Foreign and domestic high yield, Credit, liquidity, interest rate
lower rated or unrated debt and other risks that accompany an
securities. investment in lower-quality debt
securities. Particularly sensitive
to credit risk during economic
downturns. May also present price
volatility from foreign securities.
May be sensitive to currency
exchange rates, international
political and economic conditions,
and other risks.
5
<PAGE>
International
Equity Funds
-------------
Adviser
ING Pilgrim
ING PILGRIM WORLDWIDE GROWTH FUND Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in at least three countries, one of which
may be the U.S. The Fund generally invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. The Fund may
invest in companies located in countries with emerging securities markets when
the portfolio managers believe they present attractive investment opportunities.
International Component. The portfolio managers primarily use a "bottom-up"
fundamental analysis to identify stocks which they believe offer good value
relative to their peers in the same industry, sector or region. The portfolio
managers will invest at least 65% of the Fund in assets of companies which,
based upon a fundamental analysis of a company's earning prospects, they believe
will experience faster earnings per share growth than that of other companies
located in one or more of the same market, sector, or industry. In conducting
its fundamental analysis, the portfolio managers focus on various factors,
including valuation of the companies, potential catalysts to stock price
appreciation, quality of management, and financial measures, especially cash
flow and the cash flow return on capital. They also use a "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.
U.S. Component. The Fund normally invests in equity securities of large U.S.
companies that the portfolio managers feel have above-average prospects for
growth. The Fund considers a company to be large if its market capitalization
corresponds at the time of purchase to the upper 90% of the S&P 500 Index. As of
December 31, 2000 this meant market capitalizations in the range of $ billion to
$ billion. Capitalization of companies in the S&P 500 Index will change with
market conditions.
The portfolio managers emphasize a growth approach by searching for companies
that they believe are managing change advantageously and may be poised to exceed
growth expections. The portfolio managers focus on both a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies and a "top-down" thematic approach and a sell discipline. The
portfolio managers seek to identify themes that reflect the major social,
economic and technological trends that they believe are likely to shape the
future of business and commerce over the next three to five years, and seek to
provide a framework for identifying the industries and companies they believe
may benefit most. This "top-down" approach is combined with rigorous fundamental
research (a "bottom-up" approach) to guide stock selection and portfolio
structure.
From time to time, the Adviser reviews the allocation between U.S. stocks and
non-U.S. stocks in the portfolio, and may rebalance the portfolio using factors
that the Adviser deems appropriate.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund may also invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of foreign companies may trade in
lower volume and may be less liquid than securities of U.S. companies. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
6 ING Pilgrim Worldwide Growth Fund
<PAGE>
ING PILGRIM WORLDWIDE GROWTH FUND
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HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994 2.45
1995 14.74
1996 17.92
1997 17.28
1998 37.34
1999 83.52
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International World Index (MSCI World
Index).
Average Annual Total Returns
MSCI
World
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI World Index is an unmanaged index that measures the performance of
over 1,400 securities listed on exchanges in the U.S., Europe, Canada,
Australia, New Zealand and the Far East.
(7) Classes A and C commenced operations on April 19, 1993. Class B commenced
operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Growth Fund 7
<PAGE>
International
Equity Funds
Adviser
ING Pilgrim
ING PILGRIM GLOBAL CORPORATE LEADERS FUND Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of foreign and U.S.
companies.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of its total assets in a diversified
portfolio of blue chip securities (including common and preferred stock,
warrants and convertible securities) that the portfolio managers believe
represents "corporate leaders" in their respective industries. The portfolio
managers consider whether these companies have a sustainable competitive edge.
The Fund may invest in the securities of companies and governments of the
following regions:
* Asia Region (including Japan);
* Europe;
* Latin America;
* Africa;
* North America (including U.S. and Canada); and
* Other areas and countries as the Adviser may decide from time to time.
The Fund will normally invest in at least three different countries. The Fund
intends to select the countries, currencies and companies that provide the
greatest potential for long-term growth.
The Fund may invest 35% of its total assets in:
* securities of smaller capitalization companies;
* debt securities; and
* other investments.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Worldwide Growth
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
8 ING Pilgrim Global Corporate Leaders Fund
<PAGE>
ING PILGRIM GLOBAL CORPORATE LEADERS FUND
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HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 15.55
1992 -3.55
1993 31.88
1994 1.84
1995 10.69
1996 16.43
1997 6.90
1998 19.06
1999 39.06
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International World Index (MSCI World
Index).
Average Annual Total Returns
MSCI
World
Class A(3) Index(4)
------------ ---------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The MSCI World Index is an unmanaged index that measures the performance of
over 1,400 securities listed on exchanges in the U.S., Europe, Canada,
Australia, New Zealand, and the Far East.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Corporate Leaders Fund 9
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Brandes Investment
Partners, L.P.
ING PILGRIM INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests primarily in foreign companies with market capitalizations
greater than $1 billion, but it may hold up to 25% of its assets in companies
with smaller market capitalizations.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.
The Fund holds common stocks, preferred stocks, American, European and Global
depository receipts, as well as convertible securities.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in securities of companies located in at least three countries other than
the U.S. The Fund may invest up to the greater of:
* 20% of its assets in any one country or industry, or,
* 150% of the weighting of the country or industry in the Morgan Stanley
Capital International Europe, Australia and Far East (MSCI EAFE) Index, as
long as the Fund meets any industry concentration or diversification
requirements under the Investment Company Act.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. However, the Fund may also invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
value-oriented stocks in which the Fund invests. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies and some foreign
companies may trade in lower volume and may be less liquid than securities of
larger, more established companies or U.S. companies. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.
10 ING Pilgrim International Value Fund
<PAGE>
ING PILGRIM INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991
1992
1993
1994
1995
1996 15.23
1997 17.86
1998 13.46
1999 51.49
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years ended
December 31, 2000 % N/A
Since inception of
Classes A and C(6) % N/A
Since inception
of Class B(6) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(6) Classes A and C commenced operations on March 6, 1995. Class B commenced
operations on April 18, 1997.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Value Fund 11
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM INTERNATIONAL FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of companies outside of
the U.S.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside of the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund also
may invest up to 35% of its assets in securities of U.S. issuers, including
investment-grade debt securities.
The portfolio managers primarily use "bottom-up" fundamental analysis to
identify stocks which they believe 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 its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, catalysts to stock price
appreciation, quality of management and financial measures, especially cash flow
and the cash flow return on capital.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund invests primarily in equity securities of larger companies, which
sometimes have more stable prices than smaller companies. However, the Fund may
also invest in small and medium-sized companies, which may be more susceptible
to price swings than larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
12 ING Pilgrim International Fund
<PAGE>
ING PILGRIM INTERNATIONAL FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994 5.87
1995 5.77
1996 13.57
1997 1.61
1998 19.02
1999 47.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(3)(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Class A(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) This table shows the performance of the Class A shares of the Fund. Class B
and Class C shares of the Fund did not have a full year's performance
during the period ended December 31, 2000.
(4) Reflects deduction of sales charge of 5.75%.
(5) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
(6) Class A commenced operations on January 3, 1994.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Fund 13
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund may
also invest up to 35% of its assets in securities of U.S. issuers, including
investment-grade debt securities.
In pursuing the Fund's investment strategy, the portfolio managers primarily use
a "bottom-up" fundamental analysis to identify stocks which they believe offer
good value relative to their peers in the same industry, sector or region. The
portfolio managers will invest 65% of the Fund in asset of companies which,
based upon a fundamental analysis of a company's earnings prospects, they
believe will experience faster earnings per share growth than that of other
companies located in one or more of the same market, sector, or industry. In
conducting its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, potential catalysts to stock
price appreciation, quality of management and financial measures, especially
cash flow and the cash flow return on capital. They also use a "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.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in large companies, which sometimes
have more stable prices than smaller companies.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or smaller company stocks, or may not favor equities at
all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
14 ING Pilgrim International Core Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997
1998 20.92
1999 66.69
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since inception(7) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
Sub-Adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 3% respectively for 1
year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(7) The Fund commenced operations on February 28, 1997.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Core Growth Fund 15
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Nicholas-Applegate
Capital Management
ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
Under normal conditions, the Fund invests at least 65% of its total assets in
securities of small companies located outside the U.S. The Fund may invest up to
35% of its total assets in U.S. issuers.
The Fund invests primarily in smaller-capitalized companies ("small cap stocks")
located worldwide. In the opinion of the Fund's Sub-Adviser, small cap stocks
are those whose stock market capitalizations are predominantly in the bottom 25%
of publicly traded companies as measured by stock market capitalizations in over
50 countries. The market capitalization ranges of the various countries' small
cap stocks may vary greatly due to fluctuating currency values, differences in
the size of the respective economies, and movements in the local stock markets.
The Fund normally invests at least 75% of its total assets in common and
preferred stocks, warrants and convertible securities. The Fund may invest in
companies located in countries with emerging securities markets when the
Sub-Adviser believes they present attractive investment opportunities.
The Fund's Sub-Adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The Sub-Adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price.
In analyzing specific companies for possible investment, the Sub-Adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Sub-Adviser usually considers whether to sell a particular security when any of
those factors materially changes.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Sub-Adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a Fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in small companies, which may
be more susceptible to greater price swings than larger companies because they
may have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
16 ING Pilgrim International SmallCap Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995 5.51
1996 17.58
1997 13.46
1998 35.57
1999 121.93
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Salomon Europe Pacific, Australia and Composite Market Index
(Salomon EPAC EM Index).
Average Annual Total Returns
Salomon
EPAC
EM
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than Sub-Adviser, to the Fund.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The Salomon EPAC EM Index is an unmanaged index that measures the
performance of securities of smaller-capitalization companies in 22
countries excluding the U.S. and Canada.
(7) Classes A and C commenced operations on August 31, 1994. Class B commenced
operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 17
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
Sub-Adviser
Brandes Investment
Partners, L.P.
ING PILGRIM EMERGING MARKETS VALUE FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests primarily in companies located in countries with emerging
markets, including companies that may be smaller and lesser-known.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.
The Fund may invest in common stocks, preferred stocks, American, European and
Global depositary receipts, as well as convertible securities.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in securities of companies located in countries with emerging markets.
Countries with emerging markets include those countries that are generally
considered to be emerging market countries by the international financial
community. The Fund may invest up to the greater of:
* 20% of its assets in any one country or industry, or,
* 150% of the weighting of the country or industry in the Morgan Stanley
Capital International Emerging Markets Free (MSCI EMF) Index, as long as
the Fund meets any industry concentration or diversification requirements
under the Investment Company Act.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim Emerging Countries
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. For emerging market countries, the risks may be greater,
partly because emerging market countries may be less politically and
economically stable than other countries. It may also be more difficult to buy
and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may
not favor the value-oriented stocks in which the Fund invests. Rather, the
market could favor growth-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller and emerging market
companies trade in lower volume and may be less liquid than securities of
companies in larger, more established markets. The Fund could lose money if it
cannot sell a security at the time and price that would be most beneficial to
the Fund.
18 ING Pilgrim Emerging Markets Value Fund
<PAGE>
ING PILGRIM EMERGING MARKETS VALUE FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998 -22.58
1999 67.11
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI EMF Index).
Average Annual Total Return
MSCI
EMF
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since Inception(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% 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) The Fund commenced operations on January 1, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Markets Value Fund 19
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests at least 65% of its net assets in securities of issuers located
in at least three countries with emerging securities markets. Countries with
emerging securities markets are those countries which generally are considered
to be emerging market countries by the international financial community.
The Fund may invest up to 35% of its total assets in securities of U.S. and
other developed market issuers, including investment-grade debt securities of
U.S. issuers. Under normal conditions, the Fund invests at least 75% of its
total assets in common and preferred stocks, warrants and convertible
securities.
In selecting securities located in emerging market countries, the Adviser uses a
"bottom-up" fundamental analysis to identify companies which it believes have
good earnings growth prospects and that can be bought at a price which seems
reasonable. To help in this process, the Adviser scores the emerging markets
stocks on a wide range of quantitive and qualitative measures, with particular
attention paid to long-term and short-term earnings growth prospects and
valuation measures. The Adviser seeks securities of emerging market issuers
which are relatively liquid and covered by professional securities analysts.
In selecting stocks in developed markets, the portfolio managers seek the most
attractive opportunities in such markets. For such securities, the portfolio
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.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
20 ING Pilgrim Emerging Countries Fund
<PAGE>
ING PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995 6.34
1996 27.50
1997 9.44
1998 -22.19
1999 75.80
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI EMF Index).
Average Annual Total Returns
MSCI
EMF
Class A(3) Class B(4) Class C(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Classes A and C(7) % N/A
Since inception
of Class B(7) % N/A N/A
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
(3) Reflects deduction of sales charge of 5.75%.
(4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for
1 year and since inception returns.
(5) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(6) The MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(7) Classes A and C commenced operations on November 28, 1994. Class B
commenced operations on May 31, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Countries Fund 21
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital primarily
through investment in equity securities and equity equivalents of emerging
market companies.
INVESTMENT STRATEGY
The Fund will invest at least 65% of its total assets according to its
investment objective. The Fund's definition of emerging markets includes, but is
not limited to, the following:
Africa -- Botswana, Egypt, Ghana, Ivory Coast, Kenya, Mauritius, Morocco,
Namibia, South Africa, Swaziland, Tunisia, Zambia and Zimbabwe;
Asia: -- Bahrain, Bangladesh, China, Hong Kong, India, Indonesia, Malaysia,
Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and
Thailand;
Europe -- Croatia, Cyprus, Czech Republic, Estonia, Finland, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia and Slovenia;
The Middle East -- Israel, Jordan, Lebanon, Oman and Turkey;
Latin America -- Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico,
Nicaragua, Peru and Venezuela.
The Adviser considers an emerging markets company to be any company domiciled in
an emerging market country, or any company that derives 50% or more of its total
revenue from either goods or services produced or sold in countries with
emerging markets.
The Fund may invest the remaining 35% of its assets in equity securities without
regard to whether the issuer qualifies as an emerging market company,
investment-grade debt securities denominated in the currency of an emerging
market country or issued or guaranteed by an emerging market company or the
government of an emerging market country or short-term or medium-term investment
grade debt securities.
The Fund's investment approach is to focus on positive returns through long-term
capital gains. The investment strategy is based on a "top-down" approach that
compares macro trends, such as economics, politics, industry trends, and
commodity trends on a relative basis. Countries are grouped regionally and
globally and ranked based on their macro scores. Once specific countries are
identified as relative outperformers, specific companies are selected as
investments. The selection process for selecting individual companies is based
on fundamental research, industry themes, and identifying specific catalysts for
growth.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Emerging Countries
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many are dependent on a few key
managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
22 ING Pilgrim Worldwide Emerging Markets Fund
<PAGE>
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991 24.19
1992 3.77
1993 63.37
1994 -13.81
1995 -5.93
1996 7.38
1997 -11.40
1998 -29.06
1999 112.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI Emerging Markets Free Index) and the MSCI EAFE Index.
Average Annual Total Returns
MSCI MSCI
EMF EAFE
Class A(4) Index(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund. Lexington Management Corporation engaged a sub-adviser
to manage the Fund until June 7, 2000. Prior to July 26, 2000, the Fund's
shares were sold on a no-load basis. Effective July 31, 2000, the Fund's
outstanding shares were classified as "Class A" shares.
(3) Prior to June 17, 1991, the Fund operated under a different investment
objective.
(4) Reflects deduction of sales charge of 5.75%.
(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) The Morgan Stanley Capital International Europe, Australia and Far East
(MSCI EAFE) Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Emerging Markets Fund 23
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GLOBAL TECHNOLOGY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long term growth of capital. This
objective may not be changed without the approval of shareholders, and there is
no assurance that the Fund will achieve its objective.
INVESTMENT STRATEGY
The Fund seeks to achieve its objective by investing at least 80% of its total
assets in equity securities or equity equivalents (including common and
preferred stocks, warrants and convertible securities) of technology or
information infrastructure related companies of any capitalization. The Adviser
considers technology or information infrastructure related companies to be in
the following industries within the technology or information sectors:
biotechnology, broadcasting and media content, computers, electronic components
and equipment, electronic commerce and data services, data processing,
information systems, internet, medical technology, networking, office
automation, on-line services, semiconductors, semiconductor capital equipment,
server hardware producers, software companies, telecommunications,
telecommunications equipment and services, and companies involved in the
distribution, servicing, science and development of these industries.
The Fund expects that such companies will be located within Africa, Asia,
Europe, the Middle East and Latin America. However, the Fund is not limited to
these countries and may invest in any country so long as it meets the Fund's
objective. Many of the regions in which the Fund will invest will include
emerging market countries.
The Fund's portfolio managers use a "bottom-up" approach in stock selection
focusing on those companies that they believe have rising earnings expectations
and rising valuations. The Fund seeks growth companies with long-term capital
appreciation potential. In selecting individual securities the Adviser looks for
companies that it believes display or are expected to display the following
characteristics:
* Robust growth prospects
* High profit margins or return on capital
* Attractive valuations relative to expected earnings or cash flow
* Quality management
* Unique technological and competitive advantages
The Fund generally sells a stock if the Adviser believes that its target price
has been reached, its earnings are disappointing, its revenue growth has slowed
or its underlying fundamentals have deteriorated. In addition, the Adviser will
overlay a top-down macro economic and political screening process in order to
assess country specific risks and enhance returns. The Fund may invest in
larger, more established companies or in smaller or unseasoned companies.
The Fund may invest the remaining 20% of its assets in investment-grade debt
securities of any maturity denominated in U.S. or foreign currencies.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Global Information
Technology Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many are dependent on a few key
managers.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Risks of Concentration in the Technology Sector -- because the Fund's
investments are concentrated in the technology sector, the value of the Fund may
be subject to greater volatility than a fund with a portfolio that is less
concentrated. If the securities of companies in the technology sector fall out
of favor, the Fund could underperform funds that focus on other types of
companies. In addition, investments in companies in the rapidly changing fields
of technology and science face special risks such as competitive pressures and
technological obsolescence and may be subject to greater governmental regulation
than many other industries.
Non-Diversification Risk -- the Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
24 ING Pilgrim Global Technology Fund
<PAGE>
ING PILGRIM GLOBAL TECHNOLOGY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Pacific Stock Exchange Technology Index (PSE Technology
Index).
Average Annual Total Returns
PSE
Class Technology
A(3) Index(4)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 % 21.04
Since inception % -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to August 1, 2000, Lexington Management Corporation served as the
adviser to the Fund. Lexington Management Corporation engaged a sub-adviser
to manage the Fund until June 7, 2000. Prior to August 1, 2000, the Fund's
shares were sold on a no-load basis. Effective July 31, 2000, the Fund's
outstanding shares were classified as "Class A" shares.
(3) Reflects a deduction of sales charge of 5.75%.
(4) The PSE Technology Index is a price-weighted index of the top 100 U.S.
technology stocks.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Technology Fund 25
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Advisors B.V.
ING PILGRIM GLOBAL COMMUNICATIONS FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
communications companies. This portion of the portfolio will have investments
located in at least three different countries, including the United States. As a
general matter, the Fund expects these investments to be in common stocks of
large, mid-sized and small companies.
The Fund considers communications companies to be those that derive at least 50%
of their total revenues or earnings from designing, developing, operating,
financing, manufacturing or providing the following activities, products and
services: communications equipment and service (including equipment and services
for both data and voice transmission); electronic components and equipment;
broadcast (including television and radio, satellite, microwave and cable
television); computer equipment, mobile telecommunications and cellular radio
and paging; electronic mail; local and wide area networking and linkage of work
and data processing systems (collectivley, "communications activities").
The Sub-Adviser believes that because of rapid advances in communications,
investment in companies within this sector should offer substantial
opportunities for long-term capital appreciation. The communications area has
exhibited and continues to demonstrate rapid growth, both through increasing
demand for existing products and services and the broadening of the technology
market. Generally, the Sub-Adviser's overall stock selection for the Fund will
be based on an assessment of the company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
The Sub-Adviser combines broad industry analysis and "bottom-up" company
analysis to identify the stocks of companies it believes will become tomorrow's
communications leaders. In choosing investments for the Fund, the Sub-Adviser
first identifies themes that address industry and technological changes. Using
intensive fundamental research, the Sub-Adviser then analyzes individual
companies worldwide to find those firms most likely to benefit from the selected
investment themes.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Industry Concentration -- as a result of the Fund concentrating its assets in
securities related to a particular industry, the Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Communications Technology Risk -- communications companies are generally subject
to the rate of change in technology, which is higher than other industries. In
addition, products and services of companies engaged in the communications
industry are subject to relatively high risks of rapid obsolescence caused by
scientific and technological advances. Swings in investor psychology or
significant trading by large institutional investors can result in significant
price fluctuations and stock price declines.
Governmental Regulation -- certain communications industries, such as the
telecommunications industry, may be subject to greater governmental regulation
than
26 ING Pilgrim Global Communications Fund
<PAGE>
ING PILGRIM GLOBAL COMMUNICATIONS FUND
--------------------------------------------------------------------------------
many other industries. Accordingly, such industries may be subject to changes in
governmental policies and the need for regulatory approvals may have a material
effect on the products and services offered. Telephone operating companies in
the United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered.
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The Fund does not have a performance history because it has not yet commenced
operation.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Communications Fund 27
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Advisors B.V.
ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
information technology companies. The Fund defines information technology
companies as those companies that derive at least 50% of their total revenues or
earnings from information technology, hardware or software, or related
consulting and services industries. This portion of the portfolio will have
investments located in at least three different countries, including the United
States. As a general matter, the Fund expects these investments to be in common
stocks of large, mid-sized and small companies.
The Sub-Adviser believes that because of rapid advances in information
technology, investment in companies within this sector should offer substantial
opportunities for long-term capital appreciation. The information technology
area has exhibited and continues to demonstrate rapid growth, both through
increasing demand for existing products and services and the broadening of the
technology market. Generally, the Sub-Adviser's overall stock selection for the
Fund will be based on an assessment of the company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
The Sub-Adviser combines broad industry analysis and "bottom-up" company
analysis to identify the stocks of companies it believes will become tomorrow's
information technology leaders. In choosing investments for the Fund, the
Sub-Adviser first identifies themes that address industry and technological
changes. Using intensive fundamental research, the Sub-Adviser then analyzes
individual companies worldwide to find those firms most likely to benefit from
the selected investment themes.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Industry Concentration -- as a result of the Fund concentrating its assets in
securities related to a particular industry, the Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Information Technology Risk -- information technology companies are generally
subject to the rate of change in technology, which is higher than other
industries. In addition, products and services of companies engaged in the
information technology industry are subject to relative high risks of rapid
obsolescence caused by scientific and technological advances. Swings in investor
psychology or significant trading by large institutional investors can result in
significant price fluctuations and stock price declines.
28 ING Pilgrim Global Information Technology Fund
<PAGE>
ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998
1999 140.15
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Goldman Sachs Technology Industry Composite Index.
Average Annual Total Returns
Goldman
Sachs
Tech.
Industry
Class Class Class Comp.
A(2) B(3) C(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns..
(4) Reflects deduction of deferred sales charge of 1% for the 1 year return
(5) The Goldman Sachs Technology Industry Composite Index is a widely
recongnized, unmanaged index of technology stocks.
(6) Classes A, B and C commenced operations on December 15, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Information Technology Fund 29
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks long-term capital appreciation.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of its total assets in equity securities
listed on stock exchanges in countries in the Asia-Pacific region or issued by
companies based in this region. Asia-Pacific countries in which the Fund invests
include, but are not limited to, China, Hong Kong, Indonesia, Korea, Malaysia,
Philippines, Singapore, Taiwan and Thailand, but do not include Japan and
Australia. The equity securities in which the Fund may invest include common
stock, convertible securities, preferred stock, warrants, American Depositary
Receipts, European Depositary Receipts and other depositary receipts.
The Adviser bases investment decisions on a disciplined approach that takes into
consideration the following factors: a macroeconomic overview of the region,
specific country analysis, setting target country weightings, evaluation of
industry sectors within each country, and selection of specific stocks. In
selecting specific securities, the Adviser emphasizes a value approach that
seeks growth at a reasonable price. This approach involves analysis of such
fundamental factors as absolute rates of change of earnings growth, earnings
growth relative to the market and industry, quality of earnings and stability of
earnings growth, quality of management and product line, interest rate
sensitivity and liquidity of the stock.
The criteria used by the Fund to determine whether an issuer is based in the
Asia-Pacific region are: the country in which the issuer was organized; the
country in which the principal securities market for that issuer is located; the
country in which the issuer derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed; or the country
in which at least 50% of the issuer's assets are located.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the value
securities in which the Fund invests. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Risks of the Asia-Pacific Region -- the Asia-Pacific region includes countries
in various stages of economic development, including emerging market countries.
In 1997 and 1998, securities markets in Asian countries suffered significant
downturns and volatility, and currencies lost value in relation to the U.S.
dollar. Currency devaluation in any one country may have a significant effect on
the entire region. Increased political or social unrest in some or all Asian
countries could cause further economic and market uncertainty.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a Fund that
invests globally. If Asia-Pacific securities fall out of favor, it may cause the
Fund to underperform funds that focus on other types of stocks.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
30 ING Pilgrim Asia-Pacific Equity Fund
<PAGE>
ING PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996 9.46
1997 -43.73
1998 -15.51
1999 74.41
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- Morgan Stanley Capital International Far East Free ex-Japan Index
(MSCI Far East ex-Japan Index).
Average Annual Total Returns
MSCI
Far East
Free
ex-Japan
Class A(2) Class B(3) Class M(4) Index(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to January 2, 2001, the Fund was managed by a sub-adviser.
(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 sales charge of 3.5% for the 1 year return.
(5) The MSCI Far East ex-Japan Index is an unmanaged index that measures the
performance of securities listed on exchanges in the Far East markets,
excluding Japan.
(6) The Fund commenced operations on September 1, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Asia-Pacific Equity Fund 31
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM SMALLCAP ASIA GROWTH FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term capital appreciation
primarily by investing in equity securities and equity equivalents of companies
in the Asia Region having market capitalizations of less than $1 billion.
INVESTMENT STRATEGY
The Fund will normally invest at least 65% of its total assets in equity
securities and equity equivalents (including common and preferred stocks,
warrants and convertible securities) of smaller companies in the Asia Region.
The Fund will primarily invest in listed securities but may also invest in
unlisted securities.
The Fund intends to invest primarily in companies which:
* have proven management;
* are undervalued and under-researched by the investment community;
* are within industry sectors with strong growth prospects; and
* which have potential investment returns that are superior to the Asian
market as a whole.
The Fund may invest 35% of its total assets in:
* companies with market capitalizations of $1 billion or more;
* companies outside the Asia Region (e.g. Australia or New Zealand); and
* Investment-grade debt securities of any maturity
* The Fund considers the following countries to be in the Asia Region:
Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan,
The Philippines, Singapore, Sri Lanka, Vietnam, Taiwan and Thailand. The
Fund considers a company to be within the Asia Region if its principal
securities' trading market is located in the Asia Region. The Fund will
normally invest in at least three different countries. The Fund does not
intend to invest in Japanese securities.
During times that the Adviser believes that stock of smaller companies presents
undue risk, the Fund may adopt a defensive investment posture, and invest in
equity securities and equity equivalents of medium and large companies in the
Asia region. At a meeting held on December 8, 2000, the Adviser informed the
Fund's Board of Directors that the Fund likely will continue to be invested
primarily in such securities for the immediate future, and potentially through
the reorganization of the Fund with the ING Pilgrim Asia-Pacific Equity Fund, to
the extent warranted by market conditions. At times that the Fund is primarily
invested in securities of medium and large companies, it will not realize
capital appreciation from a primary investment in smaller companies.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Asia-Pacific Equity
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund invests in small companies, which may be more susceptible to price
swings than larger companies because they may have fewer financial resources,
more limited product and market diversification and many are dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Risks of the Asia Region -- the Asia region includes countries in various stages
of economic, development, including emerging market countries. In 1997 and 1998,
securities markets in Asian countries suffered significant downturns and
volatility, and currencies lost value in relation to the U.S. dollar. Currency
devaluation in any one country may have a significant effect on the entire
region. Increased political or social unrest in some or all Asian countries
could cause further economic and market uncertainty.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a Fund that
invests globally. If Asian securities fall out of favor, it may cause the Fund
to underperform funds that focus on other types of stocks.
Inability to Sell Securities -- securities of smaller and emerging market
companies trade in lower volume and may be less liquid than securities of
companies in larger, more established markets. The Fund could lose money if it
cannot sell a security at the time and price that would be most beneficial to
the Fund.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in intrest rates, usually making them more volatile than debt securities
with shorter maturities.
32 ING Pilgrim SmallCap Asia Growth Fund
<PAGE>
ING PILGRIM SMALLCAP ASIA GROWTH FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991
1992
1993
1994
1995
1996 25.50
1997 -42.32
1998 -19.41
1999 57.29
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- The Morgan Stanley Capital International Far East Free ex Japan
Index (MSCI Far East Free ex-Japan Index) and The Morgan Stanley Capital
International Europe, Australia and Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI MSCI
Far East Free EAFE
Class A(4)(5) ex Japan Index(6) Index(7)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of
Class A(8) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and another firm served as sub-adviser to the Fund.
Prior to July 26, 2000, the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Prior to January 2, 2001, the Fund was advised by a sub-adivser.
(4) This table shows the per-formance of the Class A shares of the Fund. Class
B shares of the Fund did not have a full year's performance during the
period ended December 31, 2000.
(5) Reflects deduction of sales charge of 5.75%.
(6) The MSCI Far East Free ex Japan Index is an unmanaged index that measures
the performance of securities listed on exchanges in the Far East markets
except Japan.
(7) The MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
(8) Class A commenced operations on July 3, 1995.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Asia Growth Fund 33
<PAGE>
International Equity Funds
Adviser
ING Mutual Funds
Management Co. LLC
Sub-Adviser
ING Investment
Management Adivsors B.V.
ING PILGRIM EUROPEAN EQUITY FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund seeks to provide investors with long-term capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
European issuers. The Sub-Adviser considers European issuers to be companies
whose securities are principally traded in the European capital markets, that
derive at least 50% of their total reveues or earnings from either goods
produced or services rendered in countries located in Europe, regardless of
where the securities of such companies are principally traded, or that are
organized under the laws of and have a principal office in a European country.
As a general matter, the Fund expects these investments to be in common stocks
of large companies whose market capitalizations are generally in excess of $10
billion.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, five-step investment process that seeks to identify underpriced
earnings growth in European companies. The five steps are:
* First, the Sub-Adviser ranks possible investments according to trading
volume and liquidity relative to their peers;
* Second, the Sub-Adviser performs additional screens to determine which
companies should be further researched;
* Third, the Sub-Adviser performs fundamental analysis of cyclical and
non-cyclical market sectors and companies to identify underpriced earnings
or cash flow growth.
* Fourth, the Sub-Adviser determines portfolio weightings within each sector.
* Finally, the Sub-Adviser continuously monitors the portfolio to maintain
favorable risk-reward relationships.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the The Fund may be affected by the
following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potenial for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and many may be dependent on a few
key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging market countries are generally
riskier than other kinds of foreign investments partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
34 ING Pilgrim European Equity Fund
<PAGE>
ING PILGRIM EUROPEAN EQUITY FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)
1991
1992
1993
1994
1995
1996
1997
1998
1999 18.59
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- FT-Europe Index.
Average Annual Total Returns(5)
FT-Europe
Class A(2) Class B(3) Class C(4) Index(5)
--------------------------------------------------------------------------------
One year ended
December 31, 2000 % -- -- -- --
Since inception(6) % -- -- -- --
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for
1 year and since inception returns.
(4) Reflects deduction of a deferred sales charge of 1% for the 1 year return.
(5) The FT-Europe Index is widely recognized, unmanaged index of European stock
markets.
(6) Classes A, B and C commenced operations on December 15, 1998.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim European Equity Fund 35
<PAGE>
International Equity Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek long-term capital appreciation
through investment primarily in equity securities of Russian companies.
INVESTMENT STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its total
assets in equity securities (including common and preferred stocks, warrants and
convertible securities) of Russian companies. The portfolio manager may invest
in companies with any market capitalization. The Fund may invest the other 35%
of its total assets in debt securities issued by Russian companies and debt
securities issued or guaranteed by the Russian government without any
restrictions based on investment quality or maturity of the debt securities. The
Fund may also invest in the equity securities of issuers outside of Russia which
the Fund believes will experience growth in revenue and profits from
participation in the development of the economies of the former Soviet Union.
When the Fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the Fund avoid losses, but may mean lost
opportunities.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Risks of Investing in Securities of Russian Companies
The following risks apply to all mutual funds that invest in securities of
Russian companies including ING Pilgrim Troika Dialog Russia Fund.
Political Risk -- Since the breakup of the Soviet Union in 1991, Russia has
experienced and continues to experience dramatic political and social change.
Russia is undergoing a rapid transition from a centrally-controlled command
system to a more market-oriented democratic model. The Fund may be affected
unfavorably by political developments, social instability, changes in government
policies, and other political and economic developments.
Market Concentration and Liquidity Risk -- The Russian securities markets are
substantially smaller, less liquid and more volatile than the securities markets
in the United States. A few issuers represent a large percentage of market
capitalization and trading volume. Due to these factors and despite the Fund's
policy on liquidity, it may be difficult for the Fund to buy or sell some
securities because of the poor liquidity.
Lack of Reliable Financial Information -- There may not be available reliable
financial information which has been prepared and audited in accordance with
U.S. or Western European generally accepted accounting principles and auditing
standards.
Unfavorable Actions -- There is the potential for unfavorable action such as
expropriation, dilution, devaluation, default or excessive taxation by the
Russian government or any of its agencies or political subdivisions with respect
to investments in Russian securities by or for the benefit of foreign entities.
The Fund's investments will include investments in Russian companies that have
characteristics and business relationships common to companies outside of
Russia, and as a result, outside economic forces may cause fluctuations in the
value of securities held by the Fund.
Settlement and Custody Risk -- Ownership of shares in Russian companies is
recorded by the companies themselves and by registrars instead of through a
central registration system. It is possible that the Fund's ownership rights
could be lost through fraud or negligence. Since the Russian banking
institutions and registrars are not guaranteed by the state, the Fund may not be
able to pursue claims on behalf of the Fund's shareholders.
Risks of Concentration -- because the Fund concentrates on a single region of
the world, the Fund's performance may be more volatile than that of a fund that
invests globally. If Russian securities fall out of favor, it may cause the Fund
to underperform funds that focus on other types of stocks.
Lower Quality Debt Securities -- Junk bonds are highly speculative. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity of issuers of securities to make principal and interest payments than
with higher-grade debt securities.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
Debt Securities -- The value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
36 ING Pilgrim Troika Dialog Russia Fund
<PAGE>
ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992
1993
1994
1995
1996
1997 67.50
1998 -82.99
1999 159.76
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- the Moscow Times Index and the Russian Trading System Index.
Average Annual Total Returns
Russian
Moscow Trading
Times System
Class A(3)(4) Index(5) Index(6)
-------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Since inception of Class A(7) %
-------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Prior to January 2, 2001, the Fund was advised by a
sub-adviser.
(3) This table shows the performance of the Class A shares of the Fund.
(4) Reflects deduction of sales charge of 5.75%.
(5) The Moscow Times Index is an unmanaged index that measures the performance
of 50 Russian stocks considered to represent the most liquid and most
highly capitalized Russian stocks.
(6) The Russian Trading System Index is a capitalization-weighted index that is
calculated in U.S. dollars. The index is comprised of 100 stocks traded on
the Russian Trading System.
(7) Class A commenced operations on July 3, 1996.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Troika Dialog Russia Fund 37
<PAGE>
Precious Metals Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GOLD FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to attain capital appreciation and hedge
against the loss of buying power of the U.S. Dollar as may be obtained through
investment in gold and securities of companies engaged in mining or processing
gold throughout the world.
INVESTMENT STRATEGY
The Fund normally invests at least 65% of the value of its total assets in gold
bullion and the equity securities of companies engaged in the exploration,
mining, processing, fabrication or distribution of gold ("gold-related
companies"). The Fund may invest the remaining 35% of its total assets in other
precious metal, including silver, platinum, and palladium, and in the equity
securities of companies engaged in the exploration, mining, processing,
fabrication or distribution of other precious metals or materials. From time to
time, the Fund invests to in silver bullion or the common stock of companies
engaged in the exploration, mining, processing, fabrication or distribution of
silver ("silver-related companies"). The Fund may also invest in other types of
securities, including convertible securities, preferred stocks, bonds, notes and
warrants, of gold-related companies, silver-related companies, or companies
related to other precious metals. The Fund intends to invest less than half of
the value of its assets directly in bullion or other direct forms of gold,
silver, and other precious metals (as opposed to securities).
The Fund's performance and ability to meet its objective will be largely
dependent on the market value of gold, and, to a lesser degree, silver and other
precious metals. A substantial portion of the Fund's investment will be in the
securities of foreign issuers.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Precious Metals Risk -- the Fund's focus on precious metals and precious metal
stocks may expose the investor to additional risks. Precious metal prices can
swing sharply in response to cyclical economic conditions, political events or
the monetary policies of various countries. The supply and demand for gold may
vary widely and may be affected by actions of governments or their agencies or
national banks, all of which may affect the price of a precious metal or a
related company. Under current U.S. tax law, the Fund may not receive more than
10% of its yearly income from selling precious metals or any other physical
commodity. That law may require the Fund, for example, to hold precious metals
when it would rather sell, or to sell other securities when it would rather hold
them -- both may cause investment losses or lost opportunities for profit.
Direct investments in precious metals such a bullion have the following
characteristics: they earn no income; transaction and storage costs may be
higher than for securities; and the Fund will realize gain only with an increase
in the market price.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging, market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
38 ING Pilgrim Gold Fund
<PAGE>
ING PILGRIM GOLD FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 -6.14
1992 -20.51
1993 86.96
1994 -7.28
1995 -1.89
1996 7.84
1997 -42.98
1998 -6.39
1999 8.58
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- Standard & Poor's 500 Stock Price Index (S&P 500 Index) and Gold
Bullion.
Average Annual Total Returns
S&P 500 Gold
Class A(3) Index(4) Bullion(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Gold Bullion is a commodity traded on the New York Mercantile Exchange.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Gold Fund 39
<PAGE>
Precious Metals Funds
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to maximize total return on its assets from
long-term growth of capital and income principally through investment in a
portfolio of securities which are engaged in the exploration, mining,
processing, fabrication or distribution of silver ("silver-related companies")
and in silver bullion.
INVESTMENT STRATEGY
The Fund will seek to achieve its objective through investment in common stocks
of established silver-related companies and in silver bullion which have the
potential for long-term growth of capital or income, or both. The common stocks
of silver-related companies in which the Fund intends to invest may or may not
pay dividends. The Fund may also invest in other types of securities of
silver-related companies including convertible securities, preferred stocks,
bonds, notes and warrants. The Fund invests primarily in companies with a large
market capitalization, but may also invest in mid- and small-size companies.
When the Adviser believes that the return on debt securities will equal or
exceed the return on common stocks, the Fund may, in pursuing its objective of
maximizing growth and income, substantially increase its holding in
investment-grade debt securities of any maturity.
The securities in which the Fund invests include issues of established
silver-related companies domiciled in the United States, Canada and Mexico as
well as other silver producing countries throughout the world. At least 80% of
the Fund's assets will be invested in established silver-related companies which
have been in business more than three years. Approximately 80% of silver is
provided as a by-product or co-product of other mining operations, such as gold
mining. The Fund has the ability to significantly increase its exposure to
silver by increasing its holding of silver bullion.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim Gold Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Precious Metals Risk -- the Fund's focus on precious metals and precious metal
stocks may expose the investor to additional risks. The market for silver is
relatively limited, the sources of silver are concentrated in countries that
have the potential for instability and the market for silver is widely
unregulated. As a result, the price of silver, and therefore the Fund, may
fluctuate significantly. Precious metal investments have the following
characteristics: they earn no income; transaction and storage costs may be
higher; and the Fund will realize gain only with an increase in the market
price.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging, market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries: It may
also be more difficult to buy and sell securities in emerging market countries.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
40 ING Pilgrim Silver Fund
<PAGE>
ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991
1992 -19.01
1993 76.52
1994 -8.37
1995 12.37
1996 2.38
1997 -8.05
1998 -29.64
1999 8.70
2000
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that two broad measures of market
performance -- Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index)
and Silver Bullion.
Average Annual Total Returns
S&P 500 Silver
Class A(3) Index(4) Bullion(5)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of Class A(6) %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Reflects deduction of sales charge of 5.75%.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Silver Bullion is a commodity traded on the New York Mercantile Exchange.
(6) Class A commenced operations on January 2, 1992.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Silver Fund 41
<PAGE>
International Income Fund
Adviser
ING Pilgrim
Investments, Inc.
ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is to seek high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated or unrated debt securities.
INVESTMENT STRATEGY
The Fund invests in a variety of foreign and domestic high yield, lower rated or
unrated debt securities.
The Fund, under normal conditions, invests substantially all of its assets in
lower rated or unrated debt securities of domestic companies, companies in
developed foreign countries, and companies in emerging markets. The credit
quality of the foreign debt securities which the Fund intends to buy is
generally equal to U.S. corporate debt securities known as "junk bonds". The
debt securities in which the Fund invests consist of bonds, notes, debentures
and other similar instruments. The Fund may invest in debt securities issued by
foreign governments, their agencies and instrumentalities, central banks,
commercial banks and other corporate entities. The Fund may invest up to 100% of
its total assets in domestic and foreign debt securities that are rated below
investment grade or are of comparable quality. The Fund may also invest in
securities that are in default as to payment of principal and/or interest, and
bank loan participations and assignments.
The Fund's investment strategy stresses diversification to help reduce the
Fund's price volatility. Global fixed income securities are divided into four
categories. The categories reflect whether the securities are U.S. dollar
denominated or not and whether borrowers are in developed markets or emerging
markets. The Fund then seeks to select the best values in each of these four
segments. The balance the Fund maintains between these sectors attempts to limit
the price volatility.
The Fund may invest in debt securities of any maturity, although the portfolio
manager expects to invest in long-term debt instruments.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim Strategic Income
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income funds because it invests in high
yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging markets countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.
42 ING Pilgrim Global Income Fund
<PAGE>
ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1990 6.62
1991 10.03
1992 6.51
1993 10.90
1994 -6.52
1995 20.10
1996 13.33
1997 5.00
1998 8.21
1999 -.31
Best and worst quarterly performance during this period:
quarter : %
quarter : %
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers Global Treasury Index.
Average Annual Total Returns
Lehman Brothers
Global Treasury
Class A(4)(5) Index(6)
--------------------------------------------------------------------------------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
--------------------------------------------------------------------------------
(1) These figures are for the year ended December 31 of each year. They do not
reflect sales charges and would be lower if they did.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 31, 2000, the Fund's outstanding shares were classified as
"Class A" shares.
(3) Prior to December 31, 1994, the Fund operated under a different investment
objective.
(4) This table shows the performance of the Class A shares of the Fund. Class B
and Class C shares of the Fund did not have a full year's performance
during the period ended December 31, 2000.
(5) Reflects deduction of sales charge of 4.75%.
(6) The Lehman Brothers Global Treasury Index is an unmanaged index that is
comprised of 19 countries with an average maturity of 7.46%. The index is
overweighted in the U.S. and Japan, 27% and 25%, respectively. The average
coupon is 5.37%. The index returns are calculated in three ways: U.S.
Dollar, hedged U.S. Dollar, and local returns (local currencies). The
modified adjusted duration of the index is 5.5 years.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Income Fund 43
<PAGE>
WHAT YOU PAY TO INVEST
-----------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the Fund. The tables that follow show the
fees and expenses for each of the ING Pilgrim Funds.
Fees You Pay Directly
<TABLE>
<CAPTION>
Class A Class B(1) Class C(1) Class M(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge on your investment
(as a % of offering price) %
International Equity Funds and Precious Metals
Funds 5.75(2) none none 3.50(2)
International Income Fund 4.75(2) none none 3.25(2)
Maximum deferred sales charge (as a % of
purchase or sales price, whichever is less)
All Funds none(3) 5.00(4) 1.00(5) none
Redemption fee (as a % of amount redeemed,
if applicable)
Global Technology Fund and Troika Dialog
Russia Fund 2.00(6) N/A N/A N/A
</TABLE>
(1) Not all Funds offer Classes B, C and M. Please page 48.
(2) Reduced for purchases of $50,000 and over. Please see page 49.
(3) A contingent deferred sales charge of no more than 1% 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. Please see page 49.
(4) Imposed upon redemption within 6 years from purchase. The fee has scheduled
reductions after the first year. Please see page 49.
(5) Imposed upon redemption within 1 year from purchase.
(6) The 2.0% redemption fee applies only to shares held less than 90 days for
Global Technology Fund and less than 365 days for Troika Dialog Russia
Fund.
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
<TABLE>
<CAPTION>
Class A
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 0.35 -- -- -- --
Global Corporate Leaders % 1.00 0.25 -- -- -- --
International Value % 1.00 0.30 -- -- -- --
International % 1.00 0.25 -- -- -- --
International Core Growth % 1.00 0.35 -- -- -- --
International SmallCap Growth % 1.00 0.35 -- -- -- --
Emerging Markets Value % 1.00 0.30 -- -- -- --
Emerging Countries % 1.25 0.35 -- -- -- --
Worldwide Emerging Markets % 1.00 0.25 -- -- -- --
Global Technology % 1.25 0.25 -- -- -- --
Global Communications % 1.00 0.35 -- -- -- --
Global Information Technology % 1.25 0.35 -- -- -- --
Asia-Pacific Equity % 1.25 0.25 -- -- -- --
SmallCap Asia Growth % 1.25 0.25 -- -- -- --
European Equity % 1.15 0.35 -- -- -- --
Troika Dialog Russia % 1.25 0.25 -- -- -- --
Gold % 0.95 0.25 -- -- -- --
Silver % 1.00 0.25 -- -- -- --
Global Income % 1.00 0.25 -- -- -- --
</TABLE>
44 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
Class B(3)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 1.00 -- -- -- --
International Value % 1.00 1.00 -- -- -- --
International % 1.00 1.00 -- -- -- --
International Core Growth % 1.00 1.00 -- -- -- --
International SmallCap Growth % 1.00 1.00 -- -- -- --
Emerging Markets Value % 1.00 1.00 -- -- -- --
Emerging Countries % 1.25 1.00 -- -- -- --
Global Communications % 1.00 1.00 -- -- -- --
Global Information Technology % 1.25 1.00 -- -- -- --
Asia-Pacific Equity % 1.25 1.00 -- -- -- --
SmallCap Asia Growth % 1.25 1.00 -- -- -- --
European Equity % 1.15 1.00 -- -- -- --
Global Income % 1.00 1.00 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class C(4)
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Growth % 1.00 1.00 0.32 -- -- --
International Value % 1.00 1.00 0.41 -- -- --
International % 1.00 1.00 0.70 -- -- --
International Core Growth % 1.00 1.00 0.81 -- -- --
International SmallCap Growth % 1.00 1.00 0.32 -- -- --
Emerging Markets Value % 1.00 1.00 0.91 -- -- --
Emerging Countries % 1.25 1.00 0.74 -- -- --
Global Communications % 1.00 1.00 -- -- -- --
Global Information Technology % 1.25 1.00 -- -- -- --
European Equity % 1.15 1.00 -- -- -- --
Global Income % 1.00 1.00 0.51 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class M
Distribution Total
and Service Fund Fee Waiver
Management (12b-1) Other Operating by Net
Fund Fee Fees Expenses Expenses Adviser(2) Expenses
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asia-Pacific Equity % 1.25 0.75 -- -- -- --
</TABLE>
--------------------------------------------------------------------------------
(1) These tables show the estimated operating expenses for each Fund by class
as a ratio of expenses to average daily net assets. These estimates are
based on each Fund's actual operating expenses for its most recent complete
fiscal year and fee waivers to which the Adviser has agreed for each Fund
except Global Corporate Leaders, Global Technology, International,
Worldwide Emerging Markets, SmallCap Asia Growth, Troika Dialog Russia,
Gold, Silver and Global Income Funds. For those Funds, estimated operating
expenses are based on estimated contractual operating expenses commencing
with ING Pilgrim Investments' management of these Funds.
(2) ING Pilgrim Investments has entered into written expense limitation
agreements with each Fund except International Value and Emerging Markets
Value, under which it will limit expenses of the Fund, excluding interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Pilgrim Investments within three years. The amount of
each Fund's expenses waived or reimbursed during the last fiscal year by
ING Pilgrim Investments is shown under the heading "Fee Waiver by Adviser".
For each Fund (other than Global Communications, Global Information
Technology and European Equity Funds) the expense limit will continue
through at least October 31, 2001. For Global Communications, Global
Information Technology and European Equity Funds the expense limit will
continue through at least . Nicholas-Applegate Capital Management bears 50%
of the cost of maintaining the expense limit for the International SmallCap
Growth Fund.
(3) Because Class B shares are new for International, SmallCap Asia Growth and
Global Income Funds, their expenses are estimated based on Class A
expenses.
(4) Because Class C shares are new for International Fund and Global Income
Fund, expenses are estimated based on Class A expenses.
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 45
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
<TABLE>
<CAPTION>
Class A
Fund 1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- --
Global Corporate Leaders $ -- -- -- --
International Value $ -- -- -- --
International $ -- -- -- --
International Core Growth $ -- -- -- --
International SmallCap Growth $ -- -- -- --
Emerging Markets Value $ -- -- -- --
Emerging Countries $ -- -- -- --
Worldwide Emerging Markets $ -- -- -- --
Global Technology(1) $ -- -- -- --
Global Communications $ -- -- -- --
Global Information Technology $ -- -- -- --
Asia-Pacific Equity $ -- -- -- --
SmallCap Asia Growth $ -- -- -- --
European Equity $ -- -- -- --
Troika Dialog Russia (1) $ -- -- -- --
Gold $ -- -- -- --
Silver $ -- -- -- --
Global Income $ -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
If you sell your shares If you don't sell your shares
Class B ----------------------------------------- ---------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- -- -- -- -- --
International Value $ -- -- -- -- -- -- -- --
International $ -- -- -- -- -- -- -- --
International Core Growth $ -- -- -- -- -- -- -- --
International SmallCap Growth $ -- -- -- -- -- -- -- --
Emerging Markets Value $ -- -- -- -- -- -- -- --
Emerging Countries $ -- -- -- -- -- -- -- --
Global Communications $ -- -- -- -- -- -- -- --
Global Information Technology $ -- -- -- -- -- -- -- --
Asia-Pacific Equity $ -- -- -- -- -- -- -- --
SmallCap Asia Growth $ -- -- -- -- -- -- -- --
European Equity $ -- -- -- -- -- -- -- --
Global Income $ -- -- -- -- -- -- -- --
</TABLE>
46 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you sell your shares If you don't sell your shares
Class C ---------------------------------------- -------------------------------------
Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Growth $ -- -- -- -- -- -- -- --
International Value $ -- -- -- -- -- -- -- --
International $ -- -- -- -- -- -- -- --
International Core Growth $ -- -- -- -- -- -- -- --
International SmallCap Growth $ -- -- -- -- -- -- -- --
Emerging Markets Value $ -- -- -- -- -- -- -- --
Emerging Countries $ -- -- -- -- -- -- -- --
Global Communications $ -- -- -- -- -- -- -- --
Global Information Technology $ -- -- -- -- -- -- -- --
European Equity $ -- -- -- -- -- -- -- --
Global Income $ -- -- -- -- -- -- -- --
</TABLE>
Class M
Fund 1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
Asia-Pacific Equity $ -- -- -- --
--------------------------------------------------------------------------------
(1) The cost of investing in the Global Technology Fund and the Troika Dialog
Russia Fund for one year is ____, and ____, respectively, if shares were
held for less than 90 and 365 days, respectively.
If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 47
<PAGE>
SHAREHOLDER GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
ING PILGRIM PURCHASE OPTIONS TM
Depending upon the Fund, you may select from up to four separate classes of
shares: Class A, Class B, Class C and Class M.
Class A
* Front-end sales charge, as described on the next page.
* Distribution and service (12b-1) fees of 0.25% to 0.30%.
Class B
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A contingent deferred sales charge, as described on the next page.
* Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses. Class B shares acquired initially through Funds
that were part of the Nicholas-Applegate Mutual Funds at the time of
purchase will convert after seven years from the date of original purchase.
* Not offered by Global Corporate Leaders Fund, Worldwide Emerging Markets
Fund, Troika Dialog Russia Fund, Gold Fund and Silver Fund.
Class C
* No front-end sales charge; all your money goes to work for you right away.
* Distribution and service (12b-1) fees of 1%.
* A 1% contingent deferred sales charge on shares sold within one year of
purchase.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
* Not offered by Asia-Pacific Equity Fund, Global Corporate Leaders Fund,
Worldwide Emerging Markets Fund, SmallCap Asia Growth Fund, Troika Dialog
Russia Fund, Gold Fund and Silver Fund.
Class M
* Lower front-end sales charge than Class A, as described on the next page.
* Distribution and service (12b-1) fees of 0.75%.
* No automatic conversion to Class A shares, so annual expenses continue at
the Class M level throughout the life of your investment.
* Offered only by Asia-Pacific Equity Fund.
When choosing between classes, you should carefully consider the ongoing annual
expenses along with the initial sales charge or the contingent deferred sales
charge. The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Higher distribution
fees mean a higher expense ratio, so Class B and Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A or Class M shares. Orders for Class B shares and Class M shares in excess of
$250,000 and $1,000,000, respectively, will be accepted as orders for Class A
shares or declined. You should discuss which Class of shares is right for you
with your investment professional.
Distribution and Shareholder Service Fees
To pay for the cost of promoting the Funds and servicing your shareholder
account, each class of each Fund has adopted a Rule 12b-1 plan which requires
fees to be paid out of the assets of each class. Over time the fees will
increase your cost of investing and may exceed the cost of paying other types of
sales charges.
48 Shareholder Guide
<PAGE>
CHOOSING A SHARE CLASS SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
SALES CHARGE CALCULATION
Class A(1)
Class A shares of the Funds are sold subject to the following sales charge:
International
Equity Funds, International
and Precious Metals Funds Income Fund
-------------------------- -------------------------
As a % As a %
of the As a % of of the As a % of
offering net offering net
Your Investment price asset value price asset value
Less than $50,000 5.75 6.10 4.75 4.99
$50,000 - $99,999 4.50 4.71 4.50 4.71
$100,000 - $249,999 3.50 3.63 3.50 3.63
$250,000 - $499,999 2.50 2.56 2.50 2.56
$500,000 - $1,000,000 2.00 2.04 2.00 2.04
$1,000,000 and over See below See below
(1) Shareholders that purchased funds that were a part of the Lexington family
of funds at the time of purchase are not subject to sales charges for the
life of their account.
Investments of $1 Million or More. There is no front-end sales charge if you
purchase Class A shares in an amount of $1 million or more. However, the shares
will be subject to a contingent deferred sales charge if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:
Period during which
Your investment CDSC CDSC applies
$1,000,000 to $2,499,999 1.00% 2 years
$2,500,000 to $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
However, Class A shares that were purchased in an amount of $1 million or more
through Funds that were part of the Nicholas-Applegate Mutual Funds at the time
of purchase will be subject to a contingent deferred sales charge of 1% within
one year from the date of purchase.
Class A shares that were purchased in an amount of $1 million or more through
funds that were part of the Northstar family of funds and the ING family of
funds at the time of purchase may be subject to a different contingent deferred
sales charge period of 18 months and 12 months respectively, from the date of
purchase. See the SAI for further information.
Class B and Class C
Class B and Class C shares are offered at their net asset value per share
without any initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) on shares that you sell within a certain period of
time after you bought them. The amount of the CDSC is based on the lesser of the
net asset value of the shares at the time of purchase or redemption. There is no
CDSC on shares acquired through the reinvestment of dividends and capital gains
distributions. The CDSCs are as follows:
Class B Deferred Sales Charge(2)
CDSC on shares
Years after purchase being sold
1st year 5%
2nd year 4%
3rd year 3%
4th year 3%
5th year 2%
6th year 1%
After 6th year none
(2) Class B shares that were purchased through funds that were part of the
Northstar family of funds at the time of purchase are subject to a
different contingent deferred sales charge. Please see the SAI for further
information.
Class C Deferred Sales Charge
CDSC on shares
Years after purchase being sold
1st year 1%
After 1st year none
To keep your CDSC as low as possible, each time you place a request to redeem
shares the Funds will first redeem shares in your account that are not subject
to a CDSC, and then will sell shares that have the lowest CDSC.
Class M
Class M shares are sold subject to the following sales charge.
Asia-Pacific
Equity Fund
-------------------------------
As a % As a %
of the of net
offering asset
Your investment price value
Less than $50,000 3.50% 3.63%
$50,000 - $99,999 2.50% 2.56%
$100,000 - $249,999 1.50% 1.52%
$250,000 - $499,999 1.00% 1.01%
$500,000 and over none none
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 49
<PAGE>
SHAREHOLDER GUIDE CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
Reduced Sales Charges. You may reduce the initial sales charge on a purchase of
Class A or Class M shares of the Funds by combining multiple purchases to take
advantage of the breakpoints in the sales charge schedules. You may do this by:
* Letter of Intent -- lets you purchase shares over a 13 month period and pay
the same sales charge as if the shares had all been purchased at once.
* Rights of Accumulation -- lets you add the value of shares of any open-end
Pilgrim Fund (excluding the Money Market Fund) you already own to the
amount of your next purchase for purposes of calculating the sales charge.
* Combination Privilege -- shares held by investors in the Pilgrim Funds
which impose a CDSC may be combined with Class A or Class M shares for a
reduced sales charge.
See the Account Application or the Statement of Additional Information for
details, or contact your financial representative or the Shareholder Servicing
Agent for more information.
CDSC Waivers. If you notify the Transfer Agent at the time of redemption, the
CDSC for each Class will be waived in the following cases:
* redemptions following the death or permanent disability of a shareholder if
made within one year of death or the initial determination of permanent
disability. The waiver is available only for shares held at the time of
death or initial determination of permanent disability.
* for Class B Shares, redemptions 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.
* mandatory distributions from a tax-deferred retirement plan or an IRA.
However, if you purchased shares that were part of the Nicholas-Applegate
Mutual Funds, you may be eligible for a CDSC waiver prior to the mandatory
distribution age.
* If you think you may be eligible for a CDSC waiver, contact your financial
representative or the Shareholder Servicing Agent.
Reinstatement Privilege. If you sell Class B and Class C shares of a Pilgrim
Fund, you 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. If you want to use the
Reinstatement Privilege, contact your financial representative or the
Shareholder Servicing Agent. Consult the SAI for more information.
Sales Charge Waivers. Class A or Class M shares may be purchased without a sales
charge by certain individuals and institutions. For additional information,
contact the Shareholder Servicing Agent, or see the Statement of Additional
Information.
50 Shareholder Guide
<PAGE>
HOW TO PURCHASE SHARES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
The minimum initial investment amounts for the Pilgrim Funds are as follows:
* Non-retirement accounts: $1,000
* Retirement accounts: $250
* Pre-Authorized Investment Plan: $100 to open; you must invest at least $100
a month.
The minimum additional investment is $100.
Make your investment using the table on the right.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. The Pilgrim Funds reserve the right to waive minimum
investment amounts. The Funds reserve the right to liquidate sufficient shares
to recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $1,000.00
($250.00 for IRAs).
Retirement Plans
The Funds have available prototype qualified retirement plans for both
corporations and for self-employed individuals. They also have available
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 custodial fee annually for the maintenance of such
accounts.
Initial Additional
Method Investment Investment
-----------------------------------------------------------------------
By Contacting An investment
Your professional with an
Investment authorized firm
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Visit or consult an
investment investment
professional. Make professional. Fill out
your check payable to the Account Additions
the Pilgrim Funds and form included on the
mail it, along with a bottom of your account
completed Application. statement along with
Please indicate your your check payable to
investment professional the Fund and mail
on the New Account them to the address on
Application the account statement.
