As filed with the Securities and Exchange Commission on January 3, 2002
Securities Act File No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
PILGRIM FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034
(Address of Principal Executive Offices) (Zip Code)
1-800-992-0180
(Registrant's Area Code and Telephone Number)
Kimberly A. Anderson
ING Pilgrim Investments, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz
Dechert
1775 Eye Street, N.W.
Washington, DC 20006-2401
----------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
----------
It is proposed that this filing will become effective on February 2, 2002
pursuant to Rule 488 under the Securities Act of 1933, as amended.
----------
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.
================================================================================
Pilgrim Global Communications Fund
Pilgrim Internet Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
February 5, 2002
Dear Shareholder:
Your Board of Trustees has called a special meeting of shareholders
("Special Meeting") of Pilgrim Global Communications Fund ("Global
Communications Fund") and Pilgrim Internet Fund ("Internet Fund") (each a
"Disappearing Fund" and collectively, the "Disappearing Funds") scheduled to be
held at 8:00 a.m., local time, on April 4, 2002 at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258-2034.
The Board of Trustees of each Disappearing Fund has reviewed and recommends
the proposed reorganizations (each a "Reorganization" and collectively, the
"Reorganizations") of each Disappearing Fund, which is managed by ING Pilgrim
Investments, LLC ("ING Pilgrim"), into Pilgrim Global Information Technology
Fund ("Global Information Technology Fund"), which is also managed by ING
Pilgrim. Effective March 1, 2002, Global Information Technology Fund will be
renamed "ING Global Technology Fund", and the Fund's investment strategies will
change to focus more broadly on technology companies rather than communications
companies. Each Fund is a member of the mutual fund group called the "Pilgrim
Funds".
If approved by Shareholders, you would become a Shareholder of ING Global
Technology Fund on the date that the Reorganizations occur. The Reorganizations
would provide Shareholders of each Disappearing Fund, respectively, with an
opportunity to participate in a larger technology fund that is more broadly
based across the technology sector than either of the Disappearing Funds.
You are being asked to approve an Agreement and Plan of Reorganization for
each Reorganization. The accompanying documents describe the proposed
transactions and compare the strategies and expenses of each of the Funds for
your evaluation.
After careful consideration, the Board of Trustees of each Disappearing
Fund unanimously approved these proposals and recommends shareholders vote "FOR"
the proposals.
A Proxy Statement/Prospectus that describes each 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. 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 APRIL 3, 2002.
Each Disappearing Fund is using Shareholder Communications Corporation, a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the Special Meeting approaches, if we have not already
heard from you, you may receive a telephone call from Shareholder Communications
Corporation reminding you to exercise your right to vote.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
James M. Hennessy,
President and Chief Executive Officer
Pilgrim Global Communications Fund
Pilgrim Internet Fund
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
PILGRIM GLOBAL COMMUNICATIONS FUND AND PILGRIM INTERNET FUND
SCHEDULED FOR APRIL 4, 2002
To the Shareholders:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders ("Special
Meeting") of both Pilgrim Global Communications Fund ("Global Communications
Fund") and Pilgrim Internet Fund ("Internet Fund") is scheduled for April 4,
2002 at 8:00 a.m., local time, at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258-2034.
At the Special Meeting, you will be asked to consider and approve the
following proposals:
(1) INTERNET FUND ONLY. To approve an Agreement and Plan of Reorganization
("Reorganization Agreement") by and among Internet Fund and Pilgrim
Global Information Technology Fund ("Global Information Technology
Fund") providing for the merger of Internet Fund with and into Global
Information Technology Fund, which will be renamed the "ING Global
Technology Fund" as of March 1, 2002;
(2) GLOBAL COMMUNICATIONS FUND ONLY. To approve a Reorganization Agreement
by and among Global Communications Fund and Global Information
Technology Fund providing for the merger of Global Communications Fund
with and into Global Information Technology Fund; and
(3) BOTH FUNDS. To transact such other business, not currently
contemplated, that may properly come before the Special Meeting in the
discretion of the proxies or their substitutes.
Shareholders of record at the close of business on January 11, 2002, are
entitled to notice of, and to vote at, the Special Meeting or any adjournments
thereof. Your attention is called to the accompanying Proxy
Statement/Prospectus. Regardless of whether you plan to attend the Special
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.
Proxies may be revoked at any time before they are exercised by executing and
submitting a revised proxy, by giving written notice of revocation to Internet
Fund and Global Communications Fund, respectively, or by voting in person at the
Special Meeting.
