As filed with the Securities and Exchange Commission on December 21, 2000
Securities Act File No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
PILGRIM INTERNATIONAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258
(Address of Principal Executive Offices) (Zip Code)
(800) 992-0180
(Registrant's Area Code and Telephone Number)
James M. Hennessy
ING Pilgrim Investments, Inc.
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
(Name and Address of Agent for Service)
With copies to:
Steven R. Howard, Esq. Jeffrey S. Puretz, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison Dechert
1285 Avenue of the Americas 1775 Eye Street, N.W.
New York, New York 10019 Washington, DC 20006
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Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
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It is proposed that this filing will become effective on January 20, 2001
pursuant to Rule 488 under the Securities Act of 1933.
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No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
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<PAGE>
ING International Equity Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
1-800-992-0180
_____________, 2000
Dear Shareholder:
Your Board of Trustees has called a Special Meeting of Shareholders of the
ING International Equity Fund scheduled to be held at _______ [a.m./p.m.], local
time, on February 22, 2001 at 7337 East Doubletree Ranch Road, Scottsdale, AZ
85258.
The Board of Trustees of the ING Funds Trust, on behalf of the ING
International Equity Fund, (a series of ING Funds Trust) has approved a
reorganization of ING International Equity Fund, which is managed by ING Mutual
Funds Management Co. LLC, into Pilgrim International Fund, Inc. ("Pilgrim
International Fund"), which is managed by ING Pilgrim Investments, Inc. and is
part of the Pilgrim Funds (the "Reorganization"). If approved by shareholders,
you would become a shareholder of Pilgrim International Fund on the date the
Reorganization occurs. Pilgrim International Fund has investment objectives and
policies that are similar in many respects to those of ING International Equity
Fund, and the Reorganization is expected to result in operating expenses that
are lower for shareholders.
You are being asked to vote to approve an Agreement and Plan of
Reorganization. The accompanying document describes the proposed transaction and
compares the policies and expenses of each of the funds for your evaluation.
After careful consideration, the Board of Trustees of ING Funds Trust
unanimously approved this proposal and recommended shareholders vote "FOR" the
proposal.
A Proxy Statement/Prospectus that describes the Reorganization is enclosed.
We hope that you can attend the Special Meeting in person; however, we urge you
in any event to vote your shares by completing and returning the enclosed proxy
card in the envelope provided at your earliest convenience.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER
TO AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN FEBRUARY 21,
2001.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
Robert W. Stallings
President
<PAGE>
ING International Equity Fund
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
1-800-992-0180
_____________, 2000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ING INTERNATIONAL EQUITY FUND
SCHEDULED FOR FEBRUARY 22, 2001
To the Shareholders:
A Special Meeting of Shareholders of the ING International Equity Fund
("Special Meeting") is scheduled for February 22, 2001 at _______ [a.m./p.m.],
local time, at 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.
At the Special Meeting you will be asked to consider and approve the
following:
1. An Agreement and Plan of Reorganization providing for the acquisition
of all of the assets and liabilities of each class of ING
International Equity Fund by Pilgrim International Fund, Inc. in
exchange for shares of the corresponding Class of Pilgrim
International Fund, Inc. and the subsequent liquidation of ING
International Equity Fund; and
2. Transacting such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on December 26, 2000 are
entitled to notice of, and to vote at, the meeting. Your attention is called to
the accompanying Proxy Statement/Prospectus. Regardless of whether you plan to
attend the meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD so that a quorum will be present and a maximum number of shares may be
voted. If you are present at the meeting, you may change your vote, if desired,
at that time.
By Order of the Board of Trustees
James M. Hennessy,
Secretary
December __, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
----
INTRODUCTION................................................................ 1
SUMMARY..................................................................... 2
Comparison of Investment Objectives and Strategies.......................... 3
Comparison of Portfolio Characteristics................................... 4
Relative Performance...................................................... 5
Comparison of Investment Techniques and Risks of the Funds................ 6
COMPARISON OF FEES AND EXPENSES............................................. 8
Annual Fund Operating Expenses............................................ 9
General Information....................................................... 11
Special Rules for Class A Shares of ING International Equity Fund......... 11
ADDITIONAL INFORMATION ABOUT PILGRIM INTERNATIONAL FUND..................... 12
Investment Personnel...................................................... 12
Performance of Pilgrim International Fund................................. 12
INFORMATION ABOUT THE REORGANIZATION........................................ 14
ADDITIONAL INFORMATION ABOUT THE FUNDS...................................... 16
GENERAL INFORMATION ABOUT THE PROXY STATEMENT............................... 17
Solicitation of Proxies................................................... 17
Voting Rights............................................................. 17
Other Matters to Come Before the Special Meeting.......................... 18
Shareholder Proposals..................................................... 18
Reports to Shareholders................................................... 18
APPENDIX A.................................................................. A-1
APPENDIX B.................................................................. B-1
APPENDIX C.................................................................. C-1
APPENDIX D.................................................................. D-1
APPENDIX E.................................................................. E-1
<PAGE>
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR
FEBRUARY 22, 2001
ING INTERNATIONAL EQUITY FUND
(a series of ING Funds Trust)
Relating to the Reorganization into
PILGRIM INTERNATIONAL FUND, INC.
(COLLECTIVELY, THE "FUNDS")
INTRODUCTION
This Proxy Statement/Prospectus provides you with information about a
proposed transaction. This transaction involves the transfer of all the assets
and liabilities of ING International Equity Fund to Pilgrim International Fund,
Inc. ("Pilgrim International Fund" or "Surviving Fund") in exchange for shares
of Pilgrim International Fund (the "Reorganization"). ING International Equity
Fund would then distribute to its shareholders their portion of the shares of
Pilgrim International Fund that it receives in the Reorganization. The result
would be a liquidation of ING International Equity Fund. You would receive
shares of Pilgrim International Fund having an aggregate value equal to the
aggregate value of the shares you held of ING International Equity Fund, as of
the close of business on the business day of the closing of the Reorganization.
You are being asked to vote on the Agreement and Plan of Reorganization through
which these transactions would be accomplished.
Because you, as a shareholder of ING International Equity Fund, are being
asked to approve a transaction that will result in your holding of shares of
Pilgrim International Fund, this Proxy Statement also serves as a Prospectus for
Pilgrim International Fund.
This Proxy Statement/Prospectus, which you should retain for future
reference, contains important information about Pilgrim International Fund that
you should know before investing. For a more detailed discussion of the
investment objectives, policies, restrictions and risks of the Pilgrim
International Fund, see the Prospectus (the "Pilgrim Prospectus") and the
Statement of Additional Information for Pilgrim International Funds each dated
July 31, 2000, which are incorporated herein by reference and which may be
obtained, without charge, by calling 1-800-992-0180. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of the
ING International Equity Fund, see the Prospectus (the "ING Prospectus") and
Statement of Additional Information for ING International Equity Fund, each
dated November 6, 2000, which are incorporated herein by reference and which may
be obtained, without charge, by calling 1-800-992-0180. Each of the Funds also
provides periodic reports to its shareholders which highlight certain important
information about the Funds, including investment results and financial
information. The annual report for Pilgrim International Fund dated December 31,
1999 and the semi annual report dated June 30, 2000 is incorporated herein by
reference. You may receive a copy of the most recent annual and semi-annual
reports for either of the Funds, without charge, by calling 1-800-992-0180.
You can copy and review information about each Fund (including the
Statement of Additional Information) at the Commission's Public Reference Room
in Washington, D.C. You may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-202-942-8090. Reports and other
information about the Fund are available on the EDGAR Database on the
Commission's Internet site at http://www.sec.gov. You may obtain copies of this
information, after paying a duplicating fee, by electronic request at the
following E-mail address: [email protected], or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult the Pilgrim Prospectus, the ING
Prospectus, and the Agreement and Plan of Reorganization, which is attached
hereto as Appendix B.
THE PROPOSED REORGANIZATION. On November 16, 2000, the Board of Trustees of
ING Funds Trust, on behalf of ING International Equity Fund, approved an
Agreement and Plan of Reorganization with respect to ING International Equity
Fund (the "Reorganization Agreement"). Subject to shareholder approval, the
Reorganization Agreement provides for:
* the transfer of all of the assets of ING International Equity Fund to
Pilgrim International Fund, in exchange for shares of Pilgrim
International Fund;
* the assumption by Pilgrim International Fund of all of the liabilities
of ING International Equity Fund;
* the distribution of Pilgrim International Fund shares to the
shareholders of ING International Equity Fund; and
* the complete liquidation of ING International Equity Fund.
The Reorganization is expected to be effective upon the opening of business
on February 26, 2001, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganization, each shareholder of the following
Class of shares of ING International Equity Fund, would become a shareholder of
the following Class of shares of Pilgrim International Fund.
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND
----------------------------- --------------------------
Class A Class A
Class B Class B
Class C Class C
Class I Class Q
Each shareholder would hold, immediately after the Closing, shares of each
Class of Pilgrim International Fund having an aggregate value equal to the
aggregate value of the shares of the corresponding Class of ING International
Equity Fund held by that shareholder as of the close of business on the business
day of the Closing.
The Reorganization is one of many reorganizations that are proposed among
various ING Funds and various Pilgrim Funds. These reorganizations are occurring
in connection with the integration of the ING Funds and Pilgrim Funds, as part
of which the distributor, administrator, and other service providers of the ING
Funds have been changed to those of the Pilgrim Funds. In September, 2000, ING
Groep N.V., the indirect parent company of ING Mutual Funds Management Co. LLC,
("IMFC") the investment adviser to the ING Funds, acquired ReliaStar Financial
Corp., the indirect parent company of ING Pilgrim Investments, Inc. ("ING
Pilgrim Investments") the investment adviser to the Pilgrim Funds. Management of
the ING Funds and the Pilgrim Funds have proposed the consolidation of a number
of the ING Funds and Pilgrim Funds that they believe have similar or compatible
investment policies. The proposed reorganizations are designed to reduce the
substantial overlap in funds offered by both the ING Funds and Pilgrim Funds,
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios within the same fund group. IMFC and ING Pilgrim
Investments also believe that the reorganizations may benefit fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions. The integration of the ING Funds and the Pilgrim Funds is expected to
provide further benefits to shareholders of the ING Funds because shareholders
will have the ability to exchange into Pilgrim Funds that offer the same Class
of shares. For information about a Pilgrim Fund, call the Pilgrim Funds at
2
<PAGE>
1-800-992-0180 to request a Prospectus. You should read a fund's prospectus
before investing in the fund.
In considering whether to approve the Reorganization, you should note that:
* The Funds have substantially similar investment objectives and similar
investment policies;
* For 1999 and the first nine months of 2000 the Pilgrim International
Fund outperformed the ING International Equity Fund.(1)
* The proposed Reorganization is expected to result in a reduction in
total operating expenses for shareholders of ING International Equity
Fund before giving effect to the ING International Equity Fund's
expense limitation agreement. For example, the operating expenses,
expressed as a percentage of net asset value per share of Class A
shares, are as follows:
- Expenses of ING International Equity Fund
before expense reimbursements from management
(based on the 12 months ending June 30, 2000)(2): 2.36%
- Expenses of ING International Equity Fund
after expense reimbursements from management
(based on the 12 months ending June 30, 2000)(3): 1.59%
- Expenses of Pilgrim International Fund
(based on the 12 months ending June 30, 2000)(4): 1.95%
- Estimated expenses of Pilgrim International Fund after
the Reorganization (based on the 12 months ending
June 30, 2000) (PRO FORMA): 1.70%
* Before giving effect to any expense limitation arrangements, the total
expense ratio of the Pilgrim International Fund is less than that of
the ING International Equity Fund.
* The Funds have affiliated management. ING Pilgrim Investments, 7337 E.
Doubletree Ranch Road, Scottsdale, Arizona 85258, is the investment
manager to Pilgrim International Fund. IMFC, 7337 E. Doubletree Ranch
Road, Scottsdale, Arizona 85258, is the investment manager to ING
International Equity Fund. Both are affiliated subsidiaries of the
same holding company, ING Groep N.V. Different investment personnel,
however, manage Pilgrim International Fund, which would include the
assets from ING International Equity Fund.
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(1) Past performance does not guarantee future results.
(2) Based upon expenses incurred by the ING International Equity Fund for the
12-month period ended June 30, 2000, adjusted for current expenses of
contracts and 12b-1 plans which were in effect on November 6, 2000.
(3) The current expense limitation agreement will remain in effect until
February 25, 2001. There is no assurance that the expense limitation
agreement will be continued after that date.
(4) Based on expenses incurred by the Pilgrim International Fund for the 12
month period ended June 30, 2000, adjusted for current expenses of
contracts and 12b-1 plans which became effective when ING Pilgrim
Investments became investment adviser to the Fund on July 26, 2000.
Approval of the Reorganization Agreement requires the vote of a majority of
the shares present in person or by proxy of ING International Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF THE ING FUNDS TRUST,
ON BEHALF OF ING INTERNATIONAL EQUITY FUND, UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
3
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
<TABLE>
<CAPTION>
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND
----------------------------- --------------------------
<S> <C> <C>
INVESTMENT OBJECTIVE * Seeks long-term capital appreciation. * Seeks long-term growth of capital.
INVESTMENT STRATEGIES * Normally invests at least 65% of its * Normally invests at least 65% of its
assets in equity securities of issuers assets in equity securities and
organized or having a majority of their equivalents of companies located
assets in or deriving a majority of outside the U.S., including emerging markets.
their operating income in any country
throughout the world not including the * May invest in up to 35% of its assets in
United States. This portion of the securities of U.S. companies, including
portfolio will invest in at least 7 investment grade debt securities.
different countries.
* Invests primarily in companies with a large
* Generally, invests in common stocks of market capitalization, but may also invest
large companies whose market in mid- and small-size companies.
capitalization are in excess of $10
billion * May use forward currency exchange contracts
and foreign currency transactions to hedge
* The Fund may invest in against foreign currency fluctuations.
underdeveloped or emerging market
countries. However, no more than 15% of * May also invest in other derivative
total assets may be in underdeveloped or securities.
emerging market countries.
* The Fund may also use options and futures
contracts involving foreign currencies.
INVESTMENT ADVISER ING Mutual Funds Management Co. LLC ING Pilgrim Investments, Inc.
SUB-ADVISER Baring Asset Management, Inc./Baring N/A
International Investment Ltd./Baring
Asset Management (Asia) Ltd.
PORTFOLIO MANAGERS James Williams and Hayes Miller Richard T. Saler and Philip A. Schwartz
</TABLE>
As you can see from the chart above, the investment objectives and
strategies of the Funds are substantially similar.
4
<PAGE>
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND
----------------------------- --------------------------
<S> <C> <C>
Net Assets $56,506,572 $25,610,821
Number of Holdings 93 97
Portfolio Turnover Rate(1) 83.00% 130.12%
Average market capitalization (in
dollar amounts) 44.8 billion 28.2 billion
As a percentage of net assets:
Equity Securities 96.06% 89.30%
Non--U.S. Equities 96.06% 89.30%
Developed markets 90.17% 88.70%
Emerging markets 5.89% 4.28%
Open futures/foreign currency
positions 4.50% 0.00%
Debt Securities 0.00% 3.68%
Companies with market caps of:
(as % of net assets)
$10 billion or more 76.42% 45.50%
$5 billion to less than $10
billion 10.50% 9.20%
Less than $5 billion 9.14% 34.60%
Top 5 Industries Telecommunications 23.32% Services 15.30%
(as % of Net assets) Banking 12.02% Financial Services 12.77%
Oil & Gas - Producers 7.53% Banking 8.60%
Insurance 5.76% Electrical and Electronics 7.60%
Electronics 4.92% Health and Personal Care 7.60%
Top 5 Countries Japan 22.87% Japan 18.79%
(as % of Net assets) United Kingdom 12.74% United Kingdom 14.28%
France 10.76% France 11.78%
Germany 7.88% Netherlands 6.69%
Switzerland 7.83% Germany 5.38%
Top 10 equity holdings Nokia OYJ 3.06% Total Fina SA 2.47%
(as % of Net assets) Telefonaktiebolaget LM Ericsson 2.34% Koninklijke (Royal) Philips
Total Fina Elf SA 2.30% Electronics 2.18%
Nippon Telegraph & Telephone Corp. 2.23% Axa 2.12%
BP Amoco PLC 1.98% Schlumberger, Ltd. 2.10%
Vodafone Group PLC 1.94% Petroleum Geo-Services ASA 1.64%
Canon, Inc. 1.85% Swedish Match AB 1.63%
NEC Corp. 1.78% Vivendi 1.50%
Toyota Motor Corp. 1.77% Novo Nordisk A/S "B" 1.47%
Hutchison Whampoa Ltd. 1.76% Deutsche Bank AG 1.45%
Charles Voegele Holding AG 1.44%
</TABLE>
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(1) For the year ended June 30, 2000.
RELATIVE PERFORMANCE
The following table shows, for the period shown, the average annual total
return for: (a) Class A shares of ING International Equity Fund; (b) Class A
shares of Pilgrim International Fund; and (c) the Morgan Stanley Capital
International Europe Australasia Far East (MSCI EAFE) Index. Performance of the
Funds in the table does not reflect the deduction of sales loads, and would be
lower if it did. The index has an inherent performance advantage over the Funds
5
<PAGE>
since it has no cash in its portfolios, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. Total return
is calculated assuming reinvestment of all dividends and capital gain
distributions at net asset value and excluding the deduction of sales charges.