Remember to write
your account number
on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the
Fund in the care of:
State Street Bank and
Trust Company ABA
#101003621 Kansas
City, MO credit to:
-------------- (the
Fund) A/C #751-8315;
for further credit
to: -----------------
Shareholder A/C
#----------------
(A/C # you received
over the telephone)
Shareholder Name:
---------------------
(Your Name Here)
After wiring funds
you must complete the
Account Application
and send it to: ING
Pilgrim Funds P.O.
Box 219368 Kansas
City, MO 64121-6368
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 51
<PAGE>
SHAREHOLDER GUIDE HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
You may redeem shares using the table on the right.
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $10,000.
* Minimum withdrawal amount is $100.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a 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.
Redemption Fee
A 2% redemption fee will be charged on the redemption of shares of the Pilgrim
Troika Dialog Russia Fund held less than 365 days and shares of the Pilgrim
Global Technology Fund held less than 90 days. The redemption fee will not apply
to shares representing the reinvestment of dividends and capital gains
distributions. The redemption fee will be applied on a share by share basis
using the "first shares in, first shares out" (FIFO) method. Therefore, the
oldest shares are sold first.
Method Procedures
By Contacting Your You may redeem by contacting your
Investment Professional investment professional. Investment
professionals may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes
any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check: You may have redemption
proceeds (up to a maximum of $100,000) mailed to an
address which has been on record with Pilgrim Funds
for at least 30 days. Receiving Proceeds By Wire: You
may have redemption proceeds (subject to a minimum of
$5,000) wired to your pre-designated bank account.
You will not be able to receive redemption proceeds
by wire unless you check the box on the Account
Application which signifies that you wish to receive
redemption proceeds by wire and attach a voided
check. Under normal circumstances, proceeds will be
transmitted to your bank on the business day
following receipt of your instructions, provided
redemptions may be made. In the event that share
certificates have been issued, you may not request a
wire redemption by telephone.
52 Shareholder Guide
<PAGE>
TRANSACTION POLICIES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of each class of each
Fund is calculated by taking the value of the Fund's assets attributable to that
class, subtracting the Fund's liabilities attributable to that class, and
dividing by the number of shares of that class that are outstanding. Because
foreign securities may trade on days when the Funds do not price shares, the net
asset value of a Fund that invests in foreign securities may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.
In general, assets are valued 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. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees. Valuing
securities at fair value involves greater reliance on judgment than securities
that have readily available market quotations.
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.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase 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 Fund shares 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 Funds will not be issued
unless you request them in writing.
Telephone Orders
The Funds and their 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
Funds and their 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 Funds and
their transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other ING
Pilgrim Fund, except for Lexington Money Market Trust and ING Pilgrim Corporate
Leaders Trust Fund, without paying any additional sales charge, except that
Class A shares of the Pilgrim Money Market Fund for which no sales charge was
paid must pay the applicable sales load on an exchange into Class A shares of
another Fund. Shares subject to a CDSC will continue to age from the date that
the original shares were purchased. If you exchange shares of a Fund that at the
time you acquired the shares was a Nicholas-Applegate Mutual Fund, the shares
you receive on the exchange will be subject to the current CDSC structure and
conversion rights of the Fund being acquired, although the shares will continue
to age for CDSC and conversion purposes from the date the original shares were
acquired.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes. There is no specific limit on exchange frequency;
however, the Funds are intended for long-term investment and not as a short-term
trading vehicle. The Adviser may prohibit excessive exchanges (more than four
per year). The adviser also may, on 60 days' prior notice, restrict the
frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 53
<PAGE>
SHAREHOLDER GUIDE TRANSACTION POLICIES
--------------------------------------------------------------------------------
Systematic Exchange Privilege
With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end Pilgrim Fund. This exchange privilege may be modified at any time or
terminated upon 60 days' written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at Net Asset Value (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.
Account Access
Unless your ING Pilgrim shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the internet at www.pilgrimfunds.com, or via touch
tone telephone by calling (800) 992-0180 and selecting Option 1. Should you wish
to speak with a Shareholder Service Representative you may call the toll-free
number listed above and select Option 2.
54 Shareholder Guide
<PAGE>
ADVISERS MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds (except Global
Communications, Global Information Technology and European Equity Funds). ING
Pilgrim has overall responsibility for the management of these Funds. ING Mutual
Funds Management Co. LLC ("IMFC") serves as the investment adviser to the Global
Communications, Global Information Technology and European Equity Funds, ING
Pilgrim and IMFC provide or oversee all investment advisory and portfolio
management services for each Fund, and assist in managing and supervising all
aspects of the general day-to-day business activities and operations of the
Funds, including custodial, transfer agency, dividend disbursing, accounting,
auditing, compliance and related services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Through its subsidiaries, ReliaStar offers individuals and
institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products, and personal finance education.
On July 26, 2000, ReliaStar was acquired by ING Group (NYSE: ING). 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.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors,
an indirect wholly-owned subsidiary of ReliaStar, merged with ING Pilgrim
Investments. Pilgrim Advisors and ING Pilgrim Investments were sister companies
and shared certain resources and investment personnel.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired
Lexington Global Asset Managers, Inc., the parent company of Lexington, and ING
Pilgrim Investments was approved as Adviser to the Funds formerly advised by
Lexington.
Organized in ,IMFC is registered as an investment adviser. IMFC is a
wholly-owned subsidiary of ING Group.
As of December 31, 2000, ING Pilgrim managed over $ billion in assets.
As of December 31, 2000, IMFC managed over $ billion in assets.
ING Pilgrim's and IMFC's principal address is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.
ING Pilgrim and IMFC receive a monthly fee for their services based on the
average daily net assets of each of the Funds.
The following table shows the aggregate annual management fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
Management
Fund Fee
Worldwide Growth 1.00%
Global Corporate Leaders 1.00
International Value 1.00
International 1.00
International Core Growth 1.00
International SmallCap Growth 1.00
Emerging Markets Value 1.00
Emerging Countries 1.25
Worldwide Emerging Markets 1.00
Global Technology 1.25
Global Communications 1.00
Global Information Technology 1.25
Asia-Pacific Equity 1.25
SmallCap Asia Growth 1.25
European Equity 1.15
Troika Dialog Russia 1.25
Gold 0.95
Silver 1.00
Global Income 1.00
ING Pilgrim Directly Manages the Portfolios of the Following Funds:
Worldwide Growth Fund
The following individuals share responsibility for the day-to-day management of
the Worldwide Growth Fund: Mary Lisanti, Executive Vice President and Chief
Investment Officer--Domestic Equities of ING Pilgrim, has served as a Senior
Portfolio Manager of the domestic equity portion of the Worldwide Growth Fund's
assets since October 2000. Prior to joining ING Pilgrim in October 1999, Ms.
Lisanti was Executive Vice President and Chief Investment Officer -- Domestic
Equities with Northstar Investment Management Corp., which subsequently merged
into ING Pilgrim. From 1996 to 1998, Ms. Lisanti was a Portfolio Manager at
Strong Capital Management. >From 1993 to 1996, Ms. Lisanti was a Managing
Director and Head of Small- and Mid-Capitalization Equity Strategies at Bankers
Trust Corp. Thomas J. Sullivan, Vice President of ING Pilgrim, has served as a
Portfolio Manager of the domestic equity portion of the Worldwide Growth Fund's
assets since October 1, 2000. Prior to joining ING Pilgrim in September 2000,
Mr. Sullivan was a Partner and Equity Trader for First NY Securities, LLC. From
April, 1994 to March, 2000, Mr. Sullivan was Vice President and portfolio
manager at Nicholas-Applegate Capital Management.
Richard T. Saler, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
the international portion of the Worldwide Growth Fund's assets since October
2000. From 1986 until July 2000, he was Senior Vice President and Director of
International Equity Strategy at Lexington (which was acquired by ING Pilgrim's
parent company in July 2000).
If you have any questions, please call 1-800-992-0180.
Management of the Funds 55
<PAGE>
MANAGEMENT OF THE FUNDS ADVISERS
--------------------------------------------------------------------------------
Phillip A. Schwartz, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
the international portion of the Worldwide Growth Fund's assets since October,
2000. Prior to joining ING Pilgrim in July 2000, Mr. Schwartz was Senior Vice
President and Director of International Equity Investment Strategy at Lexington
(which was acquired by ING Pilgrim's parent company in July 2000). Prior to
1993, Mr. Schwartz was a Vice President of European Research Sales with
Cheuvreux de Virieu in Paris and New York.
Global Corporate Leaders Fund
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Global Corporate Leaders Fund since
July 1994.
Philip A. Schwartz, whose background is described above, has served as as a
member of the portfolio management team that manages Global Corporate Leaders
Fund since January 1998.
Alan H. Wapnick, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim, has served as a member of the portfolio management team that manages
Global Corporate Leaders Fund since January 1998. Mr. Wapnick joined ING Pilgrim
in July 2000. Prior to July 2000, he was Senior Vice President and Senior
Portfolio Manager at Lexington (which was acquired by ING Pilgrim's parent
company in July 2000).
International Fund and International Core Growth Fund
Richard T. Saler, whose background is described above, has served as the Senior
Portfolio Manager of the portfolio management team that manages International
Fund since January 1994, and International Core Growth Fund since October 2000.
Philip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages International Fund since January
1998 and International Core Growth Fund since October 2000.
Worldwide Emerging Markets Fund and Emerging Countries Fund.
Richard T. Saler, whose background is described above, has served as the Senior
Portfolio Manager of the portfolio management team that manages Worldwide
Emerging Markets Fund since June 7, 2000, and Emerging Countries Fund since
October 2000.
Phillip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Worldwide Emerging Markets Fund
since June 7, 2000, and Emerging Countries Fund since October 2000.
Jan Wim Derks, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Derks also serves as Director of Global Emerging Markets
Equities at ING Investment Management -- Europe. Prior to joining ING Investment
Management -- Europe in 1997, Mr. Derks managed a Latin American equity fund
with ABN AMRO.
Eric Anderson, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Anderson also serves as Senior Portfolio Manager -- Global
Emerging Markets Equities at ING Investment Management -- Americas. Prior to
joining ING Investment Management -- Americas in 1997, Mr. Anderson managed a
Latin America equity portfolio and participated in the management of an emerging
market debt portfolio at Offitbank in New York.
Bratin Sanyal, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund and the
Worldwide Emerging Markets Fund since October 2000. In addition to his role with
ING Pilgrim, Mr. Sanyal serves as the Senior Portfoio Manager -- Global Emerging
Markets Equities at ING Investment Management -- Europe. Mr. Sanyal has held
several positions with ING Investment Management -- Europe, most recently as an
Asian equity fund manager. Prior to joining ING Investment Management -- Europe
in 1993, he was an economist at the World Bank where he structured debt workouts
for the Highly Indebted Countries.
Global Technology Fund
The following individuals share responsibility for the day-to-day management of
Global Technology Fund:
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Global Technology Fund since June
2000.
Phillip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Global Technology Fund since June
2000.
Alan H. Wapnick, whose background is described above, has served as a member of
the portfolio management team that manages Global Technology Fund since June
2000.
Asia-Pacific Equity Fund and SmallCap Asia Growth Fund
Richard T. Saler, whose background is described above, has served as a member of
the portfolio management team that manages Asia-Pacific Equity Fund and SmallCap
Asia Growth Fund since January 2000.
Philip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Asia-Pacific Equity Fund and
SmallCap Asia Growth Fund since January 2000.
Troika Dialog Russia Fund
Jan Wim Derks, whose background is described above, has served as a member of
the portfolio management team that manages Troika Dialog Russia Fund since
January 2000.
56 Management of the Funds
<PAGE>
SUB-ADVISERS MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
Mr. Oubadia has seven years experience in portfolio management. He is Vice
President of ING Pilgrim. Mr. Oubadia is responsible for investments in the
emerging markets of Europe, including Russia. He joined IIM in September 1996
when he was the Senior Equity Manager at IIM's office in Prague in the Czech
Republic. He joined IIM's global emerging markets team in January 1998. Mr.
Oubadia holds an MBA from Concordia University in Montreal, Canada.
Gold Fund and Silver Fund
James A. Vail has served as the Portfolio Manager of Gold Fund and Silver Fund
since June 1998.
Mr. Vail has served as Vice President and Portfolio Manager of ING Pilgrim since
July 2000. He is a Chartered Financial Analyst, a member of the New York Society
of Security Analysts and has 25 years of investment experience. Prior to joining
ING Pilgrim in July 2000, he was a Vice President at Lexington (which was
acquired by ING Pilgrim's parent company in July 2000) Prior to joining
Lexington in 1991, Mr. Vail held investment research positions with Chemical
Bank, Oppenheimer & Co., Robert Fleming, Inc. and most recently, Beacon Trust
Company, where he was a Senior Investment Analyst.
Global Income Fund
Denis P. Jamison, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim, since July 2000, has served as Senior Portfolio Manager of Global
Income Fund since July 1986. Prior to July 2000, he was a Senior Vice President
at Lexington (which was acquired by ING Pilgrim's parent company in July 2000).
He is a Chartered Financial Analyst and a member of the New York Society of
Security Analysts.
For the following Funds, ING Pilgrim or IMFC has engaged a Sub-Adviser to
provide the day-to-day management of the Fund's portfolio. The Sub-Advisers are
among the most respected institutional investment advisers in the world, and
have been selected primarily on the basis of their successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles
International Value Fund and Emerging Markets Value Fund
Brandes Investment Partners, L.P.
A registered investment adviser, Brandes Investment Partners, L.P. (Brandes)
serves as Sub-Adviser to the Pilgrim International Value Fund and the Pilgrim
Emerging Markets Value Fund. The company was formed in May 1996 as the successor
to its general partner, Brandes Investment Partners, Inc. which has been
providing investment advisory services (through various predecessor entities)
since 1974. Brandes currently manages over $33 billion in international
portfolios. Brandes' principal address is 12750 High Bluff Drive, San Diego,
California 92130.
Charles Brandes has co-managed the Pilgrim International Value Fund and the
Pilgrim Emerging Markets Value Fund since the Funds were formed in March 1995
and January 1998, respectively. Mr. Brandes has over 31 years of investment
management experience. He founded the general partner of Brandes in 1974 and
owns a controlling interest in it. At Brandes, he serves as a Managing Partner.
He is a Chartered Financial Analyst and a Member of the Association for
Investment Management and Research.
Ian Sunder has co-managed the Pilgrim Emerging Markets Value Fund since the Fund
was formed in January 1998. Mr. Sunder has over nine years of investment
management experience. At Brandes, he serves as a Portfolio Manager. He is a
Chartered Financial Analyst, and a Member of the Association for Investment
Management and Research and the Financial Analysts Society.
Jeff Busby has co-managed the Pilgrim International Value Fund since the fund
was formed in March 1995. Mr. Busby has over 13 years of investment management
experience. At Brandes, he serves as a Managing Partner. He is also responsible
for overseeing all trading activities for the firm. He is a Chartered Financial
Analyst, and a Member of the Association for Investment Management and Research
and the Financial Analysts Society.
International SmallCap Growth Fund
Nicholas-Applegate Capital Management (NACM)
NACM serves as Sub-Adviser to the Fund listed above. Founded in 1984, NACM
manages over $40 billion of discretionary assets for numerous clients, including
employee benefit plans of corporations, public retirement systems and unions,
university endowments, foundations, and other institutional investors and
individuals. The Fund listed above is managed by a team of portfolio managers
and analysts employed by NACM. NACM has offices in San Diego, New York, Chicago
and San Francisco. It's principal business address is 600 West Broadway, San
Diego, California 92101.
If you have any questions, please call 1-800-992-0180.
Management of the Funds 57
<PAGE>
MANAGEMENT OF THE FUNDS SUB-ADVISERS
--------------------------------------------------------------------------------
Global Communications Fund, Global Information Technology Fund and European
Equity Fund
ING Investment Management LLC. ING Investment Management Advisors B.V. ("IIMA")
serves as Sub-Adviser to the ING Pilgrim European Equity Fund, the ING Pilgrim
Global Information Technology Fund and the ING Pilgrim Global Communications
Fund. IIMA is located at Schenkkade 65, 2595 AS the Hague, The Netherlands. IIMA
is a company organized to manage investments and provide investment advice on a
worldwide basis to entities affiliated and unaffiliated with ING Group. IIMA
operates under the collective management of ING Investment Management which has
assets under management of $ billion as of December 31, 2000.
ING Global Communications Fund. Mr. Daniel Hayes has primary responsibility in
managing the Fund. Mr. Hayes has been employed by IIMA and its affiliates since
1998 and has ten years of investment experience.
ING Global Information Technology Fund. Mr. Guy Uding has primary responsibility
for managing the Fund and heads a three member team of investment professionals.
Mr. Uding has been employed by IIMA and it affiliates since 1995 and has five
years of investment experience.
ING European Equity Fund. Mr. Adrian van Tiggelen has primary responsibility for
managing the Fund and heads an eight member team of investment professionals.
The average experience of the team is nine years. Mr. van Tiggelen has been
employed by IIMA and its affiliates since 1988 and has eleven years of
investment experience.
58 Management of the Funds
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS/TAXES
--------------------------------------------------------------------------------
Dividends
The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends and capital gains, if any, annually, except
for Global Income Fund, which pays dividends quarterly.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class A, B, C or M shares of a Fund invested in another ING Pilgrim Fund
which offers the same class shares. If you are a shareholder of ING Pilgrim
Prime Rate Trust, whose shares are not held in a broker or nominee account, you
may, upon written request, elect to have all dividends invested into a
pre-existing Class A account of any open-end Pilgrim Fund.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely on your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, 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 a 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 a 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, a 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.
59 Dividends, Distributions and Taxes
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MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information
(SAI).
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the Adviser or Sub-Adviser
can decide whether to use them or not. The Funds named below invest in these
securities or use these techniques as part of the Fund's principal investment
strategy. However, the Adviser or Sub-Adviser of any Fund may also use these
investment techniques or make investments in securities that are not a part of
the Fund's principal investment strategy.
PRINCIPAL RISKS
Investments in Foreign Securities (All Funds). There are certain risks in owning
foreign securities, including those resulting from: fluctuations in currency
exchange rates; devaluation of currencies; political or economic developments
and the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions; reduced availability of public information
concerning issuers; accounting, auditing and financial reporting standards or
other regulatory practices and requirements that are not uniform when compared
to those applicable to domestic companies; settlement and clearance procedures
in some countries that may not be reliable and can result in delays in
settlement; higher transaction and custody expenses than for domestic
securities; and 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.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Emerging Markets Investments (All Funds) 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.
Inability to Sell Securities (All Funds). Some securities usually trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small and mid-size U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in emerging markets. The
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.
High Yield Securities (Troika Dialog Russia Fund and Global Income Fund).
Investments in high yield securities generally provide greater income and
increased opportunity for capital appreciation than investments in higher
quality debt securities, but they also typically entail greater potential price
volatility and principal and income risk. High yield securities are not
considered investment grade, and are regarded as predominantly speculative with
respect to the issuing company's continuing ability to meet principal and
interest payments. The prices of high yield securities have been found to be
less sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
High yield securities structured as zero coupon or pay-in-kind securities tend
to be more volatile. The secondary market in which high yield securities are
traded is generally less liquid than the market for higher grade bonds. At times
of less liquidity, it may be more difficult to value high yield securities.
Corporate Debt Securities (Global Corporate Leaders, International, Worldwide
Emerging Markets and Global Income Funds). Corporate debt securities are subject
to the risk of the issuer's inability to meet principal and interest payments on
the obligation and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the credit-worthiness of the
issuer and general market liquidity. When
If you have any questions, please call 1-800-992-0180.
More Information About Risks 60
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MORE INFORMATION ABOUT RISKS
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interest rates decline, the value of the Fund's debt securities can be expected
to rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility." According to this measure, the longer the
maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.
Convertible Securities (All Funds). The price of a convertible security will
normally fluctuate in some proportion to changes in the price of the underlying
equity security, and as such is subject to risks relating to the activities of
the issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.
Interests in Loans (Global Income Fund). Certain Funds may invest in
participation interests or assignments in secured variable or floating rate
loans, which include participation interests in lease financings. Loans are
subject to the credit risk of nonpayment of principal or interest. Substantial
increases in interest rates may cause an increase in loan defaults. Although the
loans will generally be fully collateralized at the time of acquisition, the
collateral may decline in value, be relatively illiquid, or lose all or
substantially all of its value subsequent to the Fund's investment. Many loans
are relatively illiquid, and may be difficult to value.
Portfolio Turnover. Each Fund, except International Value, Emerging Markets
Value, Troika Dialog Russia, Gold, Silver and Global Income Funds, is generally
expected to engage in frequent and active trading of portfolio securities to
achieve its investment objective. A high portfolio turnover rate involves
greater expenses to a Fund, including brokerage commissions and other
transaction costs, and is likely to generate more taxable short-term gains for
shareholders, which may have an adverse effect on the performance of the Fund.
Communications Technology Risk (Global Communications Fund). Communications
companies are generally subject to the rate of change in technology, which is
higher than other industries. In addition, products and services of companies
engaged in the communications industry are subject to relatively high risks of
rapid obsolescence caused by scientific and technological advances. Swings in
investor psychology or significant trading by large institutional investors can
result in significant price fluctuations and stock price declines.
Governmental Regulation (Global Communications Fund). Certain communications
industries, such as the telecommunications industry, may be subject to greater
governmental regulation than many other industries. Accordingly, such industries
may be subject to changes in governmental policies and the need for regulatory
approvals may have a material effect on the products and services offered.
Telephone operating companies in the United States, for example, are subject to
both federal and state regulation affecting permitted rates of return and the
kinds of services that may be offered.
Industry Concentration (Global Communications and Global Information Technology
Funds). As a result of the Funds concentrating their assets in securities
related to a particular industry, the Funds may be subject to greater market
fluctuation than a fund which has securities representing a broader range of
investment alternatives.
Information Technology Risk (Global Information Technology Fund). Information
technology companies are generally subject to the rate of change in technology,
which is higher than other industries. In addition, products and services of
companies engaged in the information technology industry are subject to
relatively high risks of rapid obsolescence caused by scientific and
technological advances. Swings in investor psychology or significant trading by
large institutional investors can result in significant price fluctuations and
stock price declines.
61 More Information About Risks
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MORE INFORMATION ABOUT RISKS
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OTHER RISKS
U.S. Government Securities. Some U.S. Government agency securities may be
subject to varying degrees of credit risk particularly those not backed by the
full faith and credit of the United States Government. All U.S. Government
securities may be subject to price declines in the securities due to changing
interest rates.
Other Investment Companies. Each Fund may invest up to 10% of its assets in
other investment companies. When a Fund invests in other investment companies,
you indirectly pay a proportionate share of the expenses of that other
investment company (including management fees, administration fees, and
custodial fees) in addition to the expenses of the Fund.
Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities If a security is illiquid, the Fund might be unable to sell
the security at a time when the Adviser might wish to sell, and the security
could have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Mortgage-Related Securities. Although mortgage loans underlying a
mortgage-backed security may have maturities of up to 30 years, the actual
average life of a mortgage-backed security typically will be substantially less
because the mortgages will be subject to normal principal amortization, and may
be prepaid prior to maturity. Like other fixed income securities, when interest
rates rise, the value of a mortgage-backed security generally will decline;
however, when interest rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as much as other fixed
income securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have the effect
of shortening or extending the effective maturity of the security beyond what
was anticipated at the time of the purchase. Unanticipated rates of prepayment
on underlying mortgages can be expected to increase the volatility of such
securities. In addition, the value of these securities may fluctuate in response
to the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by a Fund. Additionally, although mortgages
and mortgage-related securities are generally supported by some form of
government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.
Derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Some derivatives are sophisticated instruments
that typically involve a small investment of cash relative to the magnitude of
risks assumed. These may include swap agreements, options, forwards and futures.
Derivative securities are subject to market risk, which could be significant for
those that have a leveraging effect. Many of the Funds do not invest in these
types of derivatives, and some do, so please check the description of the Fund's
policies. Derivatives are also subject to credit risks related to the
counterparty's ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. A risk of using
derivatives is that the Adviser or Sub-Adviser might imperfectly judge the
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk in another security, the hedge might not correlate to the
market's movements and may have unexpected or undesired results, such as a loss
or a reduction in gains.
Temporary Defensive Strategies. When the Adviser or Sub-Adviser to a Fund
anticipates unusual market or other conditions, the Fund may temporarily depart
from its principal investment strategies as a defensive measure. To the extent
that a Fund invests defensively, it likely will not achieve capital
appreciation.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Lending Portfolio Securities. In order to generate additional income, certain
Funds may lend portfolio securities in an amount up to 331|M/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower default or fail financially.
Borrowing. Certain Funds may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar
If you have any questions, please call 1-800-992-0180.
More Information About Risks 62
<PAGE>
MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
securities at an agreed upon price and date. Whether such a transaction produces
a gain for a Fund depends upon the costs of the agreements and the income and
gains of the securities purchased with the proceeds received from the sale of
the security. If the income and gains on the securities purchased fail to exceed
the costs, net asset value will decline faster than otherwise would be the case.
Reverse repurchase agreements and dollar rolls, as leveraging techniques, may
increase a Fund's yield; however, such transactions also increase a Fund's risk
to capital and may result in a shareholder's loss of principal.
Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a
Fund of a security which has been borrowed from a third party on the expectation
that the market price will drop. If the price of the security rises, the Fund
may have to cover its short position at a higher price than the short sale
price, resulting in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.
Percentage and Rating Limitations Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
63 More Information About Risks
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). A report of
each Fund's independent auditors, along with the Fund's financial statements, is
included in the Fund's annual report, which is available upon request.
If you have any questions, please call 1-800-992-0180.
63
<PAGE>
ING PILGRIM WORLDWIDE GROWTH FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.58 21.39 19.33 16.88 16.57 14.29
Income from investment operations:
Net investment income (loss) $ (0.15) -- (0.02) 0.04 (0.16) (0.07)
Net realized and unrealized gains
(loss) on investments $ 9.62 2.19 5.78 5.33 2.20 2.86
Total from investment operations $ 9.47 2.19 5.76 5.37 2.04 2.79
Less distributions from:
Net investment income $ -- -- 0.06 -- -- 0.12
Net realized gains on investments $ 3.07 -- 3.64 2.92 1.73 0.39
Net asset value, end of period $ 29.98 23.58 21.39 19.33 16.88 16.57
Total Return(4): % 42.43 10.24 33.56 34.55 12.51 19.79
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 235,341 66,245 49,134 38,647 24,022 23,481
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.67 1.75 1.86 1.86 1.85 1.85
Gross expenses prior to expense
reimbursement(5) % 1.67 1.75 2.02 2.21 2.17 2.17
Net investment income (loss) after
expense reimbursement(5)(6) % (0.79) (0.03) (0.62) (0.69) (0.93) (0.35)
Portfolio turnover % 169 57 247 202 182 132
<CAPTION>
Class B
------------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year ended March 31, 1995(3) to
Oct. 31, June 30, June 30, -------------------------- March 31,
2000(1) 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 26.64 24.21 20.10 16.02 14.34 12.50
Income from investment operations:
Net investment income (loss) (0.28) (0.03) (0.08) (0.17) (0.14) (0.05)
Net realized and unrealized gains
(loss) on investments 10.76 2.46 6.25 5.44 1.82 1.89
Total from investment operations 10.48 2.43 6.17 5.27 1.68 1.84
Less distributions from:
Net investment income -- -- 0.01 -- -- --
Net realized gains on investments 3.46 -- 2.05 1.19 -- --
Net asset value, end of period 33.66 26.64 24.21 20.10 16.02 14.34
Total Return(4): 41.54 10.04 32.74 34.03 11.72 14.72
Ratios/Supplemental Data:
Net assets, end of period (000's) 130,988 27,938 18,556 10,083 5,942 1,972
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(5) 2.32 2.40 2.67 2.70 4.81 9.50
Net investment income (loss) after
expense reimbursement(5)(6) (1.44) (0.68) (1.31) (1.37) (1.62) (1.28)
Portfolio turnover 169 57 247 202 182 132
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 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 $ 23.69 21.52 19.05 16.92 16.76 14.44
Income from investment operations:
Net investment income (loss) $ (0.33) (0.04) (0.20) (0.19) (0.28) (0.21)
Net realized and unrealized gains
(loss) on investments $ 9.65 2.21 5.83 5.41 2.23 2.92
Total from investment operations $ 9.32 2.17 5.63 5.22 1.95 2.71
Less distributions from:
Net investment income $ -- -- 0.01 -- -- 0.01
Net realized gains on investments $ 3.09 -- 3.15 3.09 1.79 0.38
Net asset value, end of period $ 29.92 23.69 21.52 19.05 16.92 16.76
Total Return(4): % 41.48 10.08 32.73 33.72 11.81 18.95
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 239,432 111,250 98,470 84,292 70,345 71,155
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(5) % 2.32 2.40 2.67 2.77 2.61 2.57
Net investment income (loss) after
expense reimbursement(5)(6) % (1.44) (0.68) (1.28) (1.34) (1.57) (0.99)
Portfolio turnover % 169 57 247 202 182 132
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(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) Commencement of offering shares.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
64 ING Pilgrim Worldwide Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL CORPORATE LEADERS FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, -------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.46 10.59 11.28 11.32 11.17
Net investment income (loss) $ (0.02) 0.99 0.03 0.01 0.09
Net realized and unrealized gain (loss) from
investment operations $ 3.67 1.02 0.73 1.84 1.10
Total income (loss) from investment operations $ 3.65 2.01 0.76 1.85 1.19
Less distributions:
Distributions from net investment income $ 0.74 0.80 0.09 0.16 0.29
Distributions in excess of net investment income $ -- -- -- -- 0.13
Distributions from net realized gains $ 0.08 2.34 1.36 1.73 0.62
Total distributions $ 0.82 3.14 1.45 1.89 1.04
Net asset value, end of period $ 12.29 9.46 10.59 11.28 11.32
Total Return(2) % 39.06 19.06 6.90 16.43 10.69
Ratios/Supplemental Data
Net asset, end of period (thousands) $ 19,617 17,803 35,085 37,223 53,614
Ratio of expenses to average net assets(3) % 1.96 2.12 1.75 1.90 1.67
Ratio of net investment income (loss) to average net
assets(3) % (0.65) (0.06) 0.23 0.11 0.48
Portfolio Turnover Rate % 12.76 137.33 177.48 128.05 166.35
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December
31 to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Corporate Leaders Fund 65
<PAGE>
ING PILGRIM INTERNATIONAL VALUE FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the years ended 2000, 1999, 1998 and 1997, the information in the table
below has been audited by PricewaterhouseCoopers LLP, independent auditors. For
all periods ending prior to October 31, 1997, the financial information was
audited by other independent auditors.
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------ ---------------------------------
Year ended October 31, Year ended October 31,
----------------------------------------------------------------------------------------- ---------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the
period $ 11.88 10.90 9.05 8.10 11.76 10.87 10.00
Net investment income (loss) $ 0.08 0.11 (0.09) 0.14 0.01 0.07 (0.02)
Net realized and unrealized gain on
investments $ 3.58 0.96 2.30 0.85 3.51 0.91 0.89
Total from investment operations $ 3.66 1.07 2.21 0.99 3.52 0.98 0.87
Dividends from net investment
income $ (0.12) -- (0.14) (0.04) (0.04) -- --
Distributions from net realized gain $ (0.67) (0.09) (0.22) -- (0.67) (0.09) --
Total distributions $ (0.79) (0.09) (0.36) (0.04) (0.71) (0.09) --
Net asset value, end of the period $ 14.75 11.88 10.90 9.05 14.57 11.76 10.87
Total return(2) % 32.55 9.86 27.59 12.15 31.55 9.16 8.70
Ratios and supplemental data:
Net assets, end of the period (000's) $ 451,815 211,018 60,539 16,777 278,871 145,976 59,185
Ratio of expenses to average net
assets after reimbursement (4) % 1.68 1.74 1.80 1.85 2.41 2.47 2.50(3)
Ratio of expenses to average net
assets prior to expense
reimbursement % 1.68 1.74 2.07 2.82 2.41 2.47 2.58(3)
Ratio of net investment income
(loss) to average net assets % 0.92 1.62 0.46 1.52 0.18 0.69 (0.71)(3)
Portfolio turnover % 29 32 26 74 29 32 26
</TABLE>
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------
Year ended October 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of the period $ 11.75 10.86 8.93 8.05
Net investment (income loss) $ -- 0.06 (0.06) 0.05
Net realized and unrealized gain on
investments $ 3.51 0.92 2.20 0.86
Total from investment operations $ 3.51 0.98 2.14 0.91
Dividends from net investment
income $ (0.04) -- (0.04) (0.03)
Distributions from net realized gain $ (0.67) (0.09) (0.17) --
Total distributions $ (0.71) (0.09) (0.21) (0.03)
Net asset value, end of the period $ 14.55 11.75 10.86 8.93
Total return(2) % 31.50 9.07 25.92 11.39
Ratios and supplemental data:
Net assets, end of the period (000's) $ 310,227 137,651 62,103 14,530
Ratio of expenses to average net
assets after reimbursement (4) % 2.41 2.47 2.50 2.50
Ratio of expenses to average net
assets prior to expense
reimbursement % 2.41 2.47 2.74 3.71
Ratio of net investment income (loss)
to average net assets % 0.19 0.68 (0.23) 0.62
Portfolio turnover % 29 32 26 74
</TABLE>
--------------------------------------------------------------------------------
(1) Class B commenced operations on April 17, 1997.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement
66 ING Pilgrim International Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM INTERNATIONAL FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below,
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Ten months ended Year ended December 31,
October 31, ------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.61 10.10 10.86 10.60 10.37
Net investment income (loss) $ (0.01) 0.17 0.07 (0.02) (0.01)
Net realized and unrealized gain (loss) from
investment operations $ 5.46 1.74 0.10 1.45 0.61
Total income (loss) from investment operations $ 5.45 1.91 0.17 1.43 0.60
Less distributions:
Distributions from net investment income $ 0.03 0.06 0.13 0.20 --
Distributions in excess of net investment income $ -- -- -- -- 0.35
Distributions from net realized gains $ 3.58 0.34 0.80 0.97 0.02
Total distributions $ 3.61 0.40 0.93 1.17 0.37
Net asset value, end of period $ 13.45 11.61 10.10 10.86 10.60
Total Return(1) % 47.85 19.02 1.61 13.57 5.77
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 25,304 24,000 19,949 18,891 17,855
Ratio of expenses to average net assets, before
reimbursement or waiver(2) % 1.98 2.25 2.15 2.45 2.46
Ratio of expenses to average net assets, net of
reimbursement or waiver(2) % 1.98 1.75 1.75 2.45 2.46
Ratio of net investment income (loss) to
average net assets, before reimbursement
or waiver(2) % (0.21) (0.16) 0.13 (0.39) (0.12)
Ratio of net investment income (loss) to
average net assets, net of reimbursement
or waiver(2) % (0.21) 0.35 0.53 (0.39) (0.12)
Portfolio Turnover Rate % 143.82 143.67 122.56 113.55 137.72
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December
31 to October 31
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Fund 67
<PAGE>
ING PILGRIM INTERNATIONAL CORE GROWTH FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, -------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $ 18.92 17.71 17.01 12.73 12.50
Income from investment operations:
Net investment income (loss) $ (0.17) 0.04 (0.01) (0.02) --
Net realized and unrealized gains on
investments $ 6.25 1.17 1.02 4.56 0.23
Total from investment operations $ 6.08 1.21 1.01 4.54 0.23
Less distributions from:
Net investment income $ -- -- 0.18 -- --
Net realized gains on investments $ 1.16 -- 0.13 0.26 --
Net asset value, end of period $ 23.84 18.92 17.71 17.01 12.73
Total Return(4): % 32.83 6.83 5.90 36.10 1.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 23,003 12,409 21,627 12,664 2
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.85 1.77 1.89 1.96 1.95
Gross expenses prior to expense
reimbursement(5) % 2.16 1.86 2.13 3.02 4,579.78
Net investment income (loss) after
expense reimbursement(5)(6) % (0.83) 0.50 (0.51) (0.45) 0.00
Portfolio turnover % 200 67 214 274 76
<CAPTION>
Class B
----------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, -------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 19.08 17.89 17.10 12.68 12.50
Income from investment operations:
Net investment income (loss) (0.30) -- (0.16) (0.11) --
Net realized and unrealized gains on
investments 6.21 1.19 1.05 4.66 0.18
Total from investment operations 5.91 1.19 0.89 4.55 0.18
Less distributions from:
Net investment income -- -- 0.03 -- --
Net realized gains on investments 1.16 -- 0.07 0.13 --
Net asset value, end of period 23.83 19.08 17.89 17.10 12.68
Total Return(4): 31.62 6.65 5.24 35.31 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) 21,543 12,034 11,033 7,942 1
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.50 2.36 2.53 2.61 2.59
Gross expenses prior to expense
reimbursement(5) 2.81 2.45 2.77 3.04 16,000.25
Net investment income (loss) after
expense reimbursement(5)(6) (1.48) (0.09) (1.13) (1.32) 0.00
Portfolio turnover 200 67 214 274 76
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------
Four Three
months Year months February 28,
ended Ended ended Year ended March 31, 1997(3) to
Oct. 31, June 30, June 30, --------------------- March 31,
2000(1) 2000 1999(2) 1999 1998 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.14 17.94 17.16 12.68 12.50
Income from investment operations:
Net investment income (loss) $ (0.27) -- (0.05) (0.07) --
Net realized and unrealized gains
on investments $ 6.22 1.20 0.94 4.55 0.18
Total from investment operations $ 5.95 1.20 0.89 4.48 0.18
Less distributions from:
Net investment income $ -- -- 0.11 -- --
Net realized gains on investments $ 1.16 -- -- -- --
Net asset value, end of period $ 23.93 19.14 17.94 17.16 12.68
Total Return(4): % 31.73 6.69 5.22 35.25 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 26,734 11,936 10,400 3,517 43
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.50 2.36 2.55 2.61 2.41
Gross expenses prior to expense
reimbursement(5) % 2.81 2.45 2.79 5.10 25.55
Net investment income (loss) after
expense reimbursement(5)(6) % (1.48) (0.09) (1.19) (1.27) (0.07)
Portfolio turnover % 200 67 214 274 76
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(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) The Fund commenced operations on February 28, 1997.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
68 ING Pilgrim International Core Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 40.94 23.80 21.03 19.29 14.92 13.15 11.51
Income from investment operations:
Net investment income (loss) $ (0.11) (0.18) (0.03) 0.02 (0.15) 0.04 (0.02)
Net realized and unrealized gains on
investments $ (4.76) 19.38 2.80 3.21 5.36 1.88 1.79
Total from investment operations $ -- 19.20 2.77 3.23 5.21 1.92 1.77
Less distributions from:
Net investment income $ -- -- -- -- -- 0.01 0.13
Net realized gains on investments $ -- 2.06 -- 1.49 0.84 0.14 --
Net asset value, end of period $ 36.07 40.94 23.80 21.03 19.29 14.92 13.15
Total Return(4): % (11.90) 82.89 13.17 17.26 36.31 14.67 15.46
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 273,362 278,480 37,490 25,336 11,183 5,569 1,056
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.67 1.84 1.94 1.96 1.95 1.95
Gross expenses prior to expense
reimbursement(5) % 1.67 1.86 2.08 2.75 3.76 10.06
Net investment income (loss) after
expense reimbursement(5)(6) % (0.80) (0.69) (0.82) (1.56) (1.05) (0.27)
Portfolio turnover % 56 44 146 198 206 141
<CAPTION>
Class B
-------------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year ended March 31, 1995(3) to
Oct. 31, June 30, June 30, ---------------------------- March 31,
2000(6) 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 43.27 25.33 22.43 20.16 15.89 13.96 12.50
Income from investment operations:
Net investment income (loss) (0.19) (0.37) (0.07) (0.20) (0.15) (0.15) (0.02)
Net realized and unrealized gains on
investments (5.03) 20.50 2.97 3.46 5.56 2.09 1.48
Total from investment operations (5.22) 20.13 2.90 3.26 5.41 1.94 1.46
Less distributions from:
Net investment income -- -- -- -- -- 0.01 --
Net realized gains on investments -- 2.19 -- 0.99 1.14 -- --
Net asset value, end of period 38.0 43.27 25.33 22.43 20.16 15.89 13.96
Total Return(4): (12.05) 81.63 12.93 16.55 35.73 13.96 11.68
Ratios/Supplemental Data:
Net assets, end of period (000's) 126,846 132,028 19,331 16,158 12,033 5,080 1,487
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) 2.32 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(5) 2.32 2.32 2.51 2.73 2.98 4.89 16.15
Net investment income (loss) after
expense reimbursement(5)(6) (1.46) (1.41) (1.34) (1.45) (2.20) (1.66) (0.64)
Portfolio turnover 56 164 44 146 198 206 141
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year ended March 31,
Oct. 31, June 30, June 30, ---------------------------------------
2000(1) 2000 1999(2) 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 39.71 23.34 20.60 18.53 14.87 13.05 11.32
Income from investment operations:
Net investment income (loss) $ (0.18) (0.31) (0.06) (0.10) (0.11) (0.16) 0.01
Net realized and unrealized gains on
investments $ (4.60) 18.69 2.80 3.09 5.09 1.98 1.72
Total from investment operations $ (4.28) 18.38 2.74 2.99 4.98 1.82 1.73
Less distributions from:
Net investment income $ -- -- -- -- -- -- --
Net realized gains on investments $ -- 2.01 -- 0.92 1.32 -- --
Net asset value, end of period $ 34.93 39.71 23.34 20.60 18.53 14.87 13.05
Total Return(4): % (12.04) 80.89 13.31 16.55 35.63 13.98 15.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 136,814 144,068 18,354 13,226 8,014 3,592 933
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.32 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(5) % 2.32 2.32 2.51 2.73 3.38 3.95 16.15
Net investment income (loss) after
expense reimbursement(5)(6) % (1.46) (1.41) (1.34) (1.45) (2.18) (1.67) (1.02)
Portfolio turnover % 56 164 44 146 198 206 141
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(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) Commencement of share offerings.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 69
<PAGE>
ING PILGRIM EMERGING MARKETS VALUE FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers
LLP, independent auditors.
<TABLE>
<CAPTION>
Class A Class B
------------------------------------- ---------------------------
Year ended October 31, Year ended October 31,
------------------------------------------------------------------------------- ---------------------------
2000 1999 1998(1) 2000 1999 1998(1)
Operating performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of the period $ 7.69 10.00 7.65 10.00
Net investment income $ 0.12 0.12 0.08 0.09
Net realized and unrealized gain (loss) on
investments $ 3.01 (2.43) 2.97 (2.44)
Total from investment operations $ 3.13 (2.31) 3.05 (2.35)
Dividends from net investment income $ (0.14) -- (0.10) --
Distributions from net realized gain $ -- -- -- --
Total distributions $ (0.14) -- (0.10) --
Net asset value, end of the period $ 10.68 7.69 10.60 7.65
Total return(2) % 41.48 (23.10) 40.41 (23.50)
Ratios and supplemental data:
Net assets, end of the period (000's) $ 9,281 3,815 3,823 3,583
Ratio of expenses to average net assets
after reimbursement(4) % 2.06 1.80(3) 2.70 2.50(3)
Ratio of expenses to average net assets
prior to expense reimbursement % 2.21 3.88(3) 2.93 4.74(3)
Ratio of net investment income to
average net assets % 1.36 3.38(3) 0.67 2.55(3)
Portfolio turnover % 38 7 38 7
</TABLE>
Class C
----------------------------------
Year ended October 31,
----------------------------------
2000 1999 1998(1)
-------------------------------------------------------------------------------
Operating performance:
Net asset value, beginning of the period 7.63 10.00
Net investment income 0.04 0.09
Net realized and unrealized gain (loss) on
investments 3.00 (2.46)
Total from investment operations 3.04 (2.37)
Dividends from net investment income (0.11) --
Distributions from net realized gain -- --
Total distributions (0.11) --
Net asset value, end of the period 10.56 7.63
Total return(2) 40.49 (23.70)
Ratios and supplemental data:
Net assets, end of the period (000's) 6,674 2,304
Ratio of expenses to average net assets
after reimbursement(4) 2.75 2.50(3)
Ratio of expenses to average net assets
prior to expense reimbursement 2.91 4.87(3)
Ratio of net investment income to
average net assets 0.61 2.68(3)
Portfolio turnover 38 7
--------------------------------------------------------------------------------
(1) Class A, B and C commenced operations on January 1, 1998.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
(4) Expenses calculated net of taxes and advisor reimbursement.
70 ING Pilgrim Emerging Markets Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM EMERGING COUNTRIES FUND
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year Ended March 31,
Oct. 31, June 30, June 30, ------------------------------------------
2000(1) 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(4): % 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(5)(6) % 2.19 2.13 2.27 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(5) % 2.34 2.66 2.56 2.48 3.08 6.72
Net investment income (loss) after
expense reimbursement(5)(6) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35)
Portfolio turnover % 211 67 213 243 176 118
<CAPTION>
Class B
-----------------------------------------------------------------------------
Four Three
months Year months May 31,
ended Ended ended Year Ended March 31, 1995(3) to
Oct. 31, June 30, June 30, ---------------------------- March 31,
2000(1) 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 16.98 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(4): 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(5)(6) 2.84 2.75 2.91 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(5) 2.99 3.28 3.20 3.06 3.66 7.58
Net investment income (loss) after
expense reimbursement(5)(6) (1.80) (1.92) (0.80) (0.20) (1.77) (1.05)
Portfolio turnover 211 67 213 243 176 118
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------------
Four Three
months Year months
ended Ended ended Year Ended March 31,
Oct. 31, June 30, June 30, -------------------------------------
2000(1) 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 $ 16.35 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(4): % 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(5)(6) % 2.84 2.75 2.90 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(5) % 2.99 3.28 3.19 3.09 3.12 6.23
Net investment income (loss) after
expense reimbursement(5)(6) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06)
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) Effective May 24, 1999, INC 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) Commencement of offering shares.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Countries Fund 71
<PAGE>
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, ------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ -- 7.13 10.18 11.49 10.70 11.47
Net investment income (loss) $ -- (0.05) 0.12 0.01 -- 0.08
Net realized and unrealized gain (loss) from investment
operations $ -- 8.05 (3.08) (1.32) 0.79 (0.76)
Total income (loss) from investment operations $ -- 8.00 (2.96) (1.31) 0.79 (0.68)
Less distributions:
Distributions from net investment income $ -- 0.03 0.09 -- -- 0.08
Distributions in excess of net investment income $ -- -- -- -- -- 0.01
Total distributions $ -- 0.03 0.09 -- -- 0.09
Net asset value, end of period $ -- 15.10 7.13 10.18 11.49 10.70
Total Return(2) % -- 112.58 (29.06) (11.40) 7.38 (5.93)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ -- 154,994 65,323 137,686 254,673 265,544
Ratio of expenses to average net assets(3) % -- 2.00 1.85 1.82 1.76 1.88
Ratio of net investment income (loss) to average net
assets(3) % -- (0.66) 1.14 0.09 (0.01) 0.70
Portfolio Turnover Rate % -- 184.39 107.19 112.05 86.26 92.85
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
72 ING Pilgrim Worldwide Emerging Markets Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL TECHNOLOGY FUND
-----------------------------------------------------------------------------
The information in the table below has been audited by PricewaterhouseCoopers,
LLP, independent auditors.
Ten
months
ended
October 31,
2000
-------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning of Period $
Net investment income (loss) $
Net realized and unrealized gain (loss) from investment
operations $
Total income (loss) from investment operations $
Net asset value, end of period $
Total Return(2) %
Ratios/Supplemental Data
Net assets, end of period (thousands) $
Ratio of expenses to average net assets, before
reimbursement or waiver(3) %
Ratio of expenses to average net assets, net of
reimbursement or waiver(3) %
Ratio of net investment income (loss) to average net
assets, before reimbursement or waiver(3) %
Ratio of net investment income (loss) to average net
assets, net of reimbursement or waiver(3) %
Portfolio Turnover Rate %
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Technology Fund 73
<PAGE>
ING PILGRIM GLOBAL COMMUNICATIONS FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
Year ended October 31, Year ended October 31, Year ended October 31,
2000 2000 2000
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $
Net investment operations:
Net investment loss $
Net realized and unrealized loss(2) $
Total income from investment operations $
Distributions paid from investment income $
Net asset value per share, end of period $
Net assets, end of period (thousands) $
Total investment return at net asset value(3)(4) %
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses %
Gross expenses %
Net investment loss %
Portfolio Turnover Rate(4) %
</TABLE>
--------------------------------------------------------------------------------
(1) Commenced operations on March 1, 2000.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
74 ING Pilgrim Global Communications Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) Class C Shares(1)
------------------- ------------------- ------------------
Year ended October Year ended October Year ended October
31, 31, 31,
2000 1999 2000 1999 2000 1999
-------------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $ 10.00 10.00 10.00
Net investment operations:
Net investment loss $ (0.13) (0.08) (0.05)
Net realized and unrealized gains(2) $ 7.51 7.36 7.33
Total income from investment operations $ 7.38 7.28 7.28
Distributions paid from capital gain $ -- -- --
Net asset value per share, end of period $ 17.38 17.28 17.38
Net assets, end of period (thousands) $ 54.198 5.964 2.102
Total investment return at net asset value(3)(4) % 73.80 72.80 72.80
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses % 1.37 2.25 2.24
Gross expenses % 2.55 3.22 3.20
Net investment loss % (1.29) (2.04) 2.05
Portfolio Turnover Rate(6) % 56.88 56.88 56.88
</TABLE>
--------------------------------------------------------------------------------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Information Technology Fund 75
<PAGE>
ING PILGRIM ASIA-PACIFIC EQUITY FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For the four months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ------------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 7.22 4.46 10.93 10.35 10.00
Income from investment operations:
Net investment income (loss) $ (0.05) -- 0.03 0.02 0.03
Net realized and unrealized gain (loss) on
investments $ 0.06 2.76 (6.50) 0.58 0.34
Total from investment operations $ 0.01 2.76 (6.47) 0.60 0.37
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.02
Tax return of capital $ -- -- -- 0.02 --
Net asset value, end of period $ 7.23 7.22 4.46 10.93 10.35
Total Return(3): % 0.14 61.88 (59.29) 5.78 3.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,726 14,417 11,796 32,485 18,371
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.11 2.00 2.00 2.00 2.00
Gross expenses prior to expense
reimbursement(4) % 2.55 2.98 2.80 2.54 3.47
Net investment income (loss) after expense
reimbursement(4)(5) % (0.56) 0.01 0.38 0.00 0.33
Portfolio turnover rate % 138 111 81 38 15
<CAPTION>
Class B
-------------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ------------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 7.02 4.37 10.83 10.31 10.00
Income from investment operations:
Net investment income (loss) (0.11) (0.04) (0.03) (0.07) (0.01)
Net realized and unrealized gain (loss) on
investments 0.06 2.69 (6.43) 0.59 0.32
Total from investment operations (0.05) 2.65 (6.46) 0.52 0.31
Less distributions from:
Net investment income -- -- -- -- --
In excess of net investment income -- -- -- -- --
Tax return of capital -- -- -- -- --
Net asset value, end of period 6.97 7.02 4.37 10.83 10.31
Total Return(3): (0.71) 60.64 (59.65) 5.04 3.19
Ratios/Supplemental Data:
Net assets, end of period (000's) 12,228 12,959 9,084 30,169 17,789
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) 2.86 2.75 2.75 2.75 2.75
Gross expenses prior to expense
reimbursement(4) 3.30 3.73 3.55 3.29 4.10
Net investment income (loss) after expense
reimbursement(4)(5) (1.31) (0.74) (0.39) (0.79) (0.38)
Portfolio turnover rate 138 111 81 38 15
</TABLE>
<TABLE>
<CAPTION>
Class M
-----------------------------------------------------------------
Four months Sept. 1,
ended Year Ended June 30, 1995 to
October 31, ----------------------------------- June 30,
2000(1) 2000 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 7.07 4.40 10.86 10.32 10.00
Income from investment operations:
Net investment income (loss) $ (0.11) (0.02) -- (0.05) --
Net realized and unrealized gain (loss)
on investments $ 0.08 2.69 (6.46) 0.59 0.33
Total from investment operations $ (0.03) 2.67 (6.46) 0.54 0.33
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.01
Tax return of capital $ -- -- -- -- --
Net asset value, end of period $ 7.04 7.07 4.40 10.86 10.32
Total Return(3): % (0.42) 60.68 (59.48) 5.26 3.32
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,749 5,184 4,265 11,155 6,476
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.61 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 3.05 3.48 3.30 3.04 3.88
Net investment income (loss) after expense
reimbursement(4)(5) % (1.06) (0.49) (0.07) (0.55) (0.16)
Portfolio turnover rate % 138 111 81 38 15
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from June 30 to
October 31.
(2) The Fund commenced operations on September 1, 1995.
(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 information 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.
76 ING Pilgrim Asia-Pacific Equity Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM SMALLCAP ASIA GROWTH FUND
-----------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, ------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 5.69 7.06 12.24 9.76 10.00
Net investment income (loss) $ (0.10) -- (0.05) (0.05) 0.02
Net realized and unrealized gain (loss) from
investment operations $ 3.36 (1.37) (5.13) 2.54 (0.24)
Total income (loss) from investment operations $ 3.26 (1.37) (5.18) 2.49 (0.22)
Less distributions:
Distributions from net investment income $ -- -- -- -- 0.02
Distributions in excess of net investment income $ -- -- -- 0.01 --
Total distributions $ -- -- -- 0.01 0.02
Net asset value, end of period $ 8.95 5.69 7.06 12.24 9.76
Total Return(3) % 57.29 (19.41) (42.32) 25.50 4.39
Ratios/Supplemental Data
Net asset, end of period (thousands) $ 14,392 18,278 13,867 23,796 8,936
Ratio of expenses to average net assets, before
reimbursement or waiver(4) % 3.00 2.86 2.30 2.64 3.51
Ratio of expenses to average net assets, net of
reimbursement or waiver(4) % 2.50 2.50 2.30 2.42 1.75
Ratio of net investment income (loss)to average net
assets, before reimbursement or waiver(4) % (1.56) (0.57) (0.32) (0.86) (1.24)
Ratio of net investment income (loss)to average net
assets, net of reimbursement or waiver(4) % (1.05) (0.21) (0.32) (0.64) 0.52
Portfolio Turnover Rate % 172.89 193.48 187.41 176.49 40.22
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31
to October 31.
(2) The Fund commenced operations on July 3, 1995.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Asia Growth Fund 77
<PAGE>
ING PILGRIM EUROPEAN EQUITY FUND FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
The information in the table below has been audited by Ernst & Young LLP,
independent auditors.
<TABLE>
<CAPTION>
Class A(1) Class B(1) Class C(1)
--------------------- ----------------------- ----------------------
Year ended October 31, Year ended October 31, Year ended October 31,
2000(2) 1999 2000(2) 1999 2000(2) 1999
---------------------------------------------------------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value Per Share, Beginning of Period $ 10.00 10.00 10.00
Net investment operations:
Net investment income (loss) $ 0.04 0.00(7) (0.01)
Net realized and unrealized gains(2) $ 0.91 0.89 0.90
Total from investment operations $ 0.95 0.89 0.89
Distributions paid from:
Capital gain $ -- -- --
Investment income $ -- -- --
Total distributions $ -- -- --
Net asset value per share, end of period $ 10.95 10.89 10.89
Net assets, end of period (thousands) $ 28,746 849 62
Total investment return at net asset value(3)(4) % 9.50 8.90 8.90
Ratios/Supplemental Data
Ratio to average net assets(5)
Net expenses % 1.61 2.27 2.26
Gross expenses % 3.06 3.35 3.34
Net investment loss % 0.48 (0.08) (0.15)
Portfolio Turnover Rate(4) % 62.91 62.91 62.91
</TABLE>
--------------------------------------------------------------------------------
(1) Class A, B and C shares commenced operations on December 15, 1998.
(2) Includes gains and losses on foreign currency transactions.
(3) Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B and C shares. Total returns
would be lower if part of the Fund's expenses were not waived or
reimbursed.
(4) Not annualized.
(5) Annualized.
(6) Amount represents less than $0.01.
78 ING Pilgrim European Equity Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM TROIKA DIALOG RUSSIA FUND
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended Year ended December 31,
October 31, --------------------------------------------
2000(1) 1999 1998 1997 1996(2)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 2.64 17.50 11.24 12.12
Net investment income (loss) $ 0.18 0.15 (0.01) (0.05)
Net realized and unrealized gain (loss) from investment
operations $ 3.99 (14.70) 7.57 (0.51)
Total income (loss) from investment operations $ 4.17 (14.55) 7.56 (0.56)
Less distributions:
Distributions from net investment income $ 0.07 0.07 -- --
Distributions from net realized gains $ -- 0.24 1.30 0.32
Total distributions $ 0.07 0.31 1.30 0.32
Net asset value, end of period $ 6.74 2.64 17.50 11.24
Total Return(3) % 159.76 82.99 67.50 (9.01)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 59,011 19,147 137,873 13,846
Ratio of expenses to average net assets, before
redemption fee proceeds(4) % 3.32 2.64 2.89 5.07
Ratio of expenses to average net assets, net of
redemption fee proceeds(4) % 2.23 1.84 1.85 2.65
Ratio of net investment income (loss) to average net
assets, before redemption fee proceeds(4) % 3.30 0.57 (1.14) (3.69)
Ratio of net investment income (loss) to average net
assets, net of redemption fee proceeds(4) % 4.39 1.36 (0.11) (1.27)
Portfolio Turnover Rate % 91.14 65.76 66.84 115.55
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) The Fund's commencement of operations was June 3, 1996 with the investment
of its initial capital. The Fund's registration statement with the
Securities and Exchange Commission became effective on July 3, 1996.
Financial results prior to the effective date of the Fund's registration
statement are not presented in this Financial Highlights Table.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value.Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Troika Dialog Russia Fund 79
<PAGE>
ING PILGRIM GOLD FUND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended
October 31, Year ended December 31,
2000(1) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 3.03 3.24 5.97 6.24 6.37
Net investment income (loss) $ (0.01) -- -- 0.02 --
Net realized and unrealized gain (loss) from
investment operations $ 0.27 (0.21) (2.52) 0.50 (0.12)
Total income (loss) from investment operations $ 0.26 (0.21) (2.52) 0.52 (0.12)
Less distributions:
Distributions from net investment income $ -- -- 0.21 0.79 0.01
Total distributions $ -- -- 0.21 0.79 0.01
Net asset value, end of period $ 3.29 3.03 3.24 5.97 6.24
Total Return(2) % 8.58 (6.39) (42.98) 7.84 (1.89)
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 72,516 50,841 53,707 109,287 135,779
Ratio of expenses to average net assets(3) % 1.94 1.74 1.65 1.60 1.70
Ratio of net investment income (loss) to
average net assets(3) % (0.02) 0.08 0.17 (0.32) 0.07
Portfolio Turnover Rate % 78.55 28.93 38.32 31.04 40.41
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
80 ING Pilgrim Gold Fund
<PAGE>
FINANCIAL HIGHLIGHTS ING PILGRIM SILVER FUND
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months Six month
ended Year ended period ended Year ended June 30,
October 31, December 31, December 31, -----------------------------------
2000(1) 1999 1998(2) 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 2.73 3.26 3.95 4.46 4.00 3.92
Net investment income (loss) $ 0.01 (0.01) (0.02) (0.04) (0.03) (0.03)
Net realized and unrealized gain (loss) from investment
operations $ 0.23 (0.52) (0.66) (0.43) 0.51 0.11
Total income (loss) from investment operations $ 0.24 (0.53) (0.68) (0.47) 0.48 0.08
Less distributions:
Distributions from net investment income $ 0.01 -- -- -- -- --
Distributions in excess of net investment income $ -- -- 0.01 0.04 0.02 --
Total distributions $ 0.01 -- 0.01 0.04 0.02 --
Net asset value, end of period $ 2.96 2.73 3.26 3.95 4.46 4.00
Total Return(3) % 8.70 (16.26) (17.32) (10.76) 12.02 2.04
Ratios/Supplemental Data
Net assets, end of period (thousands) $ 25,413 25,560 34,921 42,035 73,945 65,517
Ratio of expenses to average net assets(4) % 2.11 2.37 1.90 1.96 1.73 1.82
Ratio of net investment income (loss) to average net
assets(4) % 0.49 (0.61) (0.54) (0.78) (0.72) (0.83)
Portfolio Turnover Rate % 29.44 5.68 28.78 18.76 44.30 44.22
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) The Fund changed its fiscal year-end from June 30 to December 31.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
If you have any questions, please call 1-800-992-0180.