By Order of the Board of Trustees
Kimberly A. Anderson,
Vice President and Secretary
February 5, 2002
PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
PROXY STATEMENT/PROSPECTUS
FEBRUARY 5, 2002
TABLE OF CONTENTS
INTRODUCTION...................................................................1
SUMMARY........................................................................2
The Proposed Reorganizations................................................2
Comparison of Investment Objectives and Strategies..........................4
Comparison of Portfolio Characteristics.....................................6
Relative Performance........................................................8
Performance of ING Global Technology Fund...................................9
Comparison of Investment Techniques and Principal Risks
of Investing in the Funds................................................11
COMPARISON OF FEES AND EXPENSES...............................................13
Management Fees............................................................13
Administration Fees........................................................13
Distribution and Service Fees..............................................13
Expense Limitation Arrangements............................................13
Expense Table..............................................................13
General Information........................................................18
INFORMATION ABOUT THE REORGANIZATIONS.........................................19
The Reorganization Agreements..............................................19
Reasons for the Reorganizations............................................19
Board Considerations.......................................................20
Tax Considerations.........................................................20
Expenses of the Reorganizations............................................21
ADDITIONAL INFORMATION ABOUT THE FUNDS........................................21
Forms of Organization......................................................21
Distributor................................................................21
Dividends and Other Distributions..........................................21
Capitalization.............................................................22
Portfolio Manager of ING Global Technology Fund............................23
GENERAL INFORMATION ABOUT THE PROXY STATEMENT.................................24
Solicitation of Proxies....................................................24
Voting Rights..............................................................24
Other Matters to Come Before the Special Meeting...........................25
Shareholder Proposals......................................................25
Reports to Shareholders....................................................25
APPENDICES...................................................................A-E
Management's Discussion and Analysis......................................A-1
Form of Agreement and Plan of Reorganization
(Global Communications Fund)............................................B-1
Form of Agreement and Plan of Reorganization (Internet Fund)..............B-2
Additional Information Regarding ING Global Technology Fund...............C-1
List of Pilgrim Funds.....................................................D-2
Control Person and Principal Shareholders.................................E-2
PROXY STATEMENT/PROSPECTUS
FEBRUARY 5, 2002
PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to you in connection
with a special meeting of shareholders of Pilgrim Global Communications Fund
("Global Communications Fund") and Pilgrim Internet Fund ("Internet Fund") (each
a "Disappearing Fund" and collectively, the "Disappearing Funds") to be held on
April 4, 2002 ("Special Meeting"). As more fully described in this Proxy
Statement, the purpose of the Special Meeting is to vote on the proposed
reorganizations (each a "Reorganization" and collectively, the
"Reorganizations") of Global Communications Fund and Internet Fund into Pilgrim
Global Information Technology Fund ("Global Information Technology Fund" or the
"Surviving Fund") (each a "Fund" and collectively, the "Funds").
Effective March 1, 2002, Global Information Technology Fund will be renamed
"ING Global Technology Fund", and the Fund's investment strategies will change
to focus more broadly on technology companies rather than communications
companies, as described more fully below. Throughout this Proxy
Statement/Prospectus, Global Information Technology Fund will be referred to as
"ING Global Technology Fund" since the Fund's name change will be effective
before the Special Meeting on April 4, 2002.
Under the Agreements and Plans of Reorganization (each a "Reorganization
Agreement" and collectively, the "Reorganization Agreements"), each Disappearing
Fund would transfer its assets to the Surviving Fund in exchange for shares of
beneficial interest of the Surviving Fund and the assumption by the Surviving
Fund of each Disappearing Fund's liabilities. Surviving Fund shares would then
be distributed to shareholders of each Disappearing Fund so that each
shareholder would receive a number of full and fractional shares of the
Surviving Fund equal to the aggregate value of the number of shares of each
Disappearing Fund held by such shareholder. As a result of each Reorganization,
each Disappearing Fund will distribute shares of the Surviving Fund in
liquidation of each Disappearing Fund, respectively, on April 19, 2002, or such
other date as the parties may agree (the "Closing Date").
Because you, as shareholders of one or both of the Disappearing Funds, are
each being asked to approve a Reorganization Agreement that will result in a
transaction in which you ultimately hold shares of ING Global Technology Fund,
this Proxy Statement also serves as a Prospectus for ING Global Technology Fund.
ING Global Technology Fund is a diversified, open-end management investment
company. The Fund's investment objective is to seek long-term capital
appreciation. Under normal market conditions, the Fund seeks to achieve its
investment objective by investing at least 80% of its total assets in equity
securities and equity equivalent securities of U.S. and non-U.S. technology
companies, as described more fully below.
This Proxy Statement/Prospectus, which should be read and retained for
future reference, sets forth concisely the information that shareholders of the
Disappearing Funds should know before voting on each Reorganization Agreement. A
Statement of Additional Information ("SAI") relating to this Proxy Statement
dated February __, 2002 containing additional information about the
Reorganizations and the parties thereto, has been filed with the U.S. Securities
and Exchange Commission (the "SEC") and is incorporated herein by reference. For
a more detailed discussion of the investment objectives, strategies and
restrictions of the Funds, see the Class A, B, C and M Prospectus and SAI for
Global Communications Fund and ING Global Technology Fund, dated March 1, 2001,
and the Class A, B, C, M and T Prospectus dated October 1, 2001 and SAI dated
November 9, 2001 for Internet Fund, which are incorporated herein by reference.