Each Funds' past performance is not an indication of the future performance of
that Fund.
CALENDAR PILGRIM
YEAR ING INTERNATIONAL INTERNATIONAL MSCI EAFE
PERIOD/ENDED EQUITY FUND FUND(1) INDEX(2)
------------ ----------- ------- --------
12/31/99 40.27% 47.85% 27.30%
1/1/00-9/30/00 -17.60% -7.18% -11.64%
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(1) Prior to July 26, 2000, Lexington Management Corporation ("Lexington")
served as the investment adviser to the Pilgrim International 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. Lexington
was acquired by the parent of ING Pilgrim Investments on July 26, 2000.
Richard T. Saler has been primarily responsible for managing the Fund since
July 1994, and continued to manage the Fund after the July 26, 2000
transaction.
(2) 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.
COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS
Because the Funds have investment objectives and policies that are
substantially similar in many respects, many of the risks of investing in
Pilgrim International Fund are similar to the risks of investing in ING
International Equity Fund. A principal risk of an investment in each of the
Funds is that you may lose money on your investment. Each Fund's shares may go
up or down, sometimes rapidly and unpredictably. Market conditions, financial
conditions of issuers represented in the portfolio, investment policies,
portfolio management, and other factors affect the volatility of each Fund's
shares.
EQUITY SECURITIES. Both ING International Equity Fund and Pilgrim
International Fund are subject to risks associated with investing primarily in
equity securities, including market risk, issuer risk, credit risk, price
volatility risk and market trends risk. Market risk is the risk that securities
may decline in value due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value of a security may
decline for reasons relating to the issuer, such as changes in the financial
condition of the issuer. Credit risk is the risk that an issuer may not be able
to meet its financial obligations when due, including payments on outstanding
debt. While equities may offer the potential for greater long-term growth than
most debt securities, they generally have higher volatility. Additionally,
Pilgrim International Fund invests in smaller 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.
FOREIGN SECURITIES. Both Pilgrim International Fund and ING International
Equity Fund invest at least 65% of their total assets in foreign securities.
There are certain risks in owning foreign securities, including: (i)
fluctuations in currency exchange rates; (ii) devaluation of currencies; (iii)
political or economic developments and the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions; (iv)
reduced availability of public information concerning issuers; (v) accounting,
auditing and financial reporting standards or other regulatory practices and
requirements that are not uniform when compared to those applicable to domestic
companies; and (vi) limitations on foreign ownership of equity securities. Also,
securities of many foreign companies may be less liquid and the prices more
volatile than those of domestic companies. With certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends.
6
<PAGE>
Both Funds may invest in emerging countries. ING International Equity Fund
may invest up to 15% of its assets in emerging countries. These countries may
have less developed markets and economies and, in some countries, less mature
governments or governmental institutions. The risks of investing in foreign
securities can be intensified in the case of investments in issuers domiciled or
doing substantial business in emerging market countries. These risks include:
high concentration of market capitalization and trading volume in a small number
of issuers, representing a limited number of industries, as well as a high
concentration of investors and financial intermediaries; political and social
uncertainties; over dependence on exports, especially with respect to primary
commodities, making these economies vulnerable to changes in commodity prices;
overburdened infrastructure and obsolete financial systems; environmental
problems; less well developed legal systems; and less reliable custodial
services and settlement practices.
CORPORATE DEBT SECURITIES. While Pilgrim International Fund and ING
International Equity Fund generally invest in equity securities, Pilgrim
International Fund may invest up to 35% of its total assets in corporate debt
securities of U.S. issuers.
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.
DERIVATIVE SECURITIES. Both Funds may invest in derivative securities.
Generally, derivatives can be characterized as financial instruments whose
performance is derived, at least in part, from 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 the 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. Derivatives are subject to credit risk
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 loss or
reduction in gains.
TEMPORARY DEFENSIVE STRATEGIES. For both Funds, when the adviser or
subadviser to the Fund anticipates unusual market or other conditions, the Fund
may temporarily depart from its principal investment strategies as a defensive
measure. To the extent a Fund is engaged in temporary defensive investments, it
will not be pursuing its investment objective.
PORTFOLIO TURNOVER. Pilgrim International Fund is generally expected to
engage in frequent and active trading of portfolio securities to achieve its
investment objective. A high portfolio turnover rate involves greater expenses
to a Fund, including brokerage commissions and other transaction costs, and is
likely to generate more taxable short-term gains for shareholders which may have
an adverse effect on the performance of the Fund.
COMPARISON OF FEES AND EXPENSES
The following discussion describes and compares the fees and expenses of
Pilgrim International Fund and ING International Equity Fund. For further
information on the fees and expenses of Pilgrim International Fund, see
"Appendix C: Additional Information Regarding Pilgrim International Fund, Inc."
ANNUAL FUND OPERATING EXPENSES. The operating expenses of Pilgrim
International Fund, expressed as a ratio of expenses to average daily net assets
("expense ratio") are lower than those of ING International Equity Fund, before
giving effect to the expense limitation agreement for ING International Equity
Fund described below and as adjusted to reflect material changes in expenses.
7
<PAGE>
For the year ended June 30, 2000, the operating expenses for Class A, Class B,
Class C, and Class Q shares of the Pilgrim International Fund, adjusted for
current expenses of contracts and distribution plans which became effective when
ING Pilgrim Investments became adviser to the Fund on July 26, 2000 were, 1.95%,
2.70%, 2.70% and 1.95%, respectively. Without the expense limitation contract,
the total operating expenses for Class A, Class B, Class C, and Class I shares
of ING International Equity Fund would have been 2.36%, 3.01%, 3.01% and 2.01%,
respectively. After giving effect to the expense limitation contract, the net
expenses for Class A, Class B, Class C, and Class I shares of ING International
Equity Fund for the 12 month period ending June 30, 2000 were 1.59%, 2.24%,
2.24%, and 1.04%, respectively, which are lower than those of Class A, Class B,
Class C, and Class Q shares of Pilgrim International Fund.
MANAGEMENT FEE. ING International Equity Fund has an aggregate annual
management fee of 1.25% of the Fund's average daily net assets, which is higher
than the management fee charged by the Pilgrim International Fund. Pilgrim
International Fund has an aggregate annual management fee of 1.00% of the Fund's
average daily net assets.
DISTRIBUTION AND SERVICE FEES. The distribution (12b-1) and service fees
for Class A shares of ING International Equity Fund are, in the aggregate, .10%
higher than the distribution and service fee for Class A shares of Pilgrim
International Fund. Both ING International Equity Fund and Pilgrim International
Fund have the same distribution (12b-1) and service fees for Class B and C
shares.
EXPENSE LIMITATION ARRANGEMENTS. Expense limitation arrangements are in
place for each Fund. Under the terms of the expense limitation contract for ING
International Equity Fund, IMFC has agreed to limit the expenses of the ING
International Equity Fund, excluding interest, taxes, brokerage and
extraordinary expenses. The current expense limitation agreement for the ING
International Equity Fund provides that it would remain in effect through at
least February 28, 2001. There is no assurance that the expense limitation
contract will continue after that date. The current expense limitations for
Class A, Class B, Class C, and Class I of ING International Equity Fund are at
annual rates of 1.59%, 2.24%, 2.24% and 1.04%, respectively. Although ING
Pilgrim Investments has implemented an expense limitation agreement for the
Pilgrim International Fund, the Fund's actual expenses are lower than the
expense limitations contained in the agreement.
Absent this expense limitation arrangement, the expense ratio for each
Class of ING International Equity Fund was higher than the expense ratio for the
corresponding Class of Pilgrim International Fund. For the period ended June 30,
2000, for example, the expense ratio for Class A shares of ING International
Equity Fund was 2.36% compared to 1.95% for Class A shares of Pilgrim
International Fund. This information and similar information for the other
Classes is shown in the table below entitled "Annual Fund Operating Expenses."
EXPENSE TABLE. The current expenses of each of the Funds and estimated PRO
FORMA expenses giving effect to the proposed Reorganization are shown in the
following table. Expenses for the Funds are annualized based upon the operating
expenses incurred by Class A, Class B, Class C, and Class Q shares of the
Pilgrim International Fund and by Class A, Class B, Class C, and Class I shares
of the ING International Equity Fund for the 12 month period ended June 30,
2000, adjusted, in the case of Pilgrim International Fund, for the current
expenses of contracts and distribution plans that became effective when ING
Pilgrim Investments became adviser to the Fund on July 26, 2000 and in the case
of ING International Equity Fund, for current expenses of contracts and 12b-1
plans which were in effect on June 6, 2000. PRO FORMA fees show estimated fees
of Pilgrim International Fund after giving effect to the proposed Reorganization
as adjusted to reflect changes in contractual charges. PRO FORMA numbers are
estimated in good faith and are hypothetical.
8
<PAGE>
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
(expenses that are deducted from Fund assets,
shown as a ratio of expenses to average daily net assets) (1)
<TABLE>
<CAPTION>
DISTRIBUTION
(12b-1) AND
SHAREHOLDER TOTAL FUND
MANAGEMENT SERVICING OTHER OPERATING FEE WAIVER BY NET FUND
FEES FEES(2) EXPENSES EXPENSES ADVISER(3)(4) EXPENSES
---- ------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
ING International Equity Fund 1.25% 0.35%(5) 0.76% 2.36% -0.77% 1.59%
Pilgrim International Fund 1.00% 0.25% 0.70% 1.95% -- 1.95%
Surviving Fund after
Reorganization (PRO FORMA) 1.00% 0.25% 0.45% 1.70% -- 1.70%
CLASS B
ING International Equity Fund(6) 1.25% 1.00% 0.76% 3.01% -0.77% 2.24%
Pilgrim International Fund 1.00% 1.00% 0.70% 2.70% -- 2.70%
Surviving Fund after
Reorganization (PRO FORMA) 1.00% 1.00% 0.45% 2.45% -- 2.45%
CLASS C
ING International Equity Fund (6) 1.25% 1.00% 0.76% 3.01% -0.77% 2.24%
Pilgrim International Fund 1.00% 1.00% 0.70% 2.70% -- 2.70%
Surviving Fund after
Reorganization (PRO FORMA) 1.00% 1.00% 0.45% 2.45% -- 2.45%
CLASS I (ING)/CLASS Q (PILGRIM)
ING International Equity Fund 1.25% - 0.76% 2.01% -0.97% 1.04%
Pilgrim International Fund(6) 1.00% 0.25% 0.70% 1.95% -- 1.95%
Surviving Fund after
Reorganization (PRO FORMA) 1.00% 0.25% 0.45% 1.70% -- 1.70%
</TABLE>
----------
(1) Pilgrim International Fund's fiscal year ends on December 31. ING
International Equity Fund's fiscal year ends October 31. Expenses of the
Funds and the PRO FORMA expenses are estimated based upon expenses incurred
by each Fund for the 12 month period ended June 30, 2000. Pilgrim
International Fund's expenses are adjusted for current expenses of
contracts and 12b-1 plans, which became effective when ING Pilgrim
Investments became adviser to the Fund on July 26, 2000. ING International
Equity Fund's expenses are adjusted for current expenses of contracts and
12b-1 plans which were in effect on November 6, 2000. Pro forma expenses
are adjusted for anticipated contractual changes.
(2) As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) IMFC has entered into an expense limitation agreement with the ING
International Equity Fund, under which it will limit expenses of the Fund,
excluding interest, taxes, brokerage and extraordinary expenses. The
expense limit for the Fund is shown as "Net Fund Expenses". Fee waivers
and/or reimbursements by the Investment Manager may vary in order to
achieve such contractually obligated "Net Fund Expenses". The expense
limitation agreement will run through February 28, 2001, there is no
guarantee that the expense limitation agreement will be continued after
that date.
(4) ING Pilgrim Investments has entered into an expense limitation agreement
that limits expenses (excluding interest, taxes, brokerage and
extraordinary expenses) for Pilgrim International Fund to 2.75%, 3.50%,
3.50%, and 2.75% for Class A, Class B, Class C and Class Q shares,
respectively, subject to possible later recoupment. The Fund's actual
expenses are lower than the expense limitations contained in the agreement.
ING Pilgrim Investments has agreed that the expense limitations will apply
to Pilgrim International Fund until at least July 26, 2002. There can be no
assurance that the expense limitation arrangement will remain in effect
after that date.
(5) Prior to November 6, 2000, the Class A distribution fee was 0.50% and
shareholder servicing fee was 0.25%.
(6) Because Class B, Class C, and Class Q shares of Pilgrim International Fund
were not offered until July 31, 2000, expenses for those Classes have been
estimated based on Class A expenses.
9
<PAGE>
Following the Reorganization and in the ordinary course of business as a
mutual fund, certain holdings of ING International Equity Fund that are
transferred to Pilgrim International Fund in connection with the Reorganization
may be sold. Such sales may result in increased transaction costs for Pilgrim
International Fund, and the realization of taxable gains or losses for Pilgrim
International Fund.
EXAMPLES. The examples are intended to help you compare the cost of investing in
each of the Funds. The examples assume that you invest $10,000 in each Fund for
the time periods indicated and then redeem all of your shares at the end of
those periods. The examples also assume that your investment has a 5% return
each year and that each Fund's operating expenses remain the same. The 5% return
is an assumption and is not intended to portray past or future investment
results. Based on the above assumptions, you would pay the following expenses if
you redeem your shares at the end of each period shown. Your actual costs may be
higher or lower.
<TABLE>
<CAPTION>
PRO FORMA:
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND THE FUNDS COMBINED**
------------------------------- ------------------------------- -------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 800 $1,269 $1,763 $3,116 $ 762 $1,152 $1,567 $2,719 $ 738 $1,080 $1,445 $2,468
Class B 804 1,230 1,782 3,176* 773 1,138 1,630 2,851* 748 1,064 1,506 2,601*
Class C 404 930 1,582 3,327 373 838 1,430 3,032 348 764 1,306 2,786
Class I 204 630 1,083 2,338 -- -- -- -- -- -- -- --
Class Q -- -- -- -- 198 612 1,052 2,275 173 536 923 2,009
</TABLE>
----------
* The ten year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the eighth year following the date
of purchase.
** Estimated.
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
PRO FORMA:
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND THE FUNDS COMBINED**
------------------------------- ------------------------------- -------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 800 $1,269 $1,763 $3,116 $ 762 $1,152 $1,567 $2,719 $ 738 $1,080 $1,445 $2,468
Class B 304 930 1,582 3,176* 273 838 1,430 2,851* 248 764 1,306 2,601*
Class C 304 930 1,582 3,327 273 838 1,430 3,032 248 764 1,306 2,786
Class I 204 630 1,083 2,338 -- -- -- -- -- -- -- --
Class Q -- -- -- -- 198 612 1,052 2,275 173 536 923 2,009
</TABLE>
----------
* The ten year calculations for Class B shares assume conversion of the Class
B shares to Class A shares at the end of the eighth year following the date
of purchase.
** Estimated.
10
<PAGE>
GENERAL INFORMATION
Class A, Class B, Class C and Class Q shares of Pilgrim International Fund
issued to a shareholder in connection with the Reorganization will be subject to
the same contingent deferred sales charge, if any, applicable to the
corresponding shares of ING International Equity Fund held by that shareholder
immediately prior to the Reorganization.
In addition, the period that the shareholder held shares of ING
International Equity Fund will be included in the holding period of Pilgrim
International Fund shares for purposes of calculating any contingent deferred
sales charge. Similarly, Class B shares of Pilgrim International Fund issued to
a shareholder in connection with the Reorganization will convert to Class A
shares eight years after the date that the Class B shares of ING International
Fund were purchased by the shareholder. Pilgrim International Fund and ING
International Equity Fund are both subject to the sales load structure described
in the table below.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS Q/
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
Maximum sales charge (load) imposed on purchases
<S> <C> <C> <C> <C>
(as a percentage of offering price) 5.75%(1) None None None
Maximum deferred sales charge (load) (as a
percentage of the lower of original purchase
price or redemption proceeds) None (2) 5.00% (3) 1.00% (4) None
</TABLE>
----------
(1) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" in Appendix C.
(2) A contingent deferred sales charge of no more than 1.00% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. See "Special Rules
for Shares of the ING International Equity Fund" below and "Class A Shares:
Initial Sales Charge Alternative" in Appendix C.
(3) Imposed upon redemptions within 6 years of purchase. The fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in Appendix B and "Deferred Sales Charges" in the Pilgrim
Prospectus.
(4) Imposed upon redemptions within 1 year of purchase.
Neither ING International Equity Fund nor Pilgrim International Fund has
any redemption fees, exchange fees or sales charges on reinvested dividends.
11
<PAGE>
SPECIAL RULES FOR CLASS A SHARES OF ING INTERNATIONAL EQUITY FUND
Prior to November 6, 2000, the contingent deferred sales charge on purchases of
Class A shares of ING International Equity Fund in excess of $1 million was
different than the contingent deferred sales charge on similar purchases of
Pilgrim International Fund. Shareholders of ING International Equity Fund that
purchased Class A shares subject to a contingent deferred sales charge prior to
November 6, 2000 will continue to be subject to the contingent deferred sales
charge in place when those shares were purchased. The contingent deferred sales
charge on such purchases before and after November 6, 2000 were as follows:
<TABLE>
<CAPTION>
CDSC TIME PERIOD DURING WHICH CDSC APPLIES
------------------------------------- -------------------------------------
11/06/00 AND AFTER BEFORE 11/06/00 11/06/00 AND AFTER BEFORE 11/06/00
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
CDSC ON PURCHASES OF:
$1,000,000 to $2,499,999 1.00% 1.00% 24 months 12 months
$2,500,000 to $4,999,999 0.50% 1.00% 12 months 12 months
$5,000,000 and over 0.25% 1.00% 12 months 12 months
</TABLE>
ADDITIONAL INFORMATION ABOUT PILGRIM INTERNATIONAL FUND
INVESTMENT PERSONNEL
Pilgrim International Fund is managed by a team led by Richard T. Saler,
Senior Vice President and Senior Portfolio Manager for ING Pilgrim Investments.