ING Pilgrim Silver Fund 81
<PAGE>
ING PILGRIM GLOBAL INCOME FUND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the ten months ended October 31, 2000, the information in the table below
has been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods prior to October 31, 2000, the financial information was audited by
other independent auditors.
<TABLE>
<CAPTION>
Ten months
ended
October 31, Year ended December 31,
2000(1) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.36 10.58 11.22 10.75 9.80
Net investment income (loss) $ 1.16 0.90 1.04 1.01 0.96
Net realized and unrealized gain (loss) from
investment operations $ (1.20) (0.07) (0.50) 0.36 0.95
Total income (loss) from investment operations $ 0.04 0.83 0.54 1.37 1.91
Less distributions:
Distributions from net investment income $ 0.82 0.87 0.91 0.86 0.96
Distributions from net realized gains $ 0.05 0.18 0.27 0.04 --
Total distributions $ 0.87 1.05 1.18 0.90 0.96
Net asset value, end of period $ 9.45 10.36 10.58 11.22 10.75
Total Return(2) % (0.31) 8.21 5.00 13.33 20.10
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 31,696 36,407 23,668 29,110 12,255
Ratio of expenses to average net assets, before
reimbursement or waiver(3) % 1.86 (4) 1.89 2.17 2.33 3.07
Ratio of expenses to average net assets, net of
reimbursement or waiver(3) % 1.86 (4) 1.50 1.50 1.50 2.75
Ratio of net investment income (loss) to average net
assets, before reimbursement or waiver(3) % 11.52 10.99 8.99 9.49 9.48
Ratio of net investment income (loss) to average net
assets, net of reimbursement or waiver(3) % 11.52 11.38 9.66 10.32 9.80
Portfolio turnover rate % 24.56 45.25 117.94 71.83 164.72
</TABLE>
--------------------------------------------------------------------------------
(1) Effective , 2000, the Fund changed its fiscal year end from December 31 to
October 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Fund incepted operation on October 23, 2000.
(5) Annualized for periods less than one year.
82 ING Pilgrim Global Income Fund
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/Semi-Annual reports,
the SAI or other Fund information, or to make shareholder inquiries:
THE ING PILGRIM FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim Advisory Funds, Inc. 811-9040
ING Pilgrim Mutual Funds 811-7428
ING Pilgrim Global Corporate Leaders Fund, Inc. 811-5113
ING Pilgrim International Fund, Inc. 811-8172
ING Pilgrim Worldwide Emerging Markets Fund, Inc. 811-1838
ING Pilgrim Global Technology Fund, Inc. 811-9649
ING Pilgrim SmallCap Asia Growth Fund, Inc. 811-7287
ING Pilgrim Troika Dialog Russia Fund, Inc. 811-7587
ING Pilgrim Gold Fund, Inc. 811-2881
ING Pilgrim Silver Fund, Inc. 811-4111
ING Pilgrim Global Income Fund 811-4675
ING Funds Trust 811-8895
INTLPROSXXXXXX-XXXXXX
<PAGE>
March 1, 2001
Class Q
U.S. EQUITY FUNDS
ING Pilgrim MagnaCap
ING Pilgrim Growth and Income
ING Pilgrim LargeCap Leaders
ING Pilgrim Research Enhanced Index
ING Pilgrim Growth Opportunities
ING Pilgrim LargeCap Growth
ING Pilgrim MidCap Value
ING Pilgrim MidCap Opportunities
ING Pilgrim MidCap Growth
ING Pilgrim Growth + Value
ING Pilgrim SmallCap Opportunities
ING Pilgrim SmallCap Growth
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth
ING Pilgrim International Value
ING Pilgrim International
ING Pilgrim International Core Growth
ING Pilgrim International SmallCap Growth
ING Pilgrim Emerging Countries
INCOME FUNDS
ING Pilgrim Government Securities Income
ING Pilgrim GNMA Income
ING Pilgrim Strategic Income
ING Pilgrim High Yield
ING Pilgrim High Yield II
ING Pilgrim Global Income
EQUITY & INCOME FUNDS
ING Pilgrim Balanced
ING Pilgrim Convertible
This prospectus contains important information about investing in the Class Q
shares of the ING Pilgrim Funds. You should read it carefully before you invest,
and keep it for future reference. Please note that your investment: is not a
bank deposit, is not insured or guaranteed by the FDIC, the Federal Reserve
Board or any other government agency and is affected by market fluctuations.
There is no guarantee that the Funds will achieve their objectives. As with all
mutual funds, the Securities and Exchange Commission (SEC) has not approved or
disapproved these securities nor has the SEC judged whether the information in
this prospectus is accurate or adequate. Any representation to the contrary is a
criminal offense.
<PAGE>
WHAT'S INSIDE
--------------------------------------------------------------------------------
[GRAPHIC]
OBJECTIVE
These pages contain a description of each of our Funds included in this
prospectus, including its objective, investment strategy and risks.
[GRAPHIC]
INVESTMENT
STRATEGY
You'll also find:
[GRAPHIC]
RISKS
How the Fund has performed.
A chart that shows the Fund's financial performance for the past ten years (or
since inception, if shorter).
[GRAPHIC]
HOW THE
FUND HAS
PERFORMED
What you pay to invest. A list of the fees and expenses you pay -- both directly
and indirectly -- when you invest in a Fund.
Introduction to the
ING Pilgrim Funds 1
Funds At A Glance 2
U.S. EQUITY FUNDS
ING Pilgrim MagnaCap 6
ING Pilgrim Growth and Income 8
ING Pilgrim LargeCap Leaders 10
ING Pilgrim Research Enhanced Index 12
ING Pilgrim Growth Opportunities 14
ING Pilgrim LargeCap Growth 16
ING Pilgrim MidCap Value 18
ING Pilgrim MidCap Opportunities 20
ING Pilgrim MidCap Growth 22
ING Pilgrim Growth + Value 24
ING Pilgrim SmallCap Opportunities 26
ING Pilgrim SmallCap Growth 28
INTERNATIONAL EQUITY FUNDS
ING Pilgrim Worldwide Growth 30
ING Pilgrim International Value 32
ING Pilgrim International 34
ING Pilgrim International Core Growth 36
ING Pilgrim International SmallCap Growth 38
ING Pilgrim Emerging Countries 40
INCOME FUNDS
ING Pilgrim Government Securities Income 42
ING Pilgrim GNMA Income 44
ING Pilgrim Strategic Income 46
ING Pilgrim High Yield 48
ING Pilgrim High Yield II 50
ING Pilgrim Global Income 52
EQUITY & INCOME FUNDS
ING Pilgrim Balanced 54
ING Pilgrim Convertible 56
What You Pay to Invest 58
Shareholder Guide 60
Management of the Funds 64
Dividends, Distributions and Taxes 69
More Information About Risks 70
Financial Highlights 73
Where To Go For More Information Back cover
<PAGE>
INTRODUCTION
TO THE ING PILGRIM FUNDS
--------------------------------------------------------------------------------
Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.
[GRAPHIC]
If you have any questions about the ING Pilgrim Funds, please call your
financial consultant or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
U.S. EQUITY FUNDS
ING Pilgrim's U.S. Equity Funds focus on long-term growth by investing
primarily in domestic equities.
They may suit you if you:
* are investing for the long-term -- at least several years
* are willing to accept higher risk in exchange for long-term growth.
INTERNATIONAL EQUITY FUNDS
ING Pilgrim offers International Equity Funds that emphasize a growth approach
to international investing, as well as International Equity Funds that apply
the technique of "value investing". These Funds focus on long-term growth by
investing primarily in foreign equities.
They may suit you if you:
* are investing for the long-term -- at least several years
* are looking for exposure to international markets
* are willing to accept higher risk in exchange for long-term growth.
INCOME FUNDS
ING Pilgrim offers both aggressive and conservative Income Funds.
They may suit you if you:
* want a regular stream of income
* want greater growth potential than a money market fund
* are willing to accept more risk than a money market fund.
EQUITY AND INCOME FUNDS
ING Pilgrim's Equity and Income Funds seek income and growth of capital.
They may suit you if you:
* want both regular income and capital appreciation
* are looking for growth potential but don't feel comfortable with the
level of risk associated with the Equity Funds.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
1
<PAGE>
------
Funds
At A
Glance
------
This table is a summary of the objectives, main investments and risks of each
ING Pilgrim Fund. It is designed to help you understand the differences between
the Funds, the main risks associated with each, and how risk and investment
objectives relate. This table is only a summary. You should read the complete
descriptions of each Fund's investment objectives, strategies and risks, which
begin on page 6.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity MagnaCap Fund Growth of capital, with dividend income as a
Funds Adviser: ING Pilgrim Investments, Inc. secondary consideration
Growth and Income Fund Long-term capital appreciation with income as a
Adviser: ING Pilgrim Investments, Inc. secondary objective
LargeCap Leaders Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Research Enhanced Index Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: J.P. Morgan
Investment Management Inc.
Growth Opportunities Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
LargeCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Opportunities Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
MidCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Growth + Value Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Navellier Fund
Management, Inc.
SmallCap Opportunities Fund Capital appreciation
Adviser: ING Pilgrim Investments, Inc.
SmallCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
International Worldwide Growth Fund Long-term capital appreciation
Equity Funds Adviser: ING Pilgrim Investments, Inc.
International Value Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Brandes
Investment Partners, L.P.
International Fund Long-term growth of capital
Adviser: ING Pilgrim Investments, Inc.
International Core Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
</TABLE>
2
<PAGE>
MAIN INVESTMENTS MAIN RISKS
--------------------------------------------------------------------------------
Equity securities that meet Price volatility and other risks
disciplined selection criteria that accompany an investment in
designed to identify companies equity securities.
capable of paying rising dividends.
Equity securities of large, ably Price volatility and other risks
managed, and well-financed U.S. that accompany an investment in
companies. equity securities.
Equity securities of large U.S. Price volatility and other risks
companies believed to be leaders in that accompany an investment in
their industries. equity securities.
Equity securities of large U.S. Price volatility and other risks
companies that make up the S&P 500 that accompany an investment in
Index. equity securities.
Equity securities of large, medium, Price volatility and other risks
and small U.S. companies believed that accompany an investment in
to have growth potential. growth-oriented equity securities.
Equity securities of large U.S. Price volatility and other risks
companies believed to have growth that accompany an investment in
potential. growth-oriented equity securities.
Equity securities of medium-sized Price volatility and other risks
U.S. companies that meet that accompany an investment in
disciplined selection criteria equity securities of medium-sized
designed to identify companies with companies. Particularly sensitive
prices below their long-term value. to price swings during periods of
economic uncertainty.
Equity securities of medium-sized Price volatility and other risks
U.S. companies believed to have that accompany an investment in
growth potential. equity securities of
growth-oriented and medium-sized
companies. Particularly sensitive
to price swings during periods of
economic uncertainty.
Equity securities of medium-sized Price volatility and other risks
U.S. companies believed to have that accompany an investment in
growth potential. equity securities of medium-sized
companies. Particularly sensitive
to price swings during periods of
economic uncertainty.
Equity securities of small-sized Price volatility and other risks
U.S. companies. that accompany an investment in
equity securities of
growth-oriented and small-sized
companies. Particularly sensitive
to price swings during periods of
economic uncertainty.
Equity securities of small-sized Price volatility and other risks
U.S. companies believed to have that accompany an investment in
growth potential. equity securities of
growth-oriented and small-sized
companies. Particularly sensitive
to price swings during periods of
economic uncertainty.
Equity securities of small-sized Price volatility and other risks
U.S. companies believed to have that accompany an investment in
growth potential. equity securities of
growth-oriented and small-sized
companies. Particularly sensitive
to price swings during periods of
economic uncertainty.
Equity securities of companies Price volatility and other risks
located in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility and other risks
located in countries outside the that accompany an investment in
U.S., believed to have prices below foreign equities. Sensitive to
their long-term value. currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Equity securities and equity Price volatility and other risks
equivalents of companies outside of that accompany an investment in
the U.S. growth-oriented foreign equities.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of larger Price volatility and other risks
companies in countries around the that accompany an investment in
world, which may include the U.S., growth-oriented foreign equities.
believed to have growth potential. Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
3
<PAGE>
------
Funds
At A
Glance
------
FUND INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
International SmallCap Growth Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Sub-Adviser: Nicholas-Applegate Capital Mgt.
Emerging Countries Fund Long-term capital appreciation
Adviser: ING Pilgrim Investments, Inc.
Income Funds Government Securities Income Fund High current income, consistent with liquidity
Adviser: ING Pilgrim Investments, Inc. and preservation of capital
GNMA Income Fund High current income, consistent with liquidity
Adviser: ING Pilgrim Investments, Inc. and safety of principal
Strategic Income Fund Maximum total return
Adviser: ING Pilgrim Investments, Inc.
High Yield Fund High current income, with
Adviser: ING Pilgrim Investments, Inc. capital appreciation as a secondary objective
High Yield Fund II High level of
Adviser: ING Pilgrim Investments, Inc. current income and capital growth
Global Income Fund High current income, with
Adviser: ING Pilgrim Investments, Inc. capital appreciation as a secondary objective
Equity & Balanced Fund Long-term capital appreciation and current income
Income Funds Adviser: ING Pilgrim Investments, Inc.
Convertible Fund Total return, consisting of capital appreciation
Adviser: ING Pilgrim Investments, Inc. and current income
</TABLE>
4
<PAGE>
MAIN INVESTMENTS MAIN RISKS
--------------------------------------------------------------------------------
Equity securities of small-sized Price volatility, liquidity and
companies in countries around the other risks that accompany an
world, which may include the U.S., investment in equity securities of
believed to have growth potential. foreign, small-sized companies.
Sensitive to currency exchange
rates, international political and
economic conditions and other risks
that affect foreign securities.
Equity securities of issuers Price volatility, liquidity and
located in countries with emerging other risks that accompany an
securities markets believed to have investment in equities from
growth potential. emerging countries. Sensitive to
currency exchange rates,
international political and
economic conditions and other risks
that affect foreign securities.
Securities issued or guaranteed by Credit, interest rate, prepayment
the U.S. Government and certain of and other risks that accompany an
its agencies or instrumentalities. investment in government bonds and
mortgage related investments.
Generally has less credit risk than
the other income funds.
Mortgage-backed GNMA Certificates Credit, interest rate, prepayment
that are guaranteed as to the and other risks that accompany an
timely payment of principal and investment in government bonds and
interest by the U.S. Government. mortgage related investments.
Generally has less credit than the
other income funds.
Investment grade and high yield Credit, interest rate, prepayment
debt securities. and other risks that accompany an
investment in debt securities,
including high yield debt
securities. May be sensitive to
credit risk during economic
downturns.
High yield debt securities. Credit, interest rate and other
risks that accompany an investment
in lower-quality debt securities.
Particularly sensitive to credit
risk during economic downturns.
High yield debt securities, Credit, liquidity, interest rate
including those in the lowest and other risks that accompany an
ratings, as well as equities and investment in lower-quality debt
foreign securities. securities. Particularly sensitive
to credit risk during economic
downturns. May also present price
volatility from equity exposure,
and foreign securities. May be
sensitive to currency exchange
rates, international political and
economic conditions, and other
risks.
Foreign and domestic high yield, Credit, liquidity, interest rate
lower rated or unrated debt and other risks that accompany an
securities. investment in lower-quality debt
securities. Particularly sensitive
to credit risk during economic
downturns. May also present price
volatility from foreign securities.
May be sensitive to currency
exchange rates, international
political and economic conditions,
and other risks.
A mix of equity and debt Price volatility and other risks
securities. that accompany an investment in
equity securities. Credit, interest
rate and other risks that accompany
an investment in debt securities.
Convertible securities of companies Price volatility and other risks
of various sizes, as well as that accompany an investment in
equities, and high-yield debt. equity securities. Credit, interest
rate, liquidity and other risks
that accompany an investment in
debt securities,and lower quality
debt securities.
5
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MAGNACAP FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks growth of capital, with dividend income as a secondary
consideration.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund is managed with the philosophy that companies that can best meet the
Fund's objectives have paid increasing dividends or have had the capability to
pay rising dividends from their operations. The Fund normally invests at least
65% of its assets in equity securities of companies that meet the following
disciplined criteria:
Consistent Dividends -- A company must have paid or had the financial capability
from its operations to pay a dividend in eight out of the last 10 years.
Substantial Dividend Increases -- A company must have increased its dividends or
had the financial capability from its operations to have increased its dividends
at least 100% over the past 10 years.
Reinvested Earnings -- Dividend payout must be less than 65% of current
earnings.
Strong Balance Sheet -- Long term debt should be no more than 25% of the
company's total capitalization or a company's bonds must be rated at least A- or
A-3.
Attractive Price -- A company's current share price should be in the lower half
of the stock's price/earnings ratio range for the past ten years, or the ratio
of the share price to its anticipated future earnings must be an attractive
value in relation to the average for its industry peer group or that of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index).
The equity securities in which the Fund may invest include common stocks,
convertible securities, and rights or warrants. Normally the Fund's investments
are primarily in larger companies that are included in the largest 500 U.S.
companies. The remainder of the Fund's assets may be invested in equity
securities that the adviser believes have growth potential because they
represent an attractive value.
In selecting securities for
the Fund, preservation of capital is also an important consideration. Although
the Fund normally will be invested as fully as practicable in equity securities,
assets that are not invested in equity securities may be invested in high
quality debt securities. The Fund may invest up to 5% of its assets, measured at
the time of investment, in foreign securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
Market Trends -- from time to time, the stock market may not favor the value
securities that meet the Fund's disciplined investment criteria. Rather, the
market could favor growth-oriented stocks or small company stocks, or may not
favor equities at all.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of ecomonic uncertainty or economic downturns.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
6 ING Pilgrim MagnaCap Fund
<PAGE>
ING PILGRIM MAGNACAP FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P 500 Index.
Average Annual Total Returns
S&P
500
Class Q Index(2)
------- --------
One year, ended
December 31, 2000 % %
Since inception (3) % %
----------
(2) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(3) Class Q commenced operations on November 22, 1999.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MagnaCap Fund 7
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM GROWTH AND INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's principal investment objective is long-term capital appreciation.
Income is a secondary objective.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund will invest at least 65% of its total assets in common stocks of U.S.
companies, which may include dividend paying securities and securities
convertible into shares of common stock. The Fund seeks to invest in large, ably
managed and well financed companies. The investment approach is to identify high
quality companies with good earnings and price momentum which sell at attractive
valuations.
The Fund may invest the remaining 35% of its assets in foreign securities and
smaller capitalization companies.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
8 ING Pilgrim Growth and Income Fund
<PAGE>
ING PILGRIM GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.87 12.36 13.22 -3.11 22.57 26.46 30.36 21.42 15.54
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 26, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Because Class Q shares were first offered in 2000, the
returns in the bar chart are based upon the performance of Class A shares
of the Fund. Class A shares are not offered in this prospectus. Class A
shares would have substantially similar annual returns as the Class Q
shares because the classes are invested in the same portfolio of
securities. Annual returns would differ only to the extent Class Q and
Class A shares have different expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Index (S&P 500 Index).
Average Annual Total Returns
S&P
500
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
----------
(3) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth and Income Fund 9
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM LARGECAP LEADERS FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its total assets in equity securities
of large U.S. companies that the adviser believes are leaders in their
industries. The portfolio managers consider whether these companies have a
sustainable competitive edge.
The portfolio managers emphasize a value approach, and seek securities whose
prices in relation to projected earnings are believed to be reasonable in
comparison to the market. For this Fund, a company with a market capitalization
(outstanding shares multiplied by price per share) of over $5 billion is
considered to be a large company, although the Fund may also invest to a limited
degree in companies that have a market capitalization between $1 billion and $5
billion.
The equity securities in which the Fund may invest include common stock,
convertible securities, preferred stock, American Depositary Receipts, and
warrants. The Fund normally invests as fully as practicable (at least 80%) in
equity securities.
Pending Merger -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim MagnaCap Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
10 ING Pilgrim LargeCap Leaders Fund
<PAGE>
ING PILGRIM LARGECAP LEADERS FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
T he bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.07 21.05 20.08 18.94
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) Prior to November 1, 1998, the Fund's investment policies were different in
that they emphasized large company value stocks without necessarily
emphasizing industry leaders. ING Pilgrim Investments, Inc. has been the
Fund's investment adviser since the Fund commenced operations; however,
prior to November 1, 1997, the Fund was managed by a sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
S&P
500
Class A(4) Index(5)
------------ -----------
One year, ended
December 31, 2000 % %
Since inception(6) % %
----------
(4) This table shows performance of the Class A shares of the Fund because
Class Q shares did not have a full year's performance during the year ended
December 31, 2000. Reflects deduction of Class A sales charge of 5.75%. See
the footnote to the bar chart above.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(6) Class A commenced operations on September 1, 1995. Class Q commenced
operations April 4, 2000.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Leaders Fund 11
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
ING PILGRIM RESEARCH ENHANCED INDEX FUND J.P. Morgan Investment Management Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in large companies that make up the Standard & Poor's
500 Composite Stock Price Index (S&P 500 Index). Based on extensive research
regarding projected company earnings and dividends, a valuation model ranks
companies in each industry group according to their relative value. Using this
valuation model, the portfolio managers select stocks for the Fund. Within each
industry, the Fund modestly overweights stocks that are ranked as undervalued or
fairly valued while modestly underweighting or not holding stocks that appear
overvalued. Industry by industry, the Fund's assets are invested so that the
Fund's industry sector allocations and market cap weightings closely parallel
those of the S&P 500 Index.
By owning a large number of stocks within the S&P 500 Index, with an emphasis on
those that appear undervalued or fairly valued, and by tracking the industry
weightings and other characteristics of that index, the Fund seeks returns that
modestly exceed those of the S&P 500 Index over the long term with virtually the
same level of volatility.
Under normal market conditions, the Fund invests at least 80% of its total
assets in common stocks included in the S&P 500 Index. It may also invest in
other common stocks not included in the S&P 500 Index. The Fund may also invest
in certain higher-risk investments, including derivatives (generally these
investments will be limited to S&P 500 Index options).
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The portfolio managers try to remain
fully invested in companies included in the S&P 500 Index, and generally do not
change this strategy even temporarily, which could make the Fund more
susceptible to poor market conditions.
Market Trends -- from time to time, the stock market may not favor the large
company securities that are ranked as undervalued or fairly valued in which the
Fund invests. Rather, the market could favor small company stocks, growth-
oriented stocks, or may not favor equities at all.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
12 ING Pilgrim Research Enhanced Index Fund
<PAGE>
ING PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.59
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P 500 Index.
Average Annual Total Returns
S&P
500
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Since inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Class A commenced operations on December 30, 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Research Enhanced Index Fund 13
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM GROWTH OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks long-term growth of capital.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in common stock of U.S. companies that the portfolio
manager feels have above average prospects for growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap, or small-cap
companies.
The portfolio manager uses a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom up approach) to guide
stock selection and portfolio structure.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
14 ING Pilgrim Growth Opportunities Fund
<PAGE>
ING PILGRIM GROWTH OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20.54 23.59 23.61 93.26
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index).
Average Annual Total Returns
S&P
500
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since Inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Class A commenced operations on June 5, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth Opportunities Fund 15
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM LARGECAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its net assets in equity securities of
large U.S. companies that the portfolio managers believe have above-average
prospects for growth. The equity securities in which the Fund may invest include
common and preferred stock, warrants, and convertible securities. The Fund
considers a company to be large if its market capitalization corresponds at the
time of purchase to the upper 90% of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 Index). As of December 31, 2000, this meant market
capitalizations in the range of $ billion to $ billion. Capitalization of
companies in the S&P 500 Index will change with market conditions.
The portfolio managers emphasize a growth approach by searching for companies
that they believe are managing change advantageously and may be poised to exceed
growth expectations. The portfolio managers focus on both a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies and a "top-down" thematic approach and a sell discipline. The
portfolio managers seek to identify themes that reflect the major social,
economic and technological trends that they believe are likely to shape the
future of business and commerce over the next three to five years, and seek to
provide a framework for identifying the industries and companies they believe
may benefit most. This "top-down" approach is combined with rigorous fundamental
research (a "bottom-up" approach) to guide stock selection and portfolio
structure.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a fund that emphasizes other styles, such
as a value-oriented style. The Fund invests primarily in equity securities of
larger companies, which sometimes have more stable prices than smaller
companies.
Market Trends -- from time to time, the stock market may not favor the large
company, growth-oriented securities in which the Fund invests. Rather, the
market could favor value stocks or small company stocks, or may not favor
equities at all.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
16 ING Pilgrim LargeCap Growth Fund
<PAGE>
ING PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
60.02 96.93
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 1000 Growth Index.
Average Annual Total Returns
Russell
1000
Growth S&P 500
Class Q Index(3) Index(4)
------- -------- --------
One year, ended
December 31, 2000 %
Since inception(5) %
----------
(3) The Russell 1000 Growth Index is an unmanaged index that measures the
performance of securities of companies among the Russell 1000 Index with
higher than average price to book ratios and forcasted growth.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large capitalization U.S. companies.
(5) Class Q commenced operations on July 21, 1997.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Growth Fund 17
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP VALUE FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests as fully as practicable (at least 80% of its assets)
in equity securities of medium-sized U.S. companies. The Fund will normally
invest at least 65% of its assets in equity securities of companies that meet
the following disciplined criteria, which are intended to identify companies
that are attractive values:
Consistent Dividends -- The company must have paid or had the financial
capability from its operations to pay a dividend in its last five fiscal years.
Strong Balance Sheet -- If the company has debt that is rated, that debt is
rated investment grade by a nationally recognized rating agency. If the company
does not have debt that is rated, the company's long-term debt to capitalization
ratio is below 25%.
Reinvested Earnings -- The company currently pays out in dividends less than 65%
of current earnings, or less than the dividend payout as a percentage of current
earnings of at least half of the medium-sized companies in similar industries.
Attractive Price -- The ratio of the stock's price to the next fiscal year's
anticipated earnings is less than the corresponding ratio for at least half of
the medium-sized companies in similar industries.
The Fund considers a company to be medium-sized if it has a market
capitalization between $1 billion and $8 billion. The equity securities in which
the Fund may invest include common stock, convertible securities, preferred
stock and warrants.
PENDING MERGER -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim MagnaCap Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests in medium-sized
companies, which may be more susceptible to price swings than larger companies,
but usually tend to have less volatile price swings than smaller companies.
Securities of medium-size companies may be more susceptible to price swings than
larger companies because they have fewer financial resources, more limited
product and market diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
value securities that meet the Fund's disciplined investment criteria. Rather,
the market could favor growth-oriented stocks or large or small company stocks,
or may not favor equities at all.
Inability to Sell Securities -- securities of medium-size companies trade in
lower volume an may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
18 ING Pilgrim MidCap Value Fund
<PAGE>
ING PILGRIM MIDCAP VALUE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
29.56 21.87 4.89 -7.32
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) The figure shown for the year 2000 provides performance for the Class Q
shares of the Fund. The figures shown for the years 1996 to 1999 provide
performance for Class A shares of the Fund. Class A shares would have
substantially similar performance annual returns as Class Q shares because
the classes are invested in the same portfolio of securities. Annual
returns would differ only to the extent Class Q shares and Class A shares
have different expenses.
(3) Prior to October 1, 1999, the Fund's investment policies were different in
that they emphasized midcap value stocks without employing the current
disciplined selection criteria. ING Pilgrim Investments, Inc. has been the
Fund's investment adviser since the Fund commenced operations; however,
prior to October 1, 1999, the Fund was managed by a sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Russell Midcap Index and the Russell Midcap Value Index.
Average Annual Total Returns
Russell
Russell MidCap
MidCap Value
Class A(4) Class Q Index(5) Index(6)
---------- ------- -------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception
of Class A(7) %
Since inception of
Class Q(8)
----------
(4) Class A shares on the Fund are not offered in this prospectus. Reflects
deduction of Class A sales charge of 5.75%. See footnote (2) to the bar
chart above.
(5) The Russell Midcap Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(6) The Russell MidCap Value Index is an unmanaged index that measures the
performance of companies in the Russell Midcap Index with lower
book-to-price ratios and lower forecasted growth values.
(7) Class A commenced operations on September 1, 1995.
(8) Class Q commenced operations on January 4, 2000.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Value Fund 19
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its total assets in the common stocks
of mid-sized U.S. companies that the portfolio managers feel have above average
prospects for growth. For this Fund, mid-sized companies are companies with
market capitalizations that fall within the range of companies in the Standard &
Poor's MidCap 400 Index (S&P MidCap 400 Index). As of December 31, 2000, the
market capitalization of companies in the S&P MidCap 400 Index ranged from $
million to $ billion. The market capitalization range will change as the range
of the companies included in the S&P MidCap 400 Index changes.
The portfolio managers use a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.
The Fund may invest in initial public offerings.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio managers feel have the potential for growth, which may give the Fund a
higher risk of price volatility than a fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market diversification and
may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of mid-size companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
20 ING Pilgrim MidCap Opportunities Fund
<PAGE>
ING PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
103.24
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the S&P MidCap 400 Index.
Average Annual Total Returns
S&P
MidCap 400
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Since Inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The S&P MidCap 400 Index is an unmanaged index that measures the
performance of the mid-size company segment of the U.S. market.
(5) Class A commenced operations on August 20, 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Opportunities Fund 21
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM MIDCAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of medium-sized U.S. companies, and at least 75% of its total
assets in common stocks that the portfolio managers feel have above average
prospects for growth. Mid-sized companies are companies with market
capitalizations between $1.6 billion and $10.7 billion. The market
capitalization range will change as the range of the companies included in the
S&P MidCap 400 Index changes and with market conditions.
The portfolio managers emphasize a growth approach by searching for successful,
growing companies that are managing change advantageously and may be poised to
exceed growth expectations. It focuses on both a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual companies
and a thematic approach in structuring the portfolio and a sell discipline.
Themes attempt to articulate the major social, economic and technological trends
that are likely to shape the future of business and commerce over the next three
to five years, and provide a framework for identifying the industries and
companies expected to benefit most. This top down approach is combined with
rigorous fundamental research (a "bottom up" approach) to guide stock selection
and portfolio structure.
The Fund may invest in initial public offerings.
In periods of unusual market conditions, the Fund may temporarily invest part or
all of its assets in cash or high quality money market securities. In these
circumstances, the Fund may not achieve its objective.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for growth, which may give the Fund a
higher risk of price volatility than a Fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources and more limited product and market diversification,
and may be dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of mid-size companies usually trade
in lower volume and may be less liquid than securities of larger, more
established companies. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
22 ING Pilgrim MidCap Growth Fund
<PAGE>
ING PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
38.24 16.06 16.20 14.32 98.50
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to April 1, 2000, the Fund was managed by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the S&P MidCap 400 Index and the Russell MidCap Growth Index.
Average Annual Total Returns
S&P Russell
MidCap MidCap
400 Growth
Class Q Index(3) Index(4)
------- -------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(5) %
----------
(3) The S&P MidCap 400 Index is an unmanaged index that measures the
performance of the mid-size company segment of the U.S. market.
(4) The Russell MidCap Growth Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(5) Class Q shares commenced operations on June 30, 1994.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Growth Fund 23
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
ING PILGRIM GROWTH + VALUE FUND Navellier Fund Management, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in a diversified portfolio of equity securities,
including common and preferred stock, warrants and convertible securities.
The Fund invests in common stock of companies the portfolio manager believes are
poised to rise in price. The Sub-Adviser uses a "bottom-up" quantitative
screening process designed to identify and select inefficiently priced stocks
that achieved superior returns compared to their risk characteristics. The
Sub-Adviser first uses a proprietary computer model designed to identify stocks
with above average market returns and risk levels which are reasonable for
higher return rates. The Sub-Adviser then applies a quantitative analysis which
focuses on growth and value fundamental characteristics, such as earnings
growth, earnings momentum, price to earnings (P/E) ratios, and internal
reinvestment rates. The Sub-Adviser then allocates stocks according to how they
complement other portfolio holdings.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap, or small-cap
companies.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund's performance will be affected
if the Sub-Adviser makes an inaccurate assessment of economic conditions and
investment opportunities, and chooses growth companies that do not grow as
quickly as hoped, or value companies that continue to be undervalued by the
market. Although the Sub-Adviser invests in value companies to decrease
volatility, these investments may also lower the Fund's performance. The Fund's
investments in smaller and mid-sized companies may be more susceptible to price
swings than investments in larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the mix of
growth and value securities in which the Fund invests. Rather, the market could
favor growth stocks to the exclusion of value stocks, or favor value stocks to
the exclusion of growth stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller and mid-sized companies
usually trade in lower volume and may be less liquid than securities of larger,
more established companies. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund.
Changes in Interest Rates -- the value of the Fund's convertible securities may
fall when interest rates rise. Convertible securities with longer durations tend
to be more sensitive to changes in interest rates, usually making them more
volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a convertible security
is unable to meet its financial obligations or goes bankrupt.
24 ING Pilgrim Growth + Value Fund
<PAGE>
ING PILGRIM GROWTH + VALUE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.10 17.72 88.10
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
Average Annual Total Returns
Russell
2000
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Since inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of smaller U.S. companies.
(5) Class A commenced operations on November 18, 1996.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth + Value Fund 25
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM SMALLCAP OPPORTUNITIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests at least 65% of its total assets in the common stock of
smaller, lesser-known U.S. companies that the portfolio manager believes have
above average prospects for growth. For this Fund, smaller companies are those
with market capitalizations that fall within the range of companies in the
Russell 2000 Index, which is an index that measures the performance of small
companies. The market capitalization range will change as the range of the
companies included in the Russell 2000 changes. The market capitalization of
companies held by the Fund as of December 31, 2000 ranged from $ million to $
billion.
The portfolio manager uses a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio manager seeks to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attemps to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.
The Fund may invest in initial public offerings.
The Fund was closed to new investors effective February 29, 2000. Investors who
were shareholders of the Fund on that day may continue to buy shares into
accounts existing on that day. The Fund may reopen in the future subject to the
discretion of the Board of Trustees.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small
sized growth securities in which the Fund invests. Rather, the market could
favor value-oriented stocks or large company stocks, or may not favor equities
at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
26 ING Pilgrim SmallCap Opportunities Fund
<PAGE>
ING PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.16 14.92 7.59 146.94
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.
Average Annual Total Returns
Russell
2000
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund did not have a full year's performance durring
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(5) Class A commenced operations on June 5, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Opportunities Fund 27
<PAGE>
-----------
U.S. Equity
Funds
-----------
Adviser
ING PILGRIM SMALLCAP GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of small U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio manager feels have above average prospects
for growth. Smaller companies are companies with market capitalizations that
fall within the range of companies in the Russell 2000 Growth Index. As of
December 31, 2000, the market capitalization of companies held by the Fund
ranged from $ million to $ billion. The market capitalization range will change
as the range of the companies included in the Russell 2000 Index changes.
The Fund emphasizes a growth approach by searching for successful, growing
companies that are managing change advantageously and may be poised to exceed
growth expectations. It focuses on both a "bottom-up" analysis that evaluates
the financial condition and competitiveness of individual companies and a
thematic approach in structuring the portfolio and a sell discipline. Themes
attempt to articulate the major social, economic and technological trends that
are likely to shape the future of business and commerce over the next three to
five years, and provide a framework for identifying the industries and companies
expected to benefit most. This top down approach is combined with rigorous
fundamental research (a "bottom up" approach) to guide stock selection and
portfolio structure.
The Fund may invest in initial public offerings.
In periods of unusual market conditions, the Fund may temporarily invest part or
all of its assets in cash or high quality money market securities. In these
circumstances, the Fund may not achieve its objective.
The Fund considers a company to be small if it has a market capitalization
corresponding at the time of purchase to the middle 90% of the Russell 2000
Growth Index. In the adviser's opinion, the middle 90% includes companies with
capitalizations between $255 million and $1.4 billion. Capitalization of
companies in the Index will change with market conditions.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a Fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in small-cap companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.
The Fund's investment in technology sectors of the stock market and in initial
public offerings has had a significant impact on performance in 1999 and other
periods. There can be no assurance that these factors will continue to have a
positive effect on the Fund.
28 ING Pilgrim SmallCap Growth Fund
<PAGE>
ING PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
19.44 11.56 4.26 90.58
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to April 1, 2000, the Fund was managed by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Growth Index.
Average Annual Total Returns
Russell
2000
Growth
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(4) %
----------
(3) The Russell 2000 Growth Index is an unmanaged index that measures the
performance of securities of smaller U.S. companies with greater-
than-average growth orientation.
(4) Class Q commenced operations on August 31, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Growth Fund 29
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING PILGRIM WORLDWIDE GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in at least three countries, one of which
may be the U.S. The Fund generally invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. The Fund may
invest in companies located in countries with emerging securities markets when
the portfolio managers believe they present attractive investment opportunities.
International Component -- The portfolio managers primarily use a "bottom-up"
fundamental analysis to identify stocks which they believe offer good value
relative to their peers in the same industry, sector or region. The portfolio
managers will invest at least 65% of the Fund in assets of companies which,
based upon a fundamental analysis of a company's earning prospects, they believe
will experience faster earnings per share growth than that of other companies
located in one or more of the same market, sector, or industry. In conducting
its fundamental analysis, the portfolio managers focus on various factors
including valuation of the companies, potential catalysts to stock price
appreciation, quality of management, and financial measures, especially cash
flow and the cash flow return on capital. They also use a "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.
U.S. Component -- The Fund normally invests in equity securities of large U.S.
companies that the portfolio managers feel have above-average prospects for
growth. The Fund considers a company to be large if its market capitalization
corresponds at the time of purchase to the upper 90% of the S&P 500 Index. As of
December 31, 2000, this meant market capitalizations in the range of $ billion
to $ billion. Capitalization of companies in the S&P 500 Index will change with
market conditions.
The portfolio managers emphasize a growth approach by searching for companies
that they believe are managing change advantageously and may be poised to exceed
growth expectations. The portfolio managers focus on both a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies and a "top-down" thematic approach and a sell discipline. The
portfolio managers seek to identify themes that reflect the major social,
economic and technological trends that they believe are likely to shape the
future of business and commerce over the next three to five years, and seek to
provide a framework for identifying the industries and companies they believe
may benefit most. This "top-down" approach is combined with rigorous fundamental
research (a "bottom-up" approach) to guide stock selection and portfolio
structure.
* From time to time, the Adviser reviews the allocation between the U.S.
stocks and non-U.S. stocks in the portfolio, and may rebalance the
portfolio using factors that the Adviser deems appropriate.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Sub-Adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and may be dependent on a few key
managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of foreign companies may trade in
lower volume and may be less liquid than securities of U.S. companies. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
30 ING Pilgrim Worldwide Growth Fund
<PAGE>
ING PILGRIM WORLDWIDE GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.32 17.64 37.92 83.79
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Morgan Stanley Capital International World Index (MSCI World
Index).
Average Annual Total Returns
MSCI
World
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(4) %
----------
(3) MSCI World Index is an unmanaged index that measures the performance of
over 1,400 securities listed on exchanges in the U.S., Europe, Canada,
Australia, New Zealand and the Far East.
(4) Class Q commenced operations on August 31, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Growth Fund 31
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING Pilgrim Investments, Inc.
Sub-Adviser
ING PILGRIM INTERNATIONAL VALUE FUND Brandes Investment Partners, L.P.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
This Fund seeks long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests primarily in foreign companies with market capitalizations
greater than $1 billion, but it may hold up to 25% of its assets in companies
with smaller market capitalizations.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.
The Fund holds common stocks, preferred stocks, American, European and Global
depositary receipts, as well as convertible securities.
Under normal circumstances, the Fund invests at least 65% of its total assets in
securities of companies located in at least three countries other than the U.S.
The Fund may invest up to the greater of:
* 20% of its assets in any one country or industry, or,
* 150% of the weighting of the country or industry in the Morgan Stanley
Capital International Europe, Australia, and Far East (MSCI EAFE) Index, as
long as the Fund meets any industry concentration or diversification
requirements under the Investment Company Act.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political, social and economic conditions, a lack of adequate or
accurate company information, differences in the way securities markets operate,
less secure foreign banks or securities depositories than those in the U.S., and
foreign controls on investment. To the extent that the Fund invests in emerging
market countries, the risks may be greater, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. However, the Fund may also invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
value-oriented stocks in which the Fund invests. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.
Inability to Sell Securities -- securities of smaller companies and some foreign
companies may trade in lower volume and may be less liquid than securities of
larger, more established companies or U.S. companies. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.
32 ING Pilgrim International Value Fund
<PAGE>
ING PILGRIM INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Return (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
15.23 17.86 13.46 51.49
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the MSCI EAFE Index.
Average Annual Total Returns
MSCI
EAFE
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(5) %
----------
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(5) Class A commenced operations on March 6, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Value Fund 33
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING PILGRIM INTERNATIONAL FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's investment objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of companies outside of
the U.S.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund also
may invest up to 35% of its assets in securities of U.S. issuers, including
investment-grade debt securities.
The portfolio managers primarily use "bottom-up" fundamental analysis to
identify stocks which they believe 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 its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, catalysts to stock price
appreciation, quality of management and financial measures, especially cash flow
and the cash flow return on capital.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries: It may
also be more difficult to buy and sell securities in emerging market countries.
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund invests primarily in equity securities of larger companies, which
sometimes have more stable prices than smaller companies. However, the Fund may
also invest in small and medium-sized companies, which may be more susceptible
to price swings than larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the
securities in which the Fund invests.
Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
34 ING Pilgrim International Fund
<PAGE>
ING PILGRIM INTERNATIONAL FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
5.87 5.77 13.57 1.61 19.02 47.85
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 26, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Because Class Q shares were first offered in 2000, the
returns in the bar chart are based upon the performance of Class A shares
of the Fund. Class A shares are not offered in this prospectus. Class A
shares would have substantially similar annual returns as the Class Q
shares because the classes are invested in the same portfolio of
securities. Annual returns would differ only to the extent Class Q and
Class A shares have different expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia, and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI EAFE
Class A (3) Index(4)
----------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception of Class A(5) %
----------
(3) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 5.75%. See footnote (2) to the bar chart above.
(4) MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia, and the Far
East.
(5) Class A commenced operations on January 3, 1994.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Fund 35
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING PILGRIM INTERNATIONAL CORE GROWTH FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its net assets in
equity securities of issuers located in countries outside the U.S. The Fund
generally invests at least 75% of its total assets in common and preferred
stocks, warrants and convertible securities. The Fund may invest in companies
located in countries with emerging securities markets when the portfolio
managers believe they present attractive investment opportunities. The Fund also
may invest up to 35% of its assets in securities if U.S. issuers, including
investment-grade debt securites.
In pursuing the Fund's investment strategy, the portfolio managers primarily use
a "bottom-up" fundamental analysis to identify stocks which they believe offer
good value relative to their peers in the same industry, sector or region. The
portfolio managers will invest at least 65% of the Fund in assets of companies
which, based upon a fundamental analysis of a company's earning prospects, they
believe will experience faster earnings per share growth than that of other
companies located in one or more of the same market, sector, or industry. In
conducting its fundamental analysis, the portfolio managers focus on various
factors, including valuation of the companies, potential catalysts to stock
price appreciation, quality of management, and financial measures, especially
cash flow and the cash flow return on capital. They also use a "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.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in large companies, which sometimes
have more stable prices than smaller companies.
Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or smaller company stocks, or may not favor equities at
all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
36 ING Pilgrim International Core Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.22 66.97
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Europe, Australia, and
Far East Index (MSCI EAFE Index).
Average Annual Total Returns
MSCI
EAFE
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Since inception(4) %
----------
(3) MSCI EAFE Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(4) Class Q commenced operations on February 28, 1997.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Core Growth Fund 37
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING Pilgrim Investments, Inc.
ING PILGRIM INTERNATIONAL Sub-Adviser
SMALLCAP GROWTH FUND Nicholas-Applegate Capital Management
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
securities of small companies located outside the U.S. The Fund may invest up to
35% of its total assets in U.S. issuers. The Fund invests primarily in
smaller-capitalized companies ("small cap stocks") located worldwide. In the
opinion of the Fund's Sub-Adviser, small cap stocks are those whose stock market
capitalizations are predominantly in the bottom 25% of publicly traded companies
as measured by stock market capitalizations in over 50 countries. The market
capitalization ranges of the various countries' small cap stocks may vary
greatly due to fluctuating currency values, differences in the size of the
respective economies, and movements in the local stock markets.
The Fund normally invests at least 75% of its total assets in common and
preferred stock, warrants and convertible securities. The Fund may invest in
companies located in countries with emerging securities markets when the
Sub-Adviser believes they present attractive investment opportunities.
The Fund's Sub-Adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The Sub-Adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price.
In analyzing specific companies for possible investment, the Sub-Adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Sub-Adviser usually considers whether to sell a particular security when any of
those factors materially changes.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Sub-Adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in small companies, which may
be more susceptible to greater price swings than larger companies because they
may have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.
Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
38 ING Pilgrim International SmallCap Growth Fund
<PAGE>
ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
17.98 13.93 35.96 121.97
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- Salomon Europe Pacific Australasia Composite Extended Market
Index (Salomon EPAC EM Index).
Average Annual Total Returns
Salomon
EPAC
EM
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(4) %
----------
(3) Salomon EPAC EM Index is an unmanaged index that measures the performance
of securities of smaller capitalization companies in 22 countries excluding
the U.S. and Canada.
(4) Class Q commenced operations on August 31, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 39
<PAGE>
-------------
International
Equity Funds
-------------
Adviser
ING PILGRIM EMERGING COUNTRIES FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum long-term capital appreciation.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests at least 65% of its net assets in securities of issuers located
in at least three countries with emerging securities markets. Countries with
emerging securities markets are those countries which generally are considered
to be emerging market countries by the international financial community.
The Fund may invest up to 35% of its total assets in securities of U.S. and
other developed market issuers, including investment-grade debt securities of
U.S. issuers. Under normal conditions, the Fund invests at least 75% of its
total assets in common and preferred stocks, warrants and convertible
securities.
In selecting securities of issuers located in emerging market countries, the
Adviser uses a "bottom-up" fundamental analyis to identify companies which it
believes have good earnings growth prospects and that can be bought at a price
which seems reasonable. To help in this process, the Adviser scores the emerging
markets stocks on a wide range of quantitative and qualilative measures, with
particular attention paid to long-term and short-term earnings growth prospects
and valuation measures. The Adviser seeks securities of emerging market issuers
which are relatively liquid and covered by professional securities analysts.
In selecting stocks in developed markets, the portfolio managers seek the most
attractive opportunities in such markets. For such securities, the portfolio
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 their 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.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
Adviser believes have the potential for rapid growth, which may give the Fund a
higher risk of price volatility than a fund that emphasizes other styles, such
as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many are dependent on a few key managers.
Market Trends -- from time to time, the stock market may not favor the growth
securities in company stocks, or may not favor equities at all.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.
Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
40 ING Pilgrim Emerging Countries Fund
<PAGE>
ING PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
27.75 10.00 -21.46 76.30
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- The Morgan Stanley Capital International Emerging Markets Free
Index (MSCI EMF Index).
Average Annual Total Returns
MSCI
EMF
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(4) %
----------
(3) MSCI EMF Index is an unmanaged index that measures the performance of
securities listed on exchanges in developing nations throughout the world.
(4) Class Q commenced operations on August 31, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Emerging Countries Fund 41
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks high current income, consistent with liquidity and preservation
of capital.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 70% of its total assets in securities issued
or guaranteed by the U.S. Government and the following agencies or
instrumentalities of the U.S. Government: the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corporation (FHLMC). Such securities include direct
obligations of the U.S. Treasury and mortgage-backed securities. The Fund may
fall below the 70% threshold due to changes in the value of the Fund's holdings
or the sale of securities to meet redemptions, in which case the Fund will
purchase only U.S. Government securities until the 70% level is restored. The
remainder of the Fund's assets may be invested in securities issued by other
agencies and instrumentalities of the U.S. Government and in instruments
collateralized by securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The foregoing policies are fundamental and may
not be changed without shareholder approval.
The Fund may invest in securities of any maturity; however, the Fund is expected
to have a duration within a range of 20% above or below that of the Lehman
Intermediate Treasury Index. As of December 31, 2000, the dollar-weighted
average duration of the Lehman Intermediate Treasury Index was
years. The Adviser determines the composition of the Fund's portfolio on
the basis of its judgment of existing market conditions, such as the general
direction of interest rates, trends in creditworthiness, expected inflation,
supply and demand of fixed income securities, and other factors. The Fund may
enter into reverse repurchase agreements, dollar roll transactions or pairing
off transactions. The Fund does not invest in highly leveraged derivatives, such
as swaps, interest-only or principal-only stripped mortgage-backed securities,
or interest rate futures contracts.
Pending Merger -- Subject to shareholder approval, the Fund's Board of Directors
has approved the reorganization of the Fund into ING Pilgrim GNMA Fund. You
could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. This Fund may be particularly sensitive to interest rates
because it primarily invests in U.S. government securities. Debt securities with
longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to less credit risk than the other income funds because it principally invests
in debt securities issued or guaranteed by the U.S. Government, its agencies and
government sponsored enterprises.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
42 ING Pilgrim Government Securities Income Fund
<PAGE>
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
11.90 7.46 7.46(7) -3.61 14.51 2.56 7.85 5.61 -1.17
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Lehman Brothers Government/Mortgage Index and the Lehman
Brothers Intermediate Treasury Index.
Average Annual Total Returns
Lehman Lehman
Gov't/ Intermediate
Mortgage Treasury
Class A(3)(4) Index(5) Index(6)
------------- -------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000(7) %
----------
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares did not have a full year's performance during the year ended
December 31, 2000. Reflects deduction of Class A sales charge of 4.75%. See
footnote (2) to the bar chart above.
(4) The Fund commenced operations on January 1, 1985.
(5) The Lehman Brothers Government/Mortgage Index is an unmanaged index that
measures the performance of U.S. Government agencies and instrumentalities,
as well as mortgage pass-through instruments issued by FNMA, FHLMC and
GNMA.
(6) The Lehman Brothers Intermediate Treasury Index is an unmanaged index that
measures the performance of U.S. Treasuries with maturities of under 10
years. Information on the Lehman Intermediate Treasury Index is presented
because effective May 24, 1999, the Fund seeks an average portfolio
duration within +/-20% of the duration of that Index. Previously, the
Fund's average portfolio maturity was generally longer.
(7) The Fund earned income and realized capital gains as a result of entering
into reverse repurchase agreements during the six-month period from July to
December 1992 that caused the Fund to exceed its 10% investment restriction
on borrowing. Therefore, the Fund's performance was higher than it would
have been had the Fund adhered to its borrowing restriction.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Government Securities Income Fund 43
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM GNMA INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's investment objective is to seek a high level of current income,
consistent with liquidity and safety of principal, through investment primarily
in Government National Mortgage Association ("GNMA") mortgage-backed securities
(also known as "GNMA Certificates") that are guaranteed as to the timely payment
of principal and interest by the United States Government.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund will invest at least 80% of the value of its
total assets in GNMA (Ginnie Mae) Certificates. The remaining assets of the Fund
will be invested in other securities issued or guaranteed by the U.S.
Government, including U.S. Treasury securities. The Fund may invest in debt
securites of any maturity, although the portfoio manager expects to invest in
long-term debt instruments.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Prepayment Risk -- Through investment in GNMA securities, the Fund may expose
you to certain risks which may cause you to lose money. Mortgage prepayments are
affected by the level of interest rates and other factors, including general
economic conditions and the underlying location and age of the mortgage. In
periods of rising interest rates, the prepayment rate tends to decrease,
lengthening the average life of a pool of GNMA securities. In periods of falling
interest rates, the prepayment rate tends to increase, shortening the life of a
pool. Because prepayments of principal generally occur when interest rates are
declining, it is likely that the Fund may have to reinvest the proceeds of
prepayments at lower interest rates than those of their previous investments. If
this occurs, the Fund's yields will decline correspondingly.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. This Fund may be particularly sensitive to interest rates
because it primarily invests in U.S. government securities. Debt securities with
longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than debt securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to less credit risk than the other income funds because it principally invests
in debt securities issued or guaranteed by the U.S. Government, its agencies and
government sponsored enterprises.
Please refer to the statement of additional information for a complete
description of GNMA Certificates and Modified Pass Through GNMA Certificates.
The Fund intends to use the proceeds from principal payments to purchase
additional GNMA Certificates or other U.S. Government guaranteed securities.
44 ING Pilgrim GNMA Income Fund
<PAGE>
ING PILGRIM GNMA INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
15.75 5.19 8.06 -2.07 15.91 5.71 10.20 7.52 0.58
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 26, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Because Class Q shares were first offered in 2000, the
returns in the bar chart are based upon the performance of Class A shares
of the Fund, adjusted to reflect the current Class A expenses. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers Mortgage-Backed Securities Index.
Average Annual Total Returns
Lehman Brothers
Mortgage-Backed
Securities
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
----------
(3) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 4.75%. See footnote (2) to the bar chart above.
(4) The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index
that measures comprised of 520 mortgage backed securities with an average
yield of 7.58%. The average coupon of the index is 6.85%. This index is
typically used as a benchmark for intermediate-term bond funds.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim GNMA Income Fund 45
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM STRATEGIC INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum total return.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 60% of its total assets in
debt securities issued by U.S. and foreign corporations, U.S. and foreign
governments, and their agencies and instrumentalities that are rated in one of
the top four categories by a nationally recognized statistical rating agency, or
of comparable quality if unrated. These securities include bonds, notes,
mortgage-backed and asset-backed securities with rates that are fixed, variable
or floating. The Fund may invest up to 40% of its total assets in high yield
debt securities, commonly known as "junk bonds." There is no minimum credit
rating for high yield debt securities in which the Fund may invest.
The "total return" sought by the Fund consists of income earned on the Fund's
investments, plus capital appreciation, if any, which generally arises from
decreases in interest rates or improving credit fundamentals for a particular
sector or security.
The Fund may invest in debt securities of any maturity; however, the average
portfolio duration of the Fund will generally range from two to eight years. The
Fund may invest up to 30% of its total assets in securities payable in foreign
currencies. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may also use options, futures contracts and interest rate and currency swaps as
hedging techniques. The Fund does not invest in interest-only or principal-only
stripped mortgage-backed securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns. This Fund may
be subject to more credit risk than the other income funds, because it may
invest in high yield debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments.
Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. A security in the lowest rating catergories, that is
unrated, or whose credit rating has been lowered may be particularly difficult
to sell. Foreign securities and mortgage-related and asset-backed debt
securities may be less liquid than other debt securities. The 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 -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
Other Investment Companies -- because the Fund invests in other investment
companies, you may indirectly pay a proportionate share of the expenses of that
other investment company (including management fees, administration fees and
custodial fees) in addition to the expenses of the Fund.
46 ING Pilgrim Strategic Income Fund
<PAGE>
ING PILGRIM STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-0.97
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31, of each year.
(2) Prior to May 24, 1999, a different adviser managed the Fund.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Aggregate Bond Index.
Average Annual Total Returns
Lehman
Aggregate
Bond
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Since inception(4) %
----------
(3) The Lehman Aggregate Bond Index is an unmanaged index that measures the
performance of fixed income securities that are similar, but not identical,
to those in the Fund's portfolio.
(4) Class Q shares of the Fund commenced operations on July 27, 1998.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Strategic Income Fund 47
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH YIELD FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a high level of current income, with capital appreciation as a
secondary objective.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund normally invests at least 65% of its assets in high yield debt
securities, including preferred stock and convertible securities, that do not in
the opinion of the adviser involve undue risk relative to their expected return.
High yield securities, which are commonly known as "junk bonds," are securities
that are rated below investment grade, i.e., rated lower than Baa by Moody's
Investors Service, Inc. or BBB by Standard and Poor's, or of comparable quality
if not rated. Generally, the Fund will invest in securities rated lower than B
by Moody's or S&P only when the adviser believes the financial condition of the
issuer or other available protections reduce the risk to the Fund or that there
is greater value in the securities than is reflected in their prevailing market
price. There is no minimum credit rating for high yield securities in which the
Fund may invest. The Fund may invest in debt securities of any maturity. In
selecting securities for the Fund, preservation of capital is a consideration.
The remainder of the Fund's assets may be invested in common stocks, investment
grade preferred stocks, investment grade debt obligations of all types, U.S.
Government securities, warrants, money market instruments (including repurchase
agreements on U.S. Government securities), mortgage-related securities and
participation interests and assignments in floating rate loans and notes. The
Fund may also invest up to 10% of its assets in foreign debt securities of any
rating. The Fund may invest in financial futures and related options to attempt
to hedge risk, although the Fund has not invested in such instruments since
Pilgrim Investments, Inc. became the adviser in 1995 through the date of this
prospectus. In selecting equity securities, the portfolio managers use a
"bottom-up" analysis that focuses on individual companies and assesses the
company's valuation, financial condition, management, competitiveness, and other
factors.
Differences between the Fund and High Yield Fund II -- While both Funds invest
primarily in high yield securities, the High Yield Fund normally emphasizes
bonds with stronger credit ratings in the high yield bond universe. Thus, of the
two Funds, High Yield Fund II normally presents the potential for higher income,
but with potentially higher credit risk and volatility.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in
the Fund. The Fund may be affected by the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income mutual funds because it invests in
high yield (or "junk bond") debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments. This is especially true during periods of economic
uncertainty or economic downturns. The Fund is also subject to credit risk
through its investment in floating rate loans.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security whose credit rating been lowered may be particularly difficult to sell.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, and the risk of loss due to changes in
interest rates. The use of certain derivatives may also have a leveraging
effect, which may increase the volatility of the Fund. The use of derivatives
may reduce returns for the Fund.
Price Volatility -- Equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. 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.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks, securities depositories or exchanges than those in the U.S., and
foreign controls on investment.
48 ING Pilgrim High Yield Fund
<PAGE>
ING PILGRIM HIGH YIELD FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman High Yield Bond Index.
Average Annual Total Returns
Lehman
High
Yield
Bond
Class Q Index(2)
------- --------
One year, ended
December 31, 2000 %
Since inception(3) %
----------
(2) The Lehman Brothers High Yield Bond Index is an unmanaged index that
measures the performance of fixed-income securities that are similar, but
not identical, to those in the Fund's portfolio.
(3) Class Q shares commenced operations on June 17, 1999.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund 49
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM HIGH YIELD FUND II ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a high level of current income and capital growth.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
high yield, lower rated debt securities, which are commonly referred to as "junk
bonds," and convertible securities rated below investment grade (i.e., lower
than the four highest rating catergories) by a nationally recognized statistical
rating agency, or of comparable quality if unrated. There is no limit on either
the portfolio maturity or the acceptable rating of securities bought by the
Fund. Securities may bear rates that are fixed, variable or floating. The Fund
may invest up to 35% of its total assets in equity securities of U.S. and
foreign companies, including securities of companies in emerging markets. In
selecting equity securities, the portfolio managers use a "bottom-up" analysis
that focuses on individual companies and assesses the company's valuation,
financial condition, management, competitiveness, and other factors.
The Fund is not restricted to investments in companies of any particular size,
but currently intends to invest principally in companies with market
capitalization above $100 million at the time of purchase. The Fund may also use
options, futures contracts and interest rate and currency swaps as hedging
techniques or to help seek the Fund's investment objective.
Differences between the Fund and High Yield Fund -- While both Funds invest
primarily in high yield securities, the High Yield Fund normally emphasizes
bonds with stronger credit ratings in the high yield bond universe. Thus, of the
two Funds, High Yield Fund II normally presents the potential for higher income,
but with potentially higher credit risk and volatility.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income mutual funds because it invests in
high yield (or "junk bond") debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments. This is especially true during periods of economic
uncertainty or economic downturns.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the owners of the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging market countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.
Risk of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivative instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
Price Volatility -- equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. 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.
50 ING Pilgrim High Yield Fund II
<PAGE>
ING PILGRIM HIGH YIELD FUND II
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.07 5.03 6.03
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) The figures shown for the years 1999 and 2000 provide performance for the
Class Q shares of the Fund. The figures shown for the years 1997 and 1998
provide performance for Institutional Class shares of the Fund, revised to
reflect expenses of Class Q shares. Prior to May 24, 1999, the Fund was
managed by a different adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the First Boston High Yield Index.
Average Annual Total Returns
First
Boston
High
Institutional Yield
Class Q Class(3) Index(4)
--------- --------------- -----------
One year, ended
December 31, 2000 %
Since inception of
Class Q(5) %
Since inception of
Institutional Class(5) %
----------
(3) Institutional Class shares of the Fund are no longer offerred.
(4) The First Boston High Yield Index is an unmanaged index that measures the
performance of fixed income securities similar, but not identical, to those
in the Fund's portfolio.
(5) Class Q commenced operations on March 27, 1998. Institutional Class shares
of the Fund commenced operations on July 31, 1996.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund II 51
<PAGE>
------
Income
Funds
------
Adviser
ING PILGRIM GLOBAL INCOME FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund's investment objective is to seek high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated or unrated debt securities.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund invests in a variety of foreign and domestic high yield, lower rated or
unrated debt securities.
The Fund, under normal conditions, invests substantially all of its assets in
lower rated or unrated debt securities of domestic companies, companies in
developed foreign countries, and companies in emerging markets. The credit
quality of the foreign debt securities which the Fund intends to buy is
generally equal to U.S. corporate debt securities known as "junk bonds". The
debt securities in which the Fund invests consist of bonds, notes, debentures
and other similar instruments. The Fund may invest in debt securities issued by
foreign governments, their agencies and instrumentalities, central banks,
commercial banks and other corporate entities. The Fund may invest up to 100% of
its total assets in domestic and foreign debt securities that are rated below
investment grade or are of comparable quality. The Fund may also invest in
securities that are in default as to payment of principal and/or interest, and
bank loan participations and assignments.
The Fund's investment strategy stresses diversification to help reduce the
Fund's price volatility. Global fixed income securities are divided into four
categories. The categories reflect whether the securities are U.S. dollar
denominated or not and whether borrowers are in developed markets or emerging
markets. The Fund then seeks to select the best values in each of these four
segments. The balance the Fund maintains between these sectors attempts to limit
the price volatility.
Pending Merger -- Subject to shareholder approval, the Fund's Board of Trustees
has approved the reorganization of the Fund into ING Pilgrim Strategic Income
Fund. You could therefore ultimately hold shares of that Fund.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income funds because it invests in high
yield debt securities, which are considered predominantly speculative with
respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.
Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.
Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.
Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging markets countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.
Non-Diversification Risk -- The Fund is a non-diversified investment company.
There is additional risk associated with being non-diversified, since a greater
proportion of the Fund's total assets may be invested in a single company.
52 ING Pilgrim Global Income Fund
<PAGE>
ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.
Year by Year Total Returns (%)(1)(2)(3)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
10.03 6.51 10.90 -6.52 20.10 13.33 5.00 8.21 -0.31
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund and the Fund's shares were sold on a no-load basis.
Effective July 26, 2000, the Fund's outstanding shares were classified as
"Class A" shares. Because Class Q shares were first offered in 2000, the
returns in the bar chart are based upon the performance of Class A shares
of the Fund, adjusted to reflect the current Class A expenses. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) Prior to December 31, 1994, the Fund operated under a different investment
objective.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Brothers Global Treasury Index.
Average Annual Total Returns
Lehman Brothers
Global Treasury
Class A(4) Index(5)
---------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Ten years, ended
December 31, 2000 %
----------
(4) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund did not have a full year's performance during
the year ended December 31, 2000. Reflects deduction of Class A sales
charge of 4.75%. See footnote (2) to the bar chart above.
(5) The Lehman Brothers Global Treasury Index is an unmanaged index that is
comprised of 19 countries with an average maturity of 7.46%. The index is
overweighted in the U.S. and Japan, 27% and 25% respectively. The average
coupon is 5.37%. The index returns are calculated in three ways: U.S.
Dollars hedged, U.S. Dollars and local returns (local currencies). The
modified adjusted duration of the index is 5.5 years.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Income Fund 53
<PAGE>
------------
Equity and
Income Funds
------------
Adviser
ING PILGRIM BALANCED FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks a balance of long-term capital appreciation and current income.
INVESTMENT
STRATEGY
[GRAPHIC]
The Fund's adviser actively manages a blended portfolio of equity and debt
securities with an emphasis on overall total return. The Fund normally maintains
40% to 60% of its assets in debt securities of any maturity issued by
corporations or other business entities and the U.S. Government and its agencies
and instrumentalities, and government sponsored enterprises, and normally seeks
a target allocation of 50%, although this may vary with market conditions.
The remainder of the Fund's assets are normally invested in equity securities of
large companies that the adviser believes are leaders in their industries. The
adviser considers whether these companies have a sustainable competitive edge.
The portfolio managers emphasize a value approach in equity selection and seek
securities whose prices in relation to projected earnings are believed to be
reasonable in comparison to the market. For this Fund, a company with a market
capitalization of over $5 billion is considered to be a large company, although
the Fund may also invest to a limited degree in companies that have a market
capitalization between $1 billion and $5 billion.
A portion of the Fund's net assets (up to 35%) may be invested in high yield
debt securities (commonly known as "junk bonds") rated below investment grade
(i.e., lower than the four highest rating categories) by a nationally recognized
statistical rating agency, or of comparable quality if unrated. There is no
minimum credit quality for the high yield debt securities in which the Fund may
invest. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may invest up to 20% of its total assets in foreign securities. The Fund may use
options on securities, securities indices, interest rates and foreign currencies
as a hedging technique or in furtherance of this investment objective. The Fund
may invest up to 35% of its net assets in zero coupon securities.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.
The Fund also may invest in smaller companies, which may be more susceptible to
price swings than larger companies.
Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.
Changes in Interest Rates -- the value of debt and equity securities can change
in response to changes in interest rates. The value of the debt securities held
by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in debt securities with
intermediate and long terms to maturity. Debt securities with longer maturities
tend to be more sensitive to changes in interest rates, usually making them more
volatile than debt securities with shorter maturities. Zero coupon securities
are particularly sensitive to changes in interest rates.
Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than the other income mutual funds, because it may
invest in high yield debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments. This is especially true during periods of economic
uncertainty or economic downturns.
Inability to Sell Securities -- high yield securities and securities of smaller
companies may be less liquid than other investments. The 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 -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment.
Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.
54 ING Pilgrim Balanced Fund
<PAGE>
ING PILGRIM BALANCED FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
16.88 21.46 23.52 8.69
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) Prior to May 24, 1999, a different adviser managed the Fund.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of four broad measures of market
performance -- the Standard and Poor's Barra Value Index (S&P Barra Value
Index), the Lehman Aggregate Bond Index, the Lipper Balanced Fund Index -- and a
composite index consisting of 60% S&P 500 Index and 40% Lehman Brothers
Government/Corporate Bond Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Lehman Lipper
S&P Barra Aggregate Balanced
Value Bond Fund Composite
Class Q Index(4) Index(5) Index(6) Index
------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(3) %
</TABLE>
----------
(3) Class Q commenced operations on August 31, 1995.
(4) The S&P Barra Value Index is a capitalization-weighted index of all stocks
in the Standard and Poor's 500 Composite Stock Price Index ("S&P 500
Index") that have low price-to-book ratios. It is designed so that
approximately 50% of the market capitalization of the S&P 500 Index is in
the Standard and Poor's Barra Value Index.
(5) The Lehman Aggregate Bond Index is an unmanaged index that measures the
performance of the U.S. investment grade fixed rate bond market, including
government and corporate securities, mortgage pass-through securities, and
asset-backed securities.
(6) The Lipper Balanced Fund Index is an unmanaged index that measures the
performance of balanced funds (funds that seek current income balanced with
capital appreciation).
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Balanced Fund 55
<PAGE>
------------
Equity and
Income Funds
------------
Adviser
ING PILGRIM CONVERTIBLE FUND ING Pilgrim Investments, Inc.
--------------------------------------------------------------------------------
OBJECTIVE
[GRAPHIC]
The Fund seeks maximum total return, consisting of capital appreciation and
current income.
INVESTMENT
STRATEGY
[GRAPHIC]
Under normal conditions, the Fund invests at least 65% of its total assets in
convertible securities. Convertible securities are generally preferred stock or
other securities, including debt securities, that are convertible into common
stock. The Fund emphasizes companies with market capitalizations above $500
million. Through investments in convertible securities, the Fund seeks to
capture the upside potential of the underlying equities with less downside
exposure.
The Fund normally invests a minimum of 25% of its total assets in common and
preferred stocks, and 25% in other income producing convertible and debt
securities. The Fund may also invest up to 35% of its net assets in high yield
or convertible debt securities (commonly known as "junk bonds") rated below
investment grade by a nationally recognized statistical rating agency, or of
comparable quality if unrated. There is no minimum credit rating for high yield
securities in which the Fund may invest.
The Fund may also invest in securities issued by the U.S. government and its
agencies and instrumentalities.
In evaluating convertibles the Fund's Adviser evaluates each security's
investment characteristics as a fixed income instrument as well as its potential
for capital appreciation.
In analyzing specific companies for possible investment, the Adviser ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Adviser usually considers whether to sell a particular security when any of
those factors materially changes.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.
--------------------------------------------------------------------------------
RISKS
[GRAPHIC]
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:
Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Convertible securities have investment
characteristics of both equity and debt securities. Equity securities face
market, issuer and other risks, and their values may go up or down, sometimes
rapidly and unpredictably. Market risk is the risk that securities may decline
in value due to factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security may decline for
reasons relating to the issuer, such as changes in the financial condition of
the issuer. While equities may offer the potential for greater long-term growth
than most debt securities, they generally have higher volatility. The Fund may
invest in small and medium-sized companies, which may be more susceptible to
greater price swings than larger companies because they may have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.
Changes in Interest Rates -- the value of the convertible and debt securities
held by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in securities with intermediate
and long terms to maturity. Securities with longer durations tend to be more
sensitive to changes in interest rates, usually making them more volatile than
securities with shorter durations. Zero coupon securities are particularly
sensitive to Changes in Interest Rates.
Credit Risk -- the Fund could lose money if the issuer of a security is unable
to meet its financial obligations or goes bankrupt. This is especially true
during periods of economic uncertainty or economic downturns. This Fund may be
subject to more credit risk than many bond funds, because the convertible
securities and debt securities in which it invests may be lower-rated
securities.
Inability to Sell Securities -- convertible securities and lower rated debt and
convertible securities may be less liquid than other investments. The Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.
Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.
56 ING Pilgrim Convertible Fund
<PAGE>
ING PILGRIM CONVERTIBLE FUND
--------------------------------------------------------------------------------
HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.
Year by Year Total Returns (%)(1)(2)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20.74 23.04 21.40 50.44
Best and worst quarterly performance during this period:
___ quarter ___: ___________%
___ quarter ___: ___________%
----------
(1) These figures are for the year ended December 31 of each year.
(2) ING Pilgrim Investments, Inc. has been the Fund's investment adviser since
May 24, 1999; however, prior to October 1, 2000, the Fund was advised by a
sub-adviser.
The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the First Boston Convertible Index.
Average Annual Total Returns
First
Boston
Convertible
Class Q Index(3)
------- --------
One year, ended
December 31, 2000 %
Five years, ended
December 31, 2000 %
Since inception(4) %
----------
(3) The First Boston Convertible Index is an unmanaged index that measures the
performance of a universe of convertible securities that are similar, but
not identical, to those in the Fund's portfolio.
(4) Class Q commenced operations on August 31, 1995.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Convertible Fund 57
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the fund. The table below shows the fees
and expenses for Class Q shares of the ING Pilgrim Funds.
Fees You Pay Directly
Class Q
-------
Maximum sales charge on your investment
(as a % of offering price) none
Maximum deferred sales charge
(as a % of purchase or sales price,
whichever is less) none
Operating Expenses Paid Each Year by the Funds(1)
(as a % of average net assets)
<TABLE>
<CAPTION>
Total
Fund Fee Waiver
Management Service Other Operating by Net
Fund Fee Fees Expenses(2)(3) Expenses Adviser(4) Expenses
--------------------------------- ------------ --------- ---------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MagnaCap % 0.71 0.25 0.28 1.24 -- 1.24
Growth and Income % 0.62 0.25
LargeCap Leaders % 0.85 0.25 0.59 1.69 -- 1.69
Research Enhanced Index % 0.70 0.25
Growth Opportunities % 0.95 0.25
LargeCap Growth % 0.75 0.25 0.26 1.26 -- 1.26
MidCap Value % 0.85 0.25 0.63 1.73 -- 1.73
MidCap Opportunities % 1.00 0.25
MidCap Growth % 0.75 0.25 0.26 1.26 -- 1.26
Growth + Value % 1.00 0.25
SmallCap Opportunities % 1.00 0.25
SmallCap Growth % 1.00 0.25 0.32 1.57 -0.05 1.52
Worldwide Growth % 1.00 0.25
International Value % 1.00 0.25
International % 1.00 0.25
International Core Growth % 1.00 0.25
International SmallCap Growth % 1.00 0.25
Emerging Countries % 1.25 0.25
Government Securities Income(5) % 0.50 0.25 0.60 1.35 -- 1.35
GNMA Income % 0.54 0.25
Strategic Income % 0.45 0.25 1.84 2.54 -1.68 0.86
High Yield % 0.60 0.25 0.32 1.17 -0.12 1.05
High Yield II(5) % 0.60 0.25 0.42 1.27 -0.19 1.08
Global Income % 1.00 0.25
Balanced(5) % 0.75 0.25 0.51 1.51 -0.21 1.30
Convertible % 0.75 0.25 0.25 1.25 -- 1.25
</TABLE>
----------
(1) This table shows the estimated operating expenses for Class Q shares of
each Fund as a ratio of expenses to average daily net assets. These
estimated expenses are based on each Fund's actual operating expenses for
its most recent complete fiscal year, as adjusted for contractual changes,
and fee waivers to which the Adviser has agreed.
(2) Because Class Q shares are new for Growth and Income Fund, LargeCap Leaders
Fund, Research Enhanced Index Fund, Growth Opportunities Fund, MidCap
Opportunities Fund, Growth + Value Fund, SmallCap Opportunities Fund,
International Value Fund, International Fund, Government Securities Income
Fund, GNMA Income Fund and Global Income Fund, the expenses for each Fund
are estimated based on Class A expenses of the Fund.
(3) For Growth and Income Fund, International Fund, GNMA Income Fund and
Global Income Fund, estimated operating expenses are based on estimated
contractual operating expenses commencing with ING Pilgrim Investments,
Inc.'s management of these Funds.
(4) ING Pilgrim Investments, Inc. has entered written into expense limitation
agreements with each Fund which it advises except MagnaCap Fund, Research
Enhanced Index Fund, Growth Opportunities Fund, MidCap Opportunities Fund,
Growth + Value Fund, SmallCap Opportunities Fund, International Value Fund
and Government Securities Income Fund, under which it will limit expenses
of the Fund, excluding interest, taxes, brokerage and extraordinary
expenses, subject to possible reimbursement to ING Pilgrim Investments,
Inc. within three years. The amount of each Fund's expenses waived or
reimbursed during the last fiscal year by ING Pilgrim Investments, Inc. is
shown under the heading "Fee Waiver by Adviser." For each Fund except
Government Securities Income Fund, the expense limit will continue through
at least October 31, 2001. Nicholas-Applegate Capital Management bears 50%
of the cost of maintaining the expense limit for International SmallCap
Growth Fund. ING Pilgrim Investments, Inc. has separately agreed to
reimburse Government Securities Income Fund to the extent that total Fund
operating expenses, excluding interest, taxes, brokerage commissions,
extraordinary expenses, and distribution fees in excess of 0.25%, exceed
1.50% of the Fund's average daily net assets on the first $40 million in
net assets and 1% of average daily net assets in excess of $40 million. The
expense limit for Government Securities Income Fund will terminate only
with termination of the advisory contract with ING Pilgrim Investments,
Inc.
(5) Effective April 1, 2000, certain Pilgrim Funds merged with High Yield II,
Balanced, and Government Securities Income Funds. It is expected that as a
result of the mergers, operating expenses for High Yield II, Balanced and
Government Securities Income Funds will be lower than the operating
expenses prior to the mergers.
58 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------
Examples
The examples that follow are intended to help you compare the cost of investing
in the ING Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.
Class Q
<TABLE>
<CAPTION>
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
MagnaCap $ 126 393 681 1,500
Growth and Income $
LargeCap Leaders $ 172 533 918 1,998
Research Enhanced Index $
Growth Opportunities $
LargeCap Growth $ 128 400 692 1,523
MidCap Value $ 176 545 939 2,041
MidCap Opportunities $
MidCap Growth $ 128 400 692 1,523
Growth + Value $
SmallCap Opportunities $
SmallCap Growth $ 155 491 850 1,863
Worldwide Growth $
International Value $
International $
International Core Growth $
International SmallCap Growth $
Emerging Countries $
Government Securities Income $ 137 428 739 1,624
GNMA Income $
Strategic Income $ 88 630 1,199 2,749
High Yield $ 107 360 632 1,410
High Yield II $ 110 384 679 1,517
Global Income $
Balanced $ 132 457 804 1,784
Convertible $ 127 397 686 1,511
</TABLE>
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
What You Pay to Invest 59
<PAGE>
SHAREHOLDER GUIDE HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------
Purchase of Shares
Class Q Shares are offered at net asset value without a sales charge to
qualified retirement plans, financial and other institutions and "wrap
accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment is $10,000. The Distributor may waive these minimums from
time to time. Certain Funds also offer Class A, B, C, M and T shares, which have
different sales charges and other expenses that may affect their performance.
You can obtain more information about these other share classes by calling (800)
992-0180.
The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. Pilgrim reserves the right to waive minimum investment
amounts. The Funds reserve the right to liquidate sufficient shares to recover
annual transfer agent fees or to close your account and redeem your shares
should you fail to maintain your account value at a minimum of $250,000.
If you are a participant in a qualified retirement plan, you should make
purchases through your plan administrator or sponsor, who is responsible for
transmitting orders.
All other purchasers may purchase shares by the methods outlined in the table on
the right.
Distribution and Shareholder Service Fees
To pay for the cost of servicing your shareholder account, each Fund has adopted
a Rule 12b-1 plan for Class Q shares which requires fees to be paid out of the
assets of the class. Each Fund pays a service fee at an annual rate of 0.25% of
the average daily net assets of the Class Q shares of the Fund.
Retirement Plans
You may invest in each Fund through various retirement plans, including IRAs,
Simplified Employee Plan (SEP) IRAs, Roth IRAs 403(b) plans, 457 plans, and all
qualified retirement plans. For further information about any of the plans,
agreements, applications and annual fees, contact the Distributor, your
financial consultant or plan sponsor. To determine which retirement plan is
appropriate for you, consult your tax adviser. For further information, contact
the Shareholder Servicing Agent at (800) 992-0180.
<TABLE>
<CAPTION>
Initial Additional
Method Investment Investment
------ ---------- ----------
<S> <C> <C>
By Contacting A financial consultant Visit or consult a
Your Financial with an authorized firm financial consultant.
Consultant can help you establish
and maintain your
account.
By Mail Visit or speak with a Fill out the Account
financial consultant. Additions form
Make your check included on the bottom
payable to the ING of your account
Pilgrim Funds and mail statement along with
it, along with a your check payable to
completed Application. the Fund and mail
Please indicate your them to the address on
investment professional the account statement.
on the New Account Remember to write
Application your account number
on the check.
By Wire Call the ING Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.
Instruct your bank to
wire funds to the Fund
in the care of:
State Street Bank and
Trust Kansas City ABA
#101003621 Kansas City,
MO credit to: _________
(the Fund) A/C #751-8315;
for further credit to:
___________________
Shareholder A/C #
___________________ (A/C
# you received over the
telephone) Shareholder
Name:___________________
(Your Name Here) After
wiring funds you must
complete the Account
Application and send it
to: ING Pilgrim Funds P.O.
Box 219368 Kansas City,
MO 64121-6368
</TABLE>
60 Shareholder Guide
<PAGE>
HOW TO REDEEM SHARES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
If you are a participant in a qualified retirement plan, you should make
redemptions through your plan administrator or sponsor, who is responsible for
transmitting orders.
All other shareholders may redeem shares by the methods outlined in the table on
the right.
Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $250,000.
* Minimum withdrawal amount is $1,000.
* You may choose from monthly, quarterly, semi-annual or annual payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the SAI.
Payments
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a 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.
Method Procedures
------ ----------
By Contacting Your You may redeem by contacting your financial
Financial Consultant consultant who may charge for their services
in connection with your redemption request,
but neither the Fund nor the Distributor
imposes any such charge.
By Mail Send a written request specifying the Fund
name and share class, your account number,
the name(s) in which the account is
registered, and the dollar value or number of
shares you wish to redeem to:
ING Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written
request. Corporate investors and other
associations must have an appropriate
certification on file authorizing redemptions.
A suggested form of such certification is
provided on the Account Application. A
signature guarantee may be required.
By Telephone -- You may redeem shares by telephone on all
Expedited Redemption accounts other than retirement accounts,
unless you check the box on the Account Application
which signifies that you do not wish to use telephone
redemptions. To redeem by telephone, call the
Shareholder Servicing Agent at (800) 992-0180. Receiving
Proceeds By Check: You may have redemption proceeds (up
to a maximum of $100,000) mailed to an address which has
been on record with ING Pilgrim Funds for at least 30
days. Receiving Proceeds By Wire: You may have
redemption proceeds (subject to a minimum of $5,000)
wired to your pre-designated bank account. You will not
be able to receive redemption proceeds by wire unless
you check the box on the Account Application which
signifies that you wish to receive redemption proceeds
by wire and attach a voided check. Under normal
circumstances, proceeds will be transmitted to your bank
on the business day following receipt of your
instructions, provided redemptions may be made. In the
event that share certificates have been issued, you may
not request a wire redemption by telephone.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 61
<PAGE>
SHAREHOLDER GUIDE TRANSACTION POLICIES
--------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for Class Q shares of each Fund is
determined each business day as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. Eastern Time). The NAV per share of Class Q
shares of each Fund is calculated by taking the value of the Fund's assets
attributable to Class Q shares, subtracting the Fund's liabilities attributable
to Class Q shares, and dividing by the number of Class Q shares that are
outstanding. Because foreign securities may trade on days when the Funds do not
price shares, the net asset value of a Fund that invests in foreign securities
may change on days when shareholders will not be able to purchase or redeem the
Fund's shares.
In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees, although the
actual calculations will be made by persons acting under the supervision of the
Board. Valuing securities at fair value involves greater reliance on judgment
than securities that have readily available market quotations.
Price of Shares
When you buy shares, you pay the NAV. When you sell shares, you receive the NAV.
Exchange orders are effected at NAV.
Execution of Requests
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase 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 Fund shares 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 Funds will not be issued
unless you request them in writing.
Telephone Orders
The ING Pilgrim Funds and their 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 Funds and their 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 Funds and their transfer agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Exchanges
You may exchange Class Q shares for Class Q shares of any other ING Pilgrim Fund
that offers Class Q shares. The total value of shares being exchanged must at
least equal the minimum investment requirement for Class Q shares of the Fund
into which they are being exchanged. Exchanges of shares are sales and may
result in a gain or loss for federal and state income tax purposes. There is no
specific limit on exchange frequency; however, the Funds are intended for
long-term investment and not as a trading vehicle. The Adviser may prohibit
excessive exchanges (more than four per year). The Adviser also may, on 60 days'
prior notice, restrict the frequency of, otherwise modify, or impose charges of
up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege.
Systematic Exchange Privilege
You may elect to have a specified dollar amount of Class Q 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 Class Q shares of any other open-end ING Pilgrim Fund. This exchange
privilege may be modified at any time or terminated upon 60 days' written notice
to shareholders.
62 Shareholder Guide
<PAGE>
TRANSACTION POLICIES SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
Small Accounts (Non-Retirement Only)
If you draw down a non-retirement account so that its total value is less than
the Fund minimum, you may be asked to purchase more shares within 60 days. If
you do not take action, the Fund may close out your account and mail you the
proceeds. Your account will not be closed if its drop in value is due to Fund
performance.
Account Access
Unless your ING Pilgrim shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the internet at www.pilgrimfunds.com, or via a
touch tone telephone by calling (800) 992-0180 and selecting Option 1. Should
you wish to speak with a Shareholder Service Representative you may call the
toll-free number listed above and select Option 2.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Shareholder Guide 63
<PAGE>
MANAGEMENT OF THE FUNDS ADVISER
--------------------------------------------------------------------------------
ING Pilgrim Investments, Inc. ("ING Pilgrim" or "ING Pilgrim Investments")
serves as the investment adviser to each of the Funds. ING Pilgrim has overall
responsibility for the management of the Funds. ING Pilgrim provides or oversees
all investment advisory and portfolio management services for each Fund, and
assists in managing and supervising all aspects of the general day-to-day
business activities and operations of the Funds, including custodial, transfer
agency, dividend disbursing, accounting, auditing, compliance and related
services.
Organized in December 1994, ING Pilgrim is registered as an investment adviser.
ING Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Through its subsidiaries, ReliaStar offers individuals and
institutions life insurance and annuities, employee benefits products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products, and personal finance education.
On July 26, 2000, ReliaStar was acquired by ING Group (NYSE: ING). 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.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as
investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors,
an indirect wholly-owned subsidiary of ReliaStar, merged with ING Pilgrim
Investments. Pilgrim Advisors and ING Pilgrim Investments were sister companies
and shared certain resources and investment personnel.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired
Lexington Global Asset Managers, Inc., the parent company of Lexington, and ING
Pilgrim Investments was approved as Adviser to the Funds formerly advised by
Lexington.
As of December 31, 2000, ING Pilgrim managed over $ billion in assets.
ING Pilgrim's principal address is 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258.
ING Pilgrim receives a monthly fee for its services based on the average daily
net assets of each of the Funds.
The following table shows the aggregate annual management fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:
Fund Management Fee
---- --------------
MagnaCap 0.71%
Growth and Income 0.62
LargeCap Leaders 1.00
Research Enhanced Index 0.70
Growth Opportunities 0.75
LargeCap Growth 0.75
MidCap Value 1.00
MidCap Opportunities 1.00
MidCap Growth 0.75
Growth + Value 1.00
SmallCap Opportunities 0.75
SmallCap Growth 1.00
Worldwide Growth 1.00
International Value 1.00
International 1.00
International Core Growth 1.00
International SmallCap Growth 1.00
Emerging Countries 1.25
Government Securities Income 0.50
GNMA Income 0.54
Strategic Income 0.45
High Yield 0.60
High Yield II 0.60
Global Income 1.00
Balanced 0.75
Convertible 0.75
ING Pilgrim Directly Manages the Portfolios of the Following Funds:
Growth Opportunities Fund
MidCap Opportunities Fund
MidCap Growth Fund
The following individuals share responsibility for the day-to-day management of
the Growth Opportunities Fund, the MidCap Opportunities Fund and MidCap Growth
Fund:
Mary Lisanti, Executive Vice President and Chief Investment Officer -- Domestic
Equities of ING Pilgrim, has served as a Senior Portfolio Manager of MidCap
Opportunities Fund since the fund was formed in August 1998, Growth
Opportunities Fund since August 1998, and ING Pilgrim MidCap Growth Fund since
April 2000. Prior to joining ING Pilgrim in October 1999, Ms. Lisanti was
Executive Vice President and Chief Investment Officer -- Domestic Equities with
Northstar Investment Management Corp., which subsequently merged into ING
Pilgrim. From 1996 to 1998, Ms. Lisanti was a Portfolio Manager at Strong
Capital Management. From 1993 to 1996, Ms. Lisanti was a Managing Director and
Head of Small- and Mid-Capitalization Equity Strategies at Bankers Trust Corp.
Jeffrey Bernstein, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of MidCap Opportunities Fund since
64 Management of the Funds
<PAGE>
ADVISER MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
the fund was formed in August 1998, Growth Opportunities Fund since August 1998,
and ING Pilgrim MidCap Growth Fund since April 2000. Prior to joining ING
Pilgrim in October 1999, Mr. Bernstein was a portfolio manager at Northstar
Investment Management Corp., which subsequently merged in ING Pilgrim. Prior to
May 1998, Mr. Bernstein was a Portfolio Manager at Strong Capital Management.
>From 1995 to 1997, Mr. Berstein was a Portfolio Manager at Berkeley Capital.
Growth and Income Fund
Alan H. Wapnick, Senior Vice President and Senior Portfolio Manager of Growth
and Income Fund has been managing the Fund's portfolio since July 1994. He
joined ING Pilgrim in July 2000. Prior to July 2000, he was Senior Vice
President and Senior Portfolio Manager at Lexington (which was acquired by ING
Pilgrim's parent company in July 2000). Prior to joining Lexington in 1986, Mr.
Wapnick was an equity analyst with Merrill Lynch, L.W. Seligman, Dean Witter and
most recently Union Carbide Corporation. Mr. Wapnick graduated from Dartmouth
College and received an M.B.A. from Columbia University.
SmallCap Opportunities Fund and SmallCap Growth Fund
Mary Lisanti, whose background is described above, has served as manager of the
SmallCap Opportunities Fund since July 1998 and SmallCap Growth Fund since April
2000.
MagnaCap Fund
This Fund is managed by a team led by Howard N. Kornblue, Senior Vice President
and Senior Portfolio Manager for ING Pilgrim Investments. Mr. Kornblue has
served as a Portfolio Manager of MagnaCap Fund since 1989. The other individual
on the team is G. David Underwood.
Mr. Underwood has over 21 years of investment management experience. At ING
Pilgrim, he serves as a Senior Vice President and Senior Portfolio Manager.
Prior to joining ING Pilgrim in December 1996, Mr. Underwood was a Director of
Funds Management for First Interstate Capital Management. Mr. Underwood's prior
experience includes a 10 year association with Integra Trust Company of
Pittsburgh where he served as Director of Research and Senior Portfolio Manager.
LargeCap Leaders Fund and MidCap Value Fund
The LargeCap Leaders and MidCap Value Funds are managed by a team led by G.
David Underwood, Senior Vice President and Senior Portfolio Manager for ING
Pilgrim. Mr. Underwood is the Lead Portfolio Manager of the Funds.
LargeCap Growth Fund
Mary Lisanti, whose background is described above, has served as Senior
Portfolio Manager of the LargeCap Growth Fund since October 1, 2000.
Thomas J. Sullivan, Vice President of ING Pilgrim, has served as a Portfolio
Manager of LargeCap Growth Fund since October 1, 2000. Prior to joining ING
Pilgrim in September 2000, Mr. Sullivan was a Partner and Equity Trader for
First NY Securities, LLC. From April, 1994 to March, 2000, Mr. Sullivan was Vice
President and portfolio manager at Nicholas-Applegate Capital Management.
International Fund
International Core Growth Fund
Richard T. Saler, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
International Fund since January 1994, and International Core Growth Fund since
October 2000. From 1986 until July 2000, he was Senior Vice President and
Director of International Equity Strategy at Lexington (which was acquired by
ING Pilgrim's parent company in July 2000).
Phillip A. Schwartz, Senior Vice President and Director of International Equity
Investment Strategy of ING Pilgrim, has served as Senior Portfolio Manager of
International Fund since January 1998, and International Core Growth Fund since
October 2000. Prior to joining ING Pilgrim in July 2000, Mr. Schwartz was Senior
Vice President and Director of International Equity Investment Strategy at
Lexington (which was acquired by ING Pilgrim's parent company in July 2000).
Prior to 1993, Mr. Schwartz was a Vice President of European Research Sales with
Cheuvreux de Virieu in Paris and New York.
Emerging Countries Fund
Richard T. Saler, whose background is described above, has served as the Senior
Portfolio Manager of the portfolio management team that manages Emerging
Countries Fund since October 2000.
Phillip A. Schwartz, whose background is described above, has served as a member
of the portfolio management team that manages Emerging Countries Fund since
October 2000.
Jan Wim Derks, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund since October
2000. In addition to his role with ING Pilgrim, Mr. Derks also serves as
Director of Global Emerging Markets Equities at ING Investment Management --
Europe. Prior to joining ING Investment Management -- Europe in 1997, Mr. Derks
managed a Latin American equity fund with ABN AMRO.
Eric Anderson, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Management of the Funds 65
<PAGE>
MANAGEMENT OF THE FUNDS ADVISER
--------------------------------------------------------------------------------
Emerging Countries Fund since October 2000. In addition to his role with ING
Pilgrim, Mr. Anderson also serves as Senior Portfolio Manager -- Global Emerging
Markets Equities at ING Investment Management -- Americas. Prior to joining ING
Investment Management -- Americas in 1997, Mr. Anderson managed a Latin America
equity portfolio and participated in the management of an emerging market debt
portfolio at Offitbank in New York.
Bratin Sanyal, Vice President of ING Pilgrim, has served as a member of the
portfolio management team that manages the Emerging Countries Fund since October
2000. In addition to his role with ING Pilgrim, Mr. Sanyal serves as the Senior
Portfoio Manager -- Global Emerging Markets Equities at ING Investment
Management -- Europe. Mr. Sanyal has held several positions with ING Investment
Management -- Europe, most recently as an Asian equity fund manager. Prior to
joining ING Investment Management -- Europe in 1993, he was an economist at the
World Bank where he structured debt workouts for the Highly Indebted Countries.
Worldwide Growth Fund
The following individuals share responsibility for the day-to-day management of
the Worldwide Growth Fund:
Mary Lisanti, whose background is described above, has served as Senior
Portfolio Manager of the domestic equity portion of the Worldwide Growth Fund's
assets since October 1, 2000.
Thomas J. Sullivan, whose background is described above, has served as Portfolio
Manager of the domestic equity portion of the Worldwide Growth Fund's assets
since October 1, 2000.
Richard T. Saler, whose background is described above, has served as Senior
Portfolio Manager of the international portion of the Worldwide Growth Fund's
assets since October 1, 2000.
Philip A. Schwartz, whose background is described above, has served as Senior
Portfolio Manager of the international portion of the Worldwide Growth Fund's
assets since October 1, 2000.
GNMA Income Fund and Global Income Fund
Denis P. Jamison, Senior Vice President and Senior Portfolio Manager of ING
Pilgrim, has served as Senior Portfolio Manager of GNMA Income Fund since July
1981 and Global Income Fund since July 1986. He is a Chartered Financial Analyst
and a member of the New York Society of Security Analysts.
Roseann G. McCarthy, Assistant Vice President of ING Pilgrim since July 2000 has
served as co-manager of GNMA Income Fund since November 1997. Prior to July
2000, she was an Assistant Vice President at Lexington (which was acquired by
ING Pilgrim's parent company in July 2000). Prior to joining the Lexington
Fixed-Income Department in 1997, she was Mutual Fund Marketing and Research
Coordinator. Prior to 1995, Ms. McCarthy was Fund Statistician and a Shareholder
Service Representative for the Lexington Funds.
Strategic Income Fund
The following individuals share responsibility for the day-to-day management of
the Strategic Income Fund:
Robert K. Kinsey, Vice President of ING Pilgrim, has served as a Portfolio
Manager of Strategic Income Fund since May 24, 1999. Mr. Kinsey manages
Strategic Income Fund's assets that are invested in assets other than high yield
debt securities. Prior to joining ING Pilgrim, Mr. Kinsey was a Vice President
and Fixed Income Portfolio Manager for Federated Investors from January 1995 to
March 1999. From July 1992 to January 1995, Mr. Kinsey was a Principal and
Portfolio Manager for Harris Investment Management.
Edwin Schriver, Senior Vice President of ING Pilgrim, has served as a Senior
Portfolio Manager of the portfolio management team that manages the high yield
portion of the Strategic Income Fund's assets since October 2000. Prior to
joining ING Pilgrim, Mr. Schriver was a Senior High Yield Analyst for Dreyfus
Corporation since 1998. From 1996 to 1997, Mr. Schriver was the President of
Crescent City Research, an investment research and software firm. Prior to 1996,
Mr. Schriver was President of an SEC registered investment adviser and held
various senior portfolio management positions.
Government Securities Income Fund
Robert K. Kinsey, whose background is described above, has primary
responsibility for the day-to-day management of Government Securities Income
Fund, and has served as Senior Portfolio Manager of Government Securities Income
Fund since May 24, 1999.
High Yield Fund and High Yield Fund II
Edwin Schriver, whose background is described above, has served as Senior
Portfolio Manager of the portfolio management team that manages High Yield Fund
and High Yield Fund II since October 2000.
Andy Mitchell, Vice President of ING Pilgrim, has served as Co-Portfolio Manager
of the portfolio management team that manages High Yield Fund and High Yield
Fund II since October 2000. Prior to joining ING Pilgrim in July 2000, Mr.
Mitchell was a Senior Credit Analyst with Katonah Capital since March 2000.
>From March 1998 to March 2000, Mr. Mitchell was a Vice President and Senior
High Yield Analyst at Merrill Lynch Asset Management. From March 1994 to March
1998, Mr. Mitchell was Assistant Vice President and Senior High Yield Analyst at
Schroder Capital Management.
Russ Stiver, Vice President of ING Pilgrim, has served as Co-Portfolio Manager
of the portfolio management team that manages High Yield Fund and High Yield
Fund II since October 2000. Prior to joining ING Pilgrim in May 2000, Mr. Stiver
was Portfolio Manager (1996-2000) and Acting V.P. at Manulife Financial
(1999-2000). From 1994 to 1996, Mr. Stiver analyzed investment grade, high yield
and emerging market sovereign debt securities for Toronto-Dominion Bank.
66 Management of the Funds
<PAGE>
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
Balanced Fund
The following individuals share responsibility for the day-to-day management of
the Balanced Fund:
G. David Underwood, whose background is described above, has served as Senior
Portfolio Manager of the equity portion of the Balanced Fund's assets since May
24, 1999.
Robert K. Kinsey, whose background is described above, has served as a Portfolio
Manager of the portion of Balanced Fund's assets that are invested in assets
other than high yield securities since May 24, 1999.
Edwin Schriver, whose background is described above, has served as Senior
Portfolio Manager of the high yield portion of the Balanced Fund's assets since
October 2000.
Convertible Fund
Andrew Chow, Vice President of ING Pilgrim, has served as a Portfolio Manager of
Convertible Fund since October 1, 2000. Prior to joining ING Pilgrim, Mr. Chow
was the portfolio manager of the Conseco Convertible Securities Fund since 1998.
He joined Conseco in 1991 where he was also responsible for managing convertible
securities accounts.
SUB-ADVISERS
For the following Funds, ING Pilgrim has engaged a Sub-Adviser to provide the
day-to-day management of the Fund's portfolio. The Sub-Advisers have, at least
in part, been selected on the basis of their successful application of a
consistent, well-defined, long-term investment approach over a period of several
market cycles.
Research Enhanced Index Fund
J.P. Morgan Investment Management Inc.
A registered investment adviser, J.P. Morgan Investment Management Inc. (J.P.
Morgan) serves as Sub-Adviser to the ING Pilgrim Research Enhanced Index Fund.
The firm was formed in 1984. The firm evolved from the Trust and Investment
Division of Morgan Guaranty Trust Company which acquired its first tax-exempt
client in 1913 and its first pension account in 1940. J.P. Morgan currently
manages approximately $349 billion for institutions and pension funds. The
company is a wholly owned subsidiary of J.P. Morgan & Co. J.P. Morgan's
principal address is 522 Fifth Avenue, New York, New York 10036.
Nanette Buziak, Timothy Devlin and Bernard Kroll share the responsibility for
the day-to-day management of the Research Enhanced Index Fund.
Ms. Buziak has co-managed the ING Pilgrim Research Enhanced Index Fund since
April 1999. At J.P. Morgan, she serves as a Portfolio Manager and Member of the
Structured Equity Group.
Ms. Buziak has over 8 years of investment management experience. Before joining
J.P. Morgan in 1997, Ms. Buziak was an index arbitrage trader and convertible
bond portfolio manager at First Marathon America, Inc.
Mr. Devlin has co-managed the ING Pilgrim Research Enhanced Index Fund since the
Fund was formed in December 1998. At J.P. Morgan, he serves as a Portfolio
Manager and Member of the Structured Equity Group.
Mr. Devlin has over 12 years of investment management experience. Before joining
J.P. Morgan in 1996, Mr. Devlin was a Portfolio Manager for nine years at
Mitchell Hutchins Asset Management, Inc. where he managed quantitatively-driven
portfolios for institutional and small investments.
Mr. Kroll has co-managed the ING Pilgrim Research Enhanced Index Fund since
March 2000. At J.P. Morgan, he serves as a Portfolio Manager and Member of the
Structured Equity Group.
Mr. Kroll has over 20 years of investment management experience. Before joining
J.P. Morgan in 1996, Mr. Kroll was an equity derivatives specialist at Goldman
Sachs & Co. Earlier, he managed his own software development firm and options
broker-dealer, and managed several derivatives businesses at Kidder Peabody &
Co.
Growth + Value Fund
Navellier Fund Management, Inc.
A registered investment adviser, Navellier Fund Management, Inc. (Navellier)
serves as Sub-Adviser to the ING Pilgrim Growth + Value Fund. Navellier and its
affiliate, Navellier & Associates, Inc., manage over $5 billion for
institutions, pension funds and high net worth individuals. Navellier's
principal address is 1 East Liberty, Third Floor, Reno, Nevada 89501.
Louis Navellier has managed the ING Pilgrim Growth + Value Fund since the Fund
was formed in November 1996. Mr. Navellier has over 19 years of investment
management experience and is the principal owner of Navellier & Associates, Inc.
Mr. Navellier's investment newsletter, MPT Review, has been published for over
19 years and is widely renowned throughout the investment community.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Management of the Funds 67
<PAGE>
MANAGEMENT OF THE FUNDS SUB-ADVISERS
--------------------------------------------------------------------------------
International Value Fund
Brandes Investment Partners, L.P.
A registered investment adviser, Brandes Investment Partners, L.P. (Brandes)
serves as Sub-Adviser to the ING Pilgrim International Value Fund. The company
was formed in May 1996 as the successor to its general partner, Brandes
Investment Partners, Inc., which has been providing investment advisory services
(through various predecessor entities) since 1974. Brandes currently manages
over $33 billion in international portfolios. Brandes' principal address is
12750 High Bluff Drive, San Diego, California 92130.
Charles Brandes has co-managed the ING Pilgrim International Value Fund since
the Funds were formed in March 1995 and January 1998, respectively. Mr. Brandes
has over 31 years of investment management experience. He founded the general
partner of Brandes in 1974 and owns a controlling interest in it. At Brandes, he
serves as a Managing Partner. He is a Chartered Financial Analyst and a Memeber
of the Association for Investment Management and Research.
Jeff Busby has co-managed the ING Pilgrim International Value Fund since the
fund was formed in March 1995. Mr. Busby has over 13 years of investment
management experience. At Brandes he serves as a Managing Partner. He is also
responsible for overseeing all trading activities for the firm. He is a
Chartered Financial Analyst, and a Member of the Association for Investment
Management and Research and the Financial Analyst Society.
International SmallCap Growth Fund
Nicholas-Applegate Capital Management (NACM)
NACM serves as sub-adviser to the ING Pilgrim International SmallCap Growth
Fund. Founded in 1984, NACM manages over $40 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations, and other
institutional investors and individuals. The International SmallCap Growth Fund
is managed by a team of portfolio managers and analysts employed by NACM. NACM
has offices in San Diego, New York, Chicago and San Francisco. It's principal
business address is 600 West Broadway, San Diego, California, 92101.
68 Management of the Funds
<PAGE>
DIVIDENDS/TAXES DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Dividends
The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends, if any, as follows:
Annually(1) Semi-Annually(1) Quarterly(2) Monthly(3)
----------- ---------------- ------------ ----------
LargeCap Leaders MagnaCap Balanced Government
Research Enhanced Growth and Convertible Securities
Index Income Global Income
Growth Income GNMA
Opportunities Income
LargeCap Growth High Yield
MidCap Value High Yield II
MidCap Strategic
Opportunities Income
MidCap Growth
Growth + Value
SmallCap
Opportunities
SmallCap Growth
Worldwide
Growth
International
Value
International
International
Core Growth
International
SmallCap Growth
Emerging
Countries
----------
(1) Distributions normally expected to consist primarily of capital gains.
(2) Distributions normally expected to consist, on an annual basis, of a
variable combination of capital gains and ordinary income.
(3) Distributions normally expected to consist primarily of ordinary income.
Each Fund distributes capital gains, if any, annually.
Dividend Reinvestment
Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class Q shares of a Fund invested in another ING Pilgrim Fund which
offers the Class Q shares.
Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely on your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, 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 a 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 a 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, a 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.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Dividends, Distributions and Taxes 69
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MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information
(SAI).
Many of the investment techniques and strategies discussed in this prospectus
and in the SAI are discretionary, which means that the adviser can decide
whether to use them or not. The Funds named below invest in these securities or
use these techniques as part of the Fund's principal investment strategy.
However, the adviser of any Fund may also use these investment techniques or
make investments in securities that are not a part of the Fund's principal
investment strategy.
PRINCIPAL RISKS
Investments in Foreign Securities (MagnaCap, Growth and Income, Worldwide
Growth, International Value, International, International Core Growth,
International SmallCap Growth, Emerging Countries, High Yield, High Yield II and
Global Income Funds). There are certain risks in owning foreign securities,
including those resulting from: fluctuations in currency exchange rates;
devaluation of currencies; political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning issuers;
accounting, auditing and financial reporting standards or other regulatory
practices and requirements that are not uniform when compared to those
applicable to domestic companies; settlement and clearance procedures in some
countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
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.
Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure of securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.
Emerging Markets Investments (Emerging Countries, High Yield II and Global
Income Funds). 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 financial systems;
environmental problems; less well developed legal systems; and less reliable
custodial services and settlement practices.
Inability to Sell Securities (All Funds except MagnaCap, Research Enhanced
Index, LargeCap Growth, SmallCap Growth, International Core Growth, Government
Securities Income and GNMA Income Funds). Some securities usually trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small and mid-size U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in emerging markets. A
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.
High Yield Securities (Strategic Income, High Yield, High Yield II, Global
Income, Balanced and Convertible Funds). Investments in high yield securities
generally provide greater income and increased opportunity for capital
appreciation than investments in higher quality debt securities, but they also
typically entail greater potential price volatility and principal and income
risk. High yield securities are not considered investment grade, and are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of high
yield securities have been found to be less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic downturns
or individual corporate developments. High yield securities structured as
zero-coupon or pay-in-kind securities tend to be more volatile. The secondary
market in which high yield securities are traded is generally less liquid than
the market for higher grade bonds. At times of less liquidity, it may be more
difficult to value high yield securities.
Corporate Debt Securities (International, Strategic Income, High Yield, High
Yield II, Global Income, Balanced and Convertible Funds). Corporate debt
securities are subject to the risk of the issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the credit-worthiness of the issuer and general market liquidity. When
interest rates decline, the value of the Fund's debt securities can be
70 More Information About Risks
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MORE INFORMATION ABOUT RISKS
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expected to rise, and when interest rates rise, the value of those securities
can be expected to decline. Debt securities with longer maturities tend to be
more sensitive to interest rate movements than those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility." According to this measure, the longer the
maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.
U.S. Government Securities (Government Securities Income, GNMA Income, Strategic
Income, High Yield and High Yield II Funds). Some U.S. Government agency
securities may be subject to varying degrees of credit risk, particularly those
that are not backed by the full faith and credit of the United States
Government. All U.S. Government securities may be subject to price declines in
the securities due to changing interest rates.
Convertible Securities (All Funds except Research Enhanced Index, Growth
Opportunities, Government Securities Income, GNMA Income, Strategic Income and
Global Income Funds). The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.
Other Investment Companies (Strategic Income and Balanced Funds). Each Fund
invest up to 10% of its assets in other investment companies. When a Fund
invests in other investment companies, you indirectly pay a proportionate share
of the expenses of that other investment company (including management fees,
administration fees, and custodial fees) in addition to the expenses of the
Fund.
Mortgage-Related Securities (Government Securities Income, GNMA Income,
Strategic Income, High Yield and High Yield II Funds). Although mortgage loans
underlying a mortgage-backed security may have maturities of up to 30 years, the
actual average life of a mortgage-backed security typically will be
substantially less because the mortgages will be subject to normal principal
amortization, and may be prepaid prior to maturity. Like other fixed income
securities, when interest rates rise, the value of a mortgage-backed security
generally will decline; however, when interest rates are declining, the value of
mortgage-backed securities with prepayment features may not increase as much as
other fixed income securities. The rate of prepayments on underlying mortgages
will affect the price and volatility of a mortgage-related security, and may
have the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of the purchase. Unanticipated
rates of prepayment on underlying mortgages can be expected to increase the
volatility of such securities. In addition, the value of these securities may
fluctuate in response to the market's perception of the creditworthiness of the
issuers of mortgage-related securities owned by a Fund. Additionally, although
mortgages and mortgage-related securities are generally supported by some form
of government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.
Interests in Loans (Strategic Income, High Yield, High Yield II, Global Income
and Balanced Funds). Certain Funds may invest in participation interests or
assignments in secured variable or floating rate loans, which include
participation interests in lease financings. Loans are subject to the credit
risk of nonpayment of principal or interest. Substantial increases in interest
rates may cause an increase in loan defaults. Although the loans will generally
be fully collateralized at the time of acquisition, the collateral may decline
in value, be relatively illiquid, or lose all or substantially all of its value
subsequent to the Fund's investment. Many loans are relatively illiquid, and may
be difficult to value.
Derivatives (Research Enhanced Index, Strategic Income, High Yield, High Yield
II and Balanced Funds). Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Some derivatives are sophisticated instruments
that typically involve a small investment of cash relative to the magnitude of
risks assumed. These may include swap agreements, options, forwards and futures.
Derivative securities are subject to market risk, which could be significant for
those that have a leveraging effect. Many of the Funds do not invest in these
types of derivatives, and some do, so please check the description of the Fund's
policies. Derivatives are also subject to credit risks related to the
counterparty's ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. A risk of using
derivatives is that the Adviser or Sub-Adviser might imperfectly judge the
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
More Information About Risks 71
<PAGE>
MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------
in another security, the hedge might not correlate to the market's movements and
may have unexpected or undesired results, such as a loss or a reduction in
gains.
Investments in Small- and Mid-Capitalization Companies (MidCap Value, MidCap
Opportunities, MidCap Growth, SmallCap Opportunities, SmallCap Growth Funds).
The Funds may invest in small and mid capitalization companies. Investments in
mid- and small-capitalization companies involve greater risk than is customarily
associated with larger, more established companies due to the greater business
risks of small size, limited markets and financial resources, narrow product
lines and the frequent lack of depth of management. The securities of smaller
companies are often traded over-the-counter and may not be traded in volumes
typical on a national securities exchange. Consequently, the securities of
smaller companies may have limited market stability and may be subject to more
abrupt or erratic market movements than securities of larger, more established
growth companies or the market averages in general.
Portfolio Turnover. Each Fund (except MagnaCap, LargeCap Leaders, Research
Enhanced Index, MidCap Value, International Value, Government Securities Income,
GNMA Income and Global Income Funds) is generally expected to engage in frequent
and active trading of portfolio securities to achieve its investment objective.
A high portfolio turnover rate involves greater expenses to a Fund, including
brokerage commissions and other transaction costs, and is likely to generate
more taxable short-term gains for shareholders, which may have an adverse effect
on the performance of the Fund
OTHER RISKS
Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities (except MagnaCap Fund may not invest in restricted
securities). If a security is illiquid, the Fund might be unable to sell the
security at a time when the adviser might wish to sell, and the security could
have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Temporary Defensive Strategies. When the Adviser or Sub-Adviser to a Fund
anticipates unusual market or other conditions, the Fund may temporarily depart
from its principal investment strategies as a defensive measure. To the extent
that a Fund invests defensively, it likely will not achieve capital
appreciation.
Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.
Lending Portfolio Securities. In order to generate additional income, certain
Funds may lend portfolio securities in an amount up to 33 1|M/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower default or fail financially.
Borrowing. Certain Funds may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
involves the sale of a security, with an agreement to repurchase the same
securities at an agreed upon price and date. Whether such a transaction produces
a gain for a Fund depends upon the costs of the agreements and the income and
gains of the securities purchased with the proceeds received from the sale of
the security. If the income and gains on the securities purchased fail to exceed
the costs, net asset value will decline faster than otherwise would be the case.
Reverse repurchase agreements, as leveraging techniques, may increase a Fund's
yield; however, such transactions also increase a Fund's risk to capital and may
result in a shareholder's loss of principal.
Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a
Fund of a security which has been borrowed from a third party on the expectation
that the market price will drop. If the price of the security rises, the Fund
may have to cover its short position at a higher price than the short sale
price, resulting in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.
Percentage and Rating Limitations. Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
72 More Information About Risks
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). A report of each
Fund's independent auditors, along with the Fund's financial statements, is
included in the Fund's annual report, which is available upon request.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
Financial Highlights 73
<PAGE>
FINANCIAL
ING PILGRIM MAGNACAP FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ending June 30, 2000, the information in the table below has been
audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Six Months ended Nov. 22, 1999(1)
December 31, 2000 to
(Unaudited) June 30, 2000
----------- -------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.26
Income from investment operations:
Net investment income (loss) $ 0.05
Net realized and unrealized gains on investments $ (0.47)
Total from investment operations $ (0.42)
Less distributions from:
Net investment income $ --
Net realized gains on investments $ --
Net asset value, end of period $ 15.84
Total Return(2): % (2.58)
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 9,928
Ratios to average net assets:
Expenses(3) % 1.24
Net investment income (loss)(3) % 0.46
Portfolio turnover % 26
</TABLE>
----------
(1) Commencement of offering shares.
(2) 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.
(3) Annualized for periods less than one year.
74 ING Pilgrim MagnaCap Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
Period Ended
December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to average
net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on , 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Growth And Income Fund 75
<PAGE>
FINANCIAL
ING PILGRIM LARGECAP LEADERS FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended June 30, 2000, the information in the table below has been
audited by KPMG LLP, independent auditors.
Six Months April 4,
ended 2000(1) to
December 31, 2000 June 30,
(Unaudited) 2000
----------- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.67
Income from investment operations:
Net investment income (loss) $ --
Net realized and unrealized gains on investments $ (0.79)
Total from investment operations $ (0.79)
Less distributions from:
Net investment income $ --
Net realized gains on investments $ --
Net asset value, end of period $ 15.88
Total Return(2): % (4.74)
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 199
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.75
Gross expenses prior to expense reimbursement(3) % 1.84
Net investment income (loss) after expense
reimbursement(3)(4) % (0.27)
Portfolio turnover % 39
----------
(1) Commencement of offering shares.
(2) 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.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
76 ING Pilgrim LargeCap Leaders Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below was
audited by PricewaterhouseCoopers LLP, independent auditors.
April 4, 2000(1)
to
October 31, 2000
----------------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized loss on investments $
Total from investment operations $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets, end of the period (000's) $
Ratio of expenses to average net assets %
Ratio of net investment loss to average net assets %
Portfolio turnover %
----------
(1) Class Q commenced operations on April 4, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Research Enhanced Index Fund 77
<PAGE>
FINANCIAL
ING PILGRIM GROWTH OPPORTUNITIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
June 1, 2000(1)
to December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to
average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on June 1, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
78 ING Pilgrim Growth Opportunities Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by another independent auditors.
<TABLE>
<CAPTION>
Six months Year Three months Year July 21,
ended ended ended ended 1997(1) to
December 31, 2000 June 30, June 30, March 31, March 31,
(Unaudited) 2000 1999(2) 1999 1998
----------- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 28.43 25.24 15.66 12.50
Income from investment operations:
Net investment income (loss) $ (0.20) (0.03) (0.02) (0.01)
Net realized and unrealized gains on investments $ 15.86 3.22 9.87 3.26
Total from investment operations $ 15.66 3.19 9.85 3.25
Less distributions from:
Net investment income $ -- -- -- 0.01
Net realized gains on investments $ 0.38 -- 0.27 0.08
Net asset value, end of period $ 43.71 28.43 25.24 15.66
Total Return(3): % 55.57 12.64 63.76 62.47
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 24,838 6,044 4,908 799
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.26 1.23 1.26 1.25
Gross expenses prior to expense reimbursement(4) % 1.26 1.25 1.91 10.45
Net investment income (loss) after expense
reimbursement(4)(5) % (0.77) (0.36) (0.28) (0.62)
Portfolio turnover % 139 27 253 306
</TABLE>
----------
(1) The Fund commenced operations on July 21, 1997.
(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-adviser 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.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
ING Pilgrim LargeCap Growth Fund 79
<PAGE>
FINANCIAL
ING PILGRIM MIDCAP VALUE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended June 30, 2000, the information in the table below has been
audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Six months January 3,
ended 2000(1) to
December 31, 2000 June 30,
(Unaudited) 2000
----------- ----
Per Share Operating Performance:
<S> <C> <C>
Net asset value, beginning of period $ 13.53
Income from investment operations:
Net investment income (loss) $ (0.02)
Net realized and unrealized gains on investments $ 0.78
Total from investment operations $ 0.76
Less distributions from:
Net investment income $ --
Net realized gains on investments $ --
Net asset value, end of period $ 14.29
Total Return(2): % 5.62
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 139
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.75
Gross expenses prior to expense reimbursement(3) % 1.88
Net investment income (loss) after expense
reimbursement(3)(4) % (0.49)
Portfolio turnover % 122
</TABLE>
----------
(1) Commencement of offering shares.
(2) 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.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
80 ING Pilgrim MidCap Value Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------
For the period ended Decmeber 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
April 4, 2000(1)
to
December 31, 2000
-----------------
Operating performance
Net asset value, beginning
of the period $
Net investment loss $
Net realized and unrealized gain on investments $
Total from investment operations $
Distributions from net
realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2): %
Ratios and supplemental data
Net assets, end of the
period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment loss to average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on April 4, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Opportunities Fund 81
<PAGE>
FINANCIAL
ING PILGRIM GROWTH & VALUE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below was
audited by PricewaterhouseCoopers LLP, independent auditors.
Period Ended
December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to average
net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on , 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
82 ING Pilgrim Growth & Value Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------
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>
Six months Year Three months
ended ended ended
December 31, 2000 June 30, June 30, Year ended March 31,
(Unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 26.94 25.14 23.30 18.01 17.99 13.66
Income from investment operations:
Net investment income (loss) $ (0.29) (0.06) (0.12) (0.21) (0.04) (0.07)
Net realized and unrealized gains on
investments $ 17.92 1.86 3.56 7.48 0.32 4.86
Total from investment operations $ 17.63 1.80 3.44 7.27 0.28 4.79
Less distributions from:
Net realized gains on investments $ 8.90 -- 1.60 1.98 0.26 0.46
Net asset value, end of period $ 35.67 26.94 25.14 23.30 18.01 17.99
Total Return(2): % 77.87 7.16 15.77 42.00 1.39 35.37
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 19,792 19,383 14,350 12,204 13,115 4,274
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.26 1.24 1.23 1.22 1.25 1.23
Gross expenses prior to expense
reimbursement(3) % 1.26 1.25 1.31 1.95 1.84 2.84
Net investment income (loss) after
expense reimbursement(3) % (1.00) (0.95) (0.71) (0.97) (0.69) (0.57)
Portfolio turnover % 148 55 154 200 153 114
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments, Inc. became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-adviser and the Fund changed its year end to June 30.