Mr. Saler has served as the Senior Portfolio Manager of Pilgrim International
Fund since 1994. The other individual on the team is Philip A. Schwartz, Senior
Vice President and Senior Portfolio Manager, who has been a member of the
Pilgrim International Fund portfolio management team since 1998.
PERFORMANCE OF PILGRIM INTERNATIONAL FUND
The bar chart and table that follow provide an indication of the risks of
investing in Pilgrim International Fund by showing (on a calendar year basis)
changes in Pilgrim International Fund's annual total return from year to year
and by showing (on a calendar year basis) how Pilgrim International Fund's
average annual returns for one year, five years, and since inception compare to
those of the MSCI EAFE Index. The information in the bar chart is based on the
performance of the Class A shares of Pilgrim International Fund although the bar
chart does not reflect the deduction of the sales load on Class A shares. If the
bar chart included the sales load, returns would be less than those shown. The
Pilgrim International Fund's past performance is not necessarily an indication
of how the Fund will perform in the future. Total returns include reinvestment
of dividends and capital gains distributions, if any. All indices are unmanaged.
CALENDAR YEAR-BY-YEAR RETURNS(1),(2),(3),(4)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
5.87% 5.77% 13.57% 1.61% 19.02% 47.85%
----------
(1) During the period shown in the chart, the Fund's best quarterly performance
was 27.01% for the quarter ended December 31, 1999, and the Fund's worst
quarterly performance was -10.65% for the quarter ended December 31, 1997.
(2) Prior to July 26, 2000, Lexington Management Corporation ("Lexington")
served as the investment adviser to the Fund. Lexington was acquired by the
parent of ING Pilgrim Investments on July 26, 2000. Richard T. Saler has
been primarily responsible for managing the Fund since July 1994, and
continued to manage the Fund after the July 26, 2000 transaction.
(3) The Fund's year to date total return as of September 30, 2000 was -7.18%.
(4) Pilgrim International Fund commenced operations on January 3, 1994.
12
<PAGE>
The table below shows what the average annual total returns of Pilgrim
International Fund would equal if you averaged out actual performance over
various lengths of time, compared to the MSCI EAFE Index. The MSCI EAFE Index
has an inherent performance advantage over Pilgrim International Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. Pilgrim International
Fund's performance reflected in the table assumes the deduction of the maximum
sales charge in all cases.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999(1)
SINCE
1 YEAR 5 YEARS INCEPTION(4)
------ ------- ------------
Pilgrim International Fund - Class A (2) 39.35% 15.15% 13.56%
MSCI EAFE Index (3) 27.30% 13.15% 12.30%
----------
(1) This table shows performance of the Class A shares of the Fund. Class B, C
and Q shares of Pilgrim International Fund were not offered during the
period ended December 31, 1999.
(2) Reflects deduction of sales charge of 5.75%.
(3) 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.
(4) Pilgrim International Fund commenced operations on January 3, 1994.
The table below shows the performance of Pilgrim International Fund if
sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 1999(1)
SINCE
1 YEAR 5 YEARS INCEPTION(2)
------ ------- ------------
Pilgrim International Fund - Class A 47.85% 16.52% 14.69%
----------
(1) This table shows performance of the Class A shares of the Fund. Class B, C
and Q shares of Pilgrim International Fund were not offered during the
period ended December 31, 1999.
(2) Pilgrim International Fund commenced operations on January 3, 1994.
For a discussion by the adviser regarding the performance of Pilgrim
International Fund for the year ended December 31, 1999, see Appendix A to this
Proxy Statement/Prospectus. Additional information about Pilgrim International
Fund is included in Appendix C to this Proxy Statement/Prospectus.
13
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT. The Reorganization Agreement provides for the
transfer of all of the assets and liabilities of ING International Equity Fund
to Pilgrim International Fund in exchange for shares of Pilgrim International
Fund. ING International Equity Fund will distribute the shares of Pilgrim
International Fund received in the exchange to the shareholders of ING
International Equity Fund and then ING International Equity Fund will be
liquidated.
After the Reorganization, each shareholder of the following classes of ING
International Equity Fund will own shares in the following classes of Pilgrim
International Fund having an aggregate value equal to the aggregate value of
each respective class of shares in ING International Equity Fund held by that
shareholder as of the close of business on the business day of the Closing.
Shareholders of the following Classes of shares of ING International Equity Fund
will receive shares of the corresponding Class of Pilgrim International Fund.
ING INTERNATIONAL EQUITY FUND PILGRIM INTERNATIONAL FUND
----------------------------- --------------------------
Class A Class A
Class B Class B
Class C Class C
Class I Class Q
In the interest of economy and convenience, shares of Pilgrim International
Fund generally will not be represented by physical certificates, unless you
request the certificates in writing.
Until the Closing, shareholders of ING International Equity Fund will
continue to be able to redeem their shares. Redemption requests received after
the Closing will be treated as requests received by Pilgrim International Fund
for the redemption of its shares received by the shareholder in the
Reorganization.
The obligations of the Funds under the Reorganization Agreement are subject
to various conditions, including approval of the shareholders of ING
International Equity Fund. The Reorganization Agreement also requires that each
of the Funds take, or cause to be taken, all action, and do or cause to be done,
all things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Reorganization Agreement. The
Reorganization Agreement may be terminated by mutual agreement of the parties or
on certain other grounds. Please refer to Appendix B to review the terms and
conditions of the Reorganization Agreement.
REASONS FOR THE REORGANIZATION. The Reorganization is one of many
reorganizations that are proposed among various ING Funds and various Pilgrim
Funds. These reorganizations are occurring in connection with the integration of
the ING Funds and Pilgrim Funds, as part of which the distributor,
administrator, and other service providers of the ING Funds have been changed to
those of the Pilgrim Funds. In September 2000, ING Groep N.V., the indirect
parent company of IMFC, the investment adviser to the ING Funds, acquired
ReliaStar Financial Corp., the indirect parent company of ING Pilgrim
Investments, the investment adviser to the Pilgrim Funds. Management of the ING
Funds and the Pilgrim Funds have proposed the consolidation of a number of the
ING Funds and Pilgrim Funds that they believe have similar or compatible
investment policies. The proposed reorganizations are designed to reduce the
substantial overlap in funds offered by both the ING Funds and Pilgrim Funds,
14
<PAGE>
thereby eliminating duplication of costs and other inefficiencies arising from
having similar portfolios within the same fund group. IMFC and ING Pilgrim
Investments also believe that the reorganizations may benefit Fund shareholders
by resulting in surviving funds with a greater asset base. This is expected to
achieve economies of scale for shareholders and may provide greater investment
opportunities for the surviving funds or the potential to take larger portfolio
positions. The integration of the ING Funds and the Pilgrim Funds is expected to
provide further benefits to shareholders of the ING Funds because shareholders
will have the ability to exchange into Pilgrim Funds that offer the same Class
of shares. For information about a Pilgrim Fund, call the Pilgrim Funds at
1-800-992-0180 to request a prospectus. You should read a fund's prospectus
before investing in the fund.
The proposed Reorganization was presented to the Board of Trustees of ING
Funds Trust, on behalf of ING International Equity Fund, for consideration at a
meeting held on October 25, 2000 and for approval at a meeting held on November
16, 2000. For the reasons discussed below, the Trustees, including all of the
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of ING Funds Trust, determined that the interests of the
shareholders of ING International Equity Fund will not be diluted as a result of
the proposed Reorganization, and that the proposed Reorganization is in the best
interests of ING International Equity Fund and its shareholders.
The Reorganization will allow ING International Equity Fund's shareholders
to continue to participate in a professionally-managed portfolio which seeks to
achieve long-term growth of capital through investments in equity securities and
equity equivalents of companies outside of the United States. As shareholders of
Pilgrim International Fund, a shareholder will be able to exchange into other
mutual funds in the group of Pilgrim Funds and ING Funds that offer the same
Class of shares in which such shareholder is currently invested. A list of the
Pilgrim Funds and ING Funds and Classes available after the Reorganization is
contained in Appendix D.
BOARD CONSIDERATIONS. The Board of Trustees of ING Funds Trust, on behalf
of ING International Equity Fund, in recommending the proposed transaction,
considered a number of factors, including the following:
(1) The plans of management to integrate the ING Funds and the Pilgrim
Funds;
(2) expense ratios and information regarding fees and expenses of ING
International Equity Fund and Pilgrim International Fund, including
the expense limitation arrangements;
(3) estimates that show that combining the Funds is expected to result in
lower expense ratios, in the absence of management subsidies, because
of economies of scale expected to result from an increase in the asset
size of the reorganized Fund;
(4) the Reorganization would not dilute the interests of ING International
Equity Fund's current shareholders;
(5) the relative investment performance and risks of Pilgrim International
Fund as compared to ING International Equity Fund;
(6) the similarity of Pilgrim International Fund's investment objectives,
policies and restrictions with those of ING International Equity Fund;
(7) the investment resources of ING Pilgrim Investments and distribution
capabilities of ING Pilgrim Securities, Inc., Distributor of Pilgrim
International Fund;
(8) the quality and caliber of services that have been enjoyed by
shareholders of the Pilgrim International Fund;
(8) alternatives to combining the Funds; and
(9) the tax-free nature of the Reorganization to ING International Equity
Fund and its shareholders.
THE TRUSTEES OF ING FUNDS TRUST, ON BEHALF OF ING INTERNATIONAL EQUITY FUND,
RECOMMEND THAT SHAREHOLDERS APPROVE THE REORGANIZATION WITH PILGRIM
INTERNATIONAL FUND.
15
<PAGE>
TAX CONSIDERATIONS. The Reorganization is intended to qualify for Federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended. Accordingly, pursuant to this
treatment, neither ING International Equity Fund nor its shareholders nor
Pilgrim International Fund is expected to recognize any gain or loss for federal
income tax purposes from the transactions contemplated by the Reorganization
Agreement. As a condition to the Closing of the Reorganization, the Funds will
receive an opinion from the law firm of Dechert to the effect that the
Reorganization will qualify as a tax-free reorganization for Federal income tax
purposes. That opinion will be based in part upon certain assumptions and upon
certain representations made by Pilgrim International Fund and ING Funds Trust.
Immediately prior to the Reorganization, ING International Equity Fund will
pay a dividend or dividends which, together with all previous dividends, will
have the effect of distributing to its shareholders all of ING International
Equity Fund's investment company taxable income for taxable years ending on or
prior to the Reorganization (computed without regard to any deduction for
dividends paid) and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Reorganization (after reduction for any
available capital loss carryforward). Such dividends will be included in the
taxable income of ING International Equity Fund's shareholders.
EXPENSES OF THE REORGANIZATION. ING Pilgrim Investments, investment adviser
to Pilgrim International Fund, will bear half the cost of the Reorganization.
The Funds will bear the other half of the expenses related to the proposed
Reorganization, including, but not limited to, the costs of solicitation of
voting instructions and any necessary filings with the Securities and Exchange
Commission. Of the Reorganization expenses allocated to the Funds, each Fund
will bear a ratable portion based on its relative net asset values immediately
before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORM OF ORGANIZATION. Pilgrim International Fund is a Maryland corporation.
ING International Equity Fund is a series of ING Funds Trust, which is a
Delaware business trust. Pilgrim International Fund is governed by its Board of
Directors. ING Funds Trust is governed by its Board of Trustees. Pilgrim
International Fund has eleven Directors, and ING Funds Trust has four Trustees.
DISTRIBUTOR. ING Pilgrim Securities, Inc. (the "Distributor"), whose
address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, is the
principal distributor for both Funds.
DIVIDENDS AND OTHER DISTRIBUTIONS. Both Pilgrim International Fund and ING
International Equity Fund pay dividends from net investment income and net
capital gains, if any, on an annual basis. Dividends and distributions of each
of the Funds are automatically reinvested in additional shares of the respective
class of the particular Fund, unless the shareholder elects to receive
distributions in cash.
If the Reorganization Agreement is approved by ING International Equity
Fund's shareholders, then as soon as practicable before the Closing, ING
International Equity Fund will pay its shareholders a cash distribution of
substantially all undistributed net investment income and undistributed realized
net capital gains.
16
<PAGE>
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of each of the Funds as of June 30, 2000 and on a PRO FORMA basis
as of June 30, 2000 giving effect to the Reorganization:
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
ING INTERNATIONAL EQUITY FUND
Class A $51,722,264 $12.47 4,149,142
Class B $ 2,084,712 $12.33 169,138
Class C $ 1,907,891 $12.30 155,088
Class I(1) $ 125,262 $12.45 10,061
Class X(2) $ 666,443 $12.35 53,949
PILGRIM INTERNATIONAL FUND
Class A $25,610,821 $13.46 1,902,951
PRO FORMA - PILGRIM INTERNATIONAL FUND INCLUDING
ING INTERNATIONAL EQUITY FUND
Class A $77,333,085 $13.46 5,745,615
Class B $ 2,751,155 $13.46 204,395
Class C $ 1,907,891 $13.46 141,745
Class Q $ 125,262 $13.46 9,306
----------
(1) Class I shares will merge into Class Q shares.
(2) Class X shares merged into Class B shares effective as of the close of
business on November 17, 2000.
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about December __, 2000.
Shareholders of ING International Equity Fund whose shares are held by nominees,
such as brokers, can vote their proxies by contacting their respective nominee.
In addition to the solicitation of proxies by mail, employees of ING Pilgrim
Investments and its affiliates, without additional compensation, may solicit
proxies in person or by telephone, telegraph, facsimile, or oral communication.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with ING International Equity Fund, a written revocation or duly
executed proxy bearing a later date. In addition, any shareholder who attends
the Special Meeting in person may vote by ballot at the Meeting, thereby
canceling any proxy previously given. The persons named in the accompanying
proxy will vote as directed by the proxy card, but in the absence of voting
directions in any proxy card that is signed and returned, they intend to vote
"FOR" the Reorganization proposal and may vote in their discretion with respect
to other matters not now known to the Board of Directors of Pilgrim
International Fund that may be presented at the Meeting.
VOTING RIGHTS
Shareholders of ING International Equity Fund are entitled to one vote for
each share held as to any matter on which they are entitled to vote and each
fractional share shall be entitled to a proportionate fractional vote. Shares
have no preemptive or subscription rights.
Shareholders of ING International Equity Fund at the close of business on
December 26, 2000 (the "Record Date") will be entitled to be present and give
voting instructions for ING International Equity Fund at the Meeting with
respect to their shares owned as of that Record Date. As of the Record Date,
______ shares of ING International Equity Fund were outstanding and entitled to
vote.
Approval of the Reorganization requires the vote of a majority of the
Shares present in person or by proxy of ING International Equity Fund.
The holders of one-third of the outstanding shares present in person or
represented by proxy shall constitute a quorum. In the absence of a quorum, a
majority of outstanding shares entitled to vote present in person or by proxy
may adjourn the meeting from time to time until a quorum is present.
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If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the Special Meeting for purposes of determining a quorum. However, abstentions
and broker non-votes will not be deemed represented at the Special Meeting for
purposes of calculating the vote on any matter. As a result, an abstention or
broker non-vote will have the same effect as a vote against the Reorganization.
If these instructions are not received by the date specified in the
broker-dealer firms' proxy solicitation materials, the ING Funds Trust
understands that the broker-dealers that are members of the New York Stock
Exchange may vote on the items to be considered at the Special Meeting on behalf
of their customers and beneficial owners under the rules of the New York Stock
Exchange.
As of December 1, 2000, ING America Insurance Holdings, Inc. ("ING") owns
approximately 58.12% of the outstanding voting shares of ING International
Equity Fund, and therefore controls the Fund. ING intends to vote its shares in
favor of the Reorganization, in which case the Reorganization will be approved.
To the knowledge of ING Funds Trust, as of November 1, 2000, no current
Director owns 1% or more of the outstanding shares of ING International Equity
Fund, and the officers and Directors own, as a group, less than 1% of the shares
of ING International Equity Fund.
Appendix E hereto lists the persons that, as of December 1, 2000, owned
beneficially or of record 5% or more of the outstanding shares of any Class of
ING International Equity Fund or Pilgrim International Fund.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
ING Funds Trust does not know of any matters to be presented at the Special
Meeting other than those described in this Proxy Statement/Prospectus. If other
business should properly come before the Special Meeting, the proxyholders will
vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
ING Funds Trust is not required to hold regular annual meetings and, in
order to minimize its costs, does not intend to hold meetings of shareholders
unless so required by applicable law, regulation, regulatory policy or if
otherwise deemed advisable by ING Funds Trust's management. Therefore it is not
practicable to specify a date by which shareholder proposals must be received in
order to be incorporated in an upcoming proxy statement for an annual meeting.