(2) Total return is calculated assuming reinvestment of 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.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim MidCap Growth Fund 83
<PAGE>
FINANCIAL
ING PILGRIM SMALLCAP OPPORTUNITIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
April 4, 2000(1)
to
December 31, 2000
-----------------
Operating performance:
Net asset value, beginning of the period $
Net investment loss $
Net realized and unrealized gain on investments $
Total from investment operations $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment loss to
average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on April 4, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
84 ING Pilgrim SmallCap Opportunities Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
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>
Six months Year Three months August 31,
ended ended ended 1995(2) to
December 31, 2000 June 30, June 30, Year ended March 31, March 31,
(Unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.19 18.56 19.27 13.19 14.16 12.50
Income from investment operations:
Net investment income (loss) $ (0.21) (0.06) (0.15) 0.03 (0.07) (0.03)
Net realized and unrealized gains
(loss) on investments $ 10.30 2.69 0.22 6.16 (0.77) 1.69
Total from investment operations $ 10.09 2.63 0.07 6.19 (0.84) 1.66
Less distributions from:
Net realized gains on investments $ 10.81 -- 0.78 0.11 0.13 --
Net asset value, end of period $ 20.47 21.19 18.56 19.27 13.19 14.16
Total Return(3): % 61.08 14.17 0.96 47.01 (6.03) 13.28
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 12,569 11,013 9,107 12,508 1,013 314
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.52 1.45 1.53 1.52 1.51 1.49
Gross expenses prior to expense
reimbursement(4) % 1.57 1.49 1.63 2.39 10.79 37.86
Net investment income (loss) after
expense reimbursement(4)(5) % (1.21) (1.21) (0.97) (1.52) (1.02) (1.05)
Portfolio turnover % 127 32 90 92 113 130
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund, concurrently Nicholas-Applegate Capital
Management was appointed as sub-adviser and the Fund changed its year end
to June 30.
(2) Commencement of offering shares.
(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.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim SmallCap Growth Fund 85
<PAGE>
FINANCIAL
ING PILGRIM INTERNATIONAL FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by PricewaterhouseCoopers LLP, independent auditors.
Period Ended
December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to
average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on , 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
86 ING Pilgrim International Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM WORLDWIDE GROWTH FUND
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below has
been audited by PricewaterhouseCoopers LLP , independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Period Year Three months August 31,
ended ended ended 1995(3) to
October 31, June 30, June 30, Year ended March 31, March 31,
2000(1) 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 $ 27.12 24.59 19.63 15.00 13.27 12.50
Income from investment operations:
Net investment income (loss) $ (0.16) 0.01 0.22 (0.11) 0.01 (0.04)
Net realized and unrealized gains
(loss) on investments $ 11.11 2.52 6.15 5.29 1.72 0.81
Total from investment operations $ 10.95 2.53 6.37 5.18 1.73 0.77
Less distributions from:
Net investment income $ -- -- 0.15 -- -- --
Net realized gains on investments $ 3.54 -- 1.26 0.55 -- --
Net asset value, end of period $ 34.53 27.12 24.59 19.63 15.00 13.27
Total Return(4): % 42.63 10.29 33.97 35.11 12.87 6.32
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 54,418 14,870 7,320 645 642 1
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.57 1.55 1.59 1.61 1.61 1.60
Gross expenses prior to expense
reimbursement(5) % 1.57 1.55 1.76 3.75 34.99 3,232.53
Net investment income (loss) after
expense reimbursement(5)(6) % (0.69) 0.17 0.17 (0.47) (0.91) (0.50)
Portfolio turnover % 169 57 247 202 182 132
</TABLE>
----------
(1) The Fund Changed its year end from June 30 to October 31.
(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-adviser and the Fund changed its year end
to June 30.
(3) Commencement of offering shares.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Worldwide Growth Fund 87
<PAGE>
FINANCIAL
ING PILGRIM INTERNATIONAL VALUE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below has
been audited by PricewaterhouseCoopers LLP, independent auditors.
Period
ended
October 31, 2000(1)
-------------------
Operating performance:
Net asset value, beginning of the period $
Net investment income $
Net realized and unrealized loss on investments $
Total from investment operations $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets, end of the period (000's) $
Ratio of expenses to average net assets %
Ratio of net investment income to average net assets %
Portfolio turnover %
----------
(1) Class Q commenced operations on January 25, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effects of
sales charges.
(3) Annualized.
88 ING Pilgrim International Value Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM INTERNATIONAL CORE GROWTH FUND
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below has
been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by another independent auditors.
<TABLE>
<CAPTION>
Period Year Three months February 28,
ended ended ended 1997(3) to
October 31, June 30, June 30, Year ended March 31, March 31,
2000(1) 2000 1999(2) 1999 1998 1997
------- ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.63 18.36 17.43 12.75 12.50
Income from investment operations:
Net investment income (loss) $ (0.17) 0.04 0.09 (0.04) --
Net realized and unrealized gains
on investments $ 6.48 1.23 0.97 4.72 0.25
Total from investment operations $ 6.31 1.27 1.06 4.68 0.25
Less distributions from:
Net investment income $ -- -- 0.13 -- --
Net realized gains on investments $ 1.16 -- -- -- --
Net asset value, end of period $ 24.78 19.63 18.36 17.43 12.75
Total Return(4): % 32.56 6.92 6.11 36.63 2.00
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 16,567 9,390 11,268 1,719 1
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.75 1.54 1.63 1.66 0.00
Gross expenses prior to expense
reimbursement(5) % 2.06 1.63 1.87 3.18 2,667.07
Net investment income (loss) after
expense reimbursement(5)(6) % (0.73) 0.73 (0.27) (0.47) 0.00
Portfolio turnover % 200 67 214 274 76
</TABLE>
----------
(1) The Fund changed its year end from June 30 to October 31.
(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-adviser and the Fund changed its year end
to June 30.
(3) The Fund commenced operations on February 28, 1997.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International Core Growth Fund 89
<PAGE>
FINANCIAL
ING PILGRIM GNMA INCOME FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
Period Ended
December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to
average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on _________, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
90 ING Pilgrim GNMA Income Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below has
been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Period Year Three months August 31,
ended ended ended 1995(3) to
October 31, June 30, June 30, Year ended March 31, March 31,
2000(1) 2000 1999(2) 1999 1998 1997 1996
------- ---- ------- ---- ---- ---- ----
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.16 22.23 19.18 14.01 13.52 12.50
Income from investment operations:
Net investment income (loss) $ (0.21) (0.03) (0.02) 0.05 (0.06) 0.01
Net realized and unrealized gains
on investments $ 20.53 2.96 3.36 5.12 2.01 1.01
Total from investment operations $ 20.32 2.93 3.34 5.17 1.95 1.02
Less distributions from:
Net investment income $ -- -- 0.09 -- -- --
Net realized gains on investments $ 2.18 -- 0.20 -- 1.46 --
Net asset value, end of period $ 43.30 25.16 22.23 19.18 14.01 13.52
Total Return(4): % 82.99 13.18 17.61 36.90 15.03 8.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 163,843 42,881 32,819 8,810 42 19
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.57 1.65 1.65 1.66 1.66 1.65
Gross expenses prior to expense
reimbursement(5) % 1.57 1.67 1.80 6.15 151.33 531.72
Net investment income (loss) after
expense reimbursement(5)(6) % (0.66) (0.50) (0.50) (0.43) (0.64) 0.33
Portfolio turnover % 164 44 146 198 206 141
</TABLE>
----------
(1) The Fund changed its year end from June 30 to October 31.
(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-adviser and the Fund changed its year end
to June 30.
(3) Commencement of offering shares.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim International SmallCap Growth Fund 91
<PAGE>
FINANCIAL
ING PILGRIM EMERGING COUNTRIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended October 31, 2000, the information in the table below has
been audited by PricewaterhouseCoopers LLP, independent auditors. For all
periods ending prior to October 31, 2000, the financial information was audited
by other independent auditors.
<TABLE>
<CAPTION>
Period Year Three months August 31,
ended ended ended 1995(3) to
October 31, June 30, June 30, Year Ended March 31, March 31,
2000(1) 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 $ 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(4): % 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(5)(6) % 2.09 1.90 1.94 1.91 1.91 1.90
Gross expenses prior to expense
reimbursement(5) % 2.24 2.43 2.23 2.43 4.20 44.24
Net investment income (loss) after
expense reimbursement(5)(6) % (1.05) (1.07) (0.01) 1.06 (0.87) 0.47
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
----------
(1) The Fund changed its year end from June 30 to October 31.
(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) Commencement of offering shares.
(4) 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.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
92 ING Pilgrim Emerging Countries Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM GLOBAL INCOME FUND
--------------------------------------------------------------------------------
For the period ended December 31, 2000, the information in the table below was
audited by KPMG LLP, independent auditors.
Period Ended
December
31, 2000
--------
Operating performance:
Net asset value, beginning of the period $
Net investment income (loss) $
Net realized and unrealized gain on investments $
Total from investment operations $
Dividends from net investment income $
Distributions from net realized gain $
Total distributions $
Net asset value, end of the period $
Total return(2) %
Ratios and supplemental data:
Net assets at the end of the period (000s) $
Ratio of expenses to average net assets(3) %
%
Ratio of net investment income (loss) to
average net assets(3) %
Portfolio turnover %
----------
(1) Commenced operations on ______________, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Global Income Fund 93
<PAGE>
FINANCIAL
ING PILGRIM GOVERNMENT SECURITIES INCOME FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the period ended June 30, 2000, the information in the table below has been
audited by KPMG LLP, independent auditors.
Six months April 5,
ended 2000(1) to
December 31, 2000 June 30,
(Unaudited) 2000
----------- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 11.88
Income from investment operations:
Net investment income $ 0.15
Net realized and unrealized (loss)
on investments $ 0.03
Total from investment operations $ 0.18
Less distributions from:
Net investment income $ (0.12)
Net realized gains on investments $ --
Net asset value, end of period $ 11.94
Total Return(2): % 0.94
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 22
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.35
Gross expenses prior to expense
reimbursement(3) % 1.35
Net investment income (loss) after
expense reimbursement(3)(4) % 5.87
Portfolio turnover % 44
----------
(1) Commencement of offering shares.
(2) 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.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
94 ING Pilgrim Government Securities Income Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by another independent auditors.
<TABLE>
<CAPTION>
Six months Year Three months July 27
ended ended ended 1998(1) to
December 31, 2000 June 30, June 30, March 31,
(Unaudited) 2000 1999(2) 1999
----------- ---- ------- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.99 12.26 12.43
Income from investment operations:
Net investment income $ 0.94 0.25 0.48
Net realized and unrealized (loss) on .
investments $ (0.54) (0.38) (0.04)
Total from investment operations $ 0.40 (0.13) 0.44
Less distributions from:
Net investment income $ 0.94 0.14 0.50
Net realized gains on investments $ -- -- 0.11
Net asset value, end of period $ 11.45 11.99 12.26
Total Return(3): % 3.55 1.16 5.78
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 228 171 314
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.86 0.71 0.69
Gross expenses prior to expense reimbursement(4) % 2.54 1.37 1.74
Net investment income (loss) after expense
reimbursement(4)(5) % 7.79 6.07 6.03
Portfolio turnover % 168 69 274
</TABLE>
----------
(1) The Fund commenced operations on July 27, 1998.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund 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.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Strategic Income Fund 95
<PAGE>
FINANCIAL
ING PILGRIM HIGH YIELD FUND HIGHLIGHTS
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the period ending June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors.
<TABLE>
<CAPTION>
Six months Year From June 17
ended ended thru
December 31, 2000 June 30, June 30,
(Unaudited) 2000 1999(1)
----------- ---- -------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 5.93 5.91
Income (loss) from investment
operations:
Net investment income $ 0.60 0.02
Net realized and unrealized gain
(loss) on investments $ (0.33) --
Total from investment operation $ (0.27) 0.02
Less distributions from:
Net investment income $ 0.60 --
Realized capital gains $ -- --
Total distributions $ 0.60 --
Net asset value, end of period $ 5.60 5.93
Total Return(2): % (5.29) 0.34
Ratios/Supplemental Data:
Net assets, end of period (000's) $ -- --
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.05 --
Gross expenses prior to expense
reimbursement(3) % 1.17 --
Net investment income (loss) after
expense reimbursement(3)(4) % 10.41 --
Portfolio turnover rate % 89 184
</TABLE>
----------
(1) Commencement of offering shares.
(2) 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 information for less than one year is not
annualized.
(3 Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
96 ING Pilgrim High Yield Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM HIGH YIELD FUND II
--------------------------------------------------------------------------------
For the year ended June 30, 2000 and the three months ended June 30, 1999, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ending prior to June 30, 1999, the financial
information was audited by another independent auditors.
<TABLE>
<CAPTION>
Six months Year Three months Year March 27,
ended ended ended ended 1998(1) to
December 31, 2000 June 30, June 30, March 31, March 31,
(Unaudited) 2000 1999(2) 1999 1998
----------- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.59 11.68 12.72 12.70
Income from investment operations:
Net investment income (loss) $ 1.20 0.30 1.16 0.01
Net realized and unrealized gains (loss)
on securities and foreign currency $ (0.76) (0.11) (1.01) 0.01
Total from investment operations $ 0.44 0.19 0.15 0.02
Less distributions from:
Net investment income $ (1.21) 0.28 1.19 --
Net asset value, end of period $ 10.82 11.59 11.68 12.72
Total Return(3): % 4.04 1.63 1.40 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 6,882 3,229 6,502 567
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.08 0.90 0.87 0.97
Gross expenses prior to expense
reimbursement(4) % 1.27 1.17 1.28 0.97
Net investment income (loss) after
expense reimbursement(4)(5) % 10.73 9.88 10.01 7.53
Portfolio turnover % 113 44 242 484
</TABLE>
----------
(1) The Fund commenced operations on March 27, 1998.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund 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
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim High Yield Fund II 97
<PAGE>
FINANCIAL
ING PILGRIM BALANCED FUND 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>
Six months Year Three months August 31,
ended ended ended 1995(1) to
December 31, 2000 June 30, June 30, Year ended March 31, March 31,
(Unaudited) 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 $ 19.04 18.85 18.48 13.42 12.69 12.50
Income from investment operations:
Net investment income $ 0.54 0.11 0.44 0.30 0.24 0.15
Net realized and unrealized gains on
investments $ (0.57) 0.16 2.50 5.07 0.73 0.19
Total from investment operations $ (0.03) 0.27 2.94 5.37 0.97 0.34
Less distributions from:
Net investment income $ 0.40 0.08 0.50 0.31 0.24 0.15
Net realized gains on investments $ 3.67 -- 2.07 -- -- --
Net asset value, end of period $ 14.94 19.04 18.85 18.48 13.42 12.69
Total Return(3): % (0.60) 1.44 17.49 40.21 7.60 2.77
Ratio/Supplemental Data:
Net assets, end of period (in
thousands) $ 230 190 176 166 73 1
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.30 1.25 1.25 1.26 1.26 1.25
Gross expenses prior to expense
reimbursement(4) % 1.51 1.51 1.63 11.28 126.75 3,094.48
Net investment income (loss) after
expense reimbursement(4)(5) % 3.36 2.30 2.41 4.09 2.15 2.16
Portfolio turnover % 173 63 165 260 213 197
</TABLE>
----------
(1) Commencement of offering of shares.
(2) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund 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.
98 ING Pilgrim Balanced Fund
<PAGE>
FINANCIAL
HIGHLIGHTS ING PILGRIM CONVERTIBLE FUND
--------------------------------------------------------------------------------
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>
Six months Year Three months August 31,
ended ended ended 1995(2) to
December 31, 2000 June 30, June 30, Year ended March 31, March 31,
(Unaudited) 2000 1999(1) 1999 1998 1997 1996
----------- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 22.51 21.22 18.47 15.19 13.72 12.50
Income from investment operations:
Net investment income (loss) $ 0.44 0.09 0.43 0.48 0.42 0.17
Net realized and unrealized gains
(loss) on investments $ 7.82 1.31 3.09 4.19 1.50 1.22
Total from investment operations $ 8.26 1.40 3.52 4.67 1.92 1.39
Less distributions from:
Net investment income $ (0.35) 0.11 0.46 0.48 0.42 0.17
Net realized gains on investments $ (3.57) -- 0.31 0.91 0.03 --
Net asset value, end of period $ 26.85 22.51 21.22 18.47 15.19 13.72
Total Return(3): % 40.36 6.62 19.66 31.54 14.13 11.13
Ratios/Supplemental Data:
Net assets, end of period (in
thousands) $ 56,165 17,537 8,741 7,080 4,599 1,085
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.25 1.23 1.23 1.22 1.25 1.25
Gross expenses prior to expense
reimbursement(4) % 1.25 1.23 1.35 2.35 2.90 9.21
Net investment income (loss) after
expense reimbursement(4)(5) % 1.88 2.04 2.37 5.99 3.29 3.59
Portfolio turnover % 129 28 138 160 167 145
</TABLE>
----------
(1) Effective May 24, 1999, ING Pilgrim Investments, Inc., became the
Investment Manager of the Fund and the Fund changed its year end to June
30.
(2) Commencement of offering shares.
(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.
[GRAPHIC] If you have any questions, please call 1-800-992-0180.
ING Pilgrim Convertible Fund 99
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the ING Pilgrim Funds in our:
ANNUAL/SEMI-ANNUAL REPORTS
Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditors'
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the ING Pilgrim Funds. The SAI
is legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/Semi-Annual reports,
the SAI or other Fund information, or to make shareholder inquiries:
The ING Pilgrim Funds
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034
1-800-992-0180
Or visit our website at www.pilgrimfunds.com
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
or at the e-mail address: [email protected]
Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:
ING Pilgrim Growth Opportunities Fund 811-4431
ING Pilgrim Equity Trust 811-8817
ING Pilgrim Mayflower Trust 811-7978
ING Pilgrim SmallCap Opportunities Fund 811-4434
ING Pilgrim Advisory Funds, Inc. 811-9040
ING Pilgrim Government Securities Income Fund, Inc. 811-4031
ING Pilgrim Investment Funds, Inc. 811-1939
ING Pilgrim Mutual Funds 811-7428
ING Pilgrim Growth and Income Fund, Inc. 811-0865
ING Pilgrim International Fund, Inc. 811-8172
ING Pilgrim GNMA Income Fund, Inc. 811-2401
ING Pilgrim Global Income Fund 811-4675
QPROSxxxxxx-xxxxxx
<PAGE>
GRAPHICS DESCRIPTION APPENDIX
The cover of the prospectuses has an image of the earth set behind the type
similar to a watermark that crosses over on both the front and back cover pages.
There are four icon sized graphics used throughout the prospectus as follows:
1. In the sections describing the Objective of the Funds, the graphic icon is
that of a dart in the bullseye of a target.
2. In the sections describing the Investment Strategy of the Funds, the
graphic icon is that of a compass pointing due north.
3. In the sections describing the Risks of the Funds, the graphic icon is that
of an old fashioned scale tilting heavy on the left side.
4. In the sections describing the Performance history of the Funds, the
graphic icon is that of a stack of US currency bills.
5. On the bottom footer of every odd numbered page (right hand page), the
graphic icon is that of a telephone by the 800 number of the fund to call
for information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(800) 992-0180
March 1, 2001
ING PILGRIM GLOBAL CORPORATE LEADERS FUND, INC.
ING PILGRIM GLOBAL TECHNOLOGY FUND, INC.
ING PILGRIM GNMA INCOME FUND, INC.
ING PILGRIM GOLD FUND, INC.
ING PILGRIM GROWTH AND INCOME FUND, INC.
ING PILGRIM INTERNATIONAL FUND, INC.
ING PILGRIM SILVER FUND, INC.
ING PILGRIM SMALLCAP ASIA GROWTH FUND, INC.
ING PILGRIM TROIKA DIALOG RUSSIA FUND, INC.
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND, INC.
ING PILGRIM GLOBAL INCOME FUND
LEXINGTON MONEY MARKET TRUST
(each a "Fund" and collectively the "Funds")
This Statement of Additional Information ("SAI") relates to each investment
company listed above. Prospectuses for the Funds, dated March 1, 2001 which
provide the basic information you should know before investing in the Funds, may
be obtained without charge from the Funds or the Funds' principal underwriter,
ING Pilgrim Securities, Inc. ("ING Pilgrim Securities" or the "Distributor"), at
the address listed above. This Statement of Additional Information is not a
prospectus and it should be read in conjunction with the Prospectuses which have
been filed with the Securities and Exchange Commission ("SEC"). In addition, the
financial statements from the Funds' December 31, 2000 Annual Reports are
incorporated herein by reference. Copies of the Funds' Prospectuses and Annual
or Semi-Annual Reports may be obtained without charge by contacting the ING
Pilgrim Funds at the address and phone number written above.
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION............................................1
HISTORY OF THE FUNDS...........................................................1
MANAGEMENT OF THE FUNDS........................................................3
INVESTMENT MANAGER............................................................12
INVESTMENT MANAGER FEES.......................................................13
EXPENSE LIMITATION AGREEMENTS.................................................16
RULE 12B-1 PLANS..............................................................17
SUPPLEMENTAL DESCRIPTION OF INVESTMENTS.......................................22
INVESTMENT RESTRICTIONS.......................................................42
PORTFOLIO TRANSACTIONS........................................................63
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................67
DETERMINATION OF SHARE PRICE..................................................73
SHAREHOLDER INFORMATION.......................................................75
SHAREHOLDER SERVICES AND PRIVILEGES...........................................76
DISTRIBUTIONS.................................................................79
TAX CONSIDERATIONS............................................................79
CALCULATION OF PERFORMANCE DATA...............................................85
GENERAL INFORMATION...........................................................88
FINANCIAL STATEMENTS..........................................................89
1
<PAGE>
HISTORY OF THE FUNDS
ING PILGRIM GLOBAL CORPORATE LEADERS FUND, INC.
ING Pilgrim Global Corporate Leaders Fund, Inc. ("Global Corporate Leaders
Fund") is a corporation organized under the laws of the State of Maryland on
March 11, 1987 under the name of Lexington Global Fund, Inc. The Fund is a
diversified, open-end management investment company. The Fund's name was changed
on May 5, 1998 from Lexington Global Fund, Inc. to Lexington Global Corporate
Leaders Fund, Inc., and on July 26, 2000, to Pilgrim Global Corporate Leaders
Fund, Inc. The Fund's name was changed on _____, 2001, to ING Pilgrim Global
Corporate Leaders Fund, Inc.
The Directors have approved an Agreement and Plan of Reorganization for
Global Corporate Leaders Fund that, if approved by shareholders of Global
Corporate Leaders Fund, will result in the reorganization of Global Corporate
Leaders Fund into the ING Pilgrim Worldwide Growth Fund (the "Worldwide Growth
Fund").
ING PILGRIM GLOBAL TECHNOLOGY FUND, INC.
ING Pilgrim Global Technology Fund, Inc. ("Global Technology Fund") is a
corporation organized under the laws of the State of Maryland on September 13,
1999 under the name of Lexington Emerging Technology Fund, Inc. The Fund is a
non-diversified, open-end management investment company. The name of the Fund
was changed on October 8, 1999 from Lexington Emerging Technology Fund, Inc. to
Lexington Global Technology Fund, Inc., and on July 31, 2000, to Pilgrim Global
Technology Fund, Inc. The Fund's name was changed on _____, 2001, to ING Pilgrim
Global Technology Fund, Inc.
The Directors have approved an Agreement and Plan of Reorganization for
Global Technology Fund that, if approved by shareholders of Global Technology
Fund, will result in the reorganization of Global Technology Fund into the ING
Pilgrim Global Information Technology Fund (the "Global Information Technology
Fund").
ING PILGRIM GNMA INCOME FUND, INC.
ING Pilgrim GNMA Income Fund, Inc. ("GNMA Income Fund") is a corporation
organized under the laws of the State of Maryland on August 15, 1973 under the
name of Lexington GNMA Income Fund, Inc. The Fund is a diversified, open-end
management investment company. The name of the Fund was changed on July 26, 2000
from Lexington GNMA Income Fund, Inc. to Pilgrim GNMA Income Fund, Inc. The
Fund's name was changed on _____, 2001, to ING Pilgrim GNMA Income Fund, Inc.
ING PILGRIM GOLD FUND, INC.
ING Pilgrim Gold Fund, Inc. ("Gold Fund") is a corporation formed under the
laws of the State of Maryland on May 11, 1988 under the name of Lexington
Goldfund, Inc. The Fund was originally organized as a Delaware corporation on
December 3, 1975. The Fund is a non-diversified, open-end management investment
company. The name of the Fund was changed on July 26, 2000 from Lexington
Goldfund, Inc. to Pilgrim Gold Fund, Inc. The Fund's name was changed on _____,
2001, to ING Pilgrim Gold Fund, Inc.
ING PILGRIM GROWTH AND INCOME FUND, INC.
ING Pilgrim Growth and Income Fund, Inc. ("Growth and Income Fund") is a
corporation organized under the laws of the State of Maryland on April 30, 1991
under the name of Lexington Growth and Income Fund, Inc. The Fund was originally
organized as a New Jersey Corporation on February 11, 1959. The Fund is an
open-end, diversified management investment company. The name of the Fund was
changed on July 26, 2000 from Lexington Growth and Income Fund, Inc. to Pilgrim
Growth and Income Fund, Inc. The Fund's name was changed on _____, 2001, to ING
Pilgrim Growth and Income Fund, Inc.
2
<PAGE>
ING PILGRIM INTERNATIONAL FUND, INC.
ING Pilgrim International Fund, Inc. ("International Fund") is a
corporation organized under the laws of the State of Maryland on November 23,
1993 under the name of Lexington International Fund, Inc. The Fund is an
open-end, diversified management investment company. The name of the Fund was
changed on July 26, 2000 from Lexington International Fund, Inc. to Pilgrim
International Fund, Inc. The name of the Fund's was changed on __________, 2001
to ING Pilgrim International Fund, Inc.
ING PILGRIM SILVER FUND, INC.
ING Pilgrim Silver Fund, Inc. ("Silver Fund") is a corporation formed under
the laws of the State of Maryland on January 3, 1992 under the name of Lexington
Silver Fund, Inc. The Fund is a non-diversified, open-end management investment
company. The name of the Fund was changed on July 26, 2000 from Lexington Silver
Fund, Inc. to Pilgrim Silver Fund, Inc. The Fund's name was changed on _____,
2001, to ING Pilgrim Silver Fund, Inc.
The Directors have approved an Agreement and Plan of Reorganization for
Silver Fund that, if approved by shareholders of Silver Fund, will result in the
reorganization of Silver Fund into the Gold Fund.
ING PILGRIM SMALLCAP ASIA GROWTH FUND, INC.
ING Pilgrim SmallCap Asia Growth Fund, Inc. ("SmallCap Asia Growth Fund")
is a corporation organized under the laws of the State of Maryland on April 18,
1995 under the name of Crosby Small Cap Asia Growth Fund, Inc. The Fund is an
open-end, diversified management investment company. The name of the Fund was
changed on May 3, 1999 from Lexington Crosby Small Cap Asia Growth Fund, Inc. to
Lexington Small Cap Asia Growth Fund, Inc. and on July 26, 2000 to Pilgrim
SmallCap Asia Growth Fund, Inc. The Fund's name was changed on _____, 2001, to
ING Pilgrim SmallCap Asia Growth Fund, Inc.
The Directors have approved an Agreement and Plan of Reorganization for
SmallCap Asia Growth Fund that, if approved by shareholders of SmallCap Asia
Growth Fund, will result in the reorganization of SmallCap Asia Growth Fund into
the ING Pilgrim Asia-Pacific Equity Fund (the "Asia-Pacific Equity Fund").
ING PILGRIM TROIKA DIALOG RUSSIA FUND, INC.
ING Pilgrim Troika Dialog Russia Fund, Inc. ("Russia Fund") is a
corporation organized under the laws of the State of Maryland on November 20,
1995. The Fund is a non-diversified, open-end management investment company. The
name of the Fund was changed on April 2, 1996 from Lexington Russia Fund, Inc.
to Lexington Troika Dialog Russia Fund, Inc., and on July 26, 2000, to Pilgrim
Troika Dialog Russia Fund, Inc. The Fund's name was changed on _____, 2001, to
ING Pilgrim Troika Dialog Russia Fund, Inc.
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND, INC.
ING Pilgrim Worldwide Emerging Markets Fund, Inc. ("Worldwide Emerging
Markets Fund") is a corporation organized under the laws of the State of
Maryland on January 22, 1969 under the name of Lexington Growth Fund, Inc. The
Fund is a diversified, open-end management investment company. The name of the
Fund was changed on June 14, 1991 from Lexington Growth Fund, Inc. to Lexington
Worldwide Emerging Markets Fund, Inc., and on July 26, 2000, to Pilgrim
Worldwide Emerging Markets Fund, Inc. The Fund's name was changed on _____,
2001, to ING Pilgrim Worldwide Emerging Markets Fund, Inc.
2
<PAGE>
The Directors have approved an Agreement and Plan of Reorganization for
Worldwide Emerging Markets Fund that, if approved by shareholders of Worldwide
Emerging Markets Fund, will result in the reorganization of Worldwide Emerging
Markets Fund into the ING Pilgrim Emerging Countries Fund (the "Emerging
Countries Fund").
ING PILGRIM GLOBAL INCOME FUND
ING Pilgrim Global Income Fund (the "Global Income Fund") is a trust formed
under the laws of the Commonwealth of Massachusetts on February 24, 1983. The
Fund is a non-diversified, open-end management investment company. The name of
the Fund was changed from Lexington Tax Exempt Bond Trust to Lexington Ramirez
Global Income Fund, and to Lexington Global Income Fund, and on July 26, 2000 to
Pilgrim Global Income Fund. The Fund's name was changed on _____, 2001, to ING
Pilgrim Global Income Fund, Inc.
The Trustees have approved an Agreement and Plan of Reorganization for
Global Income Fund that, if approved by shareholders of Global Income Fund, will
result in the reorganization of Global Income Fund into the ING Pilgrim
Strategic Income Fund (the "Strategic Income Fund").
LEXINGTON MONEY MARKET TRUST
Lexington Money Market Trust (the "Money Market Trust") is an organization
commonly referred to as a business trust formed under the laws of the
Commonwealth of Massachusetts on June 30, 1977 under the name of Banner
Redi-Resources Trust. The name of the Fund was changed on March 2, 1979 from
Banner Redi-Resources Trust to "Lexington Money Market Trust".
MANAGEMENT OF THE FUNDS
BOARD OF DIRECTORS/TRUSTEES
Each Fund is managed by its Directors/Trustees ("Board of Directors" and
"Board of Trustees" are used interchangeably in this SAI). The
Directors/Trustees and Officers of the Funds are listed below. An asterisk (*)
has been placed next to the name of each Director/Trustee who is an "interested
person," as that term is defined in the Investment Company Act of 1940 Act
("1940 Act"), by virtue of that person's affiliation with the Funds, or the
Funds' adviser ("ING Pilgrim Investments" or the "Investment Manager"). Unless
otherwise noted, the mailing address of the Directors/Trustees is 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258. The Board of
Directors/Trustees governs each Fund and is responsible for protecting the
interests of shareholders. The Directors/Trustees are experienced executives who
oversee the Funds' activities, review contractual arrangements with companies
that provide services to the Funds, and review each Fund's performance.
Set forth below is information regarding the Directors/Trustees of the
Funds.
<TABLE>
<CAPTION>
POSITION(S) WITH
NAME, AGE THE FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------- ---------------- ----------------------------------------
<S> <C> <C>
Al Burton Director/Trustee President of Al Burton Productions for more than
(Age 72) the last five years. Mr. Burton is also a Director,
Trustee or Advisory board member of each of the
Funds managed by ING Pilgrim Investments.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH
NAME, AGE THE FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------- ---------------- ----------------------------------------
<S> <C> <C>
Paul S. Doherty Director/Trustee President, of Doherty, Wallace, Pillsbury and
(Age 66) Murphy, P.C., Attorneys. Formerly a Director of
Tambrands, Inc. (1993-1998). Mr. Doherty is also
a Director or Trustee of each of the Funds managed
by ING Pilgrim Investments.
Robert B. Goode Director/Trustee Retired. Mr. Goode was formerly Chairman, American
(Age 69) Direct Business Insurance Agency, Inc. (1996-2000).
Mr. Goode is also a Director or Trustee of each of
the Funds managed by ING Pilgrim Investments.
Alan L. Gosule Director/Trustee Partner and Chairman of the Tax Department of
(Age 59) Clifford Chance Rogers & Wells (since 1991). Mr.
Gosule is a Director of F.L. Putnam Investment
Management Co., Inc., Simpson Housing Limited
Partnership, Home Properties of New York, Inc.,
CORE Cap, Inc. and Colonnade Partners. Mr. Gosule
is also a Director or Trustee of each of the Funds
managed by ING Pilgrim Investments.
Walter H. May Director/Trustee Retired. Mr. May was formerly Managing Director
(Age 63) and Director of Marketing for Piper Jaffray, Inc.
Mr. May is also a Director or Trustee of each of
the Funds managed by ING Pilgrim Investments.
Jock Patton Director/Trustee Private Investor. Director of Hypercom Corporation
(Age 54) (since January 1999), and JDA Software Group, Inc.
(since January 1999). Mr. Patton is also a Director
of Buick of Scottsdale, Inc., National Airlines,
Inc., BG Associates, Inc., BK Entertainment, Inc.,
Arizona Rotorcraft, Inc. and Director and Chief
Executive Officer of Rainbow Multimedia Group, Inc.
Mr. Patton was formerly Director of Stuart
Entertainment, Inc., Director of Artisoft, Inc.
(August 1994-July 1998); and a President and
Co-owner of StockVal, Inc. (April 1993-June 1997).
Mr. Patton is also a Director, Trustee, or a member
of the Advisory board of each of the Funds managed
by ING Pilgrim Investments.
David W.C. Putnam Director/Trustee President, Clerk and Director of F.L. Putnam
(Age 60) Securities Company, Inc. and its affiliates (since
1978). Mr. Putnam is Director of Anchor Investment
Management Corporation and President and
Director/Trustee of Anchor Capital Accumulation
Trust, Anchor International Bond Trust, Anchor
Gold and Currency Trust, Anchor Resources and
Commodities Trust and Anchor Strategic Assets Trust.
Mr. Putnam was formerly Director of Trust Realty
Corp. and Bow Ridge Mining Co. Mr. Putnam is also
a Director or Trustee of each of the Funds managed
by ING Pilgrim Investments.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH
NAME, AGE THE FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------- ---------------- ----------------------------------------
<S> <C> <C>
John R. Smith Director/Trustee President of New England Fiduciary Company (since
(Age 76) 1991). Mr. Smith is Chairman of Massachusetts
Educational Financing Authority (since 1987), Vice
Chairman of Massachusetts Health and Education
Authority (since 1979) and Vice-Chairman of MHI,
Inc. (Massachusetts Non-Profit Energy Purchasers
Consortium) (since 1996). Mr. Smith is also a
Director or Trustee of each of the Funds managed
by ING Pilgrim Investments.
*Robert W. Stallings Director/Trustee/ Chairman, Chief Executive Officer and President of
(Age 51) Chairman ING Pilgrim Group, Inc. ("ING Pilgrim Group")
(since December 1994); Chairman, ING Pilgrim
Investments, Inc. (since December 1994); Chairman,
ING Pilgrim Securities, Inc. ("ING Pilgrim
Securities") (since December 1994); President and
Chief Executive Officer of ING Pilgrim Funding,
Inc. (since November 1999); and President and
Chief Executive Officer of Pilgrim Capital
Corporation and its predecessors (since August
1991). Mr. Stallings is also a Director, Trustee,
or a member of the Advisory Board of each of the
ING Pilgrim Funds.
*John G. Turner Director/Trustee Chairman and Chief Executive Officer of ReliaStar
(Age 60) Financial Corp. and ReliaStar Life Insurance Co.
(since 1993); Chairman of ReliaStar Life Insurance
Company of New York (since 1995); Chairman of
Northern Life Insurance Company (since 1992). Mr.
Turner was formerly Director of Northstar
Investment Management Corporation and affiliates
(1993 to 1999) and President of ReliaStar Financial
Corp. and ReliaStar Life Insurance Co. (1989-1991).
Mr. Turner is also Chairman of each of the Funds
managed by ING Pilgrim Investments.
David Wallace Director/Trustee Chairman of FECO Engineered Systems, Inc. Mr.
(Age 76) Wallace is President and Trustee of the Robert R.
Young Foundation; Governor of the New York Hospital,
Trustee of Greenwit Hospital and Director of UMC
Electronics and Zurn Industries, Inc. Mr. Wallace
was formerly Chairman of Lone Star Industries and
Putnam Trust Company, Chairman and Chief Executive
Officer of Todd Shipyards, Bangor Punta Corporation,
and National Securities & Research Corporation.
Mr. Wallace is also a Director or Trustee of each
of the Funds managed by ING Pilgrim Investments.
</TABLE>
5
<PAGE>
In addition, the following individuals serve as Advisory Board Members to
certain of the ING Pilgrim Funds.
<TABLE>
<CAPTION>
POSITION(S) WITH
NAME, AGE THE FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------- ---------------- ----------------------------------------
<S> <C> <C>
Mary A. Baldwin, Ph.D. Advisory Board Member Realtor, Caldwell Bankers Success Realty (formerly,
(Age 60) The Prudential Arizona Realty) for more than the
last five years. Ms. Baldwin is also Vice President,
United States Olympic Committee (November
1996-present), and formerly Treasurer, United States
Olympic Committee (November 1992-November 1996).
Ms. Baldwin is an Advisory Board Member of each of
the Funds managed by ING Pilgrim Investments.
S.M.S. Chadha Advisory Board Member Secretary, Ministry of External Affairs, New Delhi,
(Age 61) India; Head of Foreign Service Institute, New Delhi,
India; Special Envoy of the Government of India;
Director, Special Unit for Technical Cooperation
among Developing countries, United Nations
Development Program, New York. Mr. Chada is an
Advisory Board Member of Global Corporate Leaders,
Global Technology, International, SmallCap Asia
Growth, Russia and Global Income Funds.
Andrew M. McCosh Advisory Board Member Professor of the Organisation of Industry and
(Age 58) Commerce, Department of Business Studies, The
University of Edinburgh, Scotland. Mr. McCosh is
an Advisory Board Member of Global Corporate
Leaders, Global Technology, International, SmallCap
Asia Growth, Russia and Global Income Funds.
</TABLE>
COMPENSATION OF DIRECTORS/TRUSTEES
The Funds pay each Director/Trustee who is not an interested person a pro
rata share, as described below, of (i) an annual retainer of $35,000, for
Msssrs. Patton and May, as lead directors, recieves an annual retainer of
$45,000; (ii) $5,500 per quarterly Board meeting; (iii) $1,000 per committee
meeting; (iv) $1,000 per special or telephonic meeting; and (v) out-of-pocket
expenses. The pro rata share paid by the Funds is based on each Fund's average
net assets as a percentage of the average net assets of all the funds managed by
the Investment Manager for which the Directors/Trustees serve in common as
Directors/Trustees. The Funds pay each Advisory Board Member a fee of $15,000
annually, plus reasonable travel expenses. Prior to July 26, 2000, (and July 31,
2000 for the Global Technology Fund), the Funds had a different compensation
structure in place.
The following table sets forth information regarding compensation of
Directors/Trustees by the Funds for the fiscal year ended December 31, 2000.
Officers of the Funds and Directors/Trustees who are interested persons of the
Funds do not receive any compensation from the Fund or any other funds managed
by the Investment Manager. In the column headed "Total Compensation from
Registrants and Fund Complex Paid to Director/Trustee," the number in
parentheses indicates the total number of boards in the fund complex on which
the Director/Trustee served during that fiscal year.
6
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE AGGREGATE AGGREGATE AGGREGATE COMPENSATION
COMPENSATION COMPENSATION AGGREGATE AGGREGATE COMPENSATION COMPENSATION AGGREGATE FROM
FROM GLOBAL FROM GLOBAL COMPENSATION COMPENSATION FROM GROWTH FROM COMPENSATION SMALLCAP
NAME OF PERSON, CORPORATE TECHNOLOGY FROM GNMA FROM GOLD AND INCOME INTERNATIONAL FROM SILVER ASIA GROWTH
POSITION LEADERS FUND FUND*** INCOME FUND FUND FUND FUND FUND FUND
-------- ------------ ------- ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S.M.S. Chadha** $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Robert M. DeMichele $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Beverly C. Duer $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Barbara R. Evans $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Richard M. Hisey $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Jerard F. Maher $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Andrew M. McCosh** $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Donald B. Miller $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Francis Olmstead* $_____ N/A $_____ $_____ $_____ $_____ $_____ $_____
John G. Preston $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Allen H. Stowe $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Margaret W. Russell* $_____ N/A $_____ $_____ $_____ $_____ $_____ $_____
Philip C. Smith* $_____ N/A $_____ $_____ $_____ $_____ $_____ $_____
Francis A. Sunderland* $_____ N/A $_____ $_____ $_____ $_____ $_____ $_____
Al Burton $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Paul S. Doherty $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Robert B. Goode $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Alan L. Gosule $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Walter H. May $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Jock Patton $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
David W.C. Putnam $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
John R. Smith $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Robert W. Stallings $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
John G. Turner $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
David W. Wallace $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
</TABLE>
----------
* Retired prior to July 26, 2000.
** Prior to July 26, 2000 Messrs. Chadha and McCosh served as
Trustees/Directors of each of the Funds (and with respect to the Global
Technology Fund, served as Trustees prior to July 31, 2000). Effective July
26, 2000, Messrs. Chadha and McCosh serve as Advisory Board Members of
certain Funds.
*** ING Pilgrim Global Technology Fund, Inc. commenced operations on December
27, 1999.
7
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION TOTAL
COMPENSATION FROM AGGREGATE AGGREGATE COMPENSATION
FROM TROIKA WORLDWIDE COMPENSATION COMPENSATION FROM FUND
NAME OF PERSON, DIALOG EMERGING FROM GLOBAL FROM MONEY COMPLEX
POSITION RUSSIA FUND MARKETS FUND INCOME FUND MARKET TRUST TO DIRECTORS
-------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
S.M.S. Chadha $_____ $_____ $_____ $_____ $_____
(15 boards)
Robert M. DeMichele $_____ $_____ $_____ $_____ $_____
(15 boards)
Beverly C. Duer $_____ $_____ $_____ $_____ $_____
(15 boards)
Barbara R. Evans $_____ $_____ $_____ $_____ $_____
(15 boards)
Richard M. Hisey $_____ $_____ $_____ $_____ $_____
(8 boards)
Jerard F. Maher $_____ $_____ $_____ $_____ $_____
(15 boards)
Andrew M. McCosh $_____ $_____ $_____ $_____ $_____
(15 boards)
Donald B. Miller $_____ $_____ $_____ $_____ $_____
(15 boards)
Francis Olmstead* $_____ $_____ $_____ $_____ $_____
(N/A)
John G. Preston $_____ $_____ $_____ $_____ $_____
(15 boards)
Allen H. Stowe $_____ $_____ $_____ $_____ $_____
(8 boards)
Margaret W. Russell* $_____ $_____ $_____ $_____ $_____
(N/A)
Philip C. Smith* $_____ $_____ $_____ $_____ $_____
(N/A)
Francis A. Sunderland* $_____ $_____ $_____ $_____ $_____
(N/A)
Al Burton $_____ $_____ $_____ $_____ $_____
Paul S. Doherty $_____ $_____ $_____ $_____ $_____
Robert B. Goode $_____ $_____ $_____ $_____ $_____
Alan L. Gosule $_____ $_____ $_____ $_____ $_____
Walter H. May $_____ $_____ $_____ $_____ $_____
Jock Patton $_____ $_____ $_____ $_____ $_____
David W.C. Putnam $_____ $_____ $_____ $_____ $_____
John R. Smith $_____ $_____ $_____ $_____ $_____
Robert W. Stallings $_____ $_____ $_____ $_____ $_____
John G. Turner $_____ $_____ $_____ $_____ $_____
David W. Wallace $_____ $_____ $_____ $_____ $_____
</TABLE>
----------
* Retired prior to July 26, 2000.
8
<PAGE>
The following table shows the annual benefits payable to certain
Directors/Trustees who are eligible for benefits under the Funds' Retirement
Plan for Eligible Directors/Trustees, effective September 12, 1995, and amended
and restated on April 18, 2000 (the "Retirement Plan"). The Retirement Plan
applies to individuals who were Directors/Trustees of the Funds prior to July
26, 2000 (and with respect to the Global Technology Fund, those who were
Directors/Trustees prior to July 31, 2000). The Retirement Plan was amended by
the Directors/Trustees on April 18, 2000 to, among other things, eliminate the
age a Director/Trustee must attain in order to receive retirement benefits. As
amended, a Director/Trustee would be eligible for retirement benefits upon
completion of ten continuous or non-forfeited years of service, as defined in
the Retirement Plan, and service has terminated due to death, disability or
voluntary or involuntary termination other than for "cause," as defined in the
Retirement Plan. Messrs. Duer, Maher, Miller and Stowe were not nominated to
serve as Directors/Trustees of the Funds after the completion of the Lexington
Acquisition. Therefore, their service was terminated and their benefits
commenced with the closing of the Lexington Acquisition and will continue for
ten years, in accordance with the terms of the Retirement Plan.
DATE BENEFITS
NAME OF DIRECTOR/TRUSTEE ANNUAL BENEFIT EXPECTED TO END
------------------------ -------------- ---------------
Beverley C. Duer $ 21,750 July 2010
Jerard F. Maher* $ 18,000 July 2010
Donald B. Miller $ 21,750 July 2010
Francis Olmsted $ 16,800 October 1, 2005
Margaret W. Russell $ 18,000 April 1, 2008
Philip C. Smith $ 19,200 October 1, 2006
Allen H. Stowe* $ 18,000 July 2010
Francis A. Sunderland $ 16,800 April 1, 2006
----------
* Messrs. Maher and Stowe are eligible to receive benefits under the
Retirement Plan as a result of their prior service as a Trustee of another
fund.
In addition, Mr. Chadha and Mr. McCosh will be eligible for retirement
benefits after six years of service, provided that if the Retirement Plan is
terminated during that period for reasons other than for "cause," as defined in
the Retirement Plan, they will be eligible to receive retirement benefits as if
they had completed 10 years of service.
OFFICERS
Unless otherwise noted, the mailing address of the Officers is 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258. The following individuals
serve as Officers for the Funds:
Stanley D. Vyner, Executive Vice President. (Age 49) President and Chief
Executive Officer (since August 1996), ING Pilgrim Investments; Executive
Vice President of most of the other ING Pilgrim Funds (since July 1996).
Formerly Chief Executive Officer (November 1993 - December 1995) HSBC Asset
Management Americas, Inc., and Chief Executive Officer, and Actuary (May
1986 - October 1993) HSBC Life Assurance Co.
James M. Hennessy, Senior Executive Vice President and Secretary. (Age 50)
Executive Vice President and Secretary (since April 1998), ING Pilgrim
Capital (formerly Express America Holdings Corporation), ING Pilgrim Group,
ING Pilgrim Securities and ING Pilgrim Investments; Executive Vice
President and Secretary of each of the other ING Pilgrim Funds. Formerly
Senior Vice President, ING Pilgrim Capital (April 1995 - April 1998);
Senior Vice President, Express America Mortgage Corporation (June 1992 -
August 1994) and President, Beverly Hills Securities Corp. (January 1990 -
June 1992).
9
<PAGE>
Michael J. Roland, Senior Vice President and Principal Financial Officer.
(Age 41) Senior Vice President and Chief Financial Officer, ING Pilgrim
Group, ING Pilgrim Investments and ING Pilgrim Securities (since June
1998); Senior Vice President and Principal Financial Officer of each of the
other ING Pilgrim Funds. He served in same capacity from January, 1995 -
April, 1997. Formerly, Chief Financial Officer of Endeaver Group (April,
1997 to June, 1998).
Robert S. Naka, Senior Vice President and Assistant Secretary. (Age 36)
Senior Vice President, ING Pilgrim Investments (since November 1999) and
ING Pilgrim Group, Inc. (since August 1999). Senior Vice President and
Assistant Secretary of each of the other ING Pilgrim Funds. Formerly Vice
President, ING Pilgrim Investments (April 1997 - October 1999), ING Pilgrim
Group, Inc. (February 1997 - August 1999). Formerly Assistant Vice
President, ING Pilgrim Group, Inc. (August 1995 - February 1997). Formerly
Operations Manager, ING Pilgrim Group, Inc. (April 1992 - April 1995).
Robyn L. Ichilov, Vice President and Treasurer. (Age 32) Vice President,
ING Pilgrim Investments (since August 1997), Accounting Manager (since
November 1995). Vice President and Treasurer of most of the other ING
Pilgrim Funds. Formerly Assistant Vice President and Accounting Supervisor
for PaineWebber (June 1993 - April 1995).
CODE OF ETHICS
The Funds have adopted a Code of Ethics governing personal trading
activities of all Directors/Trustees and Officers of the Funds and persons who,
in connection with their regular functions, play a role in the recommendation of
any purchase or sale of a security by the Funds or obtain information pertaining
to such purchase or sale. The Code is intended to prohibit fraud against the
Funds that may arise from personal trading. Personal trading is permitted by
such persons subject to certain restrictions; however they are generally
required to pre-clear all security transactions with the Funds' Compliance
Officer or her designee and to report all transactions on a regular basis.
Sub-Advisers have adopted their own Code of Ethics to govern the personal
trading activities of their personnel.
PRINCIPAL SHAREHOLDERS
As of ________, 2001 the Directors and Officers as a group owned less than
1% of any class of the Funds' outstanding shares. As of that date, to the
knowledge of management, no person owned beneficially or of record more than 5%
of the outstanding Class A, Class B, Class C, or Class Q shares of the Funds,
except as follows below.
PRINCIPAL SHAREHOLDERS
5% OR GREATER
CLASS AND
TYPE OF PERCENTAGE PERCENTAGE
FUND NAME AND ADDRESS OWNERSHIP(1) OF CLASS OF FUND
---- ---------------- --------- -------- -------
------ ----------- ---- ---- ----
PRINCIPAL SHAREHOLDERS
25% OR GREATER
CLASS AND
TYPE OF PERCENTAGE PERCENTAGE
FUND NAME AND ADDRESS OWNERSHIP(1) OF CLASS OF FUND
---- ---------------- --------- -------- -------
------ ----------- ---- ---- ----
----------
(1) Prior to July 31, 2000, the Lexington Funds offered only one class of
shares as a no-load mutual fund complex.
10
<PAGE>
INVESTMENT MANAGER
The Investment Manager for the Funds is ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments" or the "Investment Manager"). Prior to April 2000, Pilgrim
Investments served as the Investment Manager. Prior to July 26, 2000, Lexington
Management Corporation ("LMC") served as investment adviser to the Funds. On
July 26, 2000, Lexington Global Asset Managers, Inc, the indirect parent of LMC,
was acquired by ReliaStar Financial Corp., the indirect parent of ING Pilgrim
Investments, Inc. On July 26, 2000, ReliaStar was acquired by 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.
The Investment Manager, subject to the authority of the Directors/Trustees
of the Funds, serves as investment manager to the Funds and has overall
responsibility for the management of each Fund's portfolio pursuant to an
Investment Management Agreement between the Investment Manager and each Fund.
Each Fund's Investment Management Agreement requires the Investment Manager to
provide, subject to the supervision of the Board of Directors/Trustees,
investment advice and investment services to the Fund and to furnish advice and
recommendations with respect to investment of the Fund's assets and the purchase
or sale of its portfolio securities. The Investment Manager also provides
investment research and analysis. Each Investment Management Agreement provides
that the Investment Manager is not subject to liability to the Fund for any act
or omission in the course of, or connected with, rendering services under the
Investment Management Agreement, except by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties
under the Investment Management Agreement.
After an initial two year term, each Investment Management Agreement
continues in effect from year to year so long as such continuance is
specifically approved at least annually by (a) the Board of Directors/Trustees
or (b) the vote of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding shares voting as a single class; provided, that in either event the
continuance is also approved by at least a majority of the Board of
Directors/Trustees who are not "interested persons" (as defined in the 1940 Act)
of the Investment Manager by vote cast in person at a meeting called for the
purpose of voting on such approval. Each Investment Management Agreement is
terminable without penalty with not less than 60 days' notice by the Board of
Directors/Trustees or by a vote of the holders of a majority of the Fund's
outstanding shares voting as a single class, or upon not less than 60 days'
notice by the Investment Manager. The Investment Management Agreements will
terminate automatically in the event of its "assignment" (as defined in the 1940
Act).
Subject to the expense reimbursement provisions described in this Statement
of Additional Information, other expenses incurred in the operation of the Funds
are borne by the Funds, including, without limitation, investment advisory fees;
brokerage commissions; interest; legal fees and expenses of attorneys; fees of
independent auditors, transfer agents and dividend disbursing agents, accounting
agents, and custodians; the expense of obtaining quotations for calculating each
Fund's net asset value; taxes, if any, and the preparation of each Fund's tax
returns; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; fees and expenses
of registering and maintaining the registration of shares of the Funds under
federal and state laws and regulations; expenses of printing and distributing
reports, notices and proxy materials to existing shareholders; expenses of
printing and filing reports and other documents filed with governmental
agencies; expenses of annual and special shareholder meetings; expenses of
printing and distributing prospectuses and statements of additional information
to existing shareholders; fees and expenses of Directors/Trustees of the Funds
who are not employees of the Investment Manager or any Sub-Adviser, or their
affiliates; membership dues in trade associations; insurance premiums; and
extraordinary expenses such as litigation expenses.
11
<PAGE>
ING Pilgrim Investments, Inc. is registered as an investment adviser with
the SEC and serves as an investment adviser to registered investment companies
(or series thereof), as well as privately managed accounts. As of December 31,
2000, the Investment Manager had assets under management of approximately
$_______. ING Pilgrim Investments, Inc. is a wholly-owned subsidiary of
ReliaStar Financial Corp. (NYSE:RLR). Through its subsidiaries, ReliaStar
Financial Corp. offers individuals and institutions life insurance and
annuities, employee benefits products and services, life and health reinsurance,
retirement plans, mutual funds, bank products and personal finance education. On
April 30, 2000, ReliaStar Financial Corp. ("ReliaStar") entered into an
agreement (the "Transaction") to be acquired by ING Group. ING Group is a global
financial institution active in the field of insurance, banking and asset
management. Headquartered in Amsterdam, it conducts business in more than 65
countries, and has almost 100,000 employees. ING seeks to provide a full range
of integrated financial services to private, corporate, and institutional
clients through a variety of distribution channels. As of December ____, 2000,
ING had total assets of approximately $_____ billion and assets under management
of approximately $______ billion. The closing of the Transaction occurred during
the third quarter of 2000. ING's principal executive offices are located at
Strawinskylaan 2631, 1077 ZZ Amsterdam, P.O. Box 810, 1000 AV Amsterdam, the
Netherlands.
INVESTMENT MANAGER FEES
The Investment Manager bears the expense of providing its services. For its
services, each Fund pays the Investment Manager a monthly fee in arrears equal
to a percentage of each Fund's average daily net assets during the month. The
annual investment management fees for the Funds are as follows.
<TABLE>
<CAPTION>
FUND NAME ADVISER FEE
--------- -----------
<S> <C>
ING Pilgrim Global Corporate Leaders Fund, Inc. 1.00%
ING Pilgrim Global Technology Fund 1.25%
ING Pilgrim GNMA Income Fund, Inc. 0.60% on the first $150 million, 0.50% on the next $250
million, 0.45% on the next $400 million, 0.40% thereafter.
ING Pilgrim Gold Fund, Inc. 1.00% on the first $50 million and 0.75% thereafter.
ING Pilgrim Growth and Income Fund, Inc. 0.75% on the first $100 million, 0.60% on the next $50
million, 0.50% on the next $100 million and 0.40%
thereafter.
ING Pilgrim International Fund, Inc. 1.00%
ING Pilgrim Silver Fund, Inc. 1.00% on the first $30 million and 0.75% thereafter.
ING Pilgrim SmallCap Asia Growth Fund, Inc. 1.25%
ING Pilgrim Troika Dialog Russia Fund, Inc. 1.25%
ING Pilgrim Worldwide Emerging Markets Fund, Inc. 1.00%
ING Pilgrim Global Income Fund 1.00%
Lexington Money Market Trust 0.50% on the first $500 million and 0.45% thereafter.
</TABLE>
The total amount of advisory fees paid by each Fund (except for the Silver
Fund) for the fiscal years ended December 31 1998, 1999, and 2000 were as
follows:
12
<PAGE>
TOTAL ADVISORY FEES PAID DURING FISCAL YEAR ENDED
<TABLE>
<CAPTION>
DECEMBER OCTOBER DECEMBER DECEMBER DECEMBER
2000 2000 (1) 1999 1998 1997
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ING Pilgrim Global Corporate Leaders Fund, Inc. N/A $_______ $ 176,043 $ 249,333 $ 378,573
ING Pilgrim Global Technology Fund, Inc.(2) N/A $_______ -- N/A N/A
ING Pilgrim GNMA Income Fund, Inc. $_______ N/A $1,844,256 $1,224,048 $ 885,774
ING Pilgrim Gold Fund, Inc. N/A $_______ $ 583,491 $ 552,235 $ 769,527
ING Pilgrim Growth and Income Fund, Inc. $_______ N/A $1,498,729 $1,466,333 $1,403,527
ING Pilgrim International Fund, Inc.(3) N/A $_______ $ 224,416 $ 217,864 $ 210,897
ING Pilgrim SmallCap Asia Growth Fund, Inc.(4) N/A $_______ $ 167,228 $ 185,265 $ 207,247
ING Pilgrim Troika Dialog Russia Fund, Inc. N/A $_______ $ 444,970 $ 796,381 $1,307,946
ING Pilgrim Worldwide Emerging Markets Fund, Inc. N/A $_______ $ 785,431 $ 991,861 $2,373,753
ING Pilgrim Global Income Fund(5) N/A $_______ $ 334,433 $ 317,877 $ 212,446
Lexington Money Market Trust(6) $_______ N/A $ 422,726 $ 455,434 $ 455,446
</TABLE>
----------
(1) For the ten months from January 1, 2000 to October 31, 2000. Effective
______, 2000, the following Funds changed their fiscal year end to October
31 from December 31: ING Pilgrim Global Corporate Leaders Fund, Inc.; ING
Pilgrim Global Technology Fund, Inc.; ING Pilgrim Gold Fund, Inc.; ING
Pilgrim Global Income Fund; ING Pilgrim International Fund, Inc.; ING
Pilgrim SmallCap Asia Growth Fund, Inc.; ING Pilgrim Troika Dialog Russia
Fund, Inc.; ING Pilgrim Worldwide Emerging Markets Fund, Inc..
(2) ING Pilgrim Global Technology Fund, Inc. commenced operations on December
27, 1999, and as such did not operate for a full fiscal year in 1998, 1999
or 2000.
(3) Does not reflect LMC reimbursement to Lexington International Fund, Inc. of
$109,634 in 1998.
(4) Does not reflect LMC reimbursement to Lexington Small Cap Asia Growth Fund,
Inc. of $_____, $67,545 and $53,928 in 2000, 1999, and 1998 respectively.
(5) Does not reflect LMC reimbursement to Lexington Global Income Fund of
$125,346 in 1998.
(6) Does not reflect LMC reimbursement to Lexington Money Market Fund of $9,546
in 1999.
The total amount of advisory fees paid by the Silver Fund for fiscal years
ended June 30, 1997 and June 30 1998 were $462,896 and $630,181, respectively.
For the six months ended December 31, 1998, the advisory fees paid by the Silver
Fund were $150,258. In 1999, the Silver Fund paid $261,004 in advisory fees. For
the ten month period from 1/1/00 to 10/31/00, the advisory fees paid by the
Silver Fund were $______.
13
<PAGE>
SUB-ADVISORY AGREEMENTS
The Investment Management Agreements for the Funds provide that the
Investment Manager, with the approval of the Fund's Board of Directors/Trustees,
may select and employ investment advisers to serve as a Sub-Adviser for any Fund
("Sub-Adviser"), and shall monitor the Sub-Advisers' investment programs and
results, and coordinate the investment activities of the Sub-Advisers to ensure
compliance with regulatory restrictions. The Investment Manager pays all of its
expenses arising from the performance of its obligations under the Investment
Management Agreement, including all fees payable to the Sub-Advisers, executive
salaries and expenses of the Directors/Trustees and Officers of the Funds who
are employees of the Investment Manager or its affiliates. The Sub-Advisers pay
all of their expenses arising from the performance of their obligations under
the sub-advisory agreements (the "Sub-Advisory Agreements").