REPORTS TO SHAREHOLDERS
ING Funds Trust will furnish, without charge, a copy of the most recent
Annual Report regarding ING International Equity Fund and the most recent
Semi-Annual Report succeeding the Annual Report, if any, on request. Requests
for such reports should be directed to ING Funds Trust at 7337 East Doubletree
Ranch Road, Scottsdale, AZ 85258 or 1-800-992-0180
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
James M. Hennessy
Secretary
________, 2000
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
18
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APPENDIX A
INTERNATIONAL FUND
Set forth below is an excerpt from Pilgrim International Funds Annual
Report, dated December 31, 1999
We are pleased to report that the Lexington International Fund performed
well on both an absolute and relative basis during 1999. The Lexington
International Fund returned 47.85%* in 1999 while the average international
fund, according to Lipper, Inc., advanced 40.80%. The unmanaged Morgan Stanley
Capital International (EAFE) Index appreciated a strong 27.30% for the year.
During the fourth quarter Lexington International Fund gained 27.01%* against a
group average of 25.73% according to Lipper, Inc. The EAFE Index rose 16.99% due
to the strong performance of large companies.
Absolute performance was strong for the Lexington International Fund as
well as most other international funds. Several countries and sectors provided
spectacular returns. Led by Nokia, Finland gained 153% for the year. Other
particularly large returns came from Sweden with an 80% gain, Japan at 62% and
Hong Kong at 60%. The most important variable to investment success in 1999 was
sector selection. Globally, stock performance was extremely narrow which
explains the huge variation in performance among global funds. The strongest
gains came from telecoms and electronics with a yearly return of 45% and 116%
respectively. Conversely, utilities declined 13% and consumer goods fell 2%. The
Lexington International Fund performed very well compared to other international
funds. The primary reasons for the Fund's strong performance was due to gains
from technology and telecom holdings. Strong contributors to the portfolio came
from stocks such as Nokia, Yahoo Japan, and Aegis, as well as many others. The
Fund's high exposure to strong performing markets such as Japan also played an
important role in enhancing returns.
Global economic activity is on the rise after being depressed by the Asian
economic crisis. The U.S. economy continued to grow at a rapid rate of around
4%. European economies are also showing signs of life as a weak Euro and a
strong U.S. economy has ignited manufacturing exports. European unemployment is
on the decline while consumer confidence remains at healthy levels. The European
region will probably enjoy growth in the 3% range for this year. The Asian
economies are also on the mend although Japan is still struggling. The Japanese
economy is saddled by huge government debt and rising unemployment, which
continues to depress consumer spending. Rising global growth provides a good
backdrop for corporate profits. In Europe, profits will be further enhanced by a
weak currency and corporate restructuring. Japanese profitability should also be
on the rise as cost cutting is gaining greater acceptance by Japanese
managements. Technology is also playing a key role in expanding productivity.
The internet is changing the way most, if not all, companies do business.
Investment in technology and the internet in particular, is contributing to
stronger growth and productivity in most economies. Opportunities for investment
in Europe and Japan are particularly exciting for several reasons. First, as
previously mentioned, the outlook for profit growth is positive. In Europe, the
Euro has been quite weak and investors have an opportunity to buy a cheap
currency through European equity investments. Restructuring in both Europe and
Japan is leading to industry consolidation as well as a rising return on
capital. Finally, an equity investment culture is only now taking hold. The
Japanese hold the bulk of the world's savings, which have been out of Japanese
stocks for years. As Japan's society ages and government debt piles up,
individuals will have a greater need to provide for retirement. It is likely
that more savings will be earmarked for equity investment in Japan particularly
if Japanese managements continue to improve profits. The savings story is
similar in Europe where equities have been under represented in individual
portfolios. The long term outlook for global equities is very attractive.
However, there are always important risk factors to consider.
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The greatest risk to global equities is the imbalance of the U.S. economy.
U.S. economic growth is unsustainably strong. Inflation has been remarkably
subdued due to several factors. A strong dollar has kept import prices down.
Equally, the Asian economic crisis produced excess global capacity in many goods
as demand slumped. Commodity prices, until recently, have been at depressed
levels. Clearly technology has played an important role in advancing
productivity, resulting in tame inflation. However, it is unlikely that
technology alone explains such a low inflation rate at this point in the
economic cycle. Some of the underpinning causes are now reversing. Global demand
is accelerating, as are commodity prices. Inflation is a lagging indicator, so
it may take more time to see a convincing rise in inflation. U.S. growth is
being funded by foreign capital at an unprecedented rate. The trade and current
account deficits are being funded by over $300 billion in foreign capital per
year. These deficits are likely to persist if equity prices in the U.S.
continue to rise. Consumers are feeling very confident as their stock holdings
appreciate and they continue to spend. This spending requires more and more
foreign capital to support. To keep foreign capital coming real interest may
continue to rise to compete against other global investments. The U.S. dollar is
also vulnerable, as a sharp fall would be one way the market could correct part
of the trade deficit. However, a falling dollar could lead to higher inflation
and a foreign exodus of U.S. assets. Interest rates have been rising globally.
The U.S. Federal Reserve has increased short-term rates 75 basis points and
another 25 basis point hike is expected in February 2000. Long rates have
climbed even more sharply as the 30 year U.S. Treasury Bond now yields over
6.5%. Until consumer spending slows, the economy is likely to remain very
strong. Unemployment is now at only 4.1%. It is at a dangerous level as it
portends wage pressure. Interest rates are likely to rise until the U.S.
economy slows. The economy isn't likely to slow until the stock market suffers a
sharp correction.
A falling U.S. stock market will put downward pressure on European and
Asian equities as well. European returns will likely be protected to a certain
degree by a rising Euro. The growth sectors particularly telecoms and technology
are likely to suffer the greatest declines in a correction due to excessive
valuation in those sectors.
The Lexington International Fund remains well diversified. Some growth
stocks with huge gains have already been pared or sold outright to reduce the
portfolios risk level. Recent additions have focused on some forgotten sectors
such as utilities and cyclicals. Certainly, a sharp market correction will
result in a decline in the Fund's value. However, by rotating into unloved
sectors, declines should be less than average for the category. Technology
remains an exciting theme for the long-term and a healthy technology weighting
will remain to avoid market timing mistakes. A sharp correction may create a
great opportunity to add to technology at much reduced prices.
We appreciate the support of our shareholders and would be happy to respond
to any questions or comments you may have. Please feel free to call us at
1-800-526-0056 or visit our website at www.lexingtonfunds.com.
Sincerely,
/s/ RICHARD T. SALER /s/ ROBERT DEMICHELE
Richard T. Saler Robert M. DeMichele
Portfolio Manager President
February, 2000 February, 2000
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Comparison of change in value of a $10,000 investment in
Lexington International Fund, Inc. and
the unmanaged Morgan Stanley Capital International (EAFE) Index
Lexington Morgan Stanley
International Capital International
Date Fund (EAFE) Index
---- ---- ------------
1/3/94 $10,000 $10,000
12/31/94 $10,587 $10,806
12/31/95 $11,198 $12,054
12/31/96 $12,717 $12,821
12/31/97 $12,922 $13,085
12/31/98 $15,380 $15,745
12/31/99 $22,739 $20,043
Average Annual Standard Total Returns
for the Period Ending 12/31/99
Lexington Morgan Stanley
International Capital International
Annualized Returns Fund (EAFE) Index
------------------ ---- ------------
1 YR 47.85% 27.30%
5 YR 16.52% 13.15%
Since Inception 1/3/94 14.69% 12.30%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund with a similar investment in the unmanaged Morgan Stanley
Capital Investment (EAFE) Index. Results for the Fund and the Morgan Stanley
Capital International (EAFE) Index include the reinvestment of all dividend and
capital gain distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares when redeemed may be
worth more or less than at their original cost. Total return represents past
performance and it is not predictive of future results.
* 47.85%, 16.52% and 14.69% are the one, five and since commencement
(01/03/94) average annual standard total returns, respectively, for the period
ended December 31, 1999. Investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Total return represents past performance and is
not predictive of future results. International investing has special risks,
including currency fluctuation and political instability. There is no guarantee
that the Fund can achieve its objective.
All country and regional returns are from the corresponding Morgan Stanley
Capital International Indices. Returns are dollar based with all dividends
reinvested.
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APPENDIX B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2000, by and between Pilgrim International
Fund, Inc., a Maryland corporation (the "Company") with its principal place of
business at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, on behalf
of its sole series, Pilgrim International Fund Series (the "Acquiring Fund") and
ING Funds Trust, a Delaware business trust (the "ING Trust") with its principal
place of business at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258,
on behalf of its series, ING International Equity Fund (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B,
Class C, and Class Q voting shares of common stock ($.001 par value per share)
of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the
Acquiring Fund of all liabilities of the Acquired Fund, and the distribution of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type or a series thereof and the Acquired
Fund owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Directors of the Company have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Trustees of the ING Trust have determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B,
Class C, and Class Q Acquiring Fund Shares determined by dividing the value of
the Acquired Fund's net assets with respect to each class, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one Acquiring Fund Share of the same class, computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to assume all
liabilities of the Acquired Fund as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
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1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests and dividends or interests
receivable that are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing date
provided for in paragraph 3.1 (the "Closing Date") (collectively, "Assets").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
also assume all of the liabilities of the Acquired Fund, whether accrued or
contingent, known or unknown, existing at the Valuation Date (collectively
"Liabilities"). On or as soon as practicable prior to the Closing Date, the
Acquired Fund will declare and pay to its shareholders of record one or more
dividends and/or other distributions so that it will have distributed
substantially all (and in no event less than 98%) of its investment company
taxable income (computed without regard to any deduction for dividends paid) and
realized net capital gain, if any, for the current taxable year through the
Closing Date.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to each class of its shares, determined as of immediately after the
close of business on the Closing Date (the "Acquired Fund Shareholders"), on a
pro rata basis within that class, the Acquiring Fund Shares of the same class
received by the Acquired Fund pursuant to paragraph 1.1, and will completely
liquidate. Such distribution and liquidation will be accomplished, with respect
to each class of the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A, Class B, Class C, and Class Q Acquiring Fund Shares to be so credited
to Class A, Classes B, Class C, and Class I Acquired Fund Shareholders shall,
with respect to each class, be equal to the aggregate net asset value of the
Acquired Fund shares of the corresponding class owned by such shareholders on
the Closing Date. All issued and outstanding shares of the Acquired Fund will
simultaneously be canceled on the books of the Acquired Fund, although share
certificates representing interests in Class A, Class B, Class C, and Class I
shares of the Acquired Fund will represent a number of the same class of
Acquiring Fund Shares after the Closing Date, as determined in accordance with
Section 2.3. The Acquiring Fund shall not issue certificates representing the
Class A, Class B, Class C, and Class Q Acquiring Fund Shares in connection with
such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value of such assets computed as
of immediately after the close of business of the New York Stock Exchange and
after the declaration of any dividends on the Closing Date (such time and date
being hereinafter called the "Valuation Date"), using the valuation procedures
in the then-current prospectus and statement of additional information with
respect to the Acquiring Fund, and valuation procedures established by the
Acquiring Fund's Board of Directors.
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2.2 The net asset value of a Class A, Class B, Class C, or Class Q
Acquiring Fund Share shall be the net asset value per share computed with
respect to that class on the Valuation Date, using the valuation procedures set
forth in the Acquiring Fund's then-current prospectus and statement of
additional information with respect to the Acquiring Fund, and valuation
procedures established by the Acquiring Fund's Board of Directors.
2.3 The number of the Class A, Class B, Class C, and Class Q Acquiring Fund
Shares to be issued (including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined with respect to each such class by
dividing the value of the net assets with respect to the Class A, Classes B,
Class C, and Class I shares of the Acquired Fund, as the case may be, determined
using the same valuation procedures referred to in paragraph 2.1, by the net
asset value of an Acquiring Fund Share, determined in accordance with paragraph
2.2.
2.4 All computations of value shall be made by the Acquired Fund's
designated record keeping agent and shall be subject to confirmation by
Acquiring Fund's record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be _____ ___, 2001, or such other date as the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of immediately after the close of business on the
Closing Date unless otherwise agreed to by the parties. The close of business on
the Closing Date shall be as of 4:00 p.m., Eastern Time. The Closing shall be
held at the offices of the Acquiring Fund or at such other time and/or place as
the parties may agree.
3.2 The Acquired Fund shall direct State Street Bank and Trust Company, as
custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) Assets shall have been
delivered in proper form to the Acquiring Fund within two business days prior to
or on the Closing Date, and (ii) all necessary taxes in connection with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented for examination by the Custodian to the
custodian for the Acquiring Fund no later than five business days preceding the
Closing Date, and shall be transferred and delivered by the Acquired Fund as of
the Closing Date for the account of the Acquiring Fund duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof. The
Custodian shall deliver as of the Closing Date by book entry, in accordance with
the customary practices of any securities depository, as defined in Rule 17f-4
under the Investment Company Act of 1940, as amended (the "1940 Act") in which
the Acquired Fund's Assets are deposited and the Custodian, the Acquired Fund's
Assets deposited with such depositories. The cash to be transferred by the
Acquired Fund shall be delivered by wire transfer of federal funds on the
Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, Class B, Class C, and Class I shares owned by
each such shareholder immediately prior to the Closing. The Acquiring Fund shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Acquiring Fund, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have
been credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
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3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund, respectively, shall be closed to trading or trading
thereupon shall be restricted, or (b) trading or the reporting of trading on
such Exchange or elsewhere shall be disrupted so that, in the judgment of the
Board of Trustees of the Acquired Fund or the Board of Directors of the
Acquiring Fund, accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as has been disclosed to the Acquiring Fund in a written
instrument executed by an officer of the ING Trust, the ING Trust, on behalf of
the Acquired Fund, represents and warrants to the Company as follows:
(a) The Acquired Fund is duly organized as a series of ING Trust, which is
a business trust duly organized, validly existing and in good standing under the
laws of the State of Delaware, with power under ING Trust's Declaration of Trust
to own all of its properties and assets and to carry on its business as it is
now being conducted;
(b) ING Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of shares of the
Acquired Fund under the Securities Act of 1933, as amended ("1933 Act"), is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title to the Assets and full right, power, and authority to sell, assign,
transfer and deliver such Assets hereunder free of any liens or other
encumbrances, and upon delivery and payment for such assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material violation
of the ING Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the ING
Trust, on behalf of the Acquired Fund, is a party or by which it is bound, or
(ii) the acceleration of any obligation, or the imposition of any penalty, under
any agreement, indenture, instrument, contract, lease, judgment or decree to
which the ING Trust, on behalf of the Acquired Fund, is a party or by which it
is bound;
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(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts, including options,
futures, and forward contracts) will terminate without liability to the Acquired
Fund on or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the
Company, on behalf of the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquired Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its business. ING
Trust, on behalf of the Acquired Fund, knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Portfolio of Investments of the Acquired Fund at
October 31, 1999 have been audited by Ernst & Young LLP, independent auditors,
and are in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) present fairly, in all material respects, the financial
condition of the Acquired Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquired Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(j) Since October 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been (or will be) eligible to and has computed (or will
compute) its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) that has accrued through the Closing Date, and before
the Closing Date will have declared dividends sufficient to distribute all of
its investment company taxable income and net capital gain for the period ending
on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the ING Trust and have been offered and sold in every state
and the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
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<PAGE>
All of the issued and outstanding shares of the Acquired Fund will, at the time
of Closing, be held by the persons and in the amounts set forth in the records
of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph
3.3. The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the shares of the Acquired Fund, nor
is there outstanding any security convertible into any of the Acquired Fund
shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the ING Trust, on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.6, insofar as
it relates to the Acquired Fund, will, on the effective date of the Registration
Statement and on the Closing Date (i) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading provided, however,
that the representations and warranties in this subparagraph (p) shall not apply
to statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished by the Acquiring Fund for use therein, and (ii) comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder.
4.2 Except as has been disclosed to the Acquired Fund in a written
instrument executed by an officer of the Company, the Company, on behalf of the
Acquiring Fund, represents and warrants to the ING Trust as follows:
(a) The Acquiring Fund is duly organized as a series of the Company, which
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland, with power under the Company's Articles of
Incorporation to own all of its properties and assets and to carry on its
business as it is now being conducted;
(b) The Company is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act and the registration of
the shares of the Acquired Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
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<PAGE>
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Company, on behalf of the Acquiring Fund, is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment
or decree to which the Company, on behalf of the Acquiring Fund, is a party or
by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by the ING
Trust, on behalf of the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquiring Fund or
any of its properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its business. The
Company, on behalf of the Acquiring Fund, knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Portfolio of Investments of the Acquiring Fund at
December 31, 1999 have been audited KPMG LLP, independent auditors, and are in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since December 31, 1999, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund. For purposes of this subparagraph (i), a
decline in net asset value per share of the Acquiring Fund due to declines in
market values of securities in the Acquiring Fund's portfolio, the discharge of
Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a material adverse
change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
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<PAGE>
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year that
includes the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. The Acquiring Fund does
not have outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Directors of the Company, on behalf of the Acquiring Fund,
and this Agreement will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(n) The Class A, Class B, Class C, and Class Q Acquiring Fund Shares to be
issued and delivered to the Acquired Fund, for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will on the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly issued Acquiring Fund Shares, and will be fully paid and non-assessable;
(o) The information to be furnished by the Company for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading, provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
(q) Either the Acquiring Fund or ING Pilgrim Investments, Inc. shall
purchase and maintain a Directors and Officers errors and omissions insurance
policy ("D&O/E&O Policy") for the benefit of Joseph Hankin and Jack Rehm
containing substantially the same form and amount of coverage as each had under
a D&O/E&O Policy of the Acquired Fund, such D&O/E&O Policy to be effective as of
the Closing Date and continuing until the sixth (6th) anniversary of the Closing
Date.