A Sub-Advisory Agreement may be terminated without payment of any penalties
by the Investment Manager, the Directors/Trustees, on behalf of the Fund, or the
shareholders of the Fund upon 60 days' prior written notice. Otherwise, the
Sub-Advisory Agreement will remain in effect for two years and will, thereafter,
continue in effect from year to year, subject to the annual approval of the
appropriate Board of Directors/Trustees, or the vote of a majority of the
outstanding voting securities, and the vote, cast in person at a meeting duly
called and held, of a majority of the Directors/Trustees, who are not parties to
the Sub-Advisory Agreement or "interested persons" (as defined in the 1940 Act)
of any such Party.
The Funds do not have any current Sub-Advisers.
FORMER SUB-ADVISER FOR SMALLCAP ASIA GROWTH FUND. Insinger Asset Management
(U.S.) Inc. ("Insinger") acted as Sub-Adviser to the SmallCap Asia Growth Fund
from July 26, 2000 to January 2, 2001. Prior to July 2000, Crosby Asset
Management (US) Inc. ("Crosby") was the sub-adviser to the Fund. Effective
January 2, 2001, ING Pilgrim will assume full investment management
responsibilities for the Fund under its existing Investment Management
Agreement.
FORMER SUB-ADVISER FOR THE TROIKA DIALOG RUSSIA FUND. Troika Dialog Asset
Management (Cayman Islands), Ltd. ("Troika Dialog"), Troika Dialog acted as
Sub-Adviser to the Russia Fund until January 2, 2001. As of January 2, 2001, ING
Pilgrim will directly manage the Troika Dialog Russia Fund.
The total amounts of sub-advisory fees paid by SmallCap Asia Growth Fund
for fiscal years ended December 31, 1997, 1998, 1999, and the ten period from
1/1/00 to 10/31/00 were $45,931, $41,168, $83,626, and $_____ respectively, and
the total amounts of sub-advisory fees paid by Russia Fund for the fiscal years
ended December 31, 1997, 1998, 1999, and the ten month period from 1/1/00 to
10/31/00 were $ 653,973, $398,191, $222,485, and $_____ respectively.
FORMER SUB-ADVISER FOR GLOBAL TECHNOLOGY FUND AND WORLDWIDE EMERGING
MARKETS FUND. Stratos Advisors, Inc. ("Stratos") served as Sub-Adviser to Global
Technology Fund from December 27, 1999 to June 7, 2000 and as Sub-Adviser to
Worldwide Emerging Markets Fund from October 1, 1998 to June 7, 2000. The total
amount of sub-advisory fees paid by Worldwide Emerging Markets Fund for the
fiscal year ended December 31, 1999, was $242,457. Fees for fiscal year ending
December 31, 1998 with respect to Worldwide Emerging Markets Fund, and December
31, 1999 with respect to Global Technology fund, were not calculated because
Stratos had not served as sub-adviser for a full fiscal year.
14
<PAGE>
ADMINISTRATION
ING Pilgrim Group, Inc. serves as Administrator for the Funds, pursuant to
an Administrative Services Agreement. Subject to the supervision of the Board of
Directors/Trustees, the Administrator provides the overall business management
and administrative services necessary to conduct properly the Funds' business,
except for those services performed by the Investment Manager under the
Investment Management Agreements, the Custodian for the Funds under the
Custodian Agreements, the Transfer Agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring the Investment Manager for compliance with requirements under
applicable law and with the investment policies and restrictions of each Fund.
The Administrator is an affiliate of the Investment Manager. For its services
under the Administration Services Agreement, ING Pilgrim Group, Inc. receives an
annual fee equal to 0.10% of each Fund's average daily net assets.
Prior to July 26, 2000, LMC acted as administrator to the Funds and
performed certain administrative and internal accounting services, including but
not limited to, maintaining general ledger accounts, regulatory compliance,
preparing financial information for semiannual and annual reports, preparing
registration statements, calculating net asset values, providing shareholder
communications, supervising the Custodian and Transfer Agent and providing
facilities for such services. The Funds reimbursed LMC for its actual cost in
providing such services, facilities and expenses.
Prior to July 26, 2000, the adviser performed certain accounting,
shareholder servicing and other administrative services and was reimbursed by
the Funds for the costs of performing such services.
EXPENSE LIMITATION AGREEMENTS
The Investment Manager has entered into an expense limitation agreement
with the Funds, pursuant to which the Investment Manager has agreed to waive or
limit its fees. In connection with this agreement and certain U.S. tax
requirements, the Investment Manager will assume other expenses so that the
total annual ordinary operating expenses of the Funds (which excludes interest,
taxes, brokerage commissions, extraordinary expenses such as litigation, other
expenses not incurred in the ordinary course of the Funds' business, and
expenses of any counsel or other persons or services retained by the Funds'
directors who are not "interested persons" (as defined in the 1940 Act) of the
Investment Manager do not exceed:
MAXIMUM OPERATING EXPENSE LIMIT
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
NAME OF FUND CLASS A CLASS B CLASS C CLASS Q
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
ING Pilgrim Global Corporate Leaders Fund, Inc. 2.75% N/A N/A N/A
ING Pilgrim Global Technology Fund, Inc. 2.75% N/A N/A N/A
ING Pilgrim GNMA Income Fund, Inc. 1.29% 2.04% 2.04% 1.29%
ING Pilgrim Gold Fund, Inc. 2.75% N/A N/A N/A
ING Pilgrim Growth and Income Fund, Inc. 2.75% 3.50% 3.50% 2.75%
ING Pilgrim International Fund, Inc. 2.75% 3.50% 3.50% 2.75%
ING Pilgrim Silver Fund, Inc. 2.75% N/A N/A N/A
ING Pilgrim SmallCap Asia Growth Fund, Inc. 2.75% 3.50% N/A N/A
ING Pilgrim Troika Dialog Russia Fund, Inc. 3.35% 4.10% N/A N/A
ING Pilgrim Worldwide Emerging Markets Fund, Inc. 2.75% N/A N/A N/A
ING Pilgrim Global Income Fund 2.75% 3.50% 3.50% 2.75%
Lexington Money Market Trust 1.00% N/A N/A N/A
</TABLE>
15
<PAGE>
The Funds will at a later date reimburse the Investment Manager for
management fees waived and other expenses assumed by the Investment Manager
during the previous 36 months, but only if, after such reimbursement, each
Fund's expense ratio does not exceed the percentage described above. The
Investment Manager will only be reimbursed for fees waived or expenses assumed
after the effective date of the expense limitation agreements.
The expense limitation agreement provides that these expense limitations
shall continue until July 26, 2002. Thereafter, the agreement will automatically
renew for one-year terms unless the Investment Manager provides written notice
of the termination of the agreement to the Funds at least 30 days prior to the
end of the then-current term. In addition, the agreement will terminate upon
termination of the Investment Management Agreement, or it may be terminated by
the Funds, without payment of any penalty, upon ninety (90) days' prior written
notice to the Investment Manager at its principal place of business.
Prior to July 26, 2000, the Funds voluntarily limited expenses of the Funds
to the following amounts:
MAXIMUM OPERATING EXPENSE LIMIT
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
FUND NAME PREVIOUS EXPENSE CAP
--------- --------------------
ING Pilgrim Global Corporate Leaders Fund, Inc. 2.50%
ING Pilgrim Global Technology Fund, Inc. 2.50%
ING Pilgrim GNMA Income Fund, Inc. 1.04%
ING Pilgrim Gold Fund, Inc. 2.75%
ING Pilgrim Growth and Income Fund, Inc. 2.75%
ING Pilgrim International Fund, Inc. 2.75%
ING Pilgrim Silver Fund, Inc. 2.50%
ING Pilgrim SmallCap Asia Growth Fund, Inc. 2.50%
ING Pilgrim Troika Dialog Russia Fund, Inc. 3.35%
ING Pilgrim Worldwide Emerging Markets Fund, Inc. 2.75%
ING Pilgrim Global Income Fund 2.75%
Lexington Money Market Trust 1.00%
DISTRIBUTOR
Shares of the Funds are distributed by ING Pilgrim Securities pursuant to a
Distribution Agreement between each Fund and the Distributor. Each Distribution
Agreement requires the Distributor to use its best efforts on a continuing basis
to solicit purchases of shares of each Fund. The Funds and the Distributor have
agreed to indemnify each other against certain liabilities. At the discretion of
the Distributor, all sales charges may at times be re-allowed to an authorized
dealer ("Authorized Dealer"). If 90% or more of the sales commission is
re-allowed, such Authorized Dealer may be deemed to be an "underwriter" as that
term is defined under the Securities Act of 1933, as amended. Each Distribution
Agreement will remain in effect for two years and from year to year thereafter
only if its continuance is approved annually by a majority of the Board of
Directors/Trustees who are not parties to such agreement or "interested persons"
of any such party and must be approved either by votes of a majority of the
Board of Directors/Trustees or a majority of the outstanding voting securities
of the Fund. See the Prospectus for information on how to purchase and sell
shares of the Funds, and the charges and expenses associated with an investment.
The sales charge retained by the Distributor and the commissions re-allowed to
selling dealers are not an expense of the Funds and have no effect on the net
asset value of the Funds. The Distributor, like the Investment Manager, is a
wholly owned indirect subsidiary of ING Group. Prior to July 26, 2000, the
distributor for the Funds was Lexington Funds Distributor, Inc. ("LFD").
16
<PAGE>
RULE 12b-1 PLANS
Each Fund (with the exception of the Lexington Money Market Trust) has a
distribution or shareholder service plan pursuant to Rule 12b-1 under the 1940
Act ("Rule 12b-1 Plans") applicable to all classes of shares offered by each
Fund. The Funds intend to operate the Rule 12b-1 Plans in accordance with their
terms and the National Association of Securities Dealers, Inc. rules concerning
sales charges. Under the Rule 12b-1 Plans, the Distributor may be entitled to
payment each month in connection with the offering, sale, and shareholder
servicing of Class A, Class B, Class C, and Class Q shares in the following
amounts: 0.25% of average daily net assets for Class A shares, 1.00 % of average
daily net assets for Class B shares, 1.00% of average daily net assets for Class
C shares and 0.25% of average daily net assets for Class Q shares.
These fees may be used to cover the expenses of the Distributor primarily
intended to result in the sale of Class A, Class B, Class C and Class Q shares
of the Funds, including payments to dealers for selling shares of the Funds and
for servicing shareholders of these classes of the Funds. Activities for which
these fees may be used include: promotional activities; preparation and
distribution of advertising materials and sales literature; expenses of
organizing and conducting sales seminars; personnel costs and overhead of the
Distributor; printing of prospectuses and statements of additional information
(and supplements thereto) and reports for other than existing shareholders;
payments to dealers and others that provide shareholder services; interest on
accrued distribution expenses; and costs of administering the Rule 12b-1 Plans.
No more than 0.75% per annum of each Fund's average net assets may be used to
finance distribution expenses, exclusive of shareholder servicing payments, and
no Authorized Dealer may receive shareholder servicing payments in excess of
0.25% per annum of a Fund's average net assets held by the Authorized Dealer's
clients or customers.
Under the Rule 12b-1 Plans, ongoing payments will be made on a quarterly
basis to Authorized Dealers for both distribution and shareholder servicing at
rates that are based on the average daily net assets of shares that are
registered in the name of that Authorized Dealer as nominee or held in a
shareholder account that designates the Authorized Dealer as the dealer of
record. The rates, on an annual basis, are as follows: 0.25% for Class A, 0.25%
for Class B, and 1.00% for Class C. Rights to these ongoing payments begin to
accrue in the 13th month following a purchase of Class A, B or C shares. With
respect to each 12b-1 Plan, the Distributor shall receive payment without regard
to actual distribution expenses it incurs. In the event a Rule 12b-1 Plan is
terminated in accordance with its terms, the obligations of a Fund to make
payments to the Distributor pursuant to the Rule 12b-1 Plan will cease and the
Fund will not be required to make any payments for expenses incurred after the
date the Plan terminates.
In addition to providing for the expenses discussed above, the Rule 12b-1
Plans also recognize that the Investment Manager and/or the Distributor may use
their resources to pay expenses associated with activities primarily intended to
result in the promotion and distribution of the Funds' shares and other funds
managed by the Investment Manager. In some instances, additional compensation or
promotional incentives may be offered to dealers. Such compensation and
incentives may include, but are not limited to, cash, merchandise, trips and
financial assistance to dealers in connection with pre-approved conferences or
seminars, sales or training programs for invited sales personnel, payment for
travel expenses (including meals and lodging) incurred by sales personnel and
members of their families, or other invited guests, to various locations for
such seminars or training programs, seminars for the public, advertising and
sales campaigns regarding the Funds or other funds managed by the Investment
Manager and/or other events sponsored by dealers. In addition, the Distributor
may, at its own expense, pay concessions in addition to those described above to
dealers that satisfy certain criteria established from time to time by the
Distributor. These conditions relate to increasing sales of shares of the Funds
over specified periods and to certain other factors. These payments may,
depending on the dealer's satisfaction of the required conditions, be periodic
and may be up to (1) 0.30% of the value of the Funds' shares sold by the dealer
during a particular period, and (2) 0.10% of the value of the Funds' shares held
by the dealer's customers for more than one year, calculated on an annual basis.
17
<PAGE>
The Rule 12b-1 Plans have been approved by the Board of Directors/Trustees
of each Fund, including all of the Directors/Trustees who are not interested
persons of the Funds as defined in the 1940 Act. The Rule 12b-1 Plans must be
renewed annually by the Board of Directors/Trustees, including a majority of the
Directors/Trustees who are not interested persons of the Funds and who have no
direct or indirect financial interest in the operation of the Rule 12b-1 Plans,
cast in person at a meeting called for that purpose. It is also required that
the selection and nomination of such Directors/Trustees be committed to the
Directors/Trustees who are not interested persons. Each Rule 12b-1 Plan and any
distribution or service agreement may be terminated as to a Fund at any time,
without any penalty, by such Directors/Trustees or by a vote of a majority of
each Fund's outstanding shares on 60 days written notice. The Distributor or any
dealer or other firm may also terminate their respective distribution or service
agreement at any time upon written notice.
In approving each Rule 12b-1 Plan, the Board of Directors/Trustees has
determined that differing distribution arrangements in connection with the sale
of new shares of a Fund is necessary and appropriate in order to meet the needs
of different potential investors. Therefore, the Board of Directors/Trustees,
including those Directors/Trustees who are not interested persons of the Funds,
concluded that, in the exercise of their reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Rule
12b-1 Plans as tailored to each class of the Funds, will benefit the Funds and
their respective shareholders.
Each Rule 12b-1 Plan and any distribution or service agreement may not be
amended to increase materially the amount spent for distribution expenses as to
a Fund without approval by a majority of each Fund's outstanding shares, and all
material amendments to a Plan or any distribution or service agreement shall be
approved by the Directors/Trustees who are not interested persons of the Fund,
cast in person at a meeting called for the purpose of voting on any such
amendment. The Distributor is required to report in writing to the Board of
Directors/Trustees at least quarterly on the monies reimbursed to it under a
Rule 12b-1 Plan, as well as to furnish the Board with such other information as
may be reasonably be requested in connection with the payments made under the
Rule 12b-1 Plan in order to enable the Board to make an informed determination
of whether a Rule 12b-1 Plan should be continued.
Prior to July 26, 2000, the Gold, Growth and Income, International, Russia,
Worldwide Emerging Markets and Global Income Funds each had a reimbursement
style 12b-1 Plan, which provided that the Funds pay distribution fees, including
payments to Lexington Funds Distributor, Inc. (the Funds' former distributor),
at an annual rate not to exceed 0.25% of their average daily net assets for
distribution services. Under this 12b-1 Plan, the Funds, either directly or
through the Investment Manager, would make payments periodically (i) to the
distributor or to select broker/dealers, (ii) to other persons who have entered
into shareholder processing and service agreements with the investment manager
or with the distributor, with respect to Fund shares owned by shareholders for
which such broker-dealers were the dealer or holder of record, or (iii) for
expenses associated with distribution of Fund shares, including the compensation
of the sales personnel of the distributor. Payments were also made for any
advertising and promotional expenses relating to selling efforts, including but
not limited to the incremental costs of printing prospectuses, statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Fund; the costs of
preparing and distributing any other supplemental sales literature; costs of
radio, television, newspaper and other advertising; telecommunications expenses,
including the cost of telephones, telephone lines and other communications
equipment, incurred by or for the Distributor in carrying out its obligations
under the Distribution Agreement.
18
<PAGE>
The following table shows the expenses incurred by the Funds for
distribution-related activities under the Rule 12b-1 Plans during the fiscal
year ended.
<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID AGGREGATE AMOUNT PAID AGGREGATE AMOUNT PAID
NAME OF THE FUND DECEMBER 31, 2000 OCTOBER 31, 2000(2) DECEMBER 31, 1999
---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C>
Global Corporate Leaders Fund, Inc. (1) N/A $________ N/A
Global Technology Fund, Inc. (1) N/A $________ N/A
GNMA Income Fund, Inc. $________ N/A N/A
Gold Fund, Inc. (1) N/A $________ $ 75,410
Growth and Income Fund, Inc. (1) $________ N/A $ 102,040
International Fund, Inc. (1) N/A $________ $ 17,424
Silver Fund, Inc. (1) N/A $________ N/A
SmallCap Asia Growth Fund, Inc. (1) N/A $________ N/A
Troika Dialog Russia Fund, Inc. (1) N/A $________ $ 61,804
Worldwide Emerging Markets Fund, Inc. (1) N/A $________ $ 196,336
Global Income Fund $________ $ 40,884
Lexington Money Market Trust $________ N/A N/A
</TABLE>
----------
(1) Effective ______, 2000, the Fund changed its fiscal year end to October 31.
(2) Represents the ten months from January 31, 2000 to October 31, 2000.
Total distribution expenses incurred by the Distributor for the costs of
promotion and distribution of each Fund shares for the fiscal period ended were
as follows.
<TABLE>
<CAPTION>
DECEMBER 31, 2000 OCTOBER 31, 2000** DECEMBER 31, 1999
----------------- ------------------ -----------------
<S> <C> <C> <C>
ING PILGRIM GLOBAL CORPORATE LEADERS FUND, INC.*
Advertising N/A $________ N/A
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ N/A
TOTAL N/A $________ N/A
ING PILGRIM GLOBAL TECHNOLOGY FUND, INC.*
Advertising N/A $________ N/A
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ N/A
TOTAL N/A $________ N/A
ING PILGRIM GNMA INCOME FUND, INC.
Advertising $________ N/A N/A
Printing $________ N/A N/A
Payments to Brokers or Dealers $________ N/A N/A
Miscellaneous $________ N/A N/A
TOTAL $________ N/A N/A
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 2000 OCTOBER 31, 2000** DECEMBER 31, 1999
----------------- ------------------ -----------------
<S> <C> <C> <C>
ING PILGRIM GOLD FUND, INC.*
Advertising N/A $________ $ 15,836
Printing N/A $________ $ 4,525
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ $ 55,049
TOTAL N/A $________ $ 75,410
ING PILGRIM GROWTH AND INCOME FUND, INC.*
Advertising $________ N/A $ 78,571
Printing $________ N/A $ 23,469
Payments to Brokers or Dealers $________ N/A N/A
Miscellaneous $________ N/A N/A
TOTAL $________ N/A $102,040
ING PILGRIM INTERNATIONAL FUND, INC.*
Advertising N/A $________ 122
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ $ 5,105
Miscellaneous N/A $________ $ 12,198
TOTAL N/A $________ $ 17,427
ING PILGRIM SILVER FUND, INC.*
Advertising N/A $________ N/A
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ N/A
TOTAL N/A $________ N/A
ING PILGRIM SMALLCAP ASIA GROWTH FUND, INC.*
Advertising N/A $________ N/A
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ N/A
TOTAL N/A $________ N/A
ING PILGRIM TROIKA DIALOG RUSSIA FUND, INC.*
Advertising N/A $________ N/A
Printing N/A $________ $ 62,000
Payments to Brokers or Dealers N/A $________ N/A
Miscellaneous N/A $________ N/A
TOTAL N/A $________ $ 62,000
ING PILGRIM WORLDWIDE EMERGING MARKETS FUND, INC.*
Advertising N/A $________ $ 42,409
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ $135,276
Miscellaneous N/A $________ $ 18,652
TOTAL N/A $________ $196,336
ING PILGRIM GLOBAL INCOME FUND
Advertising N/A $________ $ 82
Printing N/A $________ N/A
Payments to Brokers or Dealers N/A $________ $ 34,547
Miscellaneous N/A $________ $ 6,133
TOTAL N/A $________ $ 40,884
</TABLE>
----------
* Effective ______, 2000, the Fund changed its fiscal year end to October 31.
** Represents the ten months from January 31, 2000 to October 31, 2000.
20
<PAGE>
SHAREHOLDER SERVICING AGENT
ING Pilgrim Group, Inc. serves as Shareholder Servicing Agent for the
Funds. The Shareholder Servicing Agent is responsible for responding to written
and telephonic inquiries from shareholders. Each Fund pays the Shareholder
Servicing Agent a monthly fee on a per-contact basis, based upon incoming and
outgoing telephonic and written correspondence.
OTHER EXPENSES
In addition to the management fee and other fees described previously, each
Fund pays other expenses, such as legal, audit, transfer agency and custodian
out-of-pocket fees, proxy solicitation costs, and the compensation of
Directors/Trustees who are not affiliated with the Investment Manager. Most Fund
expenses are allocated proportionately among all of the outstanding shares of
that Fund. However, where applicable, the Rule 12b-1 Plan fees for each class of
shares are charged proportionately only to the outstanding shares of that class.
For the Lexington Money Market Trust, Fund expenses are allocated
proportionately among all of the outstanding shares of the Fund.
SUPPLEMENTAL DESCRIPTION OF INVESTMENTS
Some of the different types of securities in which the Funds may invest,
subject to their respective investment objectives, policies and restrictions are
described in the Prospectus under "The Funds," and "More Information About
Risks." Additional information concerning the characteristics and risks of
certain of the Funds' investments are set forth below. There can be no assurance
that any of the Funds will achieve their investment objectives.
COMMON STOCK, CONVERTIBLE SECURITIES AND OTHER EQUITY SECURITIES
Each Fund (except GNMA Income Fund, Global Income Fund, and Money Market
Trust) may invest in common stocks, which represent an equity (ownership)
interest in a company. This ownership interest generally gives a Fund the right
to vote on issues affecting the company's organization and operations.
Each Fund (other than GNMA Income Fund, Global Income Fund, and Money
Market Trust) may also buy other types of equity securities such as convertible
securities, preferred stock, and warrants or other securities that are
exchangeable for shares of common stock. A convertible security is a security
that may be converted either at a stated price or rate within a specified period
of time into a specified number of shares of common stock. By investing in
convertible securities, a Fund seeks the opportunity, through the conversion
feature, to participate in the capital appreciation of the common stock into
which the securities are convertible, while investing at a better price than may
be available on the common stock or obtaining a higher fixed rate of return than
is available on common stocks. The value of a convertible security is a function
of its "investment value" (determined by its yield in comparison with the yields
of other securities of comparable maturity and quality that do not have a
conversion privilege) and its "conversion value" (the security's worth at market
value, if converted into the underlying common stock). The credit standing of
the issuer and other factors may also affect the investment value of a
convertible security. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value. To the extent the
market price of the underlying common stock approaches or exceeds the conversion
price, the price of the convertible security will be increasingly influenced by
its conversion value.
21
<PAGE>
The market value of convertible debt securities tends to vary inversely
with the level of interest rates. The value of the security declines as interest
rates increase and increases as interests rates decline. Although under normal
market conditions longer term debt securities have greater yields than do
shorter term debt securities of similar quality, they are subject to greater
price fluctuations. A convertible security may be subject to redemption at the
option of the issuer at a price established in the instrument governing the
convertible security. If a convertible security held by a Fund is called for
redemption, the Fund must permit the issuer to redeem the security, convert it
into the underlying common stock or sell it to a third party.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Fund's entire investment therein). The Global Technology Fund will not purchase
warrants except in units with other securities in original issuance thereof or
attached to other securities, if at the time of the purchase, the Fund's
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Fund's total assets. For these purposes, warrants attached to units or
other securities shall be deemed to be without value.
PREFERRED STOCK
Each Fund (other than Global Income Fund, GNMA Income Fund, and Money
Market Trust) may invest in preferred stock. Preferred stock, unlike common
stock, offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid before dividends are paid on the
issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on the distribution of a corporation's assets in
the event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS
The Funds (other than Global Income Fund, GNMA Income Fund, and Money
Market Trust) may invest in securities of foreign issuers in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or
other similar securities representing securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities they represent. ADRs are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in the United States securities markets, and EDRs, in bearer form, are designed
for use in European securities markets.
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U.S. GOVERNMENT SECURITIES
The Funds may invest in fixed-rate and floating- or variable-rate U.S.
government securities. The U.S. Government guarantees payments of interest and
principal of U.S. Treasury bills, notes and bonds, mortgage-related securities
and other securities issued by the U.S. government. Other securities issued by
U.S. government agencies or instrumentalities are supported only by the credit
of the agency or instrumentality, for example those issued by the Federal Home
Loan Bank, whereas others, such as those issued by the FNMA, Farm Credit System
and Student Loan Marketing Association, have an additional line of credit with
the U.S. Treasury.
Short-term U.S. government securities generally are considered to be among
the safest short-term investments. However, the U.S. government does not
guarantee the net asset value of the Funds' shares. With respect to U.S.
government securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. government will provide support to such agencies
or instrumentalities. Accordingly, such U.S. government securities may involve
risk of loss of principal and interest.
Each Fund may invest in the following types of money market instruments
(i.e., debt instruments with less than 12 months remaining until maturity)
denominated in U.S. dollars or other currencies: (a) obligations issued or
guaranteed by the U.S. or foreign governments, their agencies, instrumentalities
or municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Fund may not
invest more than 25% of its total assets in bank securities; (e) repurchase
agreements with respect to the foregoing; and (f) other substantially similar
short-term debt securities with comparable characteristics.
CORPORATE DEBT SECURITIES
Each Fund may invest in corporate debt securities. Corporate debt
securities include corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities. The investment
return on a corporate debt security reflects interest earnings and changes in
the market value of the security. The market value of a corporate debt security
will generally increase when interest rates decline, and decrease when interest
rates rise. There is also the risk that the issuer of a debt security will be
unable to pay interest or principal at the time called for by the instrument.
Investments in corporate debt securities that are rated below investment grade
are described in "Junk Bonds" below.
Debt obligations that are deemed investment grade carry a rating of at
least Baa from Moody's or BBB from Standard and Poor's, or a comparable rating
from another rating agency or, if not rated by an agency, are determined by the
Investment Adviser to be of comparable quality. Bonds rated Baa or BBB have
speculative characteristics and changes in economic circumstances are more
likely to lead to a weakened capacity to make interest and principal payments
than higher rated bonds.
With respect to the Global Technology, International and Worldwide Emerging
Markets Funds, when the Funds' portfolio manager believes that debt securities
will provide capital appreciation through favorable changes in relative foreign
exchange rates, in relative interest rate levels or in the creditworthiness of
issuers, the Funds may invest primarily in debt securities.
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The Russia Fund and Worldwide Emerging Markets Fund may invest (up to 35%
of its total assets in the case of the Russia Fund) in Short-Term and
Medium-Term Debt Securities. The Short-Term and Medium-Term Debt Securities in
which the Funds may invest are foreign and domestic debt securities, including
short-term (less than twelve months to maturity) and medium-term (not greater
than five years to maturity) obligations issued by the U.S. Government, foreign
governments, foreign and domestic corporations and banks, and repurchase
agreements.
The Global Income Fund, under normal circumstances, invests substantially
all of its assets in debt securities of issuers in the United States, developed
foreign countries, and emerging markets.
The Gold Fund and Silver Fund may invest in debt securities of companies
engaged in mining and processing gold and silver. These debt securities can be
expected to be comparable to that of other debt obligations and generally will
not react to fluctuations in the price of gold and silver. An investment in the
debt instruments of these companies, therefore, cannot be expected to provide
the hedge against inflation that may be provided through investments in equity
securities of companies engaged in such activities and can be expected to
fluctuate inversely with prevailing interest rates.
JUNK BONDS
The Gold Fund and Silver Fund may invest in high yield, lower rated debt
securities known as "junk bonds." Junk bonds are debt obligations rated below
investment grade and non-rated securities of comparable quality. Junk bonds are
considered speculative and thus pose a greater risk of default than investment
grade securities. Investments of this type are subject to greater risk of loss
of principal and interest, but in general provide higher yields than higher
rated debt obligations. Bonds issued by companies domiciled in emerging markets
are usually rated below investment grade.
BRADY BONDS AND ZERO COUPON BONDS
The Global Income Fund may invest in "Brady Bonds" and zero coupon bonds.
Brady Bonds are securities created through the exchange of existing commercial
bank loans to public and private entities in certain emerging markets for new
bonds in connection with a debt restructuring plan. Investors should recognize
that Brady Bonds have been issued only recently and, accordingly, do not have a
long payment history. Zero coupon bonds pay income only at maturity. The prices
of these bonds are highly sensitive to changes in market interest rates. The
original issue discount on the zero coupon bonds must be included ratably in the
income of the Fund as the income accrues even though payment has not been
received. The Fund nevertheless intends to distribute an amount of cash equal to
the currently accrued original issue discount, and this may require liquidating
securities at times they might not otherwise do so and may result in capital
loss. See "Tax Matters" in this Statement of Additional Information.
SAMURAI BONDS AND YANKEE BONDS
Subject to its respective fundamental investment restrictions, the ING
PILGRIM Global Income Fund may invest in yen-denominated bonds sold in Japan by
non-Japanese issuers ("Samurai bonds"), and may invest in dollar-denominated
bonds sold in the United States by non-U.S. issuers ("Yankee bonds"). It is the
policy of the Fund to invest in Samurai or Yankee bond issues only after taking
into account considerations of quality and liquidity, as well as yield.
EMERGING MARKET DEBT SECURITIES
The Global Income Fund, under normal circumstances, invests substantially
all of its assets in debt securities of issuers in the United States, developed
foreign countries and emerging markets. For purposes of its investment
objective, the Fund considers an emerging country to be any country whose
economy and market the World Bank or United Nations considers to be emerging or
developing. The Fund may also invest in debt securities traded in any market, of
companies that derive 50% or more of their total revenue from either goods or
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services produced in such emerging countries and emerging markets or sales made
in such countries. Determinations as to eligibility will be made by the
Investment Manager based on publicly available information and inquiries made to
the companies. It is possible in the future that sufficient numbers of emerging
country or emerging market debt securities would be traded on securities markets
in industrialized countries so that a major portion, if not all, of the Fund's
assets would be invested in securities traded on such markets, although such a
situation is unlikely at present.
Currently, investing in many of the emerging countries and emerging markets
is not feasible or may involve political risks. Accordingly, the Investment
Manager currently intends to consider investments only in those countries in
which it believes investing is feasible and does not involve such risks. The
list of acceptable countries will be reviewed by the Investment Manager and
approved by the Board of Trustees on a periodic basis and any additions or
deletions with respect to such list will be made in accordance with changing
economic and political circumstances involving such countries.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Global Income Fund, the Investment
Manager ordinarily consider the following factors: prospects for relative
economic growth among the different countries in which the Fund may invest;
expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
Although the Global Income Fund values assets daily in terms of U.S.
dollars, the Fund does not intend to convert holdings of foreign currencies into
U.S. dollars on a daily basis. The Fund will do so from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference ("spread") between the prices at which they are buying
and selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to sell that currency to the dealer.
SHORT SALES AND SHORT SALES "AGAINST THE BOX"
The Global Income Fund is authorized to make short sales of securities,
although it has no current intention of doing so. A short sale is a transaction
in which a Fund sells a security in anticipation that the market price of that
security will decline. The Fund may make short sales as a form of hedging to
offset potential declines in long positions in securities it owns and in order
to maintain portfolio flexibility. The Fund only may make short sales "against
the box." In this type of short sale, at the time of the sale, the Fund owns the
security it has sold short or has the immediate and unconditional right to
acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and does not receive the proceeds from the sale. To make delivery to the
purchaser, the executing broker borrows the securities being sold short on
behalf of the seller. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. To secure its obligation to deliver securities sold
short, the Fund will deposit in a separate account with its custodian an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities at no cost. The ING PILGRIM Global Income Fund
could close out a short position by purchasing and delivering an equal amount of
the securities sold short, rather than by delivering securities already held by
the Fund, because the Fund might want to continue to receive interest and
dividend payments on securities in its portfolio that are convertible into the
securities sold short.
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The Global Income Fund might make a short sale "against the box" in order
to hedge against market risks when the Investment Manager believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Investment Manager wants to sell the security the Fund
owns at a current attractive price, but also wishes to defer recognition or gain
or loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code.
The Gold Fund and Silver Fund may invest in debt securities of companies
engaged in mining and processing gold and silver. These debt securities can be
expected to be comparable to that of other debt obligations and generally will
not react to fluctuations in the price of gold and silver. An investment in the
debt instruments of these companies, therefore, cannot be expected to provide
the hedge against inflation that may be provided through investments in equity
securities of companies engaged in such activities and can be expected to
fluctuate inversely with prevailing interest rates.
GNMA CERTIFICATES
GNMA Income Fund may invest in GNMA certificates. GNMA Certificates are
Government National Mortgage Association ("GNMA") mortgage-backed securities
representing part ownership of a pool of mortgage loans. GNMA is a U.S.
Government corporation within the Department of Housing and Urban Development.
Such loans are initially made by lenders such as mortgage bankers, commercial
banks and savings and loan associations and are either insured by the Federal
Housing Administration (FHA) or Farmers' Home Administration (FMHA) or
guaranteed by the Veterans Administration (VA). A GNMA Certificate represents an
interest in a specific pool of such mortgages which, after being approved by
GNMA, is offered to investors through securities dealers. Once approved by GNMA,
the timely payment of interest and principal on each certificate is guaranteed
by the full faith and credit of the United States Government.
GNMA Certificates differ from bonds in that principal is scheduled to be
paid back by the borrower over the length of the loan rather than returned in a
lump sum at maturity. The GNMA Income Fund will purchase "modified pass through"
type GNMA Certificates, which entitle the holder to receive all interest and
principal payments owed on the mortgages in the pool (net of issuers' and GNMA
fees), regardless of whether or not the mortgagor has made such payment. The
Fund will use principal payments to purchase additional GNMA Certificates or
other government guaranteed securities. The balance of the Fund's assets will be
invested in other securities issued or guaranteed by the U.S. Government,
including U.S. Treasury bills, note or bonds. The Fund may also invest in
repurchase agreements secured by such U.S. Government securities or GNMA
Certificates.
GNMA Certificates are created by an "issuer", which is an FHA approved
mortgage banker who also meets criteria imposed by GNMA. The issuer assembles a
pool of FHA, FMHA, or VA insured or guaranteed mortgages which are homogeneous
as to interest rate, maturity and type of dwelling. Upon application by the
issuer, and after approval by GNMA of the pool, GNMA provides its commitment to
guarantee timely payment of principal and interest on the GNMA Certificates
backed by the mortgages included in the pool. The GNMA Certificates, endorsed by
GNMA, are then sold by the issuer through securities dealers.
GNMA is authorized under the Federal National Housing Act to guarantee
timely payment of principal and interest on GNMA Certificates. This guarantee is
backed by the full faith and credit of the United States. GNMA may borrow U.S.
Treasury funds to the extent needed to make payments under its guarantee. When
mortgages in the pool underlying GNMA Certificates are prepaid by mortgagors or
by result of foreclosure, such principal payments are passed through to the
certificate holders. Accordingly, the life of the GNMA Certificate is likely to
be substantially shorter than the stated maturity of the mortgages in the
underlying pool. Because of such variation in prepayment rates, it is not
possible to predict the life of a particular GNMA certificate but FHA statistics
indicate that 25 to 30 year single family dwelling mortgages have an average
life of approximately 12 years. The majority of GNMA certificates are backed by
mortgages of this type, and accordingly the generally accepted practice has
developed to treat GNMA certificates as 30 year securities which prepay fully in
the 12th year.
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GNMA certificates bear a nominal "coupon rate" which represents the
effective FHA-VA mortgage rate at the time of issuance, less 0.5% which
constitutes the GNMA and issuer's fees. For providing its guarantees, GNMA
receives an annual fee of 0.06% of the outstanding principal on certificates
backed by single family dwelling mortgages, and the issuer receives an annual
fee of 0.44% for assembling the pool and for passing through monthly payments of
interest and principal.
Payments to holders of GNMA certificates consist of the monthly
distributions of interest and principal less the GNMA and issuer's fees. The
actual yield to be earned by a holder of a GNMA certificate is calculated by
dividing such payments by the purchase price paid for the GNMA certificate
(which may be at a premium or a discount from the face value of the
certificate). Monthly distributions of interest, as contrasted to semi-annual
distributions which are common for other fixed interest investments, have the
effect of compounding and thereby raising the effective annual yield earned on
GNMA certificates. Because of the variation in the life of the pools of
mortgages which back various GNMA certificates, and because it is impossible to
anticipate the rate of interest at which future principal payments may be
reinvested, the actual yield earned from a portfolio of GNMA certificates, such
as that in which the Fund is invested, will differ significantly from the yield
estimated by using an assumption of a 12 year life for each GNMA certificate
included in such a portfolio as described.
The actual rate of prepayment for any GNMA certificate does not lend itself
to advance determination, although regional and other characteristics of a given
mortgage pool may provide some guidance for investment analysis. Also, secondary
market trading of outstanding GNMA certificates tends to be concentrated in
issues bearing the current coupon rate.
GNMA Income Fund may purchase construction loan securities which are issued
to finance building costs. The funds are disbursed as needed or in accordance
with a prearranged plan. The securities provide for the timely payment to the
registered holder of interest at the specified rate plus scheduled installments
of principal. Upon completion of the construction phase, the construction loan
securities are terminated, and project loan securities are issued. It is the
Fund's policy to record these GNMA certificates on trade date, and to segregate
assets to cover its commitments on trade date as well.
GNMA CERTIFICATES -- WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
GNMA Certificates may at times be purchased or sold on a delayed delivery
basis or on a when-issued basis. These transactions arise when GNMA Certificates
are purchased or sold by the GNMA Income Fund with payment and delivery taking
place in the future, in order to secure what is considered to be an advantageous
price and yield to the Fund. No payment is made until delivery is due, often a
month or more after the purchase. The Settlement date on such transactions will
take place no more than 120 days from the trade date. When the Fund engages in
when-issued and delayed delivery transactions, the Fund relies on the buyer or
seller, as the case may be, to consummate the sale. Failure of the buyer or
seller to do so may result in the Fund missing the opportunity of obtaining a
price considered to be advantageous. While when-issued GNMA Certificates may be
sold prior to the settlement date, the Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a GNMA
Certificate on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The Fund does not
believe that its net asset value or income will be adversely affected by its
purchase of GNMA Certificates on a when-issued basis. The Fund may invest in
when-issued securities without other conditions. Such securities either will
mature or be sold on or about the settlement date. The Fund may earn interest on
such account or securities for the benefit of shareholders.
COMMERCIAL BANK OBLIGATIONS
The Global Income Fund may invest in commercial bank obligations.
Obligations of foreign branches of U.S. banks and of foreign banks are
obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
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U.S. banks and of foreign banks may subject the Global Income Fund to investment
risks that are different in some respect from those of investments in
obligations of domestic issuers. Although the Global Income Fund typically will
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion, this $1
billion figure is not a fundamental investment policy or restriction of the
Fund. For the purposes of calculation with respect to the $1 billion figure, the
assets of a bank will be deemed to include the assets of its U.S. and non-U.S.
branches.
SETTLEMENT TRANSACTIONS
When the Funds (with the exception of GNMA Income and Growth and Income
Funds and Lexington Money Market Trust) enter into contracts for purchase or
sale of a portfolio security denominated in a foreign currency, they may be
required to settle a purchase transaction in the relevant foreign currency or
receive the proceeds of a sale in that currency. In either event, the Funds will
be obligated to acquire or dispose of such foreign currency as is represented by
the transaction by selling or buying an equivalent amount of United States
dollars. Furthermore, the Funds may wish to "lock in" the United States dollar
value of the transaction at or near the time of a purchase or sale of portfolio
securities at the exchange rate or rates then prevailing between the United
States dollar and the currency in which the foreign security is denominated.
Therefore, the Funds may, for a fixed amount of United States dollars, enter
into a forward foreign exchange contract for the purchase or sale of the amount
of foreign currency involved in the underlying securities transaction. In so
doing, the Funds will attempt to insulate themselves against possible losses
resulting from a change in the relationship between the United States dollar and
the foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is known
as "transaction hedging".
To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Funds may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Funds purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Funds' portfolio or securities or prevent loss if the price
of such securities should decline.
PORTFOLIO HEDGING
Some or all of the Global Corporate Leaders, Global Technology, Gold,
International, Silver, SmallCap Asia Growth, Russia, Worldwide Emerging Markets,
and Global Income Funds' portfolio will be denominated in foreign currencies. As
a result, in addition to the risk of change in the market value of portfolio
securities, the value of the portfolio in United States dollars is subject to
fluctuations in the exchange rate between such foreign currencies and the United
States dollar. When, in the opinion of the Investment Manager it is desirable to
limit or reduce exposure in a foreign currency in order to moderate potential
changes in the United States dollar value of the portfolio, the Funds may enter
into a forward foreign currency exchange contract by which the United States
dollar value of the underlying foreign portfolio securities can be approximately
matched by an equivalent United States dollar liability. This technique is known
as "portfolio hedging" and moderates or reduces the risk of change in the United
States dollar value of the Funds' portfolios only during the period before the
maturity of the forward contract (which will not be in excess of one year).
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The Global Corporate Leaders, Global Technology, GNMA Income, Gold, Growth
and Income, International, Silver, SmallCap Asia, Russia, Worldwide Emerging
Markets, and Global Income Funds may hedge against changes in financial markets,
currency rates and interest rates. The Funds may hedge with "derivatives."
Derivatives are instruments whose value is linked to, or derived from, another
instrument, like an index or a commodity. Hedging transactions involve certain
risks. Although the Funds may benefit from hedging, unanticipated changes in
interest rates or securities prices may result in greater losses for the Funds
than if they did not hedge. If the Funds do not correctly predict a hedge, they
may lose money. In addition, the Funds pay commissions and other costs in
connection with hedging transactions.
The Global Corporate Leaders, Global Technology, Gold, International,
Silver, SmallCap Asia Growth, Russia, Worldwide Emerging Markets, and Global
Income Funds, for hedging purposes only, may also enter into forward foreign
currency exchange contracts to increase its exposure to a foreign currency that
the Investment Manager expects to increase in value relative to the United
States dollar. The Funds will not attempt to hedge all of its foreign portfolio
positions and will enter into such transactions only to the extent, if deemed
appropriate by the Investment Manager or Sub-Adviser. Hedging against a decline
in the value of currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities decline.
The Funds will not enter into forward foreign currency exchange transactions for
speculative purposes. The Funds intend to limit transactions as described in
this paragraph to not more than 70% of total Fund assets.
RISKS ASSOCIATED WITH HEDGING TRANSACTIONS. Hedging transactions have
special risks associated with them, including possible default by the
Counterparty to the transaction, illiquidity and, to the extent the Investment
Manager's view as to certain market movements is incorrect, the risk that the
use of a hedging transaction could result in losses greater than if it had not
been used. Use of call options could result in losses to the Funds, force the
sale or purchase of portfolio securities at inopportune times or for prices
lower than current market values, or cause the Funds to hold a security it might
otherwise sell.
Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to the Funds if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, the risk exists that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Funds are engaging in portfolio
hedging. Currency transactions are also subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Funds if they
are unable to deliver or receive currency or monies in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
In addition, the Funds pay commissions and other costs in connection with
such investments. Losses resulting from the use of hedging transactions will
reduce the Funds' net asset value, and possibly income, and the losses can be
greater than if hedging transactions had not been used.
RISKS OF HEDGING TRANSACTIONS OUTSIDE THE UNITED STATES. When conducted
outside the U.S., hedging transactions may not be regulated as rigorously as in
the U.S., may not involve a clearing mechanism and related guarantees, and will
be subject to the risk of government actions affecting trading in, or the price
of, foreign securities, currencies and other instruments. The value of positions
taken as part of non-U.S. hedging transactions also could be adversely affected
by: (1) other complex foreign political, legal and economic factors; (2) lesser
availability of data on which to make trading decisions than in the U.S.; (3)
delays in the Funds' ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S.; (4) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S.; and (5) lower trading volume and liquidity.
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OPTIONS ON SECURITIES, SECURITIES INDICES AND CURRENCIES
Options may be used as a means of participating in an anticipated price
change of a security on a more limited basis than would be possible if the
security itself were purchased. The Funds (with the exception of the GNMA Income
Fund and the Lexington Money Market Trust) may purchase put options on
particular securities (or on currencies in which those securities are
denominated) in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option (or an adverse movement in the applicable currency relative to the U.S.
dollar). Prior to expiration, most options are expected to be sold in a closing
sale transaction. Profit or loss from the sale depends upon whether the amount
received is more or less than the premium paid plus transaction costs. The
Global Income Fund also may purchase put options at a time when the Fund does
not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, the Fund seek to benefit from a decline in
the market price of the underlying security or currency. If the put option is
not sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price during
the life of the put option, the Fund will lose its entire investment in the put
option. In order for the purchase of a put option to be profitable, the market
price of the underlying security or currency must decline sufficiently below the
exercise price to cover the premium and transaction cost, unless the put option
is sold in a closing sale transaction.
The Global Income and the Russia Funds may purchase call options on
securities that they intend to purchase (or on currencies in which those
securities are denominated) in order to limit the risk of a substantial increase
in the market price of such security (or an adverse movement in the applicable
currency). The Global Income Fund also may purchase call options on underlying
securities or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option would be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options also may be purchased at
times to avoid realizing losses that would result in a reduction of the Fund's
current return. For example, where the Fund has written a call option on an
underlying security or currency having a current market value below the price at
which such security or currency was purchased by the Fund, an increase in the
market price could result in the exercise of the call option written by the Fund
and the realization of a loss on the underlying security or currency with the
same exercise price and expiration date as the option previously written.
COVERED PUT AND CALL OPTIONS
The Russia and Global Income Funds may write put options. The Funds would
write put options only on a covered basis, which means that the Funds would
either (i) set aside cash, U.S. government securities or other liquid,
high-grade debt securities in an amount not less than the exercise price at all
times while the put option is outstanding (the rules of the Options Clearing
Corporation currently require that such assets be deposited in escrow to secure
payment of the exercise price), (ii) sell short the security or currency
underlying the put option at the same or higher price than the exercise price of
the put option, or (iii) purchase a put option, if the exercise price of the
purchased put option is the same or higher than the exercise price of the put
option sold by the Funds. The Funds generally would write covered put options in
circumstances where the Investment Manager and the Sub-Adviser, as applicable,
wish to purchase the underlying security or currency for the Funds' portfolio at
a price lower than the current market price of the security or currency. In such
event, the Funds would write a put option at an exercise price which, reduced by
the premium received on the option, reflects the lower price they are willing to
pay. Since the Funds also would receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
could be used to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premiums
received.
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The Global Corporate Leaders, Global Technology, International, SmallCap
Asia Growth, Russia, and Global Income Funds may write call options only on
securities owned by the Funds or securities which the Funds have the right to
acquire without additional consideration. Since it can be expected that a call
option will be exercised if the market value of the underlying security
increases to a level greater than the exercise price, this strategy will
generally be used when the Investment Manager believes that the call premium
received by the Funds plus anticipated appreciation in the price of the
underlying security, up to the exercise price of the call, will be greater than
the appreciation in the price of the security. The Global Corporate Leaders,
Global Technology, SmallCap Asia Growth, Russia, and Global Income Funds intend
to limit transactions as described in this paragraph to those where the sum of
initial margin deposits and premiums paid does not exceed 5% of its total
assets. The Global Technology and International Funds intend to limit
transactions as described in this paragraph to less than 5% of Fund assets. The
Global Corporate Leaders, SmallCap Asia Growth, and Russia Funds will not write
options in excess of 25% of their total assets. The Funds will cause their
custodian to segregate cash, U.S. Government Securities or other high grade
liquid debt obligations having a value sufficient to meet the Fund's obligations
under the call options.
The Global Corporate Leaders, Global Technology, International, and
SmallCap Asia Growth Funds will not purchase put and call options by others and
will not write any put options.
Each Fund except GNMA Income Fund and Money Market Trust may purchase put
and call options on stock indices in order to hedge against risks of stock
market or industry wide stock price fluctuations.
The Global Income and Russia Funds will not enter into options on
securities, securities indices or currencies or related options (including
options on futures) if the sum of initial margin deposits and premiums paid for
any such option or options would exceed 5% of its total assets, and it will not
enter into options with respect to more than 25% of its total assets.
FUTURES, SWAPS AND OPTIONS ON FUTURES
Each Fund (except GNMA Income Fund and Money Market Trust) may enter into
interest rate futures contracts. An interest rate futures contract is an
agreement to purchase or sell debt securities, usually U.S. government
securities, at a specified date and price. For example, the fund may sell
interest rate futures contracts (i.e., enter into a futures contract to sell the
underlying debt security) in an attempt to hedge against an anticipated increase
in interest rates and a corresponding decline in debt securities it owns. The
Funds will have collateral assets equal to the purchase price of the portfolio
securities represented by the underlying interest rate futures contracts it has
an obligation to purchase. The Funds may purchase and sell futures contracts and
related options under the following conditions: (a) the then-current aggregate
futures market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of each Fund's total
assets, at market value; and (b) no more than 5% of the assets, at market value
at the time of entering into a contract, shall be committed to margin deposits
in relation to futures contracts.
Each Fund (except Global Income, GNMA Income, Growth and Income and Money
Market Trust) may engage in equity swaps. Equity swaps allow the parties to
exchange the dividend income or other components of return on an equity
investment (e.g., a group of equity securities or an index) for a component of
return on another non-equity or equity investment. Equity swap transactions may
be volatile and may present the Funds with counterparty risks.
Global Income Fund may enter into interest rate or currency futures
contracts ("Futures" or "Futures Contracts") as a hedge against changes in
prevailing levels of interest rates or currency exchange rates in order to
establish more definitely the effective return on securities or currencies held
or intended to be acquired by the Fund. The Fund's hedging may include sales of
Futures as an offset against the effect of expected increases in interest rates
or currency exchange rates, and purchases of Futures as an offset against the
effect of expected declines in interest rates or currency exchange rates.
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The Global Income Fund will not enter into Futures Contracts for
speculation and the Fund only will enter into Futures Contracts which are traded
on national futures exchanges and are standardized as to maturity date and
underlying financial instrument. The principal interest rate and currency
Futures exchanges in the United States are the Board of Trade of the City of
Chicago and the Chicago Mercantile Exchange. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange. The Fund's Futures transactions will be entered into
for traditional hedging purposes; that is, Futures Contracts will be sold to
protect against a decline in the price of securities or currencies that the Fund
owns, or Futures Contracts will be purchased to protect the Fund against an
increase in the price of securities or currencies it has committed to purchase
or expects to purchase.
An interest rate Futures Contract provides for the future sale by one party
and purchase by another party of a specified amount of a specific financial
instrument (debt security or currency) for a specified price at a designated
date, time and place. Brokerage fees are incurred when a Futures Contract is
bought or sold, and margin deposits must be maintained at all times the Futures
Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Futures Contract.
Global Income Fund may engage in options on Futures Contracts. Options on
Futures Contracts are similar to options on securities or currencies except that
options on Futures Contracts give the purchaser the right, in return for the
premium paid, to assume a position in a Futures Contract (a long position if the
option is a call and a short position if the option is a put), rather than to
purchase or sell the Futures Contract, at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the Futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
Futures margin account which represents the amount by which the market price of
the Futures Contract, at exercise, exceeds (in the case of a call) or is less
than (in the case of a put) the exercise price of the option on the Futures
Contract. If an option is exercised on the last trading day prior to the
expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the securities, currencies or index upon which the Futures Contracts
are based on the expiration date. Purchasers of options who fail to exercise
their options prior to the exercise date suffer a loss of the premium paid.
To reduce or eliminate the leverage then employed by the Global Income
Fund, or to reduce or eliminate the hedge position then currently held by the
Fund, the Fund may seek to close out an option position by selling an option
covering the same securities or contract and having the same exercise price and
expiration date. Trading in options on Futures Contracts began relatively
recently. The ability to establish and close out positions on such options will
be subject to the development and maintenance of a liquid secondary market. It
is not certain that this market will develop.
The prices of Futures Contracts are volatile and are influenced, among
other things, by actual and anticipated changes in interest rates, which in turn
are affected by fiscal and monetary policies and national and international
political and economic events.
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There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in the Global
Income Fund's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
Futures and for debt securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading, with respect to interest rate levels, maturities, and creditworthiness
of issuers. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest rate trends.
Furthermore, in the case of a Futures Contract purchase, in order to be
certain that the Global Income Fund has sufficient assets to satisfy its
obligations under a Futures Contract, the Fund sets aside and commits to back
the Futures Contract an amount of cash, U.S. government securities and other
liquid, high grade debt securities equal in value to the current value of the
underlying instrument less margin deposit.
REPURCHASE AGREEMENTS
The Funds' investment portfolios may include repurchase agreements
("repos") with banks and dealers in U.S. Government securities. A repurchase
agreement involves the purchase by a Fund of an investment contract from a bank
or a dealer in U.S. Government securities which contract is secured by debt
securities whose value is equal to or greater than the value of the repurchase
agreement including the agreed upon interest. The agreement provides that the
institution will repurchase the underlying securities at an agreed upon time and
price. Under the Investment Company Act, repurchase agreements are considered to
be loans by a Fund and must be fully collateralized by collateral assets. If the
seller defaults on its obligations to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize upon
the security, may incur a loss if the value of the security declines and may
incur disposition costs in liquidating the security. The total amount received
on repurchase would exceed the price paid by the Fund, reflecting an agreed upon
rate of interest for the period from the date of the repurchase agreement to the
settlement date, and would not be related to the interest rate on the underlying
securities. The difference between the total amount to be received upon the
repurchase of the securities and the price paid by the Fund upon its acquisition
is accrued daily as interest. If the institution defaults on the repurchase
agreement, the Fund will retain possession of the underlying securities. In
addition, if bankruptcy proceedings are commenced with respect to the seller,
realization on the collateral by the Fund may be delayed or limited and the Fund
may incur additional costs. In such case, the Fund will be subject to risks
associated with changes in the market value of the collateral securities.
The Funds intend to limit repurchase agreements to institutions believed by
the Investment Manager or the Sub-Adviser to present minimal credit risk. The
Global Corporate Leaders, Global Technology, GNMA Income, Gold, International,
Silver, and Worldwide Emerging Markets Funds and Money Market Trust will enter
into repurchase agreements only with member banks of the Federal Reserve System
and with "primary dealers" in United States government securities. The Global
Corporate Leaders, Global Technology, GNMA Income, Gold, International, Silver,
and Worldwide Emerging Markets Funds may enter into repurchase agreements with
respect to any portfolio securities it may acquire consistent with its
investment objectives and policies, but intends to enter into repurchase
agreements only with respect to obligations of the U.S. government or its
agencies and instrumentalities, to meet anticipated redemptions or pending
investments or reinvestment of Fund assets in portfolio securities. The Funds
will not enter into repurchase agreements maturing in more than seven days if
the aggregate of such repurchase agreements and all other illiquid securities
when taken together would exceed 15% (10% in the case of the GNMA Income Fund)
of the total assets of the Fund. The Funds treat any securities subject to
restrictions on repatriation for more than seven days, and securities issued in
connection with foreign debt conversion programs that are restricted as to
remittance of invested capital or profit, as illiquid. Illiquid securities do
not include securities that are restricted from trading on formal markets for
some period of time but for which an active informal market exists, or
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securities that meet the requirements of Rule 144A under the Securities Act of
1933 and that, subject to the review by the Board of Directors/Trustees and
guidelines adopted by the Board of Directors/Trustees, the Investment Manager
has determined to be liquid.
REVERSE REPURCHASE AGREEMENTS
All of the Funds except Money Market Trust may enter into reverse purchase
agreements. In a reverse repurchase agreement, a Fund sell to a financial
institution a security that it holds and agrees to repurchase the same security
at an agreed-upon price and date. A Fund will maintain, in a segregated account
with a custodian, cash, U.S. government securities or other liquid, high grade
debt securities in an amount sufficient to cover its obligation under reverse
repurchase agreements.
ROLL TRANSACTIONS
The Global Income Fund may engage in "roll" borrowing transactions which
involve the Fund's sale of fixed income securities together with a commitment
(for which the Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. The Fund will maintain, in a segregated account
with a custodian, cash, U.S. government securities or other liquid, high grade
debt securities in an amount sufficient to cover its obligation under "roll"
transactions.
WHEN ISSUED AND FORWARD COMMITMENT SECURITIES
The Global Corporate Leaders, Global Technology, Gold Fund, International,
Silver, Worldwide Emerging Markets, SmallCap Asia Growth, and Global Income
Funds may make contracts to purchase securities for a fixed price at a future
date beyond customary settlement time ("forward commitments") because new issues
of securities are typically offered to investors, such as the Funds, on that
basis. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date. This risk is in addition
to the risk of decline in value of the Funds' other assets. Although the Funds
will enter into such contracts with the intention of acquiring the securities,
the Funds may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. The Funds may realize short-term profits
or losses upon the sale of forward commitments. The Funds may purchase U.S.
government or other securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. The price is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. When-issued securities and forward commitments may be sold prior to
the settlement date, but a Fund will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities. No income accrues on securities that have been purchased pursuant to
a forward commitment or on a when-issued basis prior to delivery to a Fund. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, it supports its obligation with collateral assets equal to the value of
the when-issued or forward commitment securities and causes the collateral
assets to be marked to market daily. There is a risk that the securities may not
be delivered and that the Fund may incur a loss.
FORWARD CURRENCY CONTRACTS
The Global Corporate Leaders, Global Technology, Gold Fund, International,
Silver, SmallCap Asia Growth, Russia, Worldwide Emerging Markets, and Global
Income Funds may enter into forward currency contracts. A forward currency
contract is a contract individually negotiated and privately traded by currency
traders and their customers and creates an obligation to purchase or sell a
specific currency for an agreed-upon price at a future date. The Funds generally
do not enter into forward contracts with terms greater than one year. The Funds
generally enter into forward contracts only under two circumstances. First, if
the Funds enter into a contract for the purchase or sale of a security
denominated in a foreign currency, they may desire to "lock in" the U.S. dollar
price of the security by entering into a forward contract to buy the amount of a
foreign currency needed to settle the transaction. Second, if the Investment
Manager believes that the currency of a particular foreign country will
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substantially rise or fall against the U.S. dollar, it may enter into a forward
contract to buy or sell the currency approximating the value of some or all of
the Funds' portfolio securities denominated in such currency. The Funds will not
enter into a forward contract if, as a result, it would have more than one-third
of total assets committed to such contracts (unless they own the currency that
it is obligated to deliver or has caused its custodian to segregate segregable
assets having a value sufficient to cover its obligations). Although forward
contracts are used primarily to protect the Funds from adverse currency
movements, they involve the risk that currency movements will not be accurately
predicted.
Investors should recognize that investing in securities of foreign
companies and in particular securities of companies domiciled in or doing
business in emerging markets and emerging countries involves certain risk
considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. companies.
INTEREST RATE AND CURRENCY AND CURRENCY SWAPS
The Global Income Fund usually will enter into interest rate swaps on a net
basis, that is, the two payment streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments. Inasmuch
as swaps, caps, floors, collars and other derivative transactions are entered
into for good faith hedging purposes, the Investment Manager and the Fund
believe that they do not constitute senior securities under the 1940 Act and,
thus, will not treat them as being subject to the Fund's borrowing restrictions.
The Fund will not enter into any swap, cap, floor, collar or other derivative
transaction unless, at the time of entering into the transaction, the unsecured
long-term debt rating of the counterparty combined with any credit enhancements
is rated at least A by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P") or has an equivalent rating from a nationally
recognized statistical rating organization or is determined to be of equivalent
credit quality by the Investment Manager. If a counterparty defaults, the Fund
may have contractual remedies pursuant to the agreements related to the
transactions. The swap market has grown substantially in recent years, with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.