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<PAGE>
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B, Class C and
Class Q Acquiring Fund Shares to be issued hereunder are not being acquired for
the purpose of making any distribution thereof, other than in accordance with
the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(p), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
5.7 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A, Class B, Class C, and Class Q Acquiring Fund Shares received at the
Closing.
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 The ING Trust, on behalf of Acquired Fund, covenants that the ING Trust
will, from time to time, as and when reasonably requested by the Acquiring Fund,
execute and deliver or cause to be executed and delivered all such assignments
and other instruments, and will take or cause to be taken such further action as
the Company, on behalf of the Acquiring Fund, may reasonably deem necessary or
desirable in order to vest in and confirm (a) the ING Trust's, on behalf of the
Acquired Fund's, title to and possession of the Acquiring Fund Shares to be
delivered hereunder, and (b) the Company's, on behalf of the Acquiring Fund's,
title to and possession of all the assets and otherwise to carry out the intent
and purpose of this Agreement.
B-9
<PAGE>
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the ING Trust, on behalf of the Acquired Fund, to
consummate the transactions provided for herein shall be subject, at the ING
Trust's election, to the performance by the Company, on behalf of the Acquiring
Fund, of all the obligations to be performed by it hereunder on or before the
Closing Date, and, in addition thereto, the following further conditions:
6.1 All representations and warranties of the Company, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
6.2 The Company shall have delivered to the ING Trust a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to the ING Trust and
dated as of the Closing Date, to the effect that the representations and
warranties of the Company, on behalf of the Acquiring Fund, made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement and as to such
other matters as the ING Trust shall reasonably request;
6.3 The Company, on behalf of the Acquiring Fund, shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by the Company, on behalf of the
Acquiring Fund, on or before the Closing Date; and
6.4 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Company, on behalf of the Acquiring Fund, to
complete the transactions provided for herein shall be subject, at the Company's
election to the performance by the ING Trust, on behalf of The Acquired Fund,
all of the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the ING Trust, on behalf of the
Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
7.2 The ING Trust shall have delivered to the Acquiring Fund a statement of
the Acquired Fund's assets and liabilities, as of the Closing Date, certified by
the Treasurer of the ING Trust;
7.3 The ING Trust shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Company and dated as of the Closing Date, to the effect that the representations
and warranties of the ING Trust, on behalf of the Acquired Fund, made in this
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<PAGE>
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Company shall reasonably request;
7.4 The ING Trust, on behalf of The Acquired Fund, shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by the ING Trust, on behalf of the
Acquired Fund, on or before the Closing Date;
7.5 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1;
7.6 The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net realized capital
gains, if any, for the period from the close of its last fiscal year to 4:00
p.m. Eastern time on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to the extent not
otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been satisfied on or
before the Closing Date with respect to the ING Trust, on behalf of the Acquired
Fund, or the Company, on behalf of the Acquiring Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the ING Trust's Declaration
of Trust, By-Laws, applicable Delaware law and the 1940 Act, and certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Company nor the ING Trust may waive the conditions set forth in this paragraph
8.1;
8.2 On the Closing Date no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Company or the ING Trust to permit consummation, in all material respects,
of the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund, provided that either party hereto may for itself waive any of
such conditions;
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert addressed to the
ING Trust and the Company substantially to the effect that, based upon certain
facts, assumptions, and representations, the transaction contemplated by this
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Agreement shall constitute a tax-free reorganization for Federal income tax
purposes. The delivery of such opinion is conditioned upon receipt by Dechert of
representations it shall request of the Company and the ING Trust.
Notwithstanding anything herein to the contrary, neither the Company nor the ING
Trust may waive the condition set forth in this paragraph 8.5.
9. INDEMNIFICATION
9.1 The Company, out of the Acquiring Fund's assets, agrees to indemnify
and hold harmless the ING Trust and each of the ING Trust's Trustees and
officers from and against any and all losses, claims, damages, liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally the ING
Trust or any of its Trustees or officers may become subject, insofar as any such
loss, claim, damage, liability or expense (or actions with respect thereto)
arises out or or is based on any breach by the Company of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
9.2 The ING Trust, out of the Acquired Fund's assets, agrees to indemnify
and hold harmless the Company and each of its Directors and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally the Company or any of its
Directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out or or
is based on any breach by the ING Trust of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
10. BROKERAGE FEES AND EXPENSES
10.1 The Company, on behalf of the Acquiring Fund, and the ING Trust, on
behalf of the Acquired Fund, represent and warrant to each other that there are
no brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
10.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquiring
Fund, and (2) half are borne by the Acquired and Acquiring Funds and will be
paid by the Acquired Fund and Acquiring Fund pro rata based upon the relative
net assets of the Acquiring Fund and Acquired Fund as of the close of business
on the record date for determining the shareholders of the Acquired Fund
entitled to vote on the Reorganization. The costs of the Reorganization shall
include, but not be limited to, costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Registration Statement,
printing and distributing the Acquiring Fund's prospectus and the Acquired
Fund's proxy materials, legal fees, accounting fees, securities registration
fees, and expenses of holding shareholders' meetings. Notwithstanding any of the
foregoing, expenses will in any event be paid by the party directly incurring
such expenses if and to the extent that the payment by another person of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The Company and the ING Trust agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
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11.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquired Fund and Acquiring Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by either party by (i) mutual agreement of the parties, or (ii)
by either party if the Closing shall not have occurred on or before ___________
__, 200_, unless such date is extended by mutual agreement of the parties, or
(iii) by either party if the other party shall have materially breached its
obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Directors/Trustees or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of the ING Trust
and the Company; provided, however, that following the meeting of the
shareholders of the Acquired Fund called by the ING Trust pursuant to paragraph
5.2 of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Class A, Class B, Class C, and
Class Q Acquiring Fund Shares to be issued to the Acquired Fund Shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the ING
Trust, 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, attn: Louis
S. Citron, in each case with a copy to Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, New York 10169, attn: Steven R. Howard;
and to the Company, 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258,
attn: James M. Hennessy, in each case with a copy to Dechert, 1775 Eye Street,
N.W., Washington, D.C. 20006, attn: Jeffrey S. Puretz.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland without regard to its principles of conflicts
of laws.
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15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the ING Trust personally, but shall bind only the trust
property of the Acquired Fund, as provided in the Declaration of Trust of the
ING Trust. The execution and delivery by such officers shall not be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of such party.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest:
PILGRIM INTERNATIONAL FUND, INC.
on behalf of its sole series, the
PILGRIM INTERNATIONAL FUND
By:
---------------------------------- -------------------------------------
SECRETARY
Title:
----------------------------------
Attest: ING FUNDS TRUST on behalf of the
ING INTERNATIONAL EQUITY FUND series
By:
---------------------------------- -------------------------------------
SECRETARY
Title:
----------------------------------
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<PAGE>
APPENDIX C
ADDITIONAL INFORMATION REGARDING PILGRIM INTERNATIONAL FUND, INC.
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to four separate Classes of the
Pilgrim International Fund ("Fund"): Class A, Class B, Class C, and Class Q each
of which represents an identical interest in the Fund's investment portfolio,
but are offered with different sales charges and distribution (Rule 12b-1) and
service fee arrangements. As described below and elsewhere in this Proxy
Statement/Prospectus, the contingent deferred sales load structure and
conversion characteristics of the Fund shares that will be issued to you in the
Reorganization will be the same as those that apply to ING International Equity
Fund shares held by you immediately prior to the Reorganization, and the period
that you held shares of ING International Equity Fund will be included in the
holding period of the Fund for purposes of calculating any contingent deferred
sales charges and determining any conversion rights. Purchases of the shares of
the Fund after the Reorganization will be subject to the sales load structure
and conversion rights discussed below.
The sales charges and fees for each Class of shares of the Fund are shown
and contrasted in the chart below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Q
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Initial Sales Charge on Purchases 5.75%(1) None None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00%(4) None
Annual Distribution (12b-1) and Service Fees(5) 0.25% 1.00% 1.00% 0.25%
Maximum Purchase Unlimited $250,000 Unlimited Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A N/A
</TABLE>
----------
(1) Imposed upon purchase. Reduced for purchases of $50,000 and over.
(2) For investments of $1 million or more, a CDSC of no more than 1% may be
assessed on redemptions of shares that were purchased without an initial
sales charge. See "Class A Shares: Initial Sales Charge Alternative" in
this Appendix C.
(3) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in this Appendix C.
(4) Imposed upon redemption within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund issued to shareholders of ING International
Equity Fund in the Reorganization will convert to Class A shares in the
eighth year from the original date of purchase of the Class B shares of ING
International Equity Fund.
The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Orders for Class B
shares in excess of $250,000 will be accepted as orders for Class A shares or
declined.
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CLASS A SHARES: INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the
Fund are sold at the net asset value ("NAV") per share in effect plus a sales
charge as described in the following table. For waivers or reductions of the
Class A shares sales charges, see "Special Purchases without a Sales Charge" and
"Reduced Sales Charges" below.
AS A % OF THE AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV
--------------- -------------- ------
Less than $50,000 5.75% 6.10%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $1,000,000 2.00% 2.04%
However, shareholders that purchased Funds that were part of the Lexington
Family of Funds at the time of purchase are not subject to sales charges for the
life of the account. There is no initial sales charge on purchases of $1,000,000
or more. However, the shares will be subject to a CDSC if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:
PERIOD DURING
YOUR INVESTMENT CDSC WHICH CDSC APPLIES
--------------- ---- ------------------
$1,000,000 - $2,499,999 1.00% 2 years
$2,500,000 - $4,999,999 0.50% 1 year
$5,000,000 and over 0.25% 1 year
Class A shares of the Fund issued in connection with the Reorganization
with respect to Class A shares of ING International Equity Fund that were
subject to a CDSC at the time of the Reorganization, will be subject to a CDSC
of up to 1% for a period of 12 months from the date of purchase of the original
shares of ING International Equity Fund.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced
sales charge on a purchase of Class A shares of the Fund or other open-end funds
in the Pilgrim Funds or ING Funds which offer Class A shares, or shares with
front-end sales charges ("Participating Funds") by completing the Letter of
Intent section of an Application to purchase Fund shares. Executing the Letter
of Intent expresses an intention to invest during the next 13 months a specified
amount, which, if made at one time, would qualify for a reduced sales charge. An
amount equal to the Letter of Intent amount multiplied by the maximum sales
charge imposed on purchases of the Fund and Class will be restricted within your
account to cover additional sales charges that may be due if your actual total
investment fails to qualify for the reduced sales charges. See the Statement of
Additional Information for the Fund for details on the Letter of Intent option
or contact the Shareholder Servicing Agent at (800) 992-0180 for more
information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
Funds (excluding Pilgrim Money Market Fund) or ING Funds ("Rights of
Accumulation"). The reduced sales charges apply to quantity purchases made at
one time or on a cumulative basis over any period of time. See the Statement of
Additional Information for the Fund for details or contact the Shareholder
Servicing Agent at (800) 992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
Privilege, shares held by investors in the Pilgrim Funds which impose a CDSC may
be combined with Class A shares for a reduced sales charge but will not affect
any CDSC which may be imposed upon the redemption of shares of the Fund which
imposes a CDSC.
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SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at (800) 992-0180, or see
the Statement of Additional Information for the Fund.
CLASS B SHARES: DEFERRED SALES CHARGE ALTERNATIVE. Class B shares are
offered at their NAV per share without any initial sales charge. Class B shares
that are redeemed within six years of purchase, however, will be subject to a
CDSC as described in the table that follows. Class B shares of the Fund are
subject to distribution and service fees at an annual rate of 1.00% of the
average daily net assets of the Class, which is higher than the distribution and
service fees of Class A shares. The higher distribution and service fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower NAV than Class A shares. Orders for Class B shares in excess of
$250,000 will be accepted as orders for Class A shares or declined. The amount
of the CDSC is based on the lesser of the NAV of the Class B shares at the time
of purchase or redemption. There is no CDSC on Class B shares acquired through
the reinvestment of dividends and capital gains distributions. The CDSCs are as
follows:
YEAR OF REDEMPTION AFTER PURCHASE CDSC
--------------------------------- ----
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
After Sixth Year None
Class B shares will automatically convert into Class A shares approximately
eight years after purchase. Class B shares of the Fund issued in connection with
the Reorganization with respect to Class B shares of ING International Equity
Fund will convert to Class A shares eight years after the purchase of the
original shares of ING International Equity Fund. For additional information on
the CDSC and the conversion of Class B, see the Fund's Statement of Additional
Information.
CLASS C SHARES. Class C shares are offered at their NAV per share without
an initial sales charge. Class C shares may be subject to a CDSC of 1% if
redeemed within one year of purchase. The amount of the CDSC is based on the
lesser of the NAV of the Class C shares at the time of purchase or redemption.
There is no CDSC on Class C shares acquired through the reinvestment of
dividends and capital gains distributions.
CLASS Q SHARES. Class Q shares are offered at NAV without a sales charge to
qualified retirement plans, financial and other institutions and "wrap
accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment is $10,000. The Distributor may waive these minimums from
time to time.
WAIVERS OF CDSC. The CDSC will be waived in the following cases. In
determining whether a CDSC is applicable, it will be assumed that shares held in
the shareholder's account that are not subject to such charge are redeemed
first.
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1) The CDSC will be waived in the case of redemption following the death or
permanent disability of a shareholder if made within one year of death or
initial determination of permanent disability. The waiver is available only for
those shares held at the time of death or initial determination of permanent
disability.
2) The CDSC also may be waived for Class B shares redeemed pursuant to a
Systematic Withdrawal Plan, up to a maximum of 12% per year of a shareholder's
account value based on the value of the account at the time the plan is
established and annually thereafter, provided all dividends and distributions
are reinvested and the total redemptions do not exceed 12% annually.
3) The CDSC also will be waived in the case of mandatory distributions from
a tax-deferred retirement plan or an IRA.
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at (800) 992-0180.
REINSTATEMENT PRIVILEGE. Class B and Class C shareholders who have redeemed
their shares in any open-end Pilgrim Fund or ING Fund may reinvest some or all
of the proceeds in the same share Class within 90 days without a sales charge.
Reinstated Class B and Class C shares will retain their original cost and
purchase date for purposes of the CDSC. This privilege can be used only once per
calendar year. See the Statement of Additional Information for the Fund for
details or contact the Shareholder Servicing Agent at (800) 992-0180 for more
information.
RULE 12b-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 applicable to each Class of shares of
the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, ING Pilgrim Securities,
Inc. (the "Distributor") may receive from the Fund an annual fee in connection
with the offering, sale and shareholder servicing of the Fund's Class A, Class
B, Class C and Class Q shares.
DISTRIBUTION AND SERVICING FEES. As compensation for services rendered and
expenses borne by the Distributor in connection with the distribution of shares
of the Fund and in connection with services rendered to shareholders of the
Fund, the Fund pays the Distributor servicing fees and distribution fees up to
the annual rates set forth below (calculated as a percentage of the Fund's
average daily net assets attributable to that Class):
SERVICING FEE DISTRIBUTION FEE
------------- ----------------
Class A 0.25% None
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class Q 0.25% None
Fees paid under the Rule 12b-1 Plan may be used to cover the expenses of
the Distributor from the sale of Class A, Class B, Class C or Class Q shares of
the Fund, including payments to Authorized Dealers, and for shareholder
servicing. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
OTHER EXPENSES. In addition to the management fee and other fees described
previously, the Fund pays other expenses, such as legal, audit, transfer agency
and custodian fees, proxy solicitation costs, and the compensation of Directors
who are not affiliated with ING Pilgrim Investments, Inc. ("ING Pilgrim
Investments"). Most Fund expenses are allocated proportionately among all of the
outstanding shares of that Fund. However, the Rule 12b-1 Plan fees for each
Class of shares are charged proportionately only to the outstanding shares of
that Class.
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PURCHASING SHARES. The Fund reserves the right to liquidate sufficient
shares to recover annual Transfer Agent fees should the investor fail to
maintain his/her account value at a minimum of $1,000.00 ($250.00 for IRAs). The
minimum initial investment in the Fund is $1,000 ($250 for IRAs), and the
minimum for additional investment in the Fund is $100. The minimum initial
investment for a pre-authorized retirement plan is $100, plus monthly
installments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable
sales charge. When you sell shares, you receive the NAV minus any applicable
deferred sales charge. Exchange orders are effected at NAV.
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. New York City time) on each day that it is
open for business. The NAV of each Class represents that class' pro rata share
of that Fund's net assets as adjusted for any class specific expenses (such as
fees under a Rule 12b-1 plan), and divided by that Class' outstanding shares. In
general, the value of the Fund's assets is based on actual or estimated market
value, with special provisions for assets not having readily available market
quotations, and short-term debt securities and for situations where market
quotations are deemed unreliable. The NAV per share of each Class of the Fund
will fluctuate in response to changes in market conditions and other factors.
Portfolio securities for which market quotations are readily available are
stated at market value. Short-term debt securities having a maturity of 60 days
or less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors, valuing securities at
fair value involves greater reliance on judgment than securities that have
readily available market quotations. For information on valuing foreign
securities, see the Fund's Statement of Additional Information.
PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized
investment plan to purchase shares with automatic bank account debiting. For
further information on pre-authorized investment plans, contact the Shareholder
Servicing Agent at (800) 992-0181.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company ("SSB") acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB
currently receives a $12 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the NAV
next determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
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the required steps set forth above under "Purchase of Shares" have been
completed. If you purchase by wire, however, the order will be deemed to be in
proper form after the telephone notification and the federal funds wire have
been received. If you purchase by wire, you must submit an application form in a
timely fashion. If an order or payment by wire is received after the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
Time), the shares will not be credited until the next business day.
You will receive a confirmation of each new transaction in your account,
which also will show you the number of shares of the Fund you own including the
number of shares being held in safekeeping by the Transfer Agent for your
account. You may rely on these confirmations in lieu of certificates as evidence
of your ownership. Certificates representing shares of the Fund will not be
issued unless you request them in writing.
TELEPHONE ORDERS. The Fund and its Transfer Agent will not be responsible
for the authenticity of phone instructions or losses, if any, resulting from
unauthorized shareholder transactions if they reasonably believe that such
instructions were genuine. The Fund and its Transfer Agent have established
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include recording telephone instructions for exchanges
and expedited redemptions, requiring the caller to give certain specific
identifying information, and providing written confirmation to shareholders of
record not later than five days following any such telephone transactions. If
the Fund and its Transfer Agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
Telephone redemptions may be executed on all accounts other than retirement
accounts.
EXCHANGE PRIVILEGES AND RESTRICTIONS
An exchange privilege is available. Exchange requests may be made in
writing to the Transfer Agent or by calling the Shareholder Servicing Agent at
(800) 992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
than four per year). ING Pilgrim Investments reserves the right, upon 60 days'
prior notice, to restrict the frequency of, otherwise modify, or impose charges
of up to $5.00 upon exchanges. The total value of shares being exchanged must at
least equal the minimum investment requirement of the Fund into which they are
being exchanged. The Fund may change or cancel its exchange policies at any
time, upon 60 days' written notice to shareholders.
Shares of one Class of the Fund generally may be exchanged for shares of
that same Class of any other open-end Pilgrim Fund or ING Fund without payment
of any additional sales charge. In most instances, if you exchange and
subsequently redeem your shares, any applicable CDSC will be based on the full
period of the share ownership. Shareholders exercising the exchange privilege
with any other open-end Pilgrim Fund or ING Fund should carefully review the
Prospectus of that Fund. Exchanges of shares are sales and may result in a gain
or loss for federal and state income tax purposes. You will automatically be
assigned the telephone exchange privilege unless you mark the box on the Account
Application that signifies you do not wish to have this privilege. The exchange
privilege is only available in states where shares of the Fund being acquired
may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent at (800) 992-0180 unless you mark the box on the
Account Application that indicates that you do not wish to have the telephone
exchange privilege.
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SYSTEMATIC EXCHANGE PRIVILEGE. With an initial account balance of at least
$5,000 and subject to the information and limitations outlined above, you may
elect to have a specified dollar amount of shares systematically exchanged,
monthly, quarterly, semi-annually or annually (on or about the 10th of the
applicable month), from your account to an identically registered account in the
same Class of any other open-end Pilgrim fund or ING Fund. This exchange
privilege may be modified at any time or terminated upon 60 days, written notice
to shareholders.
SMALL ACCOUNTS. Due to the relatively high cost of handling small
investments, the Fund reserves the right upon 30 days' written notice to redeem,
at NAV, the shares of any shareholder whose account (except for IRAs) has a
value of less than $1,000, other than as a result of a decline in the NAV per
share.
With respect to Class Q shares, if you draw down a non-retirement account
so that its total value is less than the Fund minimum, you may be asked to
purchase more shares within 60 days. If you do not take action, the Fund may
close out your account and mail you the proceeds. Your account will not be
closed if its drop in value is due to the Fund's performance.
HOW TO REDEEM SHARES
Shares of the Fund will be redeemed at the NAV (less any applicable CDSC
and/or federal income tax withholding) next determined after receipt of a
redemption request in good form on any day the New York Stock Exchange is open
for business.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to have monthly, quarterly,
semi-annual or annual payments in any fixed amount of $100 or more made to
yourself, or to anyone else you properly designate, as long as the account has a
current value of at least $10,000. With respect to Class Q shares, you may elect
to have monthly, quarterly, semi-annual or annual payments in any fixed amount
of $1,000 or more made to yourself or to anyone else you properly designate, as
long as the account has a current value of at least $250,000. For additional
information, contact the Shareholder Servicing Agent at (800) 992-0180, or see
the Fund's Statement of Additional Information.
PAYMENTS. Payment to shareholders for shares redeemed or repurchased
ordinarily will be made within three days after receipt by the Transfer Agent of
a written request in good order. The Fund may delay the mailing of a redemption
check until the check used to purchase the shares being redeemed has cleared
which may take up to 15 days or more. To reduce such delay, all purchases should
be made by bank wire or federal funds. The Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
Rules of the Securities and Exchange Commission. The Fund intends to pay in cash
for all shares redeemed, but under abnormal conditions that make payment in cash
harmful to the Fund, the Fund may make payment wholly or partly in securities at
their then current market value equal to the redemption price. In such case, the
Fund could elect to make payment in securities for redemptions in excess of
$250,000 or 1% of its net assets during any 90-day period for any one
shareholder. An investor may incur brokerage costs in converting such securities
to cash.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund. ING
Pilgrim Investments provides the Fund with office space, equipment and personnel
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necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of Directors of the Fund upon 60 days' written notice.
Organized in December 1994, ING Pilgrim Investments is registered as an
investment adviser with the Securities and Exchange Commission. As of September
30, 2000, ING Pilgrim Investments managed over $20.7 billion in assets. ING
Pilgrim Investments bears its expenses of providing the services described
above. Investment management fees are computed and accrued daily and paid
monthly.
PARENT COMPANY AND DISTRIBUTOR. ING Pilgrim Investments and the Distributor
are indirect, wholly owned subsidiaries of ING Groep, N.V. (NYSE:ING) ("ING
Group"). ING Group is a global financial institution active in the field of
insurance, banking and asset management in more than 65 countries, with almost
100,000 employees.
SHAREHOLDER SERVICING AGENT. ING Pilgrim Group, Inc. serves as Shareholder
Servicing Agent for the Fund. The Shareholder Servicing Agent is responsible for
responding to written and telephonic inquiries from shareholders. The Fund pays
the Shareholder Servicing Agent a monthly fee on a per-contact basis, based upon
incoming and outgoing telephonic and written correspondence.
PORTFOLIO TRANSACTIONS. ING Pilgrim Investments will place orders to
execute securities transactions that are designed to implement the Fund's
investment objectives and policies. ING Pilgrim Investments will use its
reasonable efforts to place all purchase and sale transactions with brokers,
dealers and banks ("brokers") that provide "best execution" of these orders. In
placing purchase and sale transactions, ING Pilgrim Investments may consider
brokerage and research services provided by a broker to ING Pilgrim Investments
or its affiliates, and the Fund may pay a commission for effecting a securities
transaction that is in excess of the amount another broker would have charged if
ING Pilgrim Investments determines in good faith that the amount of commission
is reasonable in relation to the value of the brokerage and research services
provided by the broker. In addition, ING Pilgrim Investments may place
securities transactions with brokers that provide certain services to the Fund.
ING Pilgrim Investments also may consider a broker's sale of Fund shares if ING
Pilgrim Investments is satisfied that the Fund would receive best execution of
the transaction from that broker.
DIVIDENDS, DISTRIBUTIONS & TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund generally distributes most or all of
its net earnings in the form of dividends. The Fund pays dividends and capital
gains, if any, annually. Dividends and distributions will be determined on a
class basis.
Any dividends and distributions paid by the Fund will be automatically
reinvested in additional shares of the respective Class of that Fund, unless you
elect to receive distributions in cash. When a dividend or distribution is paid,
the NAV per share is reduced by the amount of the payment. You may, upon written
request or by completing the appropriate section of the Account Application in
the Pilgrim Prospectus, elect to have all dividends and other distributions paid
on a Class A, B, C, or Q account in the Fund invested into a Pilgrim Fund or ING
Fund which offers Class A, B, C, or Q shares.
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's Statement of Additional Information for
additional information. You should rely on your own tax adviser for advice about
the particular federal, state and local tax consequences to you of investing in
the Fund.
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The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, most shareholders will be taxed on amounts they receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held your Fund
shares or whether you elect to receive your distributions in cash or reinvest
them in additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid
during the following January may be treated as having been received by
shareholders in the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital
gains distributions.
If you invest through a tax-deferred account, such as a retirement plan,
you generally will not have to pay tax on dividends until they are distributed
from the account. These accounts are subject to complex tax rules, and you
should consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You
will generally have a capital gain or loss, which will be long-term or
short-term, generally depending on how long you hold those shares. If you
exchange shares, you may be treated as if you sold them. You are responsible for
any tax liabilities generated by your transactions.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
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FINANCIAL HIGHLIGHTS
The information in the table below, except for the six months ended June
30, 2000, has been audited by KPMG LLP, independent auditors.
<TABLE>
<CAPTION>
Six months ended Year ended December 31,
June 30, 2000 -----------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 13.45 11.61 10.10 10.86 10.60 10.37
Net investment income (loss) $ 0.01 (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 $ 0.01 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 $ 13.46 13.45 11.61 10.10 10.86 10.60
Total Return(1) % 0.07 47.85 19.02 1.61 13.57 5.77
Ratios/Supplemental Data:
Net assets, end of period (thousands) $ 25,611 25,304 24,000 19,949 18,891 17,855
Ratio of expenses to average net assets, before
reimbursement or waiver(2) % 2.03 1.98 2.25 2.15 2.45 2.46
Ratio of expenses to average net assets, net of
reimbursement or waiver(2) % 2.03 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) % 0.09 (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) % 0.09 (0.21) 0.35 0.53 (0.39) (0.12)
Portfolio Turnover Rate % 65.06 143.82 143.67 122.56 113.55 137.72
</TABLE>
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(1) 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.
(2) Annualized for periods less than one year.
C-10
<PAGE>
APPENDIX D
The following is a list of the ING Funds, which are managed by an
affiliate of ING Pilgrim Investments, and Pilgrim Funds and the classes of
shares of each Fund that are expected to be offered at or shortly after the
Reorganization:
FUND CLASSES OFFERED
---- ---------------
ING FUNDS
U.S. EQUITY
Internet Fund A, B and C
Tax Efficient Equity Fund A, B and C
GLOBAL/INTERNATIONAL EQUITY
European Equity Fund A, B and C
Global Communications Fund A, B and C
Global Information Technology Fund A, B and C
FIXED INCOME
High Yield Bond Fund A, B and C
Intermediate Bond Fund A, B and C
Money Market Fund A, B, C and I
National Tax-Exempt Bond Fund A, B and C
PILGRIM FUNDS
U.S. EQUITY
Balanced Fund A, B, C, Q and T
Bank and Thrift Fund A and B
Convertible Fund A, B, C and Q
Corporate Leaders Trust Fund A
Growth and Income Fund A, B, C and Q
Growth + Value Fund A, B, C and Q
Growth Opportunities Fund A, B, C, Q, I and T
LargeCap Growth Fund A, B, C and Q
MagnaCap Fund A, B, C, Q and M
MidCap Growth Fund A, B, C and Q
MidCap Opportunities Fund A, B, C, Q and I
Research Enhanced Index Fund A, B, C, Q and I
SmallCap Growth Fund A, B, C, Q
SmallCap Opportunities Fund A, B, C, Q, I and T
GLOBAL/INTERNATIONAL EQUITY
Asia-Pacific Equity Fund A, B and M
Emerging Countries Fund A, B, C and Q
Gold Fund (to be renamed Precious Metals Fund) A
International Fund A, B, C and Q
International Core Growth Fund A, B, C and Q
International SmallCap Growth Fund A, B, C and Q
International Value Fund A, B, C and Q
Troika Dialog Russia Fund A
Worldwide Growth Fund A, B, C and Q
FIXED INCOME
GNMA Income Fund A, B, C, Q, M and T
High Yield Fund A, B, C, Q and M
High Yield Fund II A, B, C, Q and T
Lexington Money Market Trust A
Pilgrim Money Market Fund A, B and C
Strategic Income Fund A, B, C and Q
D-1
<PAGE>
APPENDIX E
As of December 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of Pilgrim
International Fund:
<TABLE>
<CAPTION>
% OF CLASS % OF FUND % OF FUND
BEFORE BEFORE AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C>
Grace Jones Richardson Trust A 12.33% 12.24%
Piedmont Financial Company Inc.
Attn: Susan Gleason
PO Box 20124
Greensboro, NC 27420
Jacqueline Goldberg B 8.45% 0.01%
3149 Cristobal Way
Las Vegas, NV 89117
Jacqueline Goldberg B 10.40% 0.02%
3149 Cristobal Way
Las Vegas, NV 89117
First Clearing Corp FBO B 14.48% 0.02%
Patricia Carbine Trust, Acct #2036-4480
8730 E San Rafael Dr
Scottsdale, AZ 85258
First Clearing Corp FBO B 6.62% 0.01%
Patricia Carbine IRA, Acct #2036-4482
8730 E San Rafael Dr
Scottsdale, AZ 85258
First Clearing Corp FBO B 37.42% 0.06%
Laurel Kubby IRA, Acct #4797-2634
5144 E Calle Del Medio
Phoenix, AZ 85018
First Clearing Corp FBO B 22.98% 0.04%
Esther & Wayne Simpson
Acct #8225-5610
3822 Thornton Dr.
Cincinnati, OH 45236
First Clearing Corp FBO C 6.33% 0.04%
Esther & Wayne Simpson
Acct #8225-5610
3822 Thornton Dr.
Cincinnati, OH 45236
CIBC World Markets Corp FBO C 17.57% 0.11%
Acct #092-46770-16
Church Street Station
PO Box 3484
New York, NY 10008
Marion J Wainwright MD Trust C 21.21% 0.13%
Biloxi Internal Medicine Clinic MPP
808 Howard Ave
Biloxi, MS 39530
</TABLE>
E-1
<PAGE>
As of November 1, 2000, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of ING
International Equity Fund:
<TABLE>
<CAPTION>
% OF CLASS % OF FUND % OF FUND
BEFORE BEFORE AFTER
NAME AND ADDRESS CLASS REORGANIZATION REORGANIZATION REORGANIZATION
---------------- ----- -------------- -------------- --------------
<S> <C> <C> <C>
ING America Insurance Holdings, Inc. A 64.77% 58.12%
Investment Accounts
5780 Powers Ferry Road, NW
Atlanta, GA 30327-4347
Carn & Co. #02265101 A 19.95% 17.90%
ING Savings Plan
Attn: Mutual Funds - Star
P.O. Box 96211
Washington, D.C. 20090-6211
Strawser Inc. 410 K Savings & C 20.05% 0.88%
Retirement Plan
1595 Frank Rd
Columbus, OH 43223
</TABLE>
E-2
<PAGE>
PART B
PILGRIM INTERNATIONAL FUND, INC.
------------------------------------------------------------
Statement of Additional Information
________ ___, 2000
------------------------------------------------------------
Acquisition of the Assets and Liabilities By and in Exchange for Shares of
of ING International Equity Fund Pilgrim International Fund, Inc.
(a series of ING Funds Trust) 7337 East Doubletree Ranch Road
7337 East Doubletree Ranch Road Scottsdale, Arizona 85258
Scottsdale, Arizona 85258
This Statement of Additional Information is available to the Shareholders of ING
International Equity Fund in connection with a proposed transaction whereby all
of the assets and liabilities of ING International Equity Fund, a series of ING
Funds Trust, will be transferred to Pilgrim International Fund in exchange for
shares of Pilgrim International Fund.
This Statement of Additional Information of the Pilgrim International Fund, Inc.
consists of this cover page and the following documents, each of which was filed
electronically with the Securities and Exchange Commission and is incorporated
by reference herein:
1. The Statement of Additional Information for Pilgrim International Fund
dated July 31, 2000, as filed on July 26, 2000.
2. The Statement of Additional Information for ING International Equity Value
Fund dated November 6, 2000, as filed on November 6, 2000.
3. The Financial Statements of ING International Equity Fund are included in
the Annual Report of ING Funds Trust dated April 30, 2000 as filed on July
7, 2000.
4. The Financial Statements of Pilgrim International Fund are included in the
Annual Report of Pilgrim International Fund dated December 31, 1999, as
filed on February 28, 2000.
5. The Financial Statements of Pilgrim International Fund are included in the
Semi-Annual Report of Pilgrim International Fund dated June 30, 2000, as
filed on August 31, 2000
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated ________ ___, 2000 relating to the Reorganization of ING
International Equity Fund may be obtained, without charge, by writing to Pilgrim
at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258 or calling (800)
992-0180. This Statement of Additional Information should be read in conjunction
with the Prospectus/Proxy Statement.
1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and pro forma financial
statements for the combined Fund, assuming the Reorganization is consummated, as
of June 30, 2000. The first table presents Statements of Assets and Liabilities
(unaudited) for each Fund and pro forma figures for the combined Fund. The
second table presents Statements of Operations (unaudited) for each Fund and pro
forma figures for the combined Fund. The third table presents Portfolio of
Investments (unaudited) for each Fund and pro forma figures for the combined
Fund. The tables are followed by the Notes to the Pro Forma Financial Statements
(unaudited).