FOREIGN SECURITIES CONSIDERATIONS
FOREIGN CURRENCY CONSIDERATIONS. The Global Corporate Leaders, Global
Technology, Gold Fund, International, Silver, SmallCap Asia Growth, Russia,
Worldwide Emerging Markets and Global Income Funds' assets will be invested in
securities of foreign companies and substantially all income will be received by
the Funds in foreign currencies. However, the Funds will compute and distribute
their income in dollars, and the computation of income will be made on the date
of its receipt by the Funds at the foreign exchange rate in effect on that date.
Therefore, if the value of the foreign currencies in which the Funds receive
their income falls relative to the dollar between receipt of the income and the
making of Funds' distributions, the Funds will be required to liquidate
securities in order to make distributions if the Funds has insufficient cash in
dollars to meet distribution requirements.
The value of the assets of the Funds as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Funds may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Funds at one rate, while offering a lesser rate of exchange
should the Funds desire immediately to resell that currency to the dealer. The
Funds will conduct their foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward or futures contracts to purchase or
sell foreign currencies.
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INVESTMENT AND REPATRIATION RESTRICTIONS. (Global Corporate Leaders, Global
Technology, Gold Fund, International, Silver, Russia, SmallCap Asia Growth,
Worldwide Emerging Markets, and Global Income Funds.)
Some foreign countries may have laws and regulations which currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain foreign
countries through investment funds which have been specifically authorized. The
Funds may invest in these investment funds subject to the provisions of the 1940
Act as discussed below under "Investment Restrictions". If the Funds invest in
such investment funds, the Funds' shareholders will bear not only their
proportionate share of the expenses of the Funds (including operating expenses
and the fees of the Investment Manager), but also will bear indirectly similar
expenses of the underlying investment funds.
In addition, prior governmental approval for foreign investments may be
required under certain circumstances in some foreign countries, while the extent
of foreign investment in domestic companies may be subject to limitation in
other foreign countries. Foreign ownership limitations also may be imposed by
the charters of individual companies in foreign countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
foreign countries. The Funds could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.
EMERGING COUNTRY AND EMERGING SECURITIES MARKETS
Certain Funds may invest in securities in emerging markets. Investing in
securities in emerging countries may entail greater risks than investing in debt
securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interests; (iv) foreign taxation; and (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property.
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Global
Income Fund may invest may have vocal minorities that advocate radical religious
or revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-spread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's investment in
those countries.
FOREIGN SECURITIES MARKETS. (Global Corporate Leaders, Global Technology,
Gold Fund, International, Silver, SmallCap Asia Growth, Russia, Worldwide
Emerging Markets, Global Income) Trading volume on foreign country and, in
particular emerging market stock exchanges is substantially less than that on
the New York Stock Exchange. Further, securities of some foreign and in
particular emerging market companies are less liquid and more volatile than
securities of comparable U.S. companies. Similarly, volume and liquidity in most
foreign bond markets is substantially less than in the U.S. and, consequently,
volatility of price can be greater than in the U.S. Fixed commissions on foreign
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Funds endeavor to achieve the most favorable net results on its
portfolio transactions and may be able to purchase the securities in which the
Funds may invest on other stock exchanges where commissions are negotiable.
Foreign stock exchanges, brokers and listed companies are generally subject to
less government supervision and regulation than in the United States. The
customary settlement time for foreign securities may be longer than the five day
customary settlement time for United States securities.
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Companies in foreign countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about a foreign company than
about a U.S. company. Further, there is generally less governmental supervision
and regulation of foreign stock exchanges, brokers and listed companies than in
the U.S. Further, the Funds may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts.
ECONOMIC AND POLITICAL RISKS. (Global Corporate Leaders, Global Technology,
Gold Fund, International, Silver, SmallCap Asia Growth, Russia, Emerging Markets
and Global Income Funds)
The economies of individual foreign countries in which the Funds invest may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Further, the economies of
foreign countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade. The export driven
nature of Asian economies is often dependent on the strength of their trading
partners in the United States and Europe, although growing intra-regional trade
is seen mitigating some of this external dependence.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Funds'
investments in those countries. In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.
INVESTING IN ASIA REGION SECURITIES
The SmallCap Asia Growth Fund will invest at least 65% of its total assets
in equity securities and equivalents of companies in the Asia Region which have
market capitalizations of less than $1 billion. Approximately 13,000 companies
are listed on recognized exchanges in the Asia Region. Approximately 300
companies in the Asia Region are capitalized over $1 billion. These companies
form the principal components of their respective market indices and
consequently attract the majority of foreign investment in the region.
Approximately 3,000 companies, which are considered Small Capitalization
companies, will be the primary focus for the Fund's investments. These companies
are frequently under-researched by international investors and undervalued by
their markets. The companies in which the Fund intends to invest will generally
have the following characteristics: a market capitalization of less than $1
billion; part of a strong growth industry; proven management; under-researched;
and undervalued.
INVESTING IN RUSSIAN SECURITIES
For the purposes of the Russia Fund section of the prospectus, and this
statement of additional information, Russian company means a legal entity (i)
that is organized under the laws of, or with a principal office and domicile in,
Russia, (ii) for which the principal equity securities trading market is in
Russia, or (iii) that derives at least 50% of its revenues or profits from goods
produced or sold, investments made, or services performed, in Russia or that has
at least 50% of its assets situated in Russia.
The Russia Fund intends to invest its assets in Russian companies in a
broad array of industries, including the following: oil and gas, energy
generation and distribution, communications, mineral extraction, trade,
financial and business services, transportation, manufacturing, real estate,
textiles, food processing and construction. The Fund is not permitted to invest
more than 25% of the value of its total assets in any one industry. It may,
however, invest an unrestricted amount of its assets in the oil and gas
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industry. The Fund's investments will include investments in Russian companies
that have characteristics and business relationships common to companies outside
of Russia. As a result, outside economic forces may cause fluctuations in the
value of securities held by the Fund.
Under current conditions, the Russia Fund expects to invest at least 20% of
its total assets in very liquid assets to maintain liquidity and provide
stability. As the Russian equity markets develop, however, and the liquidity of
Russian securities becomes less problematic, the Fund will invest a greater
percentage of its assets in Russian equity securities.
As further described above, the Russia Fund is authorized to use various
investment strategies, some or all of which may be classified as derivatives, to
hedge various market risks and to enhance total return, which may be deemed a
form of speculation. Subject to the requirements of the Investment Company Act
of 1940, as amended, the Russia Fund may hedge up to 100% of its assets when
deemed appropriate by the Investment Manager. The Fund is also authorized to use
investment strategies to manage the effective maturity or duration of debt
securities or instruments held by the Fund, or to enhance the Fund's income or
gain. Although these strategies are regularly used by some investment companies
and other institutional investors in various markets, most of these strategies
are currently unavailable in Russia and may not become available in the future.
Techniques and instruments may change over time, however, as new instruments and
strategies are developed or regulatory changes occur.
INVESTMENT IN GOLD AND SILVER
The Gold Fund's and Silver Fund's performance and ability to meet their
objective will generally be largely dependent on the market value of gold and
silver, respectively. The Funds' professional management seeks to maximize on
advances and minimize on declines by monitoring and anticipating shifts in the
relative values of silver and gold and the equity securities of companies
engaged in mining or processing silver and gold ("silver-related securities" and
"gold-related securities"). The Funds may also invest in other precious metals,
including platinum and palladium. A substantial portion of the Gold Fund's and
Silver Fund's investments will be in the securities of foreign issuers.
The Gold Fund and Silver Fund are of the belief that a silver and gold
investment medium will, over the long term, protect capital from adverse
monetary and political developments of a national or international nature and,
in the face of what appears to be continuous worldwide inflation, may offer
better opportunity for capital growth than many other forms of investment.
Throughout history, silver and gold have been thought of as the most basic
monetary standards. Investments in silver and gold may provide more of a hedge
against currencies with declining buying power, devaluation, and inflation than
other types of investments. Of course, there can be no assurance that
management's' belief will be realized or that the investment objective will be
achieved.
To the extent that investments in silver and gold and silver and gold
related securities appreciate in value relative to the U.S. dollar, the Funds'
investments may serve to offset erosion in the purchasing power of the U.S.
dollar.
The Gold Fund and Silver Fund may invest in debt securities of companies
engaged in mining and processing gold and silver. These debt securities can be
expected to be comparable to that of other debt obligations and generally will
not react to fluctuations in the price of gold and silver. An investment in the
debt instruments of these companies, therefore, cannot be expected to provide
the hedge against inflation that may be provided through investments in equity
securities of companies engaged in such activities and can be expected to
fluctuate inversely with prevailing interest rates.
It is anticipated that, except for temporary defensive or liquidity
purposes, 65% of the total assets of the Funds will be invested in silver and
gold and silver-related or gold-related securities. At any time management deems
it advisable for defensive or liquidity purposes, the Funds may hold cash or
cash equivalents in the currency of any major industrial nation, and invest in,
or hold unlimited amounts of debt obligations of the United States Government or
its political subdivisions, and money market instruments including repurchase
agreements with maturities of seven days or less and Certificates of Deposit.
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It is the Investment Manager's present intention to manage the Gold Fund's
and the Silver Fund's investments so that (i) less than half of the value of
their portfolios will consist of silver, gold or other precious metals and (ii)
more than half of the value of their portfolios will be invested in silver or
gold-related securities, including securities of foreign issuers. Although the
Funds' Board of Directors/Trustees present policy prohibits investments in
speculative securities trading at extremely low prices and in relatively
illiquid markets, investments in such securities can be made when and if the
Board determines such investments to be in the best interests of the Funds and
their shareholders. The policies set forth in this paragraph are subject to
change by the Board of Directors/Trustees of the Gold Fund or Silver Fund,
respectively, in their sole discretion.
FLUCTUATIONS IN THE PRICE OF GOLD AND SILVER. The prices of silver and gold
have been subject to dramatic downward and upward price movements over short
periods of time and may be affected by unpredictable international monetary and
political policies, such as currency devaluations or revaluations, economic
conditions within an individual country, trade imbalances, or trade or currency
restrictions between countries. The price of silver and gold, in turn, is likely
to affect the market prices of securities of companies mining or processing
silver and gold, and accordingly, the value of the Funds' investments in such
securities may also be affected.
POTENTIAL EFFECT OF CONCENTRATION OF SOURCE OF SUPPLY AND CONTROL OF SALES.
The two largest national producers of silver and gold bullion are the Republic
of South Africa and the United States of America. Changes in political and
economic conditions affecting either country may have direct impact on that
country's sales of silver and gold. Under South African law, the only authorized
sales agent for silver and gold produced in South Africa is the Reserve Bank of
South Africa, which through its retention policies controls the time and place
of any sale of South African bullion. The South African Ministry of Mines
determines silver and gold mining policy. South Africa depends predominately on
silver and gold sales for the foreign exchange necessary to finance its imports,
and its sales policy is necessarily subject to national economic and political
developments.
INVESTMENTS IN SILVER AND GOLD BULLION. Unlike certain more traditional
investment vehicles such as savings deposits and stocks and bonds, which may
produce interest or dividend income, silver and gold bullion earns no income
return. Appreciation in the market price of silver and gold is the sole manner
in which the Funds will be able to realize gains on its investment in silver and
gold bullion. Furthermore, the Funds may encounter storage and transaction costs
in connection with its ownership of silver and gold bullion which may be higher
than those attendant to the purchase, holding and disposition of more
traditional types of investments.
INTERNATIONAL AND DOMESTIC MONETARY SYSTEMS. Substantial amounts of silver
and gold bullion serving as primary official reserve assets play a major role in
the international monetary system. Since December 31, 1974, when it again became
legal to invest in silver and gold, several new markets have developed in the
United States. In connection with this legalization of silver ownership, the
U.S. Treasury and the International Monetary Fund embarked upon programs to
dispose of substantial amounts of silver and gold bullion.
OTHER INVESTMENT COMPANIES
All of the Funds may invest in other investment companies ("Underlying
Funds"). Each Fund may not (i) invest more than 10% of its total assets in
Underlying Funds, (ii) invest more than 5% of its total assets in any one
Underlying Fund, or (iii) purchase greater than 3% of the total outstanding
securities of any one Underlying Fund. The Funds may also make indirect foreign
investments through other investment companies that have comparable investment
objectives and policies as the Funds. In addition to the advisory and
operational fees a Fund bears directly in connection with its own operation, the
Fund would also bear its pro rata portions of each other investment company's
advisory and operational expenses.
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INVESTMENT STRATEGIES AND RISKS -- MONEY MARKET TRUST
In order for the Lexington Money Market Trust to achieve its objective of
seeking as high a level of current income as is available from short term
investments and consistent with the preservation of capital and liquidity, the
Fund will invest its assets in the following money market instruments: (l)
Obligations issued, or guaranteed as to interest and principal, by the
Government of the United States or any agency or instrumentality thereof; (2)
U.S. dollar denominated time deposits, certificates of deposit and bankers'
acceptances of U.S. banks and their London and Nassau branches and of U.S.
branches of foreign banks, provided that the bank has total assets of one
billion dollars; (3) Commercial paper of U.S. corporations, rated Al, A2 by
Standard & Poor's Corporation or Pl, P2 by Moody's Investors Service, Inc. or,
if not rated, of such issuers having outstanding debt rated A or better by
either of such services, or debt obligations of such issuers maturing in two
years or less and rated A or better; (4) Repurchase agreements under which the
Fund may acquire an underlying debt instrument for a relatively short period
subject to the obligation of the seller to repurchase, and of the Fund to
resell, at a fixed price. The underlying security must be of the same quality as
those described herein, although the usual practice is to use U.S. Government or
government agency securities. The Fund will enter into repurchase agreements
only with commercial banks and dealers in U.S. Government securities. Repurchase
agreements when entered into with dealers, will be fully collateralized
including the interest earned thereon during the entire term of the agreement.
If the institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Fund may be delayed or limited and the Fund may incur additional costs. In such
case the Fund will be subject to risks associated with changes in the market
value of the collateral securities. The Fund intends to limit repurchase
agreements to institutions believed by the Investment Manager to present minimal
credit risk. The Fund will not enter into repurchase agreements maturing in more
than seven days if the aggregate of such repurchase agreements would exceed 10%
of the total assets of the Fund; or (5) Other money market instruments.
The obligations of London and Nassau branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as "sovereign risk"). In addition, evidences of ownership of portfolio
securities may be held outside of the U.S., and the Lexington Money Market Trust
may be subject to the risks associated with the holding of such property
overseas. Examples of governmental actions would be the imposition of currency
controls, interest limitations, seizure of assets, or the declaration of a
moratorium. Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as by governmental action in the country in which the foreign
bank has its head office. While the Funds will carefully consider these factors
on making such investments, there are no limitations on the percentage of the
Funds' portfolio which may be invested in any one type of instrument.
The Investment Policies stated above are fundamental and may not be changed
without shareholder approval. The Fund may not invest in securities other than
the types of securities listed above and is subject to other specific
restrictions as detailed under "Investment Restrictions" below.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS -- THE ING PILGRIM GLOBAL CORPORATE LEADERS
FUND
The Fund's investment objective and the following investment restrictions
are matters of fundamental policy which may not be changed without the
affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a shareholders' meeting at which more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of the
outstanding shares. Under these investment restrictions:
40
<PAGE>
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase securities
in accordance with the Fund's investment program, including reverse repurchase
agreements, foreign exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of senior securities; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, interpretation of
the 1940 Act or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related options
shall not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.
(2) The Fund will not borrow money, except that: (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the Fund's
investment program, including delayed delivery and when-issued securities and
reverse repurchase agreements; (c) for temporary emergency purposes, the Fund
may borrow money in amounts not exceeding 5% of the value of its total assets at
the time when the loan is made; (d) the Fund may pledge its portfolio securities
or receivables or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test. The Fund will only invest in reverse repurchase agreements up to 5%
of the Fund's total assets.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may: (a) purchase bonds, debentures or
other debt securities, including short-term obligations; (b) enter into
repurchase transactions; and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter into
forward currency contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. The Fund considers
securities of individual foreign governments, companies and supranational
organizations to be industries. This limitation, however, will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities.
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<PAGE>
(8) The Fund will not purchase securities of an issuer, if: (a) more than
5% of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction shall
not apply to securities issued or guaranteed by the United States government or
its agencies or instrumentalities or, with respect to 25% of the Fund's total
assets, to securities issued or guaranteed by the government of any country
other than the United States which is a member of the Organization for Economic
Cooperation and Development ("OECD"). The member countries of OECD are at
present: Australia, Austria, Belgium, Canada, Denmark, Germany, Finland, France,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United States; or (b) such purchases would at the time result in
more than 10% of the outstanding voting securities of such issuer being held by
the Fund.
In addition to the above fundamental restrictions, the Fund has undertaken
the following non-fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.
(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(3) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(4) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(5) The Fund will not invest for the purpose of exercising control over or
management of any company.
(6) The Fund will not purchase warrants except in units with other
securities in original issuance thereof or attached to other securities, if at
the time of the purchase, the Fund's investment in warrants, valued at the lower
of cost or market, would exceed 5% of the Fund's total assets. For these
purposes, warrants attached to units or other securities shall be deemed to be
without value.
(7) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
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<PAGE>
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS--GLOBAL TECHNOLOGY FUND
The Fund's investment objective and the following investment restrictions
are matters of fundamental policy which may not be changed without the
affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a shareholders' meeting at which more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of the
outstanding shares. Under these investment restrictions:
(1) the Fund will not issue any senior security (as defined in the 1940
Act), except that: (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including reverse
repurchase agreements, foreign exchange contracts and delayed delivery and
when-issued securities, which may be considered the issuance of senior
securities; (b) the Fund may engage in transactions that may result in the
issuance of a senior security to the extent permitted under applicable
regulations, interpretation of the 1940 Act or an exemptive order; (c) the Fund
may engage in short sales of securities to the extent permitted in its
investment program and other restrictions; (d) the purchase or sale of futures
contracts and related options shall not be considered to involve the issuance of
senior securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act.
(2) The Fund will not borrow money, except that: (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the Fund's
investment program, including delayed delivery and when-issued securities and
reverse repurchase agreements; (c) for temporary emergency purposes, the Fund
may borrow money in amounts not exceeding 5% of the value of its total assets at
the time the loan is made; (d) The Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may: (a) purchase bonds, debentures or
other debt securities, including short-term obligations; (b) enter into
repurchase transactions; and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, enter into transactions in financial
43
<PAGE>
and index futures contracts and related options, engage in transactions on a
when-issued or forward commitment basis, and enter into forward currency
contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. The Fund considers
foreign government securities and supranational organizations to be industries.
This limitation, however, will not apply to securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.
In addition to the above fundamental restrictions, the Fund has undertaken
the following non fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(2) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(3) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(4) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and any other security that is restricted as to resale under federal
securities laws but is determined to be liquid by the Investment Adviser based
on criteria established by the Board of Directors shall not be deemed illiquid
solely by reason of being unregistered.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS--GNMA INCOME FUND
The following investment restrictions are matters of fundamental policy
which may not be changed without the affirmative vote of the lesser of (a) 67%
or more of the shares of the Fund present at a shareholders' meeting at which
more than 50% of the outstanding shares are present or represented by proxy or
(b) more than 50% of the outstanding shares. Under these investment
restrictions, the Fund will not :
(1) issue senior securities;
(2) borrow money;
(3) underwrite securities of other issuers;
44
<PAGE>
(4) concentrate its investments in a particular industry to an extent
greater than 25% of its total assets, provided that such limitation shall not
apply to securities issued or guaranteed by the U.S. Government or its agencies;
(5) purchase or sell real estate, commodity contracts or commodities
(however, the Fund may purchase interests in GNMA mortgage-backed certificates);
(6) make loans to other persons except: (a) through the purchase of a
portion or portions of an issue or issues of securities issued or guaranteed by
the U.S. Government or its agencies, or (b) through investments in "repurchase
agreements" (which are arrangements under which the Fund acquires a debt
security subject to an obligation of the seller to repurchase it at a fixed
price within a short period), provided that no more than 10% of the Fund's
assets may be invested in repurchase agreements which mature in more than seven
days;
(7) purchase the securities of another investment company or investment
trust, except in the open market and then only if no profit, other than the
customary broker's commission, results to a sponsor or dealer, or by merger or
other reorganization;
(8) purchase any security on margin or effect a short sale of a security;
(9) buy securities from or sell securities (other than securities issued by
the Fund) to any of its officers, directors or its investment adviser, as
principal;
(10) contract to sell any security or evidence of interest therein, except
to the extent that the same shall be owned by the Fund;
(11) purchase or retain securities of an issuer when one or more of the
officers and directors of the Fund or of the Adviser, or a person owning more
than 10% of the stock of either, own beneficially more than 1/2 of 1% of the
securities of such issuer and such persons owning more than 1/2 of 1% of such
securities together own beneficially more than 5% of the securities of such
issuer;
(12) invest more than 5% of its total assets in the securities of any one
issuer (except securities issued or guaranteed by the U.S. Government or its
agencies), except that such restriction shall not apply to 25% of the Fund's
portfolio so long as the net asset value of the portfolio does not exceed
$2,000,000;
(13) purchase any securities if such purchase would cause the Fund to own
at the time of purchase more than 10% of the outstanding voting securities of
any one issuer;
(14) purchase any security restricted as to disposition under Federal
securities laws;
(15) invest in interests in oil, gas or other mineral exploration or
development programs; or
(16) buy or sell puts, calls or other options.
In addition to the above fundamental restrictions, the Fund has undertaken
the following non fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) invest in real estate limited partnership interests, oil, gas or
mineral leases, as well as exploration or development programs; or
(2) purchase warrants except in units with other securities in original
issuance thereof or attached to other securities, if at the time of purchase,
the Fund's investment in warrants, valued at the lower of cost or market, would
exceed 5% of the Fund's total assets. Warrants which are not listed on the New
York or American stock exchanges shall not exceed 2% of the Fund's net assets.
Shares of the Fund will not be issued for consideration other than cash.
45
<PAGE>
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS-- GOLD FUND
The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters of fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase securities
in accordance with the Fund's investment program, including reverse repurchase
agreements, foreign exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of senior securities; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, interpretation of
the 1940 Act or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related options
shall not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.
(2) at the end of each quarter of the taxable year, (i) with respect to at
least 50% of the market value of the Fund's assets, the Fund may invest in cash,
U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purchases of this calculation to an amount not greater than 5%
of the value of the Fund's total assets, and (ii) not more than 25% of the value
of its total assets be invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies).
(3) The Fund will not concentrate its investments by investing more than
25% of its assets in the securities of issuers in any one industry. This limit
will not apply to gold and gold-related securities, and to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
(4) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, and may enter into
forward currency contracts. Transactions in gold, platinum, palladium or silver
bullion will not be subject to this restriction.
(5) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interest except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(6) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds, debentures or
other debt securities, including short-term obligations, (b) enter into
repurchase transactions and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(7) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may enter
into commitments to purchase securities in accordance with the Fund's investment
46
<PAGE>
program, including delayed delivery and when-issued securities and reverse
repurchase agreements; (c) for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its total assets at the time
when the loan is made; (d) the Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise encumber then in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduced its borrowings to the extent necessary to meet
the 300% test. The Fund will only invest in reverse repurchase agreements up to
5% of the Fund's total assets.
(8) The Fund will not act as underwriter of securities except to the extent
that, in connection with the disposition of portfolio securities by the Fund,
the Fund may be deemed to be an underwriter under the provisions of the 1933
Act.
In additional to the above fundamental restrictions, the Fund has
undertaken the following non fundamental restrictions, which may be changed in
the future by the Board of Directors, without a vote of the shareholders of the
Fund:
(1) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
(2) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(3) The Fund will not write, purchase or sell puts or calls on underlying
securities. However, the Fund may invest up to 15% of the value of its assets in
warrants. This restriction on the purchase of warrants does not apply to
warrants attached to, or otherwise included in, a unit with other securities.
(4) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(6) The Fund will not invest for the purpose of exercising control over or
management of any company.
(7) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.
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<PAGE>
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS-- GROWTH AND INCOME FUND
The Fund shareholder vote required for modification of the investment
policies or restrictions listed below is the lesser of: (a) 67% or more of the
voting securities present at a meeting if the holders of more than 50% are
present or represented by proxy; or (b) more than 50% of the voting securities.
The Fund shall not:
(1) issue senior securities;
(2) underwrite securities of other issuers;
(3) purchase or sell real estate, commodity contracts or commodities
(however, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the Securities Act of 1933 and are readily
marketable);
(4) make loans to other persons except (a) through the purchase of a
portion or portions of publicly distributed bonds, notes, debentures and
evidences of indebtedness authorized by its investment policy, or (b) through
investments in" repurchase agreements" (which are arrangements under which the
Fund acquires a debt security subject to an obligation of the seller to
repurchase it at a fixed price within a short period), provided that no more
than 10% of the Fund's assets may be invested in repurchase agreements which
mature in more than seven days;
(5) purchase the securities of another investment company or investment
trust except in the open market where no profit results to a sponsor or dealer,
other than the customary broker's commission;
(6) purchase any security on margin or effect a short sale of a security;
(7) buy securities from or sell securities to any of its officers and
directors or those of the investment adviser or principal distributor as
principal;
(8) contract to sell any security or evidence of interest therein except to
the extent that the same shall be owned by the Fund;
(9) retain securities of an issuer when one or more of the officers and
directors of the Fund or the investment adviser or a person owning more than 10%
of the stock of either, own beneficially more than 0.5% of the securities of
such issuer and the persons owning more than 0.5% of such securities together
own beneficially more than 5% of the securities of such issuer;
(10) invest more than 5% of the value of its total assets in the securities
of any one issuer nor acquire more than 10% of the outstanding voting securities
of any one issuer;
(11) invest in companies for the purpose of exercising management or
control; or
(12) concentrate its investments in a particular industry; thus the Fund
will not purchase a security if the immediate effect of such purchase would be
to increase the Fund's holdings in such industry above 25% of the Fund's assets.
48
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In addition to the above fundamental investment restrictions, the Fund has
undertaken not to: a) invest an aggregate of more than 5% of its total assets in
the securities of unseasoned issuers and equity securities of issuers which are
not readily marketable; b) invest in puts, calls, straddles, spreads, and any
combination thereof; or c) pledge, mortgage or hypothecate the assets of the
Fund to an extent greater than 15% of the gross assets of the Fund taken at
cost.
The Fund has authority to borrow money from a bank not in excess of the
lesser of: (a) 5% of the gross assets of the Fund at the current market value at
the time of such borrowing; or (b) 10% of the gross assets of the Fund taken at
cost. Any such borrowing may be undertaken only as a temporary measure for
extraordinary or emergency purposes. This borrowing power has not been exercised
by the Fund's management.
The 5% diversification limitation set forth in subparagraph (x) above does
not apply to obligations issued or guaranteed as to principal and interest by
the United States Government, nor does it apply to bank certificates of deposit,
which are not classified by the Fund as securities for the purposes of this
limitation.
The Fund may not use more than 5% of its net assets to purchase illiquid
securities. The Fund treats any securities subject to restrictions on
repatriation for more than seven days, and securities issued in connection with
foreign debt conversion programs that are restricted as to remittance of
invested capital or profit, as illiquid. The Fund also treats repurchase
agreements with maturities in excess of seven days as illiquid. Illiquid
securities do not include securities that are restricted from trading on formal
markets for some period of time but for which an active informal market exists,
or securities that meet the requirements of Rule 144A under the Securities Act
of 1933 and that, subject to the review by the Board of Directors and guidelines
adopted by the Board of Directors, the Investment Manager has determined to be
liquid.
FUNDAMENTAL INVESTMENT RESTRICTIONS-- INTERNATIONAL FUND
The Fund's investment objective and the following investment restrictions
are matters of fundamental policy which may not be changed without the
affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a shareholders' meeting at which more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of the
outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that: (a) The Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including reverse
repurchase agreements, foreign exchange contracts, delayed delivery and
when-issued securities, which may be considered the issuance of senior
securities; (b) the Fund may engage in transactions that may result in the
issuance of a senior security to the extent permitted under applicable
regulations, interpretation of the 1940 Act or an exemptive order; (c) the Fund
may engage in short sales of securities to the extent permitted in its
investment program and other restrictions; (d) the purchase or sale of futures
contracts and related options shall not be considered to involve the issuance of
senior securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act.
(2) The Fund will not borrow money, except that: (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the Fund's
investment program, including delayed delivery and when-issued securities and
reverse repurchase agreements; (c) for temporary emergency purposes, the Fund
may borrow money in amounts not exceeding 5% of the value of its total assets at
the time when the loan is made; (d) The Fund may pledge its portfolio securities
or receivables or transfer or assign or otherwise encumber them in an amount not
49
<PAGE>
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may: (a) purchase bonds, debentures or
other debt securities, including short-term obligations; (b) enter into
repurchase transactions; and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter into
forward currency contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. The Fund considers
foreign government securities and supranational organizations to be industries.
This limitation, however, will not apply to securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.
(8) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be invested
in the securities of such issuer, except that such restriction shall not apply
to securities issued or guaranteed by the United States government or its
agencies or instrumentalities or, with respect to 25% of the Fund's total
assets, to securities issued or guaranteed by the government of any country
other than the United States which is a member of the Organization for Economic
Cooperation and Development ("OECD"). The member countries of OECD are at
present: Australia, Austria, Belgium, Canada, Denmark, Germany, Finland, France,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United States; or (b) such purchases would at the time result in
more than 10% of the outstanding voting securities of such issuer being held by
the Fund.
In addition to the above fundamental restrictions, the Fund has undertaken
the following non fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.
50
<PAGE>
(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) The then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(3) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(4) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(5) The Fund will not invest for the purpose of exercising control over or
management of any company.
(6) The Fund will not purchase warrants except in units with other
securities in original issuance thereof or attached to other securities, if at
the time of the purchase, the Fund's investment in warrants, valued at the lower
of cost or market, would exceed 5% of the Fund's total assets. For these
purposes, warrants attached to units or other securities shall be deemed to be
without value.
(7) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS -- SILVER FUND
The Fund's investment objective, as described under "Investment Objective"
in the Fund's prospectus, and the following investment restrictions are matters
of fundamental policy which may not be changed without the affirmative vote of
the lesser of (a) 67% or more of the shares of the Fund present at a
shareholders' meeting at which more than 50% of the outstanding shares are
present or represented by proxy or (b) more than 50% of the outstanding shares.
Under these investment restrictions:
(1) At least 80% of the Fund's assets will be invested in established
silver-related companies which have been in business for more than three years.
(2) At the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets be invested in cash, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer counted for the
purposes of this calculation only if the value of thereof is not greater than 5%
of the value of the Fund's total assets, and (ii) not more than 25% of its total
assets be invested in securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies).
51
<PAGE>
(3) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(4) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter into
forward currency contracts. Transactions in which silver bullion is taken in
payment of principal, interest or both or a debt instrument and where the Fund
disposes of the silver bullion for cash will not be subject to this restriction.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds, debentures or
other debt securities, including short-term obligations, (b) enter into
repurchase transactions and (c) lend portfolio securities or bullion provided
that the value of such loaned securities does not exceed one-third of the Fund's
total assets.
(6) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may enter
into commitments to purchase securities in accordance with the Fund's investment
program, including delayed delivery and when-issued securities and reverse
repurchase agreements; (c) for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its total assets at the time
when the loan is made; (d) the Fund may pledge its silver or portfolio
securities or receivables or transfer or assign or otherwise encumber them in an
amount not exceeding one-third of the value of its total assets; and (e) for
purposes of leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of the
Fund's assets, including the amount borrowed, less its liabilities, is equal to
at least 300% of the amount borrowed, plus all outstanding borrowings. If at any
time, the value of the Fund's assets fails to meet the 300% asset coverage
requirement relative only to leveraging, the Fund will, within three days (not
including Sundays and holidays), reduce its borrowings to the extent necessary
to meet the 300% test.
(7) The Fund will not issue any senior security (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), except that (a) the
Fund may enter into commitments to purchase securities in accordance with the
Fund's investment program, including reverse repurchase agreements, foreign
exchange contracts, delayed delivery and when-issued securities, which may be
considered the issuance of senior securities; (b) the Fund may engage in
transactions that may result in the issuance of a senior security to the extent
permitted under applicable regulations, interpretations of the 1940 Act or an
exemptive order; (c) the Fund may engage in short sales of securities to the
extent permitted in its investment program and other restrictions; (d) the
purchase or sale of futures contracts and related options shall not be
considered to involve the issuance of senior securities; and (e) subject to
fundamental restrictions, the Fund may borrow money as authorized by the 1940
Act.
(8) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
Securities Act of 1933, as amended (the "1933 Act").
In addition to the above fundamental restrictions, the Fund has undertaken
the following nonfundamental restrictions, which may be changed in the future by
the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not invest more than 15% of its total net assets at
market value in illiquid securities. Illiquid securities are securities that are
not readily marketable or cannot be disposed of promptly within seven days and
52
<PAGE>
in the usual course of business without taking a materially reduced price. Such
securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days. Securities that may be resold
under Rule 144A or securities offered pursuant to Section 4(2) of the 1933 Act
shall not be deemed illiquid solely by reason of being unregistered. The
Investment Adviser shall determine whether a particular security is deemed to be
liquid based on the trading markets for the specific security and other factors.
(2) The Fund will not invest for the purpose of exercising control over
management of any company.
(3) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the Fund's total assets, at market
value at the time of entering into a contract, shall be committed to margin
deposits in relation to futures contracts.
(4) The Fund will not issue its securities for any considerations other
than cash or securities except as a dividend or distribution in connection with
a reorganization.
(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(6) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(7) The Fund will not write, purchase or sell puts, calls on underlying
securities. However, the Fund may invest up to 15% of the value of its total
assets in warrants. This restriction on the purchase of warrants does not apply
to warrants attached to, or otherwise included in, a unit with other securities.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS-- SMALLCAP ASIA GROWTH FUND
The Fund's investment objective and the following investment restrictions
are matters of fundamental policy which may not be changed without the
affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a shareholders' meeting at which more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of the
outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase securities
in accordance with the Fund's investment program, including reverse repurchase
agreements, foreign exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of senior securities; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, interpretation of
the 1940 Act or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related options
shall not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.
53
<PAGE>
(2) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may enter
into commitments to purchase securities in accordance with the Fund's investment
program, including delayed delivery and when-issued securities and reverse
repurchase agreements; (c) for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its total assets at the time
when the loan is made; (d) The Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds, debentures or
other debt securities, including short-term obligations, (b) enter into
repurchase transactions and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, enter into transactions in financial
and index futures contracts and related options, engage in transactions on a
when-issued or forward commitment basis, and enter into forward currency
contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. The Fund considers
foreign government securities and supranational organizations to be industries.
This limitation, however, will not apply to securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.
(8) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would, at the time, be invested
in the securities of such issuer, except that such restriction shall not apply
to securities issued or guaranteed by the United States government or its
agencies or instrumentalities or, with respect to 25% of the Fund's total
assets, to securities issued or guaranteed by the government of any country
other than the United States which is a member of the Organization for Economic
Cooperation and Development ("OECD"). The member countries of OECD are at
present: Australia, Austria, Belgium, Canada, Denmark, Germany, Finland, France,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United States; or (b) such purchases would at the time result in
more than 10% of the outstanding voting securities of such issuer being held by
the Fund.
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<PAGE>
In addition to the above fundamental restrictions, the Fund has undertaken
the following non-fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser or sub-adviser to save commissions or to
average prices among them is not deemed to result in a securities trading
account.
(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(3) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(4) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(5) The Fund will not invest for the purpose of exercising control over or
management of any company.
(6) The Fund will not purchase warrants except in units with other
securities in original issuance thereof or attached to other securities, if at
the time of the purchase, the Fund's investment in warrants, valued at the lower
of cost or market, would exceed 5% of the Fund's total assets. For these
purposes, warrants attached to units or other securities shall be deemed to be
without value.
(7) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
(8) The Fund will not enter into options on securities, securities indices
or currencies or related options (including options on futures) if the sum of
initial margin deposits and premiums paid for any such option or options would
exceed 5% of its total assets, and it will not enter into options with respect
to more than 25% of its total assets.
(9) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
55
<PAGE>
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS -- TROIKA DIALOG RUSSIA FUND
The Fund's investment objective, as described under `investment policy' and
the following investment restrictions are matters of fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase securities
in accordance with the Fund's investment program, including reverse repurchase
agreements, foreign exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of senior securities; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, interpretation of
the 1940 Act or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related options
shall not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.
(2) at the end of each quarter of the taxable year, (i) with respect to at
least 50% of the market value of the Fund's assets, the Fund may invest in cash,
U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purchases of this calculation to an amount not greater than 5%
of the value of the Fund's total assets, and (ii) not more than 25% of the value
of its total assets be invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies).
(3) The Fund will not concentrate its investments by investing more than
25% of its assets in the securities of issuers in any one industry. This limit
will not apply to oil and gas related securities and to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
(4) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, and may enter into
forward currency contracts.
(5) The Fund will not purchase real estate, interests in real estate or
real estate limited partnership interest except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(6) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds, debentures or
other debt securities, including short-term obligations, (b) enter into
repurchase transactions and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(7) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may enter
into commitments to purchase securities in accordance with the Fund's investment
program, including delayed delivery and when-issued securities and reverse
repurchase agreements; (c) for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its total assets at the time
when the loan is made; (d) the Fund may pledge its portfolio securities or
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receivables or transfer or assign or otherwise encumber then in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test. The Fund will only invest in reverse repurchase agreements up to 5%
of the Fund's total assets.
(8) The Fund will not act as underwriter of securities except to the extent
that, in connection with the disposition of portfolio securities by the Fund,
the Fund may be deemed to be an underwriter under the provisions of the 1933
Act.
In addition to the above fundamental restrictions, the Russia Fund has
undertaken the following non- fundamental restrictions, which may be changed in
the future by the Board of Directors, without a vote of the shareholders of the
Fund:
(1) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
(2) The Fund will not make short sales of securities, other than short
sales `against the box,' or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.
(3) The Fund may invest up to 15% of the value of its assets in warrants.
This restriction on the purchase of warrants does not apply to warrants attached
to, or otherwise included in, a unit with other securities.
(4) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(6) The Fund will not invest for the purpose of exercising control over or
management of any company.
(7) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The `bunching' of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.
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<PAGE>
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
FUNDAMENTAL INVESTMENT RESTRICTIONS -- WORLDWIDE EMERGING MARKETS FUND
The Fund's investment objective and the following investment restrictions
are matters or fundamental policy which may not be changed without the
affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a shareholders' meeting at which more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of the
outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that: (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including reverse
repurchase agreements, foreign exchange contracts, delayed delivery and
when-issued securities, which may be considered the issuance of senior
securities; (b) the Fund may engage in transactions that may result in the
issuance of a senior security to the extent permitted under applicable
regulations, interpretation of the 1940 Act or an exemptive order; (c) the Fund
may engage in short sales of securities to the extent permitted in its
investment program and other restrictions; (d) the purchase or sale of futures
contracts and related options shall not be considered to involve the issuance of
senior securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act.
(2) The Fund shall not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.
(3) The Fund shall not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.
(4) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter into
forward currency contracts.
(5) The Fund shall not make loans, except that, to the extent appropriate
under its investment program, the Fund may: (a) purchase bonds, debentures or
other debt securities, including short-term obligations; (b) enter into
repurchase transactions; and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.
(6) The Fund will not hold more than 5% of the value of its total assets in
the securities of any one issuer or hold more than 10% of the outstanding voting
securities of any one issuer. This restriction applies only to 75% of the value
of the Fund's total assets. Securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities are excluded from this
restriction.
(7) The Fund will not concentrate its investments in any one industry
except that the Fund may invest up to 25% of its total assets in securities
issuers principally engaged in any one industry. This limitation, however, will
not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, securities invested in, or repurchase agreements
for, U.S. Government securities, and certificates of deposit, or bankers'
acceptances, or securities of U.S. banks and bank holding companies.
(8) The Fund shall not borrow money, except that (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the Fund's
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<PAGE>
investment program, including delayed delivery and when-issued securities and
reverse repurchase agreements; (c) for temporary emergency purposes, the Fund
may borrow money in amounts not exceeding 5% of the value of its total assets at
the time when the loan is made; (d) the Fund may pledge its portfolio securities
or receivables or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test.
In addition to the above fundamental restrictions, the Fund has undertaken
the following non-fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.
(2) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(3) The Fund will not purchase any securities on margin or make short sales
of securities, other than short sales `against the box,' or purchase securities
on margin except for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to limit the
use of options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment programs of
the Fund.
(4) The Fund shall not buy securities from or sell securities (other than
securities issued by the Fund) to any of its officers, directors or its
investment adviser or distributor as principal.
(5) The Fund shall not contract to sell any security or evidence of
interest therein, except to the extent that the same shall be owned by the Fund.
(6) The Fund will not invest for the purpose of exercising control over or
management of any company.
(7) The Fund shall not write, purchase or sell puts or calls on underlying
securities. However, the Fund may invest up to 15% of the value of its assets in
warrants. This restriction on the purchase of warrants does not apply to
warrants attached to, or otherwise included in, a unit with other securities.
(8) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
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<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS -- GLOBAL INCOME FUND
The Fund's investment policy, and the investment restrictions set forth
below, may not be changed without the affirmative vote (defined as the lesser
of: 67% of the shares represented at a meeting at which 50% of the outstanding
shares are present or 50% of the outstanding shares) of the Fund's shareholders.
These restrictions may be summarized as follows:
The Fund shall not:
(1) issue any senior security (as defined in the 1940 Act), except that (a)
the Fund may enter into commitments to purchase securities in accordance with
the Fund's investment program, including reverse repurchase agreements, delayed
delivery and when-issued securities, which may be considered the issuance of
senior securities to the extent permitted under applicable regulations; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, the
interpretation of the 1940 Act or an exemptive order; (c) the Fund may engage in
short sales of securities to the extent permitted in its investment program and
other restrictions; (d) the purchase or sale of futures contracts and related
options shall not be considered to involve the issuance of senior securities;
and (e) subject to fundamental restrictions, the Fund may borrow money as
authorized by the 1940 Act;
(2) borrow money, except that (a) the Fund may enter into certain futures
contracts and options related thereto; (b) the Fund may enter into commitments
to purchase securities in accordance with the Fund's investment program,
including delayed delivery and when-issued securities and reverse repurchase
agreements, and (c) for temporary emergency purposes, the Fund may borrow money
in amounts not exceeding 5% of the value of its total assets at the time when
the loan is made.
(3) underwrite securities of other issuers;
(4) concentrate its investments in a particular industry to an extent
greater than 25% of the value of its total assets, provided that such limitation
shall not apply to securities issued or guaranteed by the U.S. Government or its
agencies;
(5) invest in commodity contracts, except that the Fund may, to the extent
appropriate under its investment program, purchase securities of companies
engaged in such activities, may enter into transactions in financial and index
futures contracts and related options for hedging purposes, may engage in
transactions on a when-issued or forward commitment basis and may enter into
forward currency contracts. The Fund will not purchase real estate, interests in
real estate or real estate limited partnership interests except that, to the
extent appropriate under its investment program, the Fund may invest in
securities secured by real estate or interests therein issued by companies,
including real estate investment trusts, which deal in real estate or interests
therein.
(6) make loans to other persons except: (a) through the purchase of a
portion or portions of an issue or issues of securities issued or guaranteed by
the U.S. Government or its agencies, or (b) through investments in `repurchase
agreements' (which are arrangements under which the Fund acquires a debt
security subject to an obligation of the seller to repurchase it at a fixed
price within a short period), provided that no more than 5% of the Fund's assets
may be invested in repurchase agreements;
(7) purchase the securities of another investment company or investment
trust, except in the open market and then only if no profit, other than the
customary broker's commission, results to a sponsor or dealer, or by merger or
other reorganization;
(8) buy securities from or sell securities (other than securities issued by
the Fund) to any of its officers, Trustees or the Adviser as principal; (9)
contract to sell any security or evidence of interest therein, except to the
extent that the same shall be owned by the Fund;
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<PAGE>
(9) purchase or retain securities of an issuer when one or more of the
officers and Trustees of the Fund or of the investment adviser, or a person
owning more that 10% of the stock of either, own beneficially more than 1/2 of
1% of the securities of such issuer and such persons owning more than 1/2 of 1%
of such securities together own beneficially more than 5% of the securities of
such issuer;
(10) invest more than 5% of its total assets in the securities of any one
issuer (except securities issued or guaranteed by the U.S. Government) except
that such restriction shall not apply to 50% of the Fund's portfolio;
(11) purchase any security if such purchase would cause the Fund to own at
the time of purchase more than 10% of the outstanding voting securities of any
one issuer;
(12) invest more than 15% of its net assets in illiquid securities.
Illiquid securities are securities that are not readily marketable or cannot be
disposed of promptly within seven days and in the usual course of business
without taking a materially reduced price. Such securities include, but are not
limited to, time deposits and repurchase agreements with maturities longer than
seven days. Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended, shall not be
deemed illiquid solely by reason of being unregistered. The Adviser shall
determine whether a particular security is deemed to be liquid based on the
trading markets for the specific security and other factors; and
(13) invest in interest in oil, gas or other mineral exploration or
development programs.
The following investment policy of the Fund is not a fundamental policy and
may be changed by a vote of a majority of the Fund's Board of Trustees without
shareholder approval. The Fund may purchase and sell futures contracts and
related options under the following conditions: (a) the then-current aggregate
futures market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the Fund's total
assets, at market value; and (b) no more than 5% of the Fund's total assets, at
market value at the time of entering into a contract, shall be committed to
margin deposits in relation to futures contracts.
FUNDAMENTAL INVESTMENT RESTRICTIONS -- MONEY MARKET TRUST
The following investment restrictions adopted by the Fund may not be
changed without the affirmative vote of a majority (defined as the lesser of:
67% of the shares represented at a meeting at which 50% of outstanding shares
are present, or 50% of outstanding shares) of its outstanding shares. The Fund
may not: (l) purchase any securities other than money market instruments or
other debt securities maturing within two years of the date of purchase; (2)
borrow an amount which is in excess of one-third of its total assets taken at
market value (including the amount borrowed); and then only from banks as a
temporary measure for extraordinary or emergency purposes. The Fund will not
borrow to increase income but only to meet redemption requests which might
otherwise require undue disposition of portfolio securities. The Fund will not
invest while it has borrowings outstanding; (3) pledge its assets except in an
amount up to 15% of the value of its total assets taken at market value in order
to secure borrowings made in accordance with number (2) above; (4) sell
securities short unless at all times while a short position is open the Fund
maintains a long position in the same security in an amount at least equal
thereto; (5) write or purchase put or call options; (6) purchase securities on
margin except the Fund may obtain such short term credit as may be necessary for
the clearance of purchases and sales of portfolio securities; (7) make
investments for the purpose of exercising control or management; (8) purchase
securities of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization; (9) make loans to other persons,
provided that the Fund may purchase money market securities or enter into
repurchase agreements and lend securities owned or held by it as provided
herein; (10) lend its portfolio securities, except in conformity with the
guidelines set forth below; (11) concentrate more than 25% of its total assets,
taken at market value at the time of such investment, in any one industry,
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except U.S. Government and U.S. Government agency securities and U.S. bank
obligations; (12) purchase any securities other than U.S. Government or U.S.
Government agency securities, if immediately after such purchase more than 5% of
its total assets would be invested in securities of any one issuer for more than
three business days; (taken at market value) (13) purchase or hold real estate,
commodities or commodity contracts; ( 14 ) invest more than 5% of its total
assets (taken at market value) in issues for which no readily available market
exists or with legal or contractual restrictions on resale except for repurchase
agreements; (15) act as an underwriter (except as it may be deemed such as to
the sale of restricted securities); or (16) enter into reverse repurchase
agreements.
LENDING OF PORTFOLIO SECURITIES. As stated in number (10) above, subject to
guidelines established by the Funds and by the Securities and Exchange
Commission, the Lexington Money Market Trust, from time-to-time, may lend
portfolio securities to brokers, dealers, corporations or financial institutions
and receive collateral which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Such
collateral will be either cash or fully negotiable U. S. Treasury or agency
issues. If cash, such collateral will be invested in short term securities, the
income from which will increase the return to the Fund. However, a portion of
such incremental return may be shared with the borrower. If securities, the
usual procedure will be for the borrower to pay a fixed fee to the Fund for such
time as the loan is outstanding. The Fund will retain substantially all rights
of beneficial ownership as to the loaned portfolio securities including rights
to interest or other distributions and will have the right to regain record
ownership of loaned securities in order to exercise such beneficial rights. Such
loans will be terminable at any time. The Fund may pay reasonable fees to
persons unaffiliated with it in connection with the arranging of such loans.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Funds' Board of Directors/Trustees,
the Investment Manager is responsible for the execution of the Funds' portfolio
transactions and the selection of brokers/dealers that execute such transactions
on behalf of the Funds. The Funds' primary policy is to execute all purchases
and sales of portfolio instruments at the most favorable prices consistent with
best execution, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved. This policy governs
the selection of brokers and dealers and the market in which a transaction is
executed. Consistent with this policy, the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and such other policies as the
Directors may determine, ING Pilgrim Investments may consider sales of shares of
the Funds and of the other funds managed by ING Pilgrim Investments (the `ING
Pilgrim Funds') as a factor in the selection of broker-dealers to execute the
Funds' portfolio transactions.
Consistent with the interests of the Funds, the Investment Manager may
select brokers to execute the Funds' portfolio transactions on the basis of the
research and brokerage services they provide to the Investment Manager for its
use in managing the Funds and its other advisory accounts so long as the
criteria of Section 28(e) of the Securities Exchange Act of 1934 are met.
Section 28(e) of the Securities Exchange Act of 1934 was adopted in 1975 and
specifies that a person with investment discretion shall not be `deemed to have
acted unlawfully or to have breached a fiduciary duty' solely because such
person has caused the account to pay higher commissions than the lowest
available under certain circumstances, provided that the person so exercising
investment discretion makes a good faith determination that the amount of
commissions paid was `reasonable in relation to the value of the brokerage and
research services provided are viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion.' Such services may include furnishing
analyses, reports and information concerning issuers, industries, securities,
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research and
brokerage services received from such brokers are in addition to, and not in
lieu of, the services required to be performed by the Investment Manager under
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the Investment Management Agreement. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for effecting
the same transaction, provided that the Investment Manager determines in good
faith that such commission is reasonable in terms either of that particular
transaction or the overall responsibility of the Investment Manager to the Fund
and its other clients and that the total commissions paid by the Fund will be
reasonable in relation to the benefits received by the Fund over the long term.
Research services may also be received from dealers who execute Fund
transactions.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services (`soft dollars') might
exceed commissions that would be payable for execution services alone. Nor
generally can the value of research services to the Funds be measured. Research
services furnished might be useful and of value to ING Pilgrim Investments and
its affiliates, in serving other clients as well as the Funds. On the other
hand, any research services obtained by ING Pilgrim Investments or its
affiliates from the placement of portfolio brokerage of other clients might be
useful and of value to ING Pilgrim Investments in carrying out its obligations
to the Funds. With respect to Gold Fund and Silver Fund it is, as a general
matter, the Funds' policy to execute in the U.S. all transactions with respect
to securities traded in the U.S. and to execute its gold transactions in the
U.S. except when better price and execution can, in the judgment of management
of the Funds, be obtained elsewhere. For the Gold Fund and Silver Fund,
over-the-counter purchases and sales are normally made with principal market
makers, except where, in the opinion of management, the best executions are
available elsewhere.
Investment decisions for the Funds and for other investment accounts
managed by the Investment Manager are made independently of each other in light
of differing conditions. However, the same investment decision occasionally may
be made for two or more of such accounts. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Funds are concerned, in other cases the Investment
Manager believes that coordination and the ability to participate in volume
transactions will be beneficial to the Funds.
Debt securities generally are traded on a `net' basis with a dealer acting
as principal for its own account without a stated commission, although the price
of the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes a amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Brokers/dealers may receive commissions on
futures, currency and options transactions.
The Funds anticipate that their brokerage transactions involving securities
of companies domiciled in countries other than the United States will normally
be conducted on the principal stock exchanges of those countries. Fixed
commissions of foreign stock exchange transactions are generally higher than the
negotiated commission rates available in the United States. There is generally
less government supervision and regulation of foreign stock exchanges and
broker-dealers than in the United States.
The Funds engage in portfolio trading when the Investment Manager concludes
that the sale of a security owned by the Funds and/or the purchase of another
security of better value can enhance principal and/or increase income. A
security may be sold to avoid any prospective decline in market value, or a
security may be purchased in anticipation of a market rise. Consistent the
Funds' investment objectives, a security also may be sold and a comparable
security purchased coincidentally in order to take advantage of what is believed
to be a disparity in the normal yield and price relationship between the two
securities.
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Although the Funds do not generally intend to trade for short-term profits,
the Funds' investments may be changed when circumstances warrant, without regard
to the length of time a particular security has been held. It is expected that
the Funds will have an annual portfolio turnover rate that will generally not
exceed 100%. A 100% portfolio turnover rate would occur if the lesser of the
value of purchases or sales of portfolio securities for the Fund for a year
(excluding purchases of U.S. Treasury and other securities with a maturity at
the date of purchase of one year or less) were equal to 100% of the average
monthly value of the securities, excluding short-term investments, held by the
Funds during such year. A high turnover rate (100% or more) results in
correspondingly greater brokerage commissions and other transactional expenses
which are borne by the Funds. High portfolio turnover may result in the
realization of net short-term capital gains by the Funds which, when distributed
to shareholders, will be taxable as ordinary income. See `Tax Considerations.'
The brokerage commissions paid by each Fund and the Fund's portfolio
turnover rate for the last three years are as follows:
PILGRIM GLOBAL CORPORATE LEADERS FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 275,413 $ 37,312 117.48%
12/98 $ 203,102 $ 68,164 137.33%
12/99 $ 18,457 $ 7,360 12.76%
10/00 $_________ $________ ______%
PILGRIM GNMA INCOME FUND, INC.
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/98 $ 34,516 $ 0 54.47%
12/99 $ 60,939 $ 0 25.10%
12/00 $_________ $________ ______%
PILGRIM GOLD FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 223,351 $ 42,728 38.32%
12/98 $ 124,761 $ 31,159 28.93%
12/99 $ 389,449 $ 110,507 78.55%
10/00 $_________ $________ ______%
PILGRIM GROWTH AND INCOME FUND, INC.
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/98 $ 372,204 $ 177,110 63.20%
12/99 $ 482,487 $ 237,439 86.31%
12/00 $_________ $________ ______%
PILGRIM INTERNATIONAL FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 177,179 $ 20,613 122.56%
12/98 $ 174,405 $ 40,453 143.67%
12/99 $ 167,074 $ 38,707 148.82%
10/00 $_________ $________ ______%
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PILGRIM SILVER FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 111,983 $ 0 18.76%
12/98 $ 62,713 $ 0 28.78%
12/99 $ 36,882 $ 11,129 29.44%
10/00 $_________ $________ ______%
PILGRIM SMALLCAP ASIA GROWTH FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 632,268 $ 0 187.41%
12/98 $ 290,149 $ 0 192.28%
12/99 $ 235,538 $ 0 172.89%
10/00 $_________ $________ ______%
PILGRIM TROIKA DIALOG RUSSIA FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 5,475 $ 0 66.84%
12/98 $ 47,806 $ 0 65.76%
12/99 $ 91,247 $ 0 91.14%
10/00 $_________ $________ ______%
PILGRIM WORLDWIDE EMERGING MARKETS FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $2,989,156 $ 234,472 112.05%
12/98 $ 924,618 $ 36,566 107.19%
12/99 $1,367,102 $ 170,098 184.39%
10/00 $_________ $________ ______%
PILGRIM GLOBAL INCOME FUND, INC. (1)
TOTAL BROKERAGE SOFT DOLLAR PORTFOLIO
COMMISSION PAID COMMISSION PAID TURNOVER RATE
--------------- --------------- -------------
12/97 $ 212,446 $ 0 117.94%
12/98 $ 317,877 $ 0 45.26%
12/99 $ 334,433 $ 0 24.56%
10/00 $_________ $________ ______%
----------
(1) Effective ______, 2000, the Fund changed its fiscal year end to October 31.
October 2000 numbers represent the ten months from January 1, 2000 to
October 31, 2000.
ABOUT THE MONEY MARKET TRUST
Portfolio securities are normally purchased directly from the issuer or
from an underwriter or market maker for money market instruments. Therefore,
usually no brokerage commissions were paid by the Fund. Transactions are
allocated to various dealers by the Investment Manager in its best judgment.
Dealers are selected primarily on the basis of prompt execution of orders at the
most favorable prices. The Fund has no obligation to deal with any dealer or
group of dealers. Particular dealers may be selected for research or statistical
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and other services to enable the Investment Manager to supplement its own
research and analysis with that of such firms. Information so received will be
in addition to and not in lieu of the services required to be performed by the
Investment Manager under the Investment Management Agreement and the expenses of
the Investment Manager will not necessarily be reduced as a result of the
receipt of such supplemental information.
ABOUT GLOBAL INCOME FUND
Portfolio securities are purchased directly from dealers acting as
principal underwriters or market makers for GNMA certificates or government
securities. Such transactions are usually conducted on a net basis and
accordingly no brokerage commissions are paid by the Fund. The Fund may also
execute transactions through broker-dealers on a commission basis.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A complete description of the manner in which shares may be purchased,
redeemed or exchanged appears in the Prospectus under `Shareholder Guide.'
Shares of the Funds are offered at the net asset value next computed following
receipt of the order by the dealer (and/or the Distributor) or by the Funds'
transfer agent, DST Systems, Inc. (`Transfer Agent'), plus, for Class A, a
varying sales charge depending upon the amount of money invested, as set forth
in the Prospectus.
SPECIAL PURCHASES AT NET ASSET VALUE
Class A shares of the Funds may be purchased at net asset value, without a
sales charge, by persons who have redeemed their Class A shares of a Fund (or
shares of other funds managed by the Investment Manager in accordance with the
terms of such privileges established for such funds) within the previous 90
days. The amount that may be so reinvested in the Fund is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). In order to exercise this privilege, a
written order for the purchase of shares must be received by the Transfer Agent,
or be postmarked, within 90 days after the date of redemption. This privilege
may only be used once per calendar year. Payment must accompany the request and
the purchase will be made at the then current net asset value of the Fund. Such
purchases may also be handled by a securities dealer who may charge a
shareholder for this service. If the shareholder has realized a gain on the
redemption, the transaction is taxable and any reinvestment will not alter any
applicable Federal capital gains tax. If there has been a loss on the redemption
and a subsequent reinvestment pursuant to this privilege, some or all of the
loss may not be allowed as a tax deduction depending upon the amount reinvested,
although such disallowance is added to the tax basis of the shares acquired upon
the reinvestment.
Class A shares of the Funds may also be purchased at net asset value by any
person who can document that Fund shares were purchased with proceeds from the
redemption (within the previous 90 days) of shares from any unaffiliated mutual
fund on which a sales charge was paid or which were subject at any time to a
CDSC, and the Distributor has determined in its discretion that the unaffiliated
fund invests primarily in the same types of securities as the ING Pilgrim Fund
purchased.
Additionally, Class A shares of the Funds may also be purchased at net
asset value by any charitable organization or any state, county, or city, or any
instrumentality, department, authority or agency thereof that has determined
that a Fund is a legally permissible investment and that is prohibited by
applicable investment law from paying a sales charge or commission in connection
with the purchase of shares of any registered management investment company (`an
eligible governmental authority'). If an investment by an eligible governmental
authority at net asset value is made though a dealer who has executed a selling
group agreement with respect to the Fund (or the other open-end ING Pilgrim
Funds) the Distributor may pay the selling firm 0.25% of the Offering Price.