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
ING
PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value* $23,814,625 $54,278,983 $ 78,093,608
Foreign currencies** -- 2,540,781 2,540,781
Repurchase Agreements -- 2,870,000 2,870,000
Cash 1,771,740 12,939 1,784,679
Receivable for investment securities sold 42,731 776,027 818,758
Receivable for fund shares sold 478,800 22,344 501,144
Dividends and interest receivable 74,196 123,950 198,146
Due from affiliate -- 15,308 15,308
Prepaid expenses -- 22,183 22,183
----------- ----------- --------- ------------
Total Assets 26,182,092 60,662,515 -- 86,844,607
----------- ----------- --------- ------------
LIABILITIES:
Due to affiliate 21,130 -- 21,130
Payable for investment securities purchased -- 4,036,736 2,176,142
Payable for fund shares redeemed 478,018 10,105 488,123
Other liabilities and accrued expenses 72,123 109,102 2,041,819
----------- ----------- --------- ------------
Total Liabilities 571,271 4,155,943 -- 4,727,214
----------- ----------- --------- ------------
NET ASSETS $25,610,821 $56,506,572 $ -- $ 82,117,393
=========== =========== ========= ============
NET ASSETS CONSIST OF:
Paid-in capital $18,935,047 $50,890,776 $ 69,825,823
Undistributed net investment income (loss) 232,525 (59,032) 173,493
Accumulated net realized gain on investments
and foreign currency transactions 4,827,261 2,341,500 7,168,761
Unrealized appreciation of investments and
foreign currency translations of other
assets and liabilities 1,615,988 3,333,328 4,949,316
----------- ----------- --------- ------------
Net Assets $25,610,821 $56,506,572 $ -- $ 82,117,393
=========== =========== ========= ============
CLASS A:
Net Assets $25,610,821 $51,722,264 $ 77,333,085
Shares outstanding 1,902,951 4,149,142 (306,478)(A) 5,745,615
Net asset value and redemption price per share $ 13.46 $ 12.47 $ 13.46
Maximum offering price per share $ 13.46 $ 13.23 $ 14.28
CLASS B:
Net Assets N/A $ 2,084,712 $ 666,443 (B) $ 2,751,155
Shares outstanding N/A 169,138 35,257 (B) 204,395
Net asset value and redemption price per share N/A $ 12.33 $ 13.46
Maximum offering price per share N/A $ 12.33 $ 13.46
CLASS C:
Net Assets N/A $ 1,907,891 $ 1,907,891
Shares outstanding N/A 155,088 (13,343)(A) 141,745
Net asset value and redemption price per share N/A $ 12.30 $ 13.46
Maximum offering price per share N/A $ 12.30 $ 13.46
CLASS Q:
Net Assets N/A N/A $ 125,262 (C) $ 125,262
Shares outstanding N/A N/A 9,306 (C) 9,306
Net asset value and redemption price per share N/A N/A $ 13.46
Maximum offering price per share N/A N/A $ 13.46
CLASS I:
Net Assets N/A $ 125,262 $(125,262)(C) N/A
Shares outstanding N/A 10,061 (10,061)(C) N/A
Net asset value and redemption price per share N/A $ 12.45 N/A
Maximum offering price per share N/A $ 12.45 N/A
CLASS X:
Net Assets N/A $ 666,443 $(666,443)(B) N/A
Shares outstanding N/A 53,949 (53,949)(B) N/A
Net asset value and redemption price per share N/A $ 12.35 N/A
Maximum offering price per share N/A $ 12.35 N/A
* Cost of Securities $22,196,098 $50,942,534 $ 73,138,632
** Cost of Foreign Currencies $ -- $ 2,587,183 $ 2,587,183
</TABLE>
(A) Reflects new shares issued, net of retired shares of the Fund.
(B) Reflects the merging of Class X into Class B.
(C) Reflects the merging of Class I into Class Q.
See Accompanying Notes to Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
ING
PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 2000 JUNE 30, 2000 JUNE 30, 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 326,389 $ 670,060 $ 996,449
Interest 105,695 142,838 248,533
------------ ------------ ------------ ------------
432,084 812,898 -- 1,244,982
Less: foreign tax expense 35,803 71,904 107,707
------------ ------------ ------------ ------------
Total investment income 396,281 740,994 -- 1,137,275
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees 237,109 556,904 (111,251) (A) 682,762
Distribution expenses
Class A 4,687 314,012 (305,725) (A) 12,974
Class B -- 11,990 4,725 (C) 16,715
Class C -- 9,638 9,638
Class X -- 4,725 (4,725) (C) --
Transfer agent and shareholder servicing expenses 30,822 139,151 (67,558) (A) 102,415
Directors' fees and expenses 52,345 485 (42,830) (B) 10,000
Professional fees 30,942 30,846 (15,423) (B) 46,365
Shareholder reporting 19,119 15,419 34,538
Accounting expenses 19,227 49,707 (24,854) (B) 44,080
Custodian expenses 39,154 77,072 116,226
Registration fees 8,688 51,563 (25,782) (B) 34,469
Computer processing fees 10,873 -- (10,873) (B) --
Other expenses 14,909 10,867 25,776
------------ ------------ ------------ ------------
Total expenses 467,875 1,272,379 (604,296) 1,135,958
------------ ------------ ------------ ------------
Less:
Waived and reimbursed fees -- 549,936 (549,936) (A) --
------------ ------------ ------------ ------------
Net expenses 467,875 722,443 (54,360) 1,135,958
------------ ------------ ------------ ------------
Net investment income (loss) (71,594) 18,551 54,360 1,317
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments 3,229,256 3,059,081 6,288,337
Foreign currency transactions 3,089,688 (181,609) 2,908,079
Net change in unrealized appreciation (depreciation) of:
Investments (340,953) 1,358,657 1,017,704
Foreign currency translation of other assets and
liabilities (13,605) 5,853 (7,752)
------------ ------------ ------------ ------------
Net gain from investments 5,964,386 4,241,982 -- 10,206,368
------------ ------------ ------------ ------------
NET (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 5,892,792 $ 4,260,533 $ 54,360 $ 10,207,685
============ ============ ============ ============
</TABLE>
(A) Reflects adjustment in expenses due to effects of proposed contract rate.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
(C) Reflects merging of Class X into Class B.
See Accompanying Notes to Financial Statements
3
<PAGE>
INTERNATIONAL FUND AND INTERNATIONAL EQUITY (ING) PRO FORMA
PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ING ING
PILGRIM INTERNATIONAL PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA INTERNATIONAL EQUITY PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS: 95.09%
AUSTRALIA: 0.53%
60,900 60,900 Foster's Brewing Group, Ltd. $ 171,858 $ 171,858
63,800 63,800 Telstra Corp., Ltd. 259,720 259,720
------------ ------------ ------------
431,578 -- 431,578
------------ ------------ ------------
BRAZIL: 0.99%
17,975 17,975 Embratel Participacoes SA $ 424,659 424,659
16,264 16,264 Tele Norte Leste Participacoes SA 384,237 384,237
------------ ------------ ------------
-- 808,896 808,896
------------ ------------ ------------
CANADA: 0.40%
20,000 20,000 # Industrial Alliance Life
Insurance Co. 330,70 330,708
------------ ------------ ------------
CHINA: 0.45%
1,780,000 1,780,000 PetroChina Co., Ltd. 369,906 369,906
------------ ------------ ------------
DENMARK: 0.77%
2,200 2,200 Novo Nordisk A/S 375,989 375,989
3,800 3,800 Tele Danmark A/S 256,844 256,844
------------ ------------ ------------
632,833 -- 632,833
------------ ------------ ------------
FINLAND: 2.50%
7,230 7,230 Sonera OYJ 329,611 329,611
33,850 33,850 Nokia OYJ 1,727,412 1,727,412
------------ ------------ ------------
-- 2,057,023 2,057,023
------------ ------------ ------------
FRANCE: 11.08%
2,400 2,400 Alcatel 158,052 158,052
1,760 1,760 Atos SA 165,337 165,337
3,430 3,445 6,875 Axa 542,513 542,704 1,085,217
5,780 5,780 BNP Paribas 556,260 556,260
2,260 2,260 Castorama Dubois
Investissements 558,853 558,853
3,890 3,890 Canal Plus 653,660 653,660
3,220 3,220 Christian Dior 730,145 730,145
385 385 Cross Systems 56,835 56,835
5,610 5,610 France Telecom 784,140 784,140
17,130 17,130 Havas Advertising 391,699 391,699
2,400 2,400 Rexel SA 185,199 185,199
7,200 7,200 Schlumberger, Ltd. 537,300 537,300
1,300 1,300 Sidel SA 105,862 105,862
3,680 9,430 13,110 @ Societe Generale 222,239 567,207 789,446
920 920 @ Sodifrance 26,457 26,457
8,465 8,465 Total Fina SA 1,297,962 1,297,962
8,244 8,244 Total Fina SA ADR 633,242 633,242
4,330 4,330 Vivendi 383,731 383,731
------------ ------------ ------------
3,016,767 6,082,630 9,099,397
------------ ------------ ------------
GERMANY: 7.10%
660 2,320 2,980 Allianz AG 240,098 841,707 1,081,805
2,750 2,750 Aventis SA 197,709 197,709
6,540 6,540 BASF AG 265,060 265,060
9,200 9,200 Commerzbank AG 327,186 327,186
4,511 10,508 15,019 Deutsche Bank AG 372,313 866,809 1,239,122
13,120 13,120 Deutsche Telekom 746,568 746,568
1,590 1,590 Muenchener Rueckversicher 504,752 504,752
2,370 2,370 SAP AG 437,843 437,843
1,600 5,240 6,840 Siemens AG 241,564 787,955 1,029,519
------------ ------------ ------------
1,378,870 4,450,694 5,829,564
------------ ------------ ------------
HONG KONG: 4.98%
121,200 121,200 Cable & Wireless HKT Ltd. 266,638 266,638
26,000 38,000 64,000 Cheung Kong (Holdings), Ltd. 287,683 420,435 708,118
98,000 98,000 China Mobile (Hong Kong) Ltd. 864,281 864,281
27,000 18,700 45,700 Hang Seng Bank, Ltd. 256,317 177,513 433,830
79,200 79,200 Hutchison Whampoa 995,651 995,651
916,000 916,000 I-Cable Communications, Ltd. 355,470 355,470
226,000 226,000 Mandarin Oriental
International, Ltd. 150,290 150,290
410,000 410,000 South China Morning Post
(Holdings), Ltd. 318,216 318,216
------------ ------------ ------------
1,367,976 2,724,518 4,092,494
------------ ------------ ------------
HUNGARY: 0.28%
6,750 6,750 Matav Rt. 232,453 232,453
------------ ------------ ------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ING ING
PILGRIM INTERNATIONAL PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA INTERNATIONAL EQUITY PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INDIA: 0.49%
18,200 18,200 Mahanagar Telephone Nigam 185,413 185,413
13,900 13,900 Videsh Sanchar Nigam Ltd. 218,230 218,230
------------ ------------ ------------
-- 403,643 403,643
------------ ------------ ------------
INDONESIA: 0.14%
10,400 10,400 Indosat (Persero) Tbk 118,300 118,300
------------ ------------ ------------
IRELAND: 0.45%
116,900 116,900 Jefferson Smurfit Group 201,706 201,706
23,500 23,500 @ Ryanair Holdings Plc 171,204 171,204
------------ ------------ ------------
372,910 -- 372,910
------------ ------------ ------------
ISRAEL: 0.63%
2,000 2,000 Mercury Interactive Corp. 193,563 193,563
5,800 5,800 Teva Pharmaceutical
Industries, Ltd. (ADR) 321,719 321,719
------------ ------------ ------------
515,282 -- 515,282
------------ ------------ ------------
ITALY: 2.52%
12,400 12,400 Banca Fideuram SpA 187,807 187,807
64,630 64,630 Banca Intesa SpA 289,399 289,399
11,000 11,000 Mediolanum SpA 179,678 179,678
37,630 37,630 San Paolo-IMI SpA 667,887 667,887
72,930 72,930 TIM SpA 745,039 745,039
------------ ------------ ------------
367,485 1,702,325 2,069,810
------------ ------------ ------------
JAPAN: 21.60%
64,000 64,000 Asahi Chemical Industry Co Ltd. 452,425 452,425
68,000 68,000 Bunka Shutter Co., Ltd. 173,533 173,533
21,000 21,000 Canon, Inc. 1,045,101 1,045,101
40 40 DDI Corp. 384,561 384,561
25,000 25,000 Daifuku Co., Ltd. 277,879 277,879
52,000 52,000 Daiwa Securities Group, Inc. 686,177 686,177
145,000 145,000 Hitachi Zosen Corp. 131,567 131,567
2,000 2,000 Hoya Corp. 179,582 179,582
28,000 28,000 Isetan Co., Ltd. 344,040 344,040
2,000 2,000 Jafco Co., Ltd. 327,027 327,027
4 4 Japan Telecom Co., Ltd. 173,911 173,911
23,000 23,000 KAO Corp. 702,389 702,389
14,000 14,000 MARUI Co., Ltd. 268,616 268,616
31,000 31,000 Matsushita Electric Industrial Co 803,525 803,525
49,000 49,000 Mitsubishi Corp. 442,914 442,914
150,000 150,000 Mitsui Engineer &
Shipbuilding Co., Ltd. 143,193 143,193
64,000 64,000 Mitsui Fudosan 693,718 693,718
3,000 3,000 Murata Manufacturing Co., Ltd. 438,286 438,286
32,000 32,000 NEC Corp. 1,004,383 1,004,383
2,800 2,800 Nintendo Co Ltd. 490,881 490,881
72,000 72,000 Nippon Express Co Ltd. 441,793 441,793
15 95 110 Nippon Telegraph & Telephone Corp. 199,903 1,262,548 1,462,451
4,800 4,800 Nissin Co., Ltd. 262,227 262,227
5 5 NTT Docomo, Inc. 135,631 135,631
2,980 2,980 Orix Corp 439,578 439,578
4,000 4,000 Pasona Softbank, Inc. 109,639 109,639
6,500 6,500 Promise Co. Ltd. 513,408 513,408
9,200 9,200 Rinnai Corp. 205,649 205,649
800 800 Rohm Co., Ltd. 234,401 234,401
480 480 Shohkoh Fund & Co., Ltd. 108,429 108,429
600 600 Softbank Corp. 81,662 81,662
3,200 3,200 Sony Corp. 299,429 299,429
75,000 75,000 Sumitomo Realty and
Development Co., Ltd. 338,133 338,133
5,000 5,000 TDK Corp. 718,224 718,224
13,000 13,000 Takeda Chemical Industries Ltd. 852,821 852,821
19,000 19,000 The Fuji Bank, Ltd. 144,743 144,743
10,000 10,000 The Nikko Securities Co., Ltd. 99,242 99,242
9,000 9,000 The Nomura Securities Co., Ltd. 220,744 220,744
22,500 22,500 Tokyo Electric Power Co 548,211 548,211
31,000 31,000 Toto, Ltd. 238,503 238,503
22,000 22,000 Toyota Motor Corp. 1,001,555 1,001,555
25,000 25,000 Yamato Kogyo Co., Ltd. 115,783 115,783
------------ ------------ ------------
4,813,466 12,922,498 17,735,964
------------ ------------ ------------
MEXICO: 0.95%
14,400 14,400 Coca-Cola Femsa S.A. 271,800 271,800
67,000 67,000 Grupo Financiero Bancomer,
S.A. de C.V. - O Shares 281,799 281,799
3,300 3,300 Grupo Televisa SA 227,494 227,494
------------ ------------ ------------
281,799 499,294 781,093
------------ ------------ ------------
NETHERLANDS: 6.14%
12,500 12,500 ABN AMRO Holding NV 307,467 307,467
10,400 10,400 ASM Lithography Holding NV 447,021 447,021
12,190 12,190 KPNQwest NV 479,502 479,502
11,800 19,592 31,392 Koninklijke (Royal) Philips
Electronics N.V 558,781 924,049 1,482,830
6,000 6,000 Randstad Holding N.V 222,872 222,872
15,390 15,390 Royal Dutch Petroleum Co. 956,553 956,553
19,190 19,190 TNT Post Group NV 517,586 517,586
5,800 5,800 Unilever NV 267,149 267,149
8,400 8,400 Unique International NV 202,109 202,109
3,700 3,700 Versatel Telecom International NV 156,058 156,058
------------ ------------ ------------
1,714,436 3,324,711 5,039,147
------------ ------------ ------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ING ING
PILGRIM INTERNATIONAL PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA INTERNATIONAL EQUITY PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NEW ZEALAND: 0.41%
315,000 315,000 Fletcher Challenge Building 335,131 335,131
------------ ------------ ------------
NORWAY: 051%
24,500 24,500 @ Petroleum Geo-Services ASA 419,920 419,920
------------ ------------ ------------
PHILIPPINES: 0.21%
9,700 9,700 Philippine Long Distance 173,901 173,901
------------ ------------ ------------
PORTUGAL: 0.55%
13,501 13,501 EDP-Electricidade de Portugal, SA 246,155 246,155
18,200 18,200 Portugal Telecom SA 205,169 205,169
------------ ------------ ------------
451,324 -- 451,324
------------ ------------ ------------
RUSSIA: 0.42%
25,900 25,900 Surgutneftegaz 345,118 345,118
------------ ------------ ------------
SINGAPORE: 2.74%
37,000 29,000 66,000 Chartered Semiconductor
Manufacturing, Ltd. 323,139 253,561 576,700
43,000 43,000 DBS Group Holdings Ltd. 552,750 552,750
32,550 32,550 Oversea-Chinese Banking Corp. 224,288 224,288
34,000 34,000 NatSteel Electronics, Ltd. 104,223 104,223
28,000 28,000 Singapore Press Holdings 437,753 437,753
243,000 243,000 Singapore Telecommunications 355,987 355,987
------------ ------------ ------------
427,362 1,824,339 2,251,701
------------ ------------ ------------
SOUTH AFRICA: 0.54%
18,100 18,100 De Beers Consolidated Mines
Limited/De Beers Centenary AG 440,162 440,162
------------ ------------ ------------
SOUTH KOREA: 0.65%
6,500 6,500 Korea Telecom 314,438 314,438
2,400 2,400 Samsung Electronics 219,300 219,300
------------ ------------ ------------
-- 533,738 533,738
------------ ------------ ------------
SPAIN: 0.72%
21,914 21,914 Banco Santander Central
Hispano SA 231,192 231,192
18,770 18,770 Endesa SA 363,610 363,610
------------ ------------ ------------
-- 594,802 594,802
------------ ------------ ------------
SWEDEN: 3.93%
5,600 5,600 Framtidsfabriken AB 77,576 77,576
71,490 71,490 Nordic Baltic Holding AB 539,073 539,073
11,450 11,450 Sandvik AB 240,192 240,192
23,970 23,970 Skandia Forsakrings AB 633,293 633,293
134,422 134,422 Swedish Match AB 416,873 416,873
66,790 66,790 Telefonaktiebolaget LM Ericsson 1,321,562 1,321,562
------------ ------------ ------------
494,449 2,734,120 3,228,569
------------ ------------ ------------
SWITZERLAND: 6.98%
5,666 5,666 ABB Ltd. (NEW) 678,142 678,142
900 900 Adecco SA 764,643 764,643
1,870 1,870 @ Charles Voegele Holding AG 369,155 369,155
2,390 2,390 Credit Suisse Group 475,407 475,407
133 133 Nestle AG 267,053 267,053
141 141 Novartis AG 224,065 224,065
330 330 Richemont (cie Fin) 889,049 889,049
29 56 85 Roche Holding AG 283,211 545,119 828,330
370 370 Swatch Group AG 470,396 470,396
1,080 1,080 UBS AG 158,739 158,739
1,220 1,220 Zurich Allied AG 602,765 602,765
------------ ------------ ------------
1,302,223 4,425,521 5,727,744
------------ ------------ ------------
TAIWAN: 0.59%
32,900 32,900 Asustek Computer, Inc. 301,858 301,858
19,700 19,700 Siliconware Precision Inds 182,225 182,225
------------ ------------ ------------
-- 484,083 484,083
------------ ------------ ------------
TURKEY: 0.16%
16,932,000 16,932,000 Akbank T.A.S 131,054 131,054
------------ ------------ ------------
UNITED KINGDOM: 13.22%
35,000 35,000 Amvescap Plc 561,360 561,360
20,250 20,250 Barclays Plc 503,420 503,420
11,200 11,200 Barclays Plc 278,582 278,582
116,600 116,600 BP Amoco Plc 1,118,550 1,118,550
38,400 38,400 Cadbury Schweppes Plc 252,301 252,301
8,700 8,700 @ Capita Group Plc 212,974 212,974
5,100 5,100 @ Colt Telecom Group Plc 169,860 169,860
212,800 212,800 Corus Group Plc 310,882 310,882
29,200 29,200 Diageo Plc 262,141 262,141
7,500 7,500 Glaxo Welcome Plc 218,796 218,796
13,000 13,000 Glaxo Wellcome Plc 379,047 379,047
76,400 76,400 HSBC Holdings Plc 873,364 873,364
13,500 13,500 Kingston Communication (Hull) Plc 132,845 132,845
23,500 23,500 Lloyds TSB Group Plc 221,998 221,998
31,003 31,003 Logica Plc 733,682 733,682
19,200 19,200 PizzaExpress Plc 183,121 183,121
24,100 24,100 Provident Financial Plc 253,571 253,571
15,800 15,800 Reed International Plc 137,538 137,538
37,300 37,300 Regent Inns Plc 78,491 78,491
17,460 17,460 Rio Tinto Plc 285,473 285,473
19,600 19,600 Scottish & Newcastle Plc 160,083 160,083
45,000 45,000 Shire Pharmaceuticals Plc 783,029 783,029
62,290 62,290 Spirent Plc 418,946 418,946
55,426 55,426 Vodafone AirTouch Plc 224,038 224,038
270,966 270,966 Vodafone Group Plc 1,094,696 1,094,696
30,500 30,500 Whitbread Plc 274,735 274,735
50,277 50,277 WPP Group Plc 734,115 734,115
------------ ------------ ------------
3,657,429 7,200,209 10,857,638
------------ ------------ ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
ING ING
PILGRIM INTERNATIONAL PILGRIM INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA INTERNATIONAL EQUITY PRO FORMA
SHARES SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL COMMON STOCKS
(Cost: $20,880,130, $50,942,534,
$71,822,664) 22,616,903 54,278,983 76,895,886
------------ ------------ ------------
PREFERRED STOCK: 0.31%
Germany: 0.31%
5,730 5,730 Rhoen-Klinikum AG 255,411 255,411
------------ ------------ ------------
TOTAL PREFERRED STOCK (Cost:
$198,042, $0, $198,042) 255,411 -- 255,411
------------ ------------ ------------
GOVERNMENT OBLIGATION: 1.15%
Germany: 1.15%
1,092,000 1,092,000 Bundesbank Deutschland
Republic Bond, 3.75%, due 01/04/09 942,311 942,311
------------ ------------ ------------
TOTAL GOVERNMENT OBLIGATION
(Cost: $1,117,926, $0, $1,117,926) 942,311 -- 942,311
------------ ------------ ------------
TOTAL LONG-TERM INVESTMENTS
(Cost: $22,196,098, $50,942,534,
$73,138,632) 23,814,625 54,278,983 78,093,608
------------ ------------ ------------
PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS: 3.50%
--------------------------------------
$2,870,000 $ 2,870,000 State Street Bank & Trust
Repurchase Agreement, 6.55%,
due 07/03/00 2,870,000 2,870,000
------------ ------------ ------------
TOTAL SHORT-TERM INVESTMENTS
(Cost: $0, $2,870,000, $2,870,000) -- 2,870,000 2,870,000
------------ ------------ ------------
TOTAL INVESTMENTS (Cost:
$22,196,098, $53,812,534,
$76,008,632) 98.59% 23,814,625 57,148,983 80,963,608
Other assets in excess of
liabilities 1.41% 1,796,196 (642,411) 1,153,785
------ ------------ ------------ ------------
TOTAL NET ASSETS 100.00% $ 25,610,821 $ 56,506,572 $ 82,117,393
====== ============ ============ ============
</TABLE>
@ Non-income producing security.
# Restricted security.
ADR - American Depository Receipt.
See Accompanying Notes to Financial Statements
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On November 2, 2000, the Board of Pilgrim International Fund
("International Fund") and on November 16, 2000, the Board of ING International
Equity Fund ("International Equity Fund"), approved an Agreement and Plan of
Reorganization (the "Plan") whereby, subject to approval by the shareholders of
International Equity Fund, International Fund will acquire all the assets of
International Equity Fund subject to the liabilities of such Fund, in exchange
for a number of shares equal to the pro rata net assets of shares of the
International Fund (the "Merger").
The Merger will be accounted for as a tax free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be representative of
what the actual combined financial statements would have been had the
reorganization occurred at June 30, 2000. The unaudited pro forma portfolio of
investments, and statement of assets and liabilities reflect the financial
position of International Fund and International Equity Fund at June 30, 2000.
The unaudited pro forma statement of operations reflects the results of
operations of International Fund and International Equity Fund for the year
ended June 30, 2000. These statements have been derived from the Funds'
respective books and records utilized in calculating daily net asset value at
the dates indicated above for International Fund and International Equity Fund
under generally accepted accounting principles. The historical cost of
investment securities will be carried forward to the surviving entity and
results of operations of International Fund for pre-combination periods will not
be restated.
The unaudited pro forma portfolio of investments, and unaudited pro forma
statements of assets and liabilities and operations should be read in
conjunction with the historical financial statements of the Funds incorporated
by reference in the Statements of Additional Information.
NOTE 2 - SECURITY VALUATION:
Investments in equity securities traded on a national securities exchange
or included on the NASDAQ National Market System are valued at the last reported
sale price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market are valued at the
mean between the last reported bid and ask prices. U.S. Government obligations
are valued by using market quotations or independent pricing services which use
prices provided by market-makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
All investments quoted in foreign currencies will be valued daily in U.S.
Dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined by each Fund's Custodian. Securities for which
market quotations are not readily available are valued at their respective fair
values as determined in good faith and in accordance with policies set by the
Board of Directors. Investments in securities maturing in less than 60 days are
valued at cost, which, when combined with accrued interest, approximates market
value.
NOTE 3 - FOREIGN CURRENCY TRANSACTIONS:
The books and records of the funds are maintained in U.S. dollars. Any
foreign currency amounts are translated into U.S. dollars on the following
basis:
(1) Market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
8
<PAGE>
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from the changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gains or losses from the investments. Reported net realized foreign
exchange gains or losses arise from sales and maturities of short-term
securities, sales of foreign currencies, currency gains or losses realized
between the trade and settlement on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with investing in U.S. companies and the U.S.
Government. These risks include but are not limited to re-evaluation of
currencies and future adverse political and economic developments which could
cause securities and their markets to be less liquid and prices more volatile
than those in the United States.
NOTE 4 - CAPITAL SHARES:
The unaudited pro forma net asset value per share assumes additional shares
of common stock issued in connection with the proposed acquisition of
International Equity Fund by International Fund as of June 30, 2000. The number
of additional shares issued was calculated by dividing the net asset value of
each Class of International Equity Fund by the respective Class net asset value
per share of International Fund.
NOTE 5 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on June 30, 2000. International
Equity Fund expenses were adjusted assuming International Fund's fee structure
was in effect for the year ended June 30, 2000.
NOTE 6 - MERGER COSTS:
Merger costs are estimated at approximately $125,000 and are not included
in the unaudited pro forma statement of operations since these costs are not
reccurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger.
NOTE 7 - FEDERAL INCOME TAXES:
It is the policy of the Funds to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Fund intends not to be subject to any federal excise tax.
The Fund intends to offset any net capital gains with any available capital
loss carryforward until each carryforward has been fully utilized or expires. In
addition, no capital gain distribution shall be made until the capital loss
carryforward has been fully utilized or expires.
9
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
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.
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, as amended (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant by the Registrant pursuant to
the Trust Instrument, or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
1
<PAGE>
ITEM 16. EXHIBITS
(1) (A) Form of Articles of Incorporation filed as an exhibit to Registrant's
Post-Effective Amendment No. 9 to Registrant's Form N-1A Registration
Statement on July 26, 2000 and incorporated herein by reference.
(B) Form of Articles Supplementary Designating Classes A, B, C & Q filed
as an exhibit to Registrant's Post-Effective Amendment No. 9 to
Registrant's Form N-1A Registration Statement on July 26, 2000 and
incorporated herein by reference.
(2) Form of Bylaws filed as an exhibit to Registrant's Post-Effective Amendment
No. 9 to Registrant's Form N-1A Registration Statement on July 26, 2000 and
incorporated herein by reference.
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between ING Funds Trust on
behalf of ING International Equity Fund and Pilgrim International Fund,
Inc.
(5) Not Applicable
(6) Form of Investment Management Agreement between Registrant and Pilgrim
Investments, Inc
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc.
(8) Not Applicable
(9) Form of Custodian Agreement between Registrant and Brown Brothers Harriman
& Co. filed as an exhibit to Registrant's Post-Effective Amendment No. 9 to
Registrant's Form N-1A Registration Statement on July 26, 2000 and
incorporated herein by reference.
(10) (A) Form of Service and Distribution Plan for Class A Shares filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 to Registrant's
Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference.
(B) Form of Service and Distribution Plan for Class B Shares filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 to Registrant's
Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference.
(C) Form of Service and Distribution Plan for Class C Shares filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 to Registrant's
Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference.
(D) Form of Shareholder Service Plan for Class Q Shares filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 to Registrant's
Form N-1A Registration Statement on July 26, 2000 and incorporated
herein by reference.
(E) Form of Multiple Class Plan Pursuant to Rule 18f-3 filed as an exhibit
to Registrant's Post-Effective Amendment No. 9 to Registrant's Form
N-1A Registration Statement on July 26, 2000 and incorporated herein
by reference.
2
<PAGE>
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(13) (A) Form of Administration Agreement between Registrant and Pilgrim Group,
Inc. filed as an exhibit to Registrant's Post-Effective Amendment No.
9 to Registrant's Form N-1A Registration Statement on July 26, 2000
and incorporated herein by reference.
(B) Form of Expense Limitation Agreement between Registrant and Pilgrim
Investments, Inc. iled as an exhibit to Registrant's Post-Effective
Amendment No. 9 to Registrant's Form N-1A Registration Statement on
July 26, 2000 and incorporated herein by reference.
(14) Consents of Independent Auditors
(15) Not Applicable
(16) Powers of Attorney
(17) Not Applicable
ITEM 17. UNDERTAKINGS
Not Applicable
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Phoenix and State of Arizona on the 20th 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, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Director and Chairman December 20, 2000
-------------------------
John G. Turner*
Director and President December 20, 2000
------------------------- (Chief Executive Officer)
Robert W. Stallings*
Director December 20, 2000
-------------------------
Al Burton*
Director December 20, 2000
-------------------------
Paul S. Doherty *
Director December 20, 2000
-------------------------
Robert B. Goode *
Director December 20, 2000
-------------------------
Alan L. Gosule *
Director December 20, 2000
-------------------------
Walter H. May*
Director December 20, 2000
-------------------------
Jock Patton*
Director December 20, 2000
-------------------------
David W.C. Putnam
4
<PAGE>
Director December 20, 2000
-------------------------
John R. Smith*
Director December 20, 2000
-------------------------
David W. Wallace*
Senior Vice President and
------------------------- Principal Financial Officer December 20, 2000
Michael J. Roland*
* By: /s/ James M. Hennessy
---------------------------
James M. Hennessy
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Robert W. Stallings, James M. Hennessy, Jeffrey S. Puretz and Karen L.
Anderberg, and each of them his true and lawful attorney-in-fact as agent with
full power of substitution and resubstitution of him in his name, place, and
stead, to sign any and all registration statements on Form N-14 applicable to
Pilgrim International Fund, Inc. and any amendment or supplement thereto, and to
file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: November 10, 2000
/s/ John G. Turner /s/ Alan L. Gosule
---------------------------------- ----------------------------------------
John G. Turner Alan L. Gosule
/s/ Robert W. Stallings /s/ Walter H. May
---------------------------------- ----------------------------------------
Robert W. Stallings Walter H. May
/s/ Al Burton /s/ Jock Patton
---------------------------------- ----------------------------------------
Al Burton Jock Patton
/s/ Paul S. Doherty /s/ David W.C. Putnam
---------------------------------- ----------------------------------------
Paul S. Doherty David W.C. Putnam
/s/ Robert B. Goode /s/ John R. Smith
---------------------------------- ----------------------------------------
Robert B. Goode John R. Smith
/s/ David W. Wallace
----------------------------------
David W. Wallace
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Robert W. Stallings, James M. Hennessy, Jeffrey S. Puretz and Karen L.
Anderberg, and each of them his true and lawful attorney-in-fact as agent with
full power of substitution and resubstitution of him in his name, place, and
stead, to sign any and all registration statements on Form N-14 applicable to
Pilgrim International Fund, Inc. and any amendment or supplement thereto, and to
file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: November 14, 2000
/s/ Michael J. Roland
----------------------------------------
Michael J. Roland
7
<PAGE>
EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between Pilgrim Global Income
Fund and Pilgrim Mutual Funds, on behalf of Pilgrim Strategic Income Fund.
(6) Form of Investment Management Agreement between Registrant and Pilgrim
Investments, Inc
(7) Form of Underwriting Agreement between Registrant and Pilgrim Securities,
Inc.
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion and Consent of Counsel supporting tax matters and
consequences
(14) Consents of Independent Auditors
<PAGE>
ING INTERNATIONAL EQUITY FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON ________ ___, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) ROBERT W. STALLINGS and JAMES M. HENNESSY or
any one or more of them, proxies, with full power of substitution, to vote all
shares of ING International Equity Fund (the "Fund") a series of ING Funds Trust
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of the Fund at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258 on ________ ___, 2000 at ______ a.m., local
time, and at any adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Class A, Class B, Class C, and Class I
shares of ING International Equity Fund by Pilgrim International Fund in
exchange for Class A, Class B, Class C, and Class Q shares of common stock of
Pilgrim International Fund, Inc., respectively, and the assumption by Pilgrim
International Fund, Inc. of all of the liabilities of ING International Equity
Fund.
For [ ] Against [ ] Abstain [ ]
This proxy card must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
---------------------------------- --------------------
Signature Date
---------------------------------- --------------------
Signature (if held jointly) Date
ING Funds Trust
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004