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The officers, directors/trustees and bona fide full-time employees of each
Fund and the officers, directors and full-time employees of the Investment
Manager, any Sub-Advisers, the Distributor, any service provider to the Funds or
affiliated corporations thereof or any trust, pension, profit-sharing or other
benefit plan for such persons, broker-dealers, for their own accounts or for
members of their families (defined as current spouse, children, parents,
grandparents, uncles, aunts, siblings, nephews, nieces, step-relations,
relations at-law, and cousins) employees of such broker-dealers (including their
immediate families) and discretionary advisory accounts of the Investment
Manager or any Sub-Adviser, may purchase Class A shares of a Fund at net asset
value without a sales charge. Such purchaser may be required to sign a letter
stating that the purchase is for his own investment purposes only and that the
securities will not be resold except to the Fund. The Funds may, under certain
circumstances, allow registered investment advisers to make investments on
behalf of their clients at net asset value without any commission or concession.
Class A shares may also be purchased at net asset value by certain fee
based registered investment advisers, trust companies and bank trust departments
under certain circumstances making investments on behalf of their clients and by
shareholders who have authorized the automatic transfer of dividends from the
same class of another open-end fund managed by the Investment Manager or from
ING Pilgrim Prime Rate Trust.
Class A shares may also be purchased without a sales charge by (i)
shareholders who have authorized the automatic transfer of dividends from the
same class of another ING Pilgrim Fund distributed by the Distributor or from
ING Pilgrim Prime Rate Trust; (ii) registered investment advisors, trust
companies and bank trust departments investing in Class A shares on their own
behalf or on behalf of their clients, provided that the aggregate amount
invested in any one or more Funds, during the 13 month period starting with the
first investment, equals at least $1 million; (iii) broker-dealers, who have
signed selling group agreements with the Distributor, and registered
representatives and employees of such broker-dealers, for their own accounts or
for members of their families (defined as current spouse, children, parents,
grandparents, uncles, aunts, siblings, nephews, nieces, step relations,
relations-at-law and cousins); (iv) broker-dealers using third party
administrators for qualified retirement plans who have entered into an agreement
with the ING Pilgrim Funds or an affiliate, subject to certain operational and
minimum size requirements specified from time-to-time by the ING Pilgrim Funds;
(v) accounts as to which a banker or broker-dealer charges an account management
fee (`wrap accounts'); and (vi) any registered investment company for which ING
Pilgrim Investments serves as Investment Manager.
The Funds may terminate or amend the terms of these sales charge waivers at
any time.
LETTERS OF INTENT AND RIGHTS OF ACCUMULATION
An investor may immediately qualify for a reduced sales charge on a
purchase of Class A shares by completing the Letter of Intent section of the
Shareholder Application in the Prospectus (the `Letter of Intent' or `Letter').
By completing the Letter, the investor expresses an intention to invest during
the next 13 months a specified amount which if made at one time would qualify
for the reduced sales charge. At any time within 90 days after the first
investment which the investor wants to qualify for the reduced sales charge, a
signed Shareholder Application, with the Letter of Intent section completed, may
be filed with the Funds. After the Letter of Intent is filed, each additional
investment made will be entitled to the sales charge applicable to the level of
investment indicated on the Letter of Intent as described above. Sales charge
reductions based upon purchases in more than one investment in the ING Pilgrim
Funds will be effective only after notification to the Distributor that the
investment qualifies for a discount. The shareholder's holdings in the
Investment Manager's funds (excluding ING Pilgrim General Money Market shares)
acquired within 90 days before the Letter of Intent is filed will be counted
towards completion of the Letter of Intent but will not be entitled to a
retroactive downward adjustment of sales charge until the Letter of Intent is
fulfilled. Any redemptions made by the shareholder during the 13-month period
will be subtracted from the amount of the purchases for purposes of determining
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<PAGE>
whether the terms of the Letter of Intent have been completed. If the Letter of
Intent is not completed within the 13-month period, there will be an upward
adjustment of the sales charge as specified below, depending upon the amount
actually purchased (less redemption) during the period.
An investor acknowledges and agrees to the following provisions by
completing the Letter of Intent section of the Shareholder Application in the
Prospectus. A minimum initial investment equal to 25% of the intended total
investment is required. An amount equal to the maximum sales charge or 5.75% of
the total intended purchase will be held in escrow at ING Pilgrim Funds, in the
form of shares, in the investor's name to assure that the full applicable sales
charge will be paid if the intended purchase is not completed. The shares in
escrow will be included in the total shares owned as reflected on the monthly
statement; income and capital gain distributions on the escrow shares will be
paid directly by the investor. The escrow shares will not be available for
redemption by the investor until the Letter of Intent has been completed, or the
higher sales charge paid. If the total purchases, less redemptions, equal the
amount specified under the Letter, the shares in escrow will be released. If the
total purchases, less redemptions, exceed the amount specified under the Letter
and is an amount which would qualify for a further quantity discount, a
retroactive price adjustment will be made by the Distributor and the dealer with
whom purchases were made pursuant to the Letter of Intent (to reflect such
further quantity discount) on purchases made within 90 days before, and on those
made after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the applicable offering price.
If the total purchases, less redemptions, are less than the amount specified
under the Letter, the investor will remit to the Distributor an amount equal to
the difference in dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total of
such purchases had been made at a single account in the name of the investor or
to the investor's order. If within 10 days after written request such difference
in sales charge is not paid, the redemption of an appropriate number of shares
in escrow to realize such difference will be made. If the proceeds from a total
redemption are inadequate, the investor will be liable to the Distributor for
the difference. In the event of a total redemption of the account prior to
fulfillment of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the Investor. By completing the Letter of Intent section of the Shareholder
Application, an investor grants to the Distributor a security interest in the
shares in escrow and agrees to irrevocably appoint the Distributor as his
attorney-in-fact with full power of substitution to surrender for redemption any
or all shares for the purpose of paying any additional sales charge due and
authorizes the Transfer Agent or Sub-Transfer Agent to receive and redeem shares
and pay the proceeds as directed by the Distributor. The investor or the
securities dealer must inform the Transfer Agent or the Distributor that this
Letter is in effect each time a purchase is made.
If at any time prior to or after completion of the Letter of Intent the
investor wishes to cancel the Letter of Intent, the investor must notify the
Distributor in writing. If, prior to the completion of the Letter of Intent, the
investor requests the Distributor to liquidate all shares held by the investor,
the Letter of Intent will be terminated automatically. Under either of these
situations, the total purchased may be less than the amount specified in the
Letter of Intent. If so, the Distributor will redeem at NAV to remit to the
Distributor and the appropriate authorized dealer an amount equal to the
difference between the dollar amount of the sales charge actually paid and the
amount of the sales charge that would have been paid on the total purchases if
made at one time.
The value of shares of the Funds plus shares of the other open-end funds
distributed by the Distributor (excluding ING Pilgrim General Money Market
shares) can be combined with a current purchase to determine the reduced sales
charge and applicable offering price of the current purchase. The reduced sales
charge applies to quantity purchases made at one time or on a cumulative basis
over any period of time by (i) an investor, (ii) the investor's spouse and
children under the age of majority, (iii) the investor's custodian accounts for
the benefit of a child under the Uniform Gift to Minors Act, (iv) a trustee or
other fiduciary of a single trust estate or a single fiduciary account
(including a pension, profit-sharing and/or other employee benefit plans
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<PAGE>
qualified under Section 401 of the Code), by trust companies' registered
investment advisors, banks and bank trust departments for accounts over which
they exercise exclusive investment discretionary authority and which are held in
a fiduciary, agency, advisory, custodial or similar capacity.
The reduced sales charge also apply on a non-cumulative basis, to purchases
made at one time by the customers of a single dealer, in excess of $1 million.
The Letter of Intent option may be modified or discontinued at any time.
Shares of the Funds and other open-end ING Pilgrim Funds (excluding ING
Pilgrim General Money Market shares) purchased and owned of record or
beneficially by a corporation, including employees of a single employer (or
affiliates thereof) including shares held by its employees, under one or more
retirement plans, can be combined with a current purchase to determine the
reduced sales charge and applicable offering price of the current purchase,
provided such transactions are not prohibited by one or more provisions of the
Employee Retirement Income Security Act or the Internal Revenue Code.
Individuals and employees should consult with their tax advisors concerning the
tax rules applicable to retirement plans before investing.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the ING Pilgrim Funds which impose a CDSC
may be combined with Class A shares for a reduced sales charge but will not
affect any CDSC which may be imposed upon the redemption of shares of a Fund
which imposes a CDSC.
REDEMPTIONS
Payment to shareholders for shares redeemed will be made within seven days
after receipt by the Funds' Transfer Agent of the written request in proper
form, except that a Fund may suspend the right of redemption or postpone the
date of payment during any period when (a) trading on the New York Stock
Exchange is restricted as determined by the SEC or such exchange is closed for
other than weekends and holidays; (b) an emergency exists as determined by the
SEC making disposal of portfolio series or valuation of net assets of the Fund
not reasonably practicable; or (c) for such other period as the SEC may permit
for the protection of the Funds' shareholders. At various times, a Fund may be
requested to redeem shares for which it has not yet received good payment.
Accordingly, the Fund may delay the mailing of a redemption check until such
time as it has assured itself that good payment has been collected for the
purchase of such shares, which may take up to 15 days or longer.
The Funds intend to pay in cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, a Fund may make payment wholly or
partly in securities at their then current market value equal to the redemption
price. In such case, an investor may incur brokerage costs in converting such
securities to cash. However, the Funds have elected to be governed by the
provisions of Rule 18f-1 under the 1940 Act, which contains a formula for
determining the minimum amount of cash to be paid as part of any redemption. In
the event the Funds must liquidate portfolio securities to meet redemptions,
they reserves the right to reduce the redemption price by an amount equivalent
to the pro-rated cost of such liquidation not to exceed one percent of the net
asset value of such shares.
Due to the relatively high cost of handling small investments, each Fund
reserves the right, upon 30 days written notice, to redeem, at net asset value
(less any applicable deferred sales charge), the shares of any shareholder whose
account has a value of less than $1,000 in the Fund, other than as a result of a
decline in the net asset value per share. Before the Fund redeems such shares
and sends the proceeds to the shareholder, it will notify the shareholder that
the value of the shares in the account is less than the minimum amount and will
allow the shareholder 30 days to make an additional investment in an amount that
will increase the value of the account to at least $1,000 before the redemption
is processed. This policy will not be implemented where a Fund has previously
waived the minimum investment requirements.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the portfolio securities
at the time of redemption or repurchase.
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Certain purchases of Class A shares and most Class B and Class C shares may
be subject to a CDSC. Shareholders will be charged a CDSC if certain of those
shares are redeemed within the applicable time period as stated in the
prospectus.
No CDSC is imposed on any shares subject to a CDSC to the extent that those
shares (i) are no longer subject to the applicable holding period, (ii) resulted
from reinvestment of distributions on CDSC shares, or (iii) were exchanged for
shares of another fund managed by the Investment Manager, provided that the
shares acquired in such exchange and subsequent exchanges will continue to
remain subject to the CDSC, if applicable, until the applicable holding period
expires.
The CDSC or redemption fee will be waived for certain redemptions of shares
upon (i) the death or permanent disability of a shareholder, or (ii) in
connection with mandatory distributions from an Individual Retirement Account
(`IRA') or other qualified retirement plan. The CDSC or redemption fee will be
waived in the case of a redemption of shares following the death or permanent
disability of a shareholder if the redemption is made within one year of death
or initial determination of permanent disability. The waiver is available for
total or partial redemptions of shares owned by an individual or an individual
in joint tenancy (with rights of survivorship), but only for redemptions of
shares held at the time of death or initial determination of permanent
disability. The CDSC or redemption fee will also be waived in the case of a
total or partial redemption of shares in connection with any mandatory
distribution from a tax-deferred retirement plan or an IRA. The waiver does not
apply in the case of a tax-free rollover or transfer of assets, other than one
following a separation from services, except that a CDSC or redemption fee may
be waived in certain circumstances involving redemptions in connection with a
distribution from a qualified employer retirement plan in connection with
termination of employment or termination of the employer's plan and the transfer
to another employer's plan or to an IRA. The shareholder must notify the Fund
either directly or through the Distributor at the time of redemption that the
shareholder is entitled to a waiver of CDSC or redemption fee. The waiver will
then be granted subject to confirmation of the shareholder's entitlement. The
CDSC or redemption fee, which may be imposed on Class A shares purchased in
excess of $1 million, will also be waived for registered investment advisors,
trust companies and bank trust departments investing on their own behalf or on
behalf of their clients. These waivers may be changed at any time.
REINSTATEMENT PRIVILEGE
If you sell Class B or Class C shares of a ING Pilgrim Fund, you 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. The amount of any CDSC
also will be reinstated. To exercise this privilege, the written order for the
purchase of shares must be received by the Transfer Agent or be postmarked
within 90 days after the date of redemption. This privilege can be used only
once per calendar year. If a loss is incurred on the redemption and the
reinstatement privilege is used, some or all of the loss may not be allowed as a
tax deduction.
CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares
in a Fund on the first business day of the month in which the eighth anniversary
of the issuance of the Class B shares occurs, together with a pro rata portion
of all Class B shares representing dividends and other distributions paid in
additional Class B shares. The conversion of Class B shares into Class A shares
is subject to the continuing availability of an opinion of counsel or an
Internal Revenue Service (`IRS') ruling, if the Investment Manager deems it
advisable to obtain such advice, to the effect that (1) such conversion will not
constitute taxable events for federal tax purposes; and (2) the payment of
different dividends on Class A and Class B shares does not result in the Fund's
dividends or distributions constituting `preferential dividends' under the
Internal Revenue Code of 1986. The Class B shares so converted will no longer be
subject to the higher expenses borne by Class B shares. The conversion will be
effected at the relative net asset values per share of the two Classes.
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DEALER'S COMMISSIONS AND OTHER INCENTIVES
In connection with the sale of shares of the Funds, the Distributor may pay
Authorized Dealers of record a sales commission as a percentage of the purchase
price. In connection with the sale of Class A shares, the Distributor will
re-allow to Authorized Dealers of record from the sales charge on such sales the
following amounts:
EQUITY FUNDS
DEALER'S REALLOWANCE AS A
PERCENTAGE OF OFFERING PRICE
----------------------------
AMOUNT OF TRANSACTION CLASS A
--------------------- -------
Less than $ 50,000 5.00%
$ 50,000 -- $ 99,999 3.75%
$ 100,000 -- $ 249,999 2.75%
$ 250,000 -- $ 499,999 2.00%
$ 500,000 -- $ 999,999 1.75%
$1,000,000 and over See below
INCOME FUNDS
DEALER'S REALLOWANCE AS A
PERCENTAGE OF OFFERING PRICE
AMOUNT OF TRANSACTION CLASS A
--------------------- -------
Less than $ 50,000 4.25%
$ 50,000 -- $ 99,999 4.00%
$ 100,000 -- $ 249,999 3.00%
$ 250,000 -- $ 499,999 2.25%
$ 500,000 -- $ 999,999 1.75%
$1,000,000 and over See below
The Distributor may pay to Authorized Dealers out of its own assets
commissions on shares sold in Classes A, B and C, at net asset value, which at
the time of investment would have been subject to the imposition of a contingent
deferred sales charge (`CDSC') if redeemed. There is no sales charge on
purchases of $1,000,000 or more of Class A shares. However, such purchases may
be subject to a CDSC, as disclosed in the Prospectus. The Distributor will pay
Authorized Dealers of record commissions at the rates shown in the table below
for purchases of Class A shares that are subject to a CDSC.
DEALER COMMISSION AS A
AMOUNT OF TRANSACTION PERCENTAGE OF AMOUNT INVESTED
--------------------- -----------------------------
$1,000,000 to $2,499,000 1.00%
$2,500,000 to $4,999,999 0.50%
$5,000,000 and over 0.25%
Also, the Distributor will pay out of its own assets a commission of 1% of
the amount invested for purchases of Class A shares of less than $1 million by
qualified employer retirement plans with 50 or more participants.
The Distributor will pay out of its own assets a commission of 4% of the
amount invested for purchases of Class B shares subject to a CDSC. For purchases
of Class C shares subject to a CDSC, the Distributor may pay out of its own
assets a commission of 1% of the amount invested of each Fund.
The Distributor may, from time to time, at its discretion, allow a selling
dealer to retain 100% of a sales charge, and such dealer may therefore be deemed
an `underwriter' under the Securities Act of 1933, as amended. the Distributor,
at its expense, may also provide additional promotional incentives to dealers.
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The incentives may include payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to locations within or outside of the United
States, merchandise or other items. For more information on incentives, see
`Management of the Funds -- 12b-1 Plans' in this Statement of Additional
Information.
DETERMINATION OF SHARE PRICE
The Funds calculate net asset value as of the close of normal trading on
the New York Stock Exchange (currently 4:00 p.m., Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing time) each
business day. It is expected that the New York Stock Exchange will be closed on
Saturdays and Sundays and on New Year's Day, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Per share net asset value is calculated by dividing the value
of the Funds' total net assets by the total number of the Funds' shares then
outstanding. For the Money Market Trust, substantially all of the Fund's net
income calculated from the immediately preceding determination of net income, is
declared daily as dividends.
The Funds' portfolio securities and other assets are valued as follows:
Portfolio securities are valued using current market valuations: either the
last reported sales price or, in the case of securities for which there is no
reported last sale and fixed-income securities, the mean between the closing bid
and asked price. Securities and assets for which market quotations are not
readily available (including restricted securities which are subject to
limitations as to their sale) are valued at their fair values as determined in
good faith by or under the supervision of each Fund's Board, in accordance with
methods that are specifically authorized by the Board. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Funds in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of other assets is added to the value of all securities
positions to arrive at the value of a Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearest cent, is the net asset
value per share. Short-term obligations with maturities of 60 days or less are
valued at amortized cost as reflecting fair value. Options are valued at the
mean of the last bid and asked price on the exchange where the option is
primarily traded.
Long-term debt obligations are valued at the mean of representative quoted
bid or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Investment Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation, provided such valuation represents fair value.
Options on currencies purchased by the Funds are valued at their last bid
price in the case of listed options or at the average of the last bid prices
obtained from dealers in the case of OTC options. The value of each security
denominated in a currency other than U.S. dollars will be translated into U.S.
dollars at the prevailing market rate as determined by the Investment Manager on
that day.
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The value of securities denominated in foreign currencies and traded on
foreign exchanges or in foreign markets will be translated into U.S. dollars at
the last price of their respective currency denomination against U.S. dollars
quoted by a major bank or, if no such quotation is available, at the rate of
exchange determined in accordance with policies established in good faith by the
Boards. Because the value of securities denominated in foreign currencies must
be translated into U.S. dollars, fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of a Fund's shares
even without any change in the foreign-currency denominated values of such
securities.
Because foreign securities markets may close before a Fund determines its
net asset value, events affecting the value of portfolio securities occurring
between the time prices are determined and the time the Fund calculates its net
asset value may not be reflected unless the Investment Manager, under
supervision of the Board, determines that a particular event would materially
affect the Fund's net asset value.
European, Far Eastern or Latin American securities trading may not take
place on all days on which the NYSE is open. Further, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of a Fund's respective
net asset values therefore may not take place contemporaneously with the
determination of the prices of securities held by the Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
a Fund's net asset value unless the Investment Manager, under the supervision of
the Fund's Board of Trustees, determines that the particular event would
materially affect net asset value. As a result, the Fund's net asset value may
be significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
The per share net asset value of Class A shares generally will be higher
than the per share net asset value of shares of the other classes, reflecting
daily expense accruals of the higher distribution fees applicable to Class B and
Class C. It is expected, however, that the per share net asset value of the
classes will tend to converge immediately after the payment of dividends or
distributions that will differ by approximately the amount of the expense
accrual differentials between the classes.
The price of silver and gold bullion is determined by measuring the mean
between the closing bid and asked quotations of silver and gold bullion set at
the time of the close of the New York Stock Exchange, as supplied by the Gold
Fund's and Silver Fund's custodian bank or other broker-dealers or banks
approved by the Gold Fund and Silver Fund, on each date that the Exchange is
open for business.
LEXINGTON MONEY MARKET TRUST
For the purpose of determining the price at which shares are issued and
redeemed, the net asset value per share is calculated immediately after the
daily dividend declaration by: (a) valuing all securities and instruments as set
forth below; (b) deducting the Fund's liabilities; and (c) dividing the
resulting amount by the number of shares outstanding. As discussed below, it is
the intention of the Fund to maintain a net asset value per share of $1.00. The
Fund's portfolio instruments are valued on the basis of amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold its portfolio. During periods of declining
interest rates, the daily yield on shares of the Fund computed as described
above may be higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all its portfolio instruments. Thus, if the use
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of amortized cost by the Fund results in a lower aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing investors in the Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.
The Fund's use of amortized cost and the maintenance of the Fund's per
share net value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the Investment Company Act of 1940. As a condition
of operating under that rule, the Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in securities
which are determined by the Board of Trustees to present minimal credit risks
and which are of high quality as required by the Rule, or in the case of any
instrument not so rated, considered by the Board of Trustees to be of comparable
quality. Securities in the Trust will consist of money market instruments that
have been rated (or whose issuer's short-term debt obligations are rated) in one
of the two highest categories (i.e., `Al/Pl') by both Standard & Poor's
Corporation (`S&P') and Moody's Investors Services, Inc. (`Moody's'), two
nationally recognized statistical rating organizations (`NRSRO').
The Fund may invest up to 5% of its assets in any single `Tier I' security
(other than U.S. Government securities), measured at the time of acquisition;
however, it may invest more than 5% of its assets in a single Tier 1 security
for no more than three business days. A `Tier I' security is one that has been
rated (or the issuer of such security has been rated) by both S&P and Moody's in
the highest rating category or, if unrated, is of comparable quality. A security
rated in the highest category by only one of these NRSROs is also considered a
Tier 1 security.
In addition, the Fund may invest not more than 5% of its assets in `Tier 2'
securities. A Tier 2 security is a security that is (a) rated in the second
highest category by either S&P or Moody's or (b) an unrated security that is
deemed to be of comparable quality by the Fund's investment advisor. The Fund
may invest up to 1% of its assets in any single Tier 2 security.
The Fund may invest only in a money market instrument that has a remaining
maturity of 13 months (397 days) or less, provided that the Fund's average
weighted maturity is 90 days or less.
The Board of Trustees has also agreed, as a particular responsibility
within the overall duty of care owed to its shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objective, to stabilize the net asset value per share
as computed for the purposes of sales and redemptions at $1.00. These procedures
include periodic review, as the Board deems appropriate and at such intervals as
are reasonable in light of current market conditions, of the relationship
between the amortized cost value per share and a net asset value per share based
upon available indications of market value. In such review, investments for
which market quotations are readily available are valued at the most recent bid
price or quoted yield equivalent for such securities or for securities of
comparable maturity, quality and type as obtained from one or more of the major
market makers for the securities to be valued. Other investments and assets are
valued at fair value, as determined in good faith by the Board of Trustees.
SHAREHOLDER INFORMATION
Certificates representing shares of the Funds will not normally be issued
to shareholders. The Transfer Agent will maintain an account for each
shareholder upon which the registration and transfer of shares are recorded, and
any transfers shall be reflected by bookkeeping entry, without physical
delivery.
The Transfer Agent will require that a shareholder provide requests in
writing, accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.).
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Each Fund reserves the right, if conditions exist that make cash payments
undesirable, to honor any request for redemption or repurchase order with
respect to shares of the Fund by making payment in whole or in part in readily
marketable securities chosen by the Fund and valued as they are for purposes of
computing a Fund's net asset value (redemption-in-kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting theses
securities to cash. Each Fund has elected, however, to be governed by Rule 18f-1
under the 1940 Act as a result of which the Fund is obligated to redeem shares
with respect to any one shareholder during any 90-day period solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of the period.
SHAREHOLDER SERVICES AND PRIVILEGES
As discussed in the Prospectus, the Funds provide a Pre-Authorized
Investment Program for the convenience of investors who wish to purchase shares
of the Funds on a regular basis. Such a Program may be started with an initial
investment ($1,000 minimum) and subsequent voluntary purchases ($100 minimum)
with no obligation to continue. The Program may be terminated without penalty at
any time by the investor or the Funds. The minimum investment requirements may
be waived by the Funds for purchases made pursuant to (i) employer-administered
payroll deduction plans, (ii) profit-sharing, pension, or individual or any
employee retirement plans, or (iii) purchases made in connection with plans
providing for periodic investments in Fund shares.
For investors purchasing shares of the Funds under a tax-qualified
individual retirement or pension plan or under a group plan through a person
designated for the collection and remittance of monies to be invested in shares
of the Funds on a periodic basis, the Funds may, in lieu of furnishing
confirmations following each purchase of Fund shares, send statements no less
frequently than quarterly pursuant to the provisions of the Securities Exchange
Act of 1934, as amended, and the rules thereunder. Such quarterly statements,
which would be sent to the investor or to the person designated by the group for
distribution to its members, will be made within five business days after the
end of each quarterly period and shall reflect all transactions in the
investor's account during the preceding quarter.
All shareholders will receive a confirmation of each new transaction in
their accounts, which will also show the total number of Fund shares owned by
each shareholder, the number of shares being held in safekeeping by the Funds'
Transfer Agent for the account of the shareholder and a cumulative record of the
account for the entire year. Shareholders may rely on these statements in lieu
of certificates. Certificates representing shares of the Fund will not be issued
unless the shareholder requests them in writing.
SELF-EMPLOYED AND CORPORATE RETIREMENT PLANS
For self-employed individuals and corporate investors that wish to purchase
shares of a Fund, there is available through the Fund a Prototype Plan and
Custody Agreement. The Custody Agreement provides that Investors Fiduciary Trust
Company, Kansas City, Missouri, will act as Custodian under the Plan, and will
furnish custodial services for an annual maintenance fee of $12.00 for each
participant, with no other charges. (This fee is in addition to the normal
Custodian charges paid by the Funds.) The annual contract maintenance fee may be
waived from time to time. For further details, including the right to appoint a
successor Custodian, see the Plan and Custody Agreements as provided by the
Funds. Employers who wish to use shares of a Fund under a custodianship with
another bank or trust company must make individual arrangements with such
institution.
INDIVIDUAL RETIREMENT ACCOUNTS
Investors having earned income are eligible to purchase shares of a Fund
under an IRA pursuant to Section 408(a) of the Internal Revenue Code. An
individual who creates an IRA may contribute annually certain dollar amounts of
earned income, and an additional amount if there is a non-working spouse. Simple
IRA plans that employers may establish on behalf of their employees are also
available. Roth IRA plans that enable employed and self-employed individuals to
make non-deductible contributions, and, under certain circumstances, effect
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tax-free withdrawals, are also available. Copies of a model Custodial Account
Agreement are available from the Distributor. Investors Fiduciary Trust Company,
Kansas City, Missouri, will act as the Custodian under this model Agreement, for
which it will charge the investor an annual fee of $12.00 for maintaining the
Account (such fee is in addition to the normal custodial charges paid by the
Funds). Full details on the IRA are contained in an IRS required disclosure
statement, and the Custodian will not open an IRA until seven (7) days after the
investor has received such statement from the Funds. An IRA using shares of a
Fund may also be used by employers who have adopted a Simplified Employee
Pension Plan.
Purchases of Fund shares by Section 403(b) and other retirement plans are
also available. Section 403(b) plans are arrangements by a public school
organization or a charitable, educational, or scientific organization that is
described in Section 501(c)(3) of the Internal Revenue Code under which
employees are permitted to take advantage of the federal income tax deferral
benefits provided for in Section 403(b) of the Code. It is advisable for an
investor considering the funding of any retirement plan to consult with an
attorney or to obtain advice from a competent retirement plan consultant.
TELEPHONE REDEMPTION AND EXCHANGE PRIVILEGES
As discussed in the Prospectus, the telephone redemption and exchange
privileges are available for all shareholder accounts; however, retirement
accounts may not utilize the telephone redemption privilege. The telephone
privileges may be modified or terminated at any time. The privileges are subject
to the conditions and provisions set forth below and in the Prospectus.
(1) Telephone redemption and/or exchange instructions received in good
order before the pricing of a Fund on any day on which the New York Stock
Exchange is open for business (a `Business Day'), but not later than 4:00 p.m.
eastern time, will be processed at that day's closing net asset value. For each
exchange, the shareholder's account may be charged an exchange fee. There is no
fee for telephone redemption; however, redemptions of Class A and Class B shares
may be subject to a contingent deferred sales charge (See `Redemption of shares'
in the Prospectus).
(2) Telephone redemption and/or exchange instructions should be made by
dialing 1-800-992-0180 and selecting option 3.
(3) The Funds will not permit exchanges in violation of any of the terms
and conditions set forth in the Funds' Prospectus or herein.
(4) Telephone redemption requests must meet the following conditions to be
accepted by the Funds:
(a) Proceeds of the redemption may be directly deposited into a
predetermined bank account, or mailed to the current address on the
registration. This address cannot reflect any change within the previous
thirty (30) days.
(b) Certain account information will need to be provided for
verification purposes before the redemption will be executed.
(c) Only one telephone redemption (where proceeds are being mailed to
the address of record) can be processed with in a 30 day period.
(d) The maximum amount which can be liquidated and sent to the address
of record at any one time is $100,000.
(e) The minimum amount which can be liquidated and sent to a
predetermined bank account is $5,000.
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(5) If the exchange involves the establishment of a new account, the dollar
amount being exchanged must at least equal the minimum investment requirement of
the ING Pilgrim Fund being acquired.
(6) Any new account established through the exchange privilege will have
the same account information and options except as stated in the Prospectus.
(7) Certificated shares cannot be redeemed or exchanged by telephone but
must be forwarded to ING Pilgrim at P.O. Box 419368, Kansas City, MO 64141 and
deposited into your account before any transaction may be processed.
(8) If a portion of the shares to be exchanged are held in escrow in
connection with a Letter of Intent, the smallest number of full shares of the
Fund to be purchased on the exchange having the same aggregate net asset value
as the shares being exchanged shall be substituted in the escrow account. Shares
held in escrow may not be redeemed until the Letter of Intent has expired and/or
the appropriate adjustments have been made to the account.
(9) Shares may not be exchanged and/or redeemed unless an exchange and/or
redemption privilege is offered pursuant to the Fund's then-current prospectus.
(10) Proceeds of a redemption may be delayed up to 15 days or longer until
the check used to purchase the shares being redeemed has been paid by the bank
upon which it was drawn.
SYSTEMATIC WITHDRAWAL PLAN
You may elect to make periodic withdrawals from your account in any fixed
amount in excess of $100 to yourself, or to anyone else you properly designate,
as long as the account has a current value of at least $10,000. To establish a
systematic cash withdrawal, complete the Systematic Withdrawal Plan section of
the Account Application. To have funds deposited to your bank account, follow
the instructions on the Account Application. You may elect to have monthly,
quarterly, semi-annual or annual payments. Redemptions are normally processed on
the fifth day prior to the end of the month, quarter or year. Checks are then
mailed or proceeds are forwarded to your bank account on or about the first of
the following month. You may change the amount, frequency and payee, or
terminate the plan by giving written notice to the Transfer Agent. A Systematic
Withdrawal Plan may be modified at any time by the Funds or terminated upon
written notice by the relevant Fund.
During the withdrawal period, you may purchase additional shares for
deposit to your account, subject to any applicable sales charge, if the
additional purchases are equal to at least one year's scheduled withdrawals, or
$1,200, whichever is greater. There are no separate charges to you under this
Plan, although a CDSC may apply if you purchased Class A, B or C shares.
Shareholders who elect to have a systematic cash withdrawal must have all
dividends and capital gains reinvested. As shares of the Fund are redeemed under
the Plan, you may realize a capital gain or loss for income tax purposes.
DISTRIBUTIONS
As noted in the Prospectus, shareholders have the privilege of reinvesting
both income dividends and capital gains distributions, if any, in additional
shares of a respective class of a Fund at the then current net asset value, with
no sales charge. The Funds' management believes that most investors desire to
take advantage of this privilege. It has therefore made arrangements with its
Transfer Agent to have all income dividends and capital gains distributions that
are declared by the Funds automatically reinvested for the account of each
shareholder. A shareholder may elect at any time by writing to the Fund or the
Transfer Agent to have subsequent dividends and/or distributions paid in cash.
In the absence of such an election, each purchase of shares of a class of a Fund
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is made upon the condition and understanding that the Transfer Agent is
automatically appointed the shareholder's agent to receive his dividends and
distributions upon all shares registered in his name and to reinvest them in
full and fractional shares of the respective class of the Fund at the applicable
net asset value in effect at the close of business on the reinvestment date. A
shareholder may still at any time after a purchase of Fund shares request that
dividends and/or capital gains distributions be paid to him in cash.
TAX CONSIDERATIONS
Information set forth in the Prospectus and this SAI is only a summary of
certain key tax considerations generally affecting purchasers of shares of the
Funds. The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt has been made to present a complete explanation of
the federal, state and local tax treatment of the Funds or the implications to
shareholders, and the discussions here and in the Funds' Prospectus are not
intended as substitutes for careful tax planning. Accordingly, potential
purchasers of shares of the Funds are urged to consult their tax advisers with
specific reference to their own tax circumstances. In addition, the tax
discussion in the Prospectus and this SAI is based on tax law in effect on the
date of the Prospectus and this SAI; such laws and regulations may be changed by
legislative, judicial or administrative action, sometimes with retroactive
effect.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, each Fund is not
subject to federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net of expenses)
and capital gain net income (i.e., the excess of capital gains over capital
losses) that it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (i.e., net investment income
and the excess of net short-term capital gain over net long-term capital loss)
for the taxable year (the `Distribution Requirement'), and satisfies certain
other requirements of the Code that are described below. Distributions by a Fund
made during the taxable year or, under specified circumstances, within twelve
months after the close of the taxable year, will be considered distributions of
income and gains of the taxable year and will, therefore, count toward
satisfaction of the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the `Income Requirement').
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. In addition, gain will be recognized as a
result of certain constructive sales, including short sales `against the box.'
However, gain recognized on the disposition of a debt obligation purchased by a
Fund at a market discount (generally, at a price less than its principal amount)
will be treated as ordinary income to the extent of the portion of the market
discount which accrued during the period of time the Fund held the debt
obligation. In addition, under the rules of Code section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent attributable
to changes in foreign currency exchange rates), and gain or loss recognized on
the disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code section 1256
(unless the Fund elects otherwise), will generally be treated as ordinary income
or loss.
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Further, the Code also treats as ordinary income a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses will be preserved where a Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed
through to a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (1) the asset is used to
close a `short sale' (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by the Fund as part of a `straddle' (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto), or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position. Any gain recognized by a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will be treated as a
short-term capital gain or loss.
Certain transactions that may be engaged in by certain Funds (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
`Section 1256 contracts.' Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. A Fund, however,
may elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a `mixed straddle' with other investments of the Fund that are
not Section 1256 contracts.
Certain Funds may purchase securities of certain foreign investment funds
or trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If a Fund invests in a PFIC, it has three separate
options. First, it may elect to treat the PFIC as a qualified electing fund (a
"QEF"), in which event the Fund will each year have ordinary income equal to its
pro rata share of the PFIC's ordinary earnings for the year and long-term
capital gain equal to its pro rata share of the PFIC's net capital gain for the
year, regardless of whether the Fund receives distributions of any such ordinary
earnings or capital gains from the PFIC. Second, a Fund that invests in stock of
a PFIC may make a mark-to-market election with respect to such stock. Pursuant
to such election, the Fund will include as ordinary income any excess of the
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fair market value of such stock at the close of any taxable year over the Fund's
adjusted tax basis in the stock. If the adjusted tax basis of the PFIC stock
exceeds the fair market value of the stock at the end of a given taxable year,
such excess will be deductible as ordinary loss in an amount equal to the lesser
of the amount of such excess or the net mark-to-market gains on the stock that
the Fund included in income in previous years. A Fund's holding period with
respect to its PFIC stock subject to the election will commence on the first day
of the next taxable year. If the Fund makes the mark-to-market election in the
first taxable year it holds PFIC stock, it will not incur the tax described
below under the third option.
Finally, if a Fund does not elect to treat the PFIC as a QEF and does not
make a mark-to-market election, then, in general, (1) any gain recognized by the
Fund upon the sale or other disposition of its interest in the PFIC or any
`excess distribution' (as defined) received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC
stock, (2) the portion of such gain or excess distribution so allocated to the
year in which the gain is recognized or the excess distribution is received
shall be included in the Fund's gross income for such year as ordinary income
(and the distribution of such portion by the Fund to shareholders will be
taxable as an ordinary income dividend, but such portion will not be subject to
tax at the Fund level), (3) the Fund shall be liable for tax on the portions of
such gain or excess distribution so allocated to prior years in an amount equal
to, for each such prior year, (i) the amount of gain or excess distribution
allocated to such prior year multiplied by the highest tax rate (individual or
corporate) in effect for such prior year, plus (ii) interest on the amount
determined under clause (i) for the period from the due date for filing a return
for such prior year until the date for filing a return for the year in which the
gain is recognized or the excess distribution is received, at the rates and
methods applicable to underpayments of tax for such period, and (4) the
distribution by the Fund to its shareholders of the portions of such gain or
excess distribution so allocated to prior years (net of the tax payable by the
Fund thereon) will again be taxable to the shareholders as an ordinary income
dividend.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss (including, to
the extent provided in Treasury Regulations, losses recognized pursuant to the
PFIC mark-to-market election) incurred after October 31 as if it had been
incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to each of which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
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EXCISE TAX ON REGULATED INVESTMENT COMPANIES.
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of its
ordinary income for such calendar year and 98% of capital gain net income for
the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a `taxable year election')). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses and ordinary gains or losses arising as a result of a
PFIC mark-to-market election (or upon the actual disposition of the PFIC stock
subject to such election) incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
Each Fund anticipates distributing all or substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes. Distributions attributable to dividends received by
a Fund from domestic corporations will qualify for the 70% dividends-received
deduction for corporate shareholders only to the extent discussed below.
Distributions attributable to interest received by a Fund will not, and
distributions attributable to dividends paid by a foreign corporation generally
should not, qualify for the dividend-received deduction.
Ordinary income dividends paid by each Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations such as S corporations, which are not
eligible for the deduction because of their special characteristics, and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by a Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4):
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such (or
substantially identical) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced (1) if the corporate
shareholder fails to satisfy the foregoing requirements with respect to its
shares of the Fund or (2) by application of Code Section 246(b) which in general
limits the dividends-received deduction to 70% of the shareholder's taxable
income (determined without regard to the dividends-received deduction and
certain other items).
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A Fund may either retain or distribute to shareholders its net capital gain
for each taxable year. Each Fund currently intends to distribute any such
amounts. Net capital gain that is distributed and designated as a capital gain
dividend will be taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder has held his shares or whether such gain
was recognized by the Fund prior to the date on which the shareholder acquired
his shares. The Code provides, however, that under certain conditions only 50%
(58% for alternative minimum tax purposes) of the capital gain recognized upon a
Fund's disposition of domestic `small business' stock will be subject to tax.
Conversely, if a Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If a Fund elects to retain its net capital gain,
it is expected that the Fund also will elect to have shareholders of record on
the last day of its taxable year treated as if each received a distribution of
his pro rata share of such gain, with the result that each shareholder will be
required to report his pro rata share of such gain on his tax return as
long-term capital gain, will receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain, and will increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.
Alternative minimum tax (`AMT') is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for non corporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income (`AMTI') over an exemption
amount. For purposes of the corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, a corporate shareholder will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
Investment income that may be received by a Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle a Fund to a reduced rate of, or exemption from, taxes on such income. It
is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of its
taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to `pass through' to its shareholders the amount of foreign taxes
paid by the Fund. If a Fund so elects, each shareholder would be required to
include in gross income, even though not actually received, his pro rata share
of the foreign taxes paid by the Fund, but would be treated as having paid his
pro rata share of such foreign taxes and would therefore be allowed to either
deduct such amount in computing taxable income or use such amount (subject to
various Code limitations) as a foreign tax credit against federal income tax
(but not both). For purposes of the foreign tax credit limitation rules of the
Code, each shareholder would treat as foreign source income his pro rata share
of such foreign taxes plus the portion of dividends received from the Fund
representing income derived from foreign sources. No deduction for foreign taxes
could be claimed by an individual shareholder who does not itemize deductions.
Each shareholder should consult his own tax adviser regarding the potential
application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and in reduction of) the shareholder's tax basis in his shares; any excess will
be treated as gain from the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional Fund shares or shares of another Fund. Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
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distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although they economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such month will be deemed to have
been received by the shareholders (and made by the Fund) on December 31 of such
calendar year if such dividends are actually paid in January of the following
year. Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made (or deemed made) during the year.
The Funds will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has failed
to provide a correct taxpayer identification number, (2) who is subject to
backup withholding for failure to properly report the receipt of interest or
dividend income, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is an exempt recipient (such as a
corporation).
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares
(however, because the Money Market Trust normally maintains a stable value, in
most cases there will be no gain or loss on the sale of shares of that Fund).
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of a Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership (`foreign shareholder') depends on whether the income from a Fund is
`effectively connected' with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower applicable treaty rate) upon the gross amount of the dividend.
Furthermore, such foreign shareholder may be subject to U.S. withholding tax at
the rate of 30% (or lower applicable treaty rate) on the gross income resulting
from a Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or a
credit against this U.S. withholding tax for the foreign shareholder's pro rata
share of such foreign taxes which it is treated as having paid. Such foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of a Fund, capital gain dividends, and amounts
retained by a Fund that are designated as undistributed capital gains.
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If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required
to withhold U.S. federal income tax at the rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; STATE AND LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies may differ from the rules for
U.S. federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in a Fund.
CALCULATION OF PERFORMANCE DATA
For the purpose of quoting and comparing the performance of the Funds (with
the exception of the Lexington Money Market Trust) to that of other mutual funds
and to other relevant market indices in advertisements or in reports to
shareholders, performance may be stated in terms of total return. Under the
rules of the SEC (`SEC rules'), funds advertising performance must include total
return quotes calculated according to the following formula:
n
P(l+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods or at the end
of the 1, 5 or 10 year periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the effectiveness
of the Funds' Registration Statement. In calculating the ending redeemable
value, all dividends and distributions by the Funds are assumed to have been
reinvested at net asset value as described in the prospectus on the reinvestment
dates during the period. Total return, or `T' in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5 and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Funds would be included at that time.
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The Funds may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Funds with other
measures of investment return. For example, in comparing the Funds' total return
with data published by Lipper Analytical Services, Inc., or with the performance
of the Standard and Poor's 500 Stock Index or the Dow Jones Industrial Average,
the Funds calculate their aggregate total return for the specified periods of
time assuming the investment of $10,000 in Fund shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. Percentage increases are determined by subtracting the
initial value of the investment from the ending value and by dividing the
remainder by the beginning value.
With respect to the Lexington Money Market Fund, the Fund provides current
yield and effective yield quotations, which are calculated in accordance with
the regulations of the Securities and Exchange Commission, based upon changes in
account value during a recent seven-day base period.
Current yield quotations are computed by annualizing (on a 365-day basis)
the `base period return'. The `base period return' is computed by determining
the net change exclusive of capital changes in the value of the account, divided
by the value of the account at the beginning of the base period. Effective yield
is computed by compounding the `base period return.' Based upon dividends
actually credited to the shareholders' accounts (i.e.: based upon net investment
income), the current yield to an investor in the Fund during the last seven
calendar days of its fiscal year ended December 31, 1999 was at an annual rate
of 5.08% and the effective yield was at an annual rate of 4.96%. The average
weighted maturity of investments was 46 days. The current and effective yield
are affected by market conditions, portfolio quality, portfolio maturity, type
of instruments held and operating expenses. The Fund attempts to keep its net
asset value per share at $1.00, but attainment of this objective is not
guaranteed. This Statement of Additional Information may be in use for a full
year and it can be expected that these yields will fluctuate substantially from
the example shown above.
The current and effective yield figures are not a representation of future
yield as the Fund's net income and expenses will vary based on many factors,
including changes in short term money market yields generally and the types of
instruments in the Fund's portfolio. The stated yield of the Fund may be useful
in reviewing the Fund's performance and in providing a basis for comparison with
other investment alternatives. However, unlike bank deposits and other
investments which pay fixed yields for stated periods of time, the yield of the
Fund fluctuates. In addition, other investment companies may calculate yield on
a different basis and may purchase securities for their portfolios which have
different qualities and maturities than those of the Fund's portfolio
securities.
PERFORMANCE COMPARISONS
In reports or other communications to shareholders or in advertising
material, a Fund may compare the performance of its Class A, Class B, Class C or
Class Q shares with that of other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc., Morningstar, Inc., CDA
Technologies, Inc., Value Line, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indexes of
investment securities. In addition, certain indexes may be used to illustrate
historic performance of select asset classes. The performance information may
also include evaluations of the Funds published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
Business Week, Forbes, Fortune, Institutional Investor, Money and The Wall
Street Journal. If a Fund compares its performance to other funds or to relevant
indexes, the Fund's performance will be stated in the same terms in which such
comparative data and indexes are stated, which is normally total return rather
than yield. For these purposes the performance of the Fund, as well as the
performance of such investment companies or indexes, may not reflect sales
charges, which, if reflected, would reduce performance results.
Reports and promotional literature may also contain the following
information: (i) a description of the gross national or domestic product and
populations, including but not limited to age characteristics, of various
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countries and regions in which a Fund may invest, as compiled by various
organizations, and projections of such information; (ii) the performance of
worldwide equity and debt markets; (iii) the capitalization of U.S. and foreign
stock markets prepared or published by the International Finance Corporation,
Morgan Stanley Capital International or a similar financial organization; (iv)
the geographic distribution of a Fund's portfolio; (v) the major industries
located in various jurisdictions; (vi) the number of shareholders in the Funds
or other ING Pilgrim Funds and the dollar amount of the assets under management;
(vii) descriptions of investing methods such as dollar-cost averaging, best
day/worst day scenarios, etc.; (viii) comparisons of the average price to
earnings ratio, price to book ratio, price to cash flow and relative currency
valuations of the Funds and individual stocks in a Fund's portfolio, appropriate
indices and descriptions of such comparisons; (ix) quotes from the Sub-Adviser
of a Fund or other industry specialists; (x) lists or statistics of certain of a
Fund's holdings including, but not limited to, portfolio composition, sector
weightings, portfolio turnover rate, number of holdings, average market
capitalization, and modern portfolio theory statistics; (xi) NASDAQ symbols for
each class of shares of each Fund; and descriptions of the benefits of working
with investment professionals in selecting investments.
In addition, reports and promotional literature may contain information
concerning the Investment Manager, the Sub-Advisers, ING Pilgrim Capital, ING
Pilgrim Group, Inc. or affiliates of the Company, the Investment Manager, the
Sub-Advisers, ING Pilgrim Capital or ING Pilgrim Group, Inc. including: (i)
performance rankings of other funds managed by the Investment Manager or a
Sub-Adviser, or the individuals employed by the Investment Manager or a
Sub-Adviser who exercise responsibility for the day-to-day management of a Fund,
including rankings of mutual funds published by Lipper Analytical Services,
Inc., Morningstar, Inc., CDA Technologies, Inc., or other rating services,
companies, publications or other persons who rank mutual funds or other
investment products on overall performance or other criteria; (ii) lists of
clients, the number of clients, or assets under management; (iii) information
regarding the acquisition of the ING Pilgrim Funds by ING Pilgrim Capital; (iv)
the past performance of ING Pilgrim Capital and ING Pilgrim Group, Inc.; (v)
information regarding rights offerings conducted by closed-end funds managed by
the Investment Manager.
The average annual total returns, including sales charges, for each Fund
for the one-, five-, and ten-year periods ended December 31, 2000, are as
follows. If a Fund has been in existence for less than 10 years, performance for
the period since inception and ended December 31, 2000 is also provided.
<TABLE>
<CAPTION>
SINCE INCEPTION
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION DATE
--------- ------ ------ ------- --------- ----
<S> <C> <C> <C> <C> <C>
ING Pilgrim Global Corporate Leaders Fund, Inc.
ING Pilgrim Global Technology Fund, Inc.
ING Pilgrim Gold Fund, Inc.
ING Pilgrim Global Income, Inc.
ING Pilgrim International Fund, Inc.
ING Pilgrim Silver Fund, Inc.
ING Pilgrim SmallCap Asia Growth Fund, Inc.
ING Pilgrim Troika Dialog Russia Fund, Inc.
ING Pilgrim Worldwide Emerging Markets Fund, Inc.
ING Pilgrim GNMA Income Fund, Inc.
ING Pilgrim Growth and Income Fund, Inc.
Lexington Money Market Trust(1)
</TABLE>
----------
(1) Shares of the Money Market Trust are sold without a sales load.
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GENERAL INFORMATION
CUSTODIAN
Brown Brothers Harriman & Co., 40 Walker Street, Boston, Massachusetts
12109, has been retained to act as the Custodian for all Funds' (except ING
Pilgrim Growth & Income Fund, ING Pilgrim GNMA Income Fund and Lexington Money
Market Trust) portfolio securities including those to be held by foreign banks
and foreign securities depositories which qualify as eligible foreign custodians
under the rules adopted by the SEC and for the Funds' domestic securities and
other assets. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02181, has been retained to act as the custodian for the portfolio
securities of ING Pilgrim Growth & Income Fund, ING Pilgrim GNMA Income Fund and
Lexington Money Market Trust. DST Systems, Inc. has been retained to act as the
transfer agent. Neither Brown Brothers Harriman nor DST Systems, Inc. have any
part in determining the investment policies of the Funds or in determining which
portfolio securities are to be purchased or sold by the Funds or in the
declaration of dividends and distributions.
LEGAL COUNSEL
Legal matters for the Funds are passed upon by Dechert, 1775 Eye Street,
N.W., Washington, D.C. 20006.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP has been selected as independent auditors for
the GNMA Income Fund for the fiscal year ending March 31, 2001. KPMG LLP has
been selected as independent auditors for the Growth and Income Fund for the
fiscal year ending May 31, 2001. PricewaterhouseCoopers LLP has been selected as
independent auditors for the Global Corporate Leaders, Global Technology, Gold,
International, Silver, SmallCap Asia Growth, Troika Dialog Russia, Worldwide
Emerging Markets and Global Income Funds for the fiscal year ending October 31,
2001. KPMG LLP has been selected as independent auditors for the Lexington Money
Market Trust for the fiscal year ending December 31, 2001.
DECLARATION OF TRUST
The Global Income Fund and Money Market Trust are organized as
Massachusetts business trusts. The Declaration of Trust of each of these Funds
provides that obligations of the Fund are not binding upon its Trustees,
officers, employees and agents individually and that the Trustees, officers,
employees and agents will not be liable to the trust or its investors for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee, officer, employee or agent against any liability to the trust or its
investors to which the Trustee, officer, employee or agent would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of his or her duties. The Declaration of Trust also provides
that the debts, liabilities, obligations and expenses incurred, contracted for
or existing with respect to a designated Fund shall be enforceable against the
assets and property of such Fund only, and not against the assets or property of
any other Fund or the investors therein.
OTHER INFORMATION
The Funds are registered with the SEC as an open-end management investment
company. Such registration does not involve supervision of the management or
policies of the Funds by any governmental agency. The Prospectus and this
Statement of Additional Information omit certain of the information contained in
the Funds' Registration Statement filed with the SEC and copies of this
information may be obtained from the SEC upon payment of the prescribed fee or
examined at the SEC in Washington, D.C. without charge.
Investors in the Funds will be kept informed of their progress through
semi-annual reports showing portfolio composition, statistical data and any
other significant data, including financial statements audited by independent
certified public accountants.
REPORTS TO SHAREHOLDERS
The fiscal year for the following Funds is October 31: ING Pilgrim Global
Corporate Leaders Fund; ING Pilgrim Global Technology Fund; ING Pilgrim Gold
Fund; ING Pilgrim Global Income Fund; ING Pilgrim International Fund; ING
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Pilgrim SmallCap Asia Growth Fund; ING Pilgrim Troika Dialog Russia Fund; ING
Pilgrim Worldwide Emerging Markets Fund. The fiscal year for the following Funds
is December 31: ING Pilgrim GNMA Income Fund; ING Pilgrim Growth and Income
Fund; Lexington Money Market Trust. The Funds will send financial statements to
its shareholders at least semiannually. An annual report containing financial
statements audited by the independent accountants will be sent to shareholders
each year.
FINANCIAL STATEMENTS
The financial statements from the Funds' December 31, 2000 Annual Report
are incorporated herein by reference. Copies of the Funds' Annual and
Semi-Annual Reports may be obtained without charge by contacting ING Pilgrim
Funds at 7337 East Doubletree Ranch Road, Scottsdale, Arizona, (800) 992-0180.
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Form of Articles of Incorporation - Filed as an exhibit to
Post Effective Amendment No. 9 to the Registrant's Form N-1A
Registration Statement on July 26, 2000 and incorporated
herein by reference.
(2) Form of Articles Supplementary Designating Classes A, B, C &
Q - Filed as an exhibit to Post Effective Amendment No. 9 to
the Registrant's Form N-1A Registration Statement on July
26, 2000 and incorporated herein by reference.
(b) Form of Bylaws - Filed as an exhibit to Post Effective
Amendment No. 9 to the Registrant's Form N-1A Registration
Statement on July 26, 2000 and incorporated herein by
reference.
(c) Not Applicable
(d) Form of Investment Management Agreement between Registrant
and Pilgrim Investments, Inc.
(e) Form of Underwriting Agreement between Registrant and
Pilgrim Securities, Inc.
(f) Not Applicable
(g) Form of Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post
Effective Amendment No. 9 to the Registrant's Form N-1A
Registration Statement on July 26, 2000 and incorporated
herein by reference.
(h)(1) Form of Administration Agreement between Registrant and
Pilgrim Group, Inc. - Filed as an exhibit to Post Effective
Amendment No. 9 to the Registrant's Form N-1A Registration
Statement on July 26, 2000 and incorporated herein by
reference.
(2) Form of Expense Limitation Agreement between Registrant and
Pilgrim Investments, Inc. - Filed as an exhibit to Post
Effective Amendment No. 9 to the Registrant's Form N-1A
Registration Statement on July 26, 2000 and incorporated
herein by reference.
(i) Opinion of Counsel - Filed as an exhibit to Registrant's
Form N-1A Registration Statement and incorporated herein by
reference.
(j)(1) Consent of KPMG LLP - To be filed by amendment.
(2) Consent of Dechert
(k) Not Applicable
(l) Form of Investment Letter of Initial Investors - Filed as an
exhibit to Registrant's Form N-1A Registration Statement and
incorporated herein by reference.
C-1
<PAGE>
(m)(1) Form of Service and Distribution Plan for Class A Shares -
Filed as an exhibit to Post Effective Amendment No. 9 to the
Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference.
(2) Form of Service and Distribution Plan for Class B Shares -
Filed as an exhibit to Post Effective Amendment No. 9 to the
Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference.
(3) Form of Service and Distribution Plan for Class C Shares -
Filed as an exhibit to Post Effective Amendment No. 9 to the
Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference.
(4) Form of Shareholder Service Plan for Class Q Shares - Filed
as an exhibit to Post Effective Amendment No. 9 to the
Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference.
(n) Form of Multiple Class Plan Pursuant to Rule 18f-3 - Filed
as an exhibit to Post Effective Amendment No. 9 to the
Registrant's Form N-1A Registration Statement on July 26,
2000 and incorporated herein by reference.
(p) Form of Code of Ethics - Filed as an exhibit to Post
Effective Amendment No. 9 to the Registrant's Form N-1A
Registration Statement on July 26, 2000 and incorporated
herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
Article Seventh of the Articles of Incorporation provides to the fullest
extent that limitations on the liability of directors and officers are permitted
by the Maryland General Corporation Law, no director or officer of the
corporation shall have any liability to the corporation or its stockholders for
damages. This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the corporation whether or not such
person is a director or officer at the time of any proceeding in which liability
is asserted. The corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
the law. The Board of Directors may, through a by-law, resolution or agreement,
make further provisions for indemnification of directors, officers, employees
and agents to the fullest extent permitted by Maryland General Corporation Law.
No provision of the Articles of Incorporation shall be effective to require a
waiver of compliance with any provision of the Securities Act of 1933, or of the
Investment Company Act of 1940, or of any valid rule, regulation or order of the
Securities and Exchange Commission thereunder or to protect or purport to
protect any director or officer of the corporation against any liability to the
corporation or its stockholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 7 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.
C-2
<PAGE>
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 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS
Information as to the directors and officers of the Investment Manager,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the directors and officers of
the Investment Manager in the last two years, is included in its application for
registration as an investment adviser on Form ADV (File No. 801-48282) filed
under the Investment Advisers Act of 1940 and is incorporated herein by
reference thereto.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) ING Pilgrim Securities, Inc. is the principal underwriter for the
Registrant and for Pilgrim Advisory Funds, Inc., Pilgrim Investment Funds, Inc.,
Pilgrim Bank and Thrift Fund, Inc., Pilgrim Prime Rate Trust, Pilgrim Mutual
Funds, Pilgrim Equity Trust, Pilgrim SmallCap Opportunities Fund, Pilgrim Growth
Opportunities Fund, Pilgrim Mayflower Trust, Pilgrim Government Securities
Income Fund, Pilgrim Global Corporate Leaders Fund, Pilgrim Global Technology
Fund, Pilgrim GNMA Income Fund, Pilgrim Growth and Income Fund, Pilgrim
International Fund, Pilgrim Silver Fund, Pilgrim SmallCap Asia Growth Fund,
Pilgrim Troika Dialog Russia Fund, Pilgrim Worldwide Emerging Markets Fund,
Pilgrim Global Income Fund and Lexington Money Market Trust.
(b) Information as to the directors and officers of the Distributor,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the directors and officers of
the Distributor in the last two years, is included in its application for
registration as a broker-dealer on Form BD (File No. 8-48020) filed under the
Securities Exchange Act of 1934 and is incorporated herein by reference thereto.
(c) Not applicable.
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ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained at the offices of (a) the Registrant, (b) ING Pilgrim
Investments, Inc., (c) ING Pilgrim Group, Inc., (d) the Portfolio Managers, (e)
the Custodians and (f) the Transfer Agent. The address of each is as follows:
(a) ING Pilgrim International Fund, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(b) ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(c) ING Pilgrim Group, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(d) ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(e) Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109-3661
(f) DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Not Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant has duly caused this
Post-Effective Amendment No. 10 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Scottsdale, and State of Arizona on the 22nd day of December, 2000.
PILGRIM INTERNATIONAL FUND, INC.
By: /s/ James M. Hennessy
------------------------------
James M. Hennessy
Senior Executive Vice
President & Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John G. Turner Director and Chairman December 22, 2000
------------------------------
John G. Turner*
/s/ Robert W. Stallings Director and President December 22, 2000
------------------------------ (Chief Executive Officer)
Robert W. Stallings*
/s/ Michael J. Roland Senior Vice President and December 22, 2000
------------------------------ Principal Financial Officer
Michael J. Roland*
/s/ Al Burton Director December 22, 2000
------------------------------
Al Burton*
/s/ Paul S. Doherty Director December 22, 2000
------------------------------
Paul S. Doherty*
/s/ Robert B. Goode Director December 22, 2000
------------------------------
Robert B. Goode*
/s/ Alan L. Gosule Director December 22, 2000
------------------------------
Alan L. Gosule*
/s/ Walter H. May Director December 22, 2000
------------------------------
Walter H. May*
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<PAGE>
/s/ Jock Patton Director December 22, 2000
------------------------------
Jock Patton*
/s/ David W.C. Putnam Director December 22, 2000
------------------------------
David W.C. Putnam*
/s/ John R. Smith Director December 22, 2000
------------------------------
John R. Smith*
/s/ David W. Wallace Director December 22, 2000
------------------------------
David W. Wallace*
* By: /s/ James M. Hennessy
------------------------------
James M. Hennessy
Attorney-in-Fact**
-------
** Powers of Attorney for Michael J. Roland and the Directors were filed as part
of Post-Effective Amendment No. 9 to the Registrant's Registration Statement as
filed on July 26, 2000 and are incorporated herein by reference.
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EXHIBIT LIST
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
(d) Form of Investment Management Agreement between Registrant
and Pilgrim Investments, Inc.
(e) Form of Underwriting Agreement between Registrant and
Pilgrim Securities, Inc.
(j)(2) Consent of Dechert