Each Fund 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 Global Communications Fund and ING
Global Technology Fund, dated October 31, 2001 and the annual report for the
Internet Fund, dated May 31, 2001 are incorporated herein by reference. You may
receive a copy of the most recent Prospectus, SAI, SAI relating to this Proxy
Statement, annual report and any more recent semi-annual report for either of
the Funds, without charge, by contacting the Funds at Pilgrim Funds, 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034 or by calling
1-800-992-0180.
You can copy and review information about each Fund (including the SAI) at
the SEC's Public Reference Room in Washington, D.C. You may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-202-942-8090. Reports and other information about the Fund are available on
the EDGAR Database on the SEC'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: publicinfo@sec.gov, or by writing the
SEC's Public Reference Section, Washington, D. C. 20549-0102.
THE U.S. 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
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For
additional information, you should consult each Fund's Prospectus (the "Pilgrim
Prospectuses") and the Reorganization Agreements, which are attached hereto as
Appendix B-1 and Appendix B-2.
THE PROPOSED REORGANIZATIONS
On November 2, 2001, the Board of Trustees of each Disappearing Fund,
respectively, approved each Reorganization Agreement. Subject to shareholder
approval, the Reorganization Agreements provide for:
* the transfer of all of the assets of each Disappearing Fund in
exchange for shares of beneficial interest of the Surviving Fund;
* the assumption by the Surviving Fund of all of the liabilities of each
Disappearing Fund;
* the distribution of the Surviving Fund's shares to the shareholders of
each Disappearing Fund; and
* the complete liquidation of each Disappearing Fund.
The Reorganizations are expected to be effective upon the Closing Date. As
a result of the Reorganizations, each Shareholder will hold, immediately after
the Closing Date, shares of the corresponding Class of the Surviving Fund having
an aggregate value equal to the aggregate value of the shares of the Class of
each Disappearing Fund's shares held by that shareholder as of the Closing Date.
The Reorganizations are two of several reorganizations that are proposed
among the various Pilgrim Funds. The Pilgrim Funds complex has grown in recent
years through the addition of many funds. Management of the Pilgrim Funds has
proposed the consolidation of a number of the Pilgrim Funds that they believe
have similar or compatible investment policies. The proposed reorganizations are
designed to reduce the substantial overlap in the Pilgrim Fund complex, thereby
eliminating inefficiencies arising from having similar portfolios within the
same fund group and confusion about overlapping funds. ING Pilgrim Investments,
LLC ("ING Pilgrim" or the "Adviser"), the investment adviser to each Fund, also
believes that the Reorganizations may benefit fund shareholders by resulting in
surviving funds with a greater asset base. This is expected to achieve economies
of scale for shareholders and may provide greater investment opportunities for
the surviving funds or the potential to take larger portfolio positions.
In considering whether to approve each Reorganization, you should note
that:
* The Funds have similar investment objectives and strategies;
* The Disappearing Funds are both very small ($19m of net assets for
Internet Fund and $16m of net assets for Global Communications Fund,
effective October 31, 2001) - perhaps too small to be viable;
consolidation of these Funds will result in a larger Surviving Fund
whose style should attract greater interest from investors, and should
be more viable;
* The Disappearing Funds, by themselves, are not only very small in
asset size, but the Funds address very small sub-sectors of the larger
technology sector;
* The Surviving Fund, after a change in investment strategy effective
March 1, 2002, will permit shareholders to continue to invest in a
technology fund, but one that is more broadly based across the
technology sector than either of the Disappearing Funds;
* Both existing and prospective shareholders would benefit from the
proposed Reorganizations through an increase in asset size of the
Surviving Fund, resulting in a fund that can be more diversified
and/or take larger positions in portfolio holdings; and
2
* The proposed Reorganizations are expected to result in slightly higher
operating expenses per share for all Classes of Global Communications
Fund. For example, the operating expenses, expressed as a percentage
of net asset value per share of each Class of each Fund based on the
twelve-month period ended October 31, 2001, are as follows:
(UNAUDITED)
BEFORE THE MERGER CLASS A CLASS B CLASS C
--------- --------- ---------
Global Communications Fund and Internet Fund 2.24% and 2.98% and 2.99% and
before expense reimbursement from management: 2.86% 3.51% 3.51%
ING Global Technology Fund before expense
reimbursement from management: 2.47% 3.16% 3.16%
Global Communications Fund and Internet Fund 1.59% and 2.30% and 2.30% and
after expense reimbursement from management:(1) 1.63% 2.38% 2.38%
ING Global Technology Fund after expense
reimbursement from management:(2) 1.83% 2.54% 2.54%
AFTER THE MERGER
PRO FORMA estimated expenses before
reimbursement from management: 2.48% 3.13% 3.13%
PRO FORMA estimated expenses after
expense reimbursement from management: 1.95% 2.70% 2.70%
Approval of each Reorganization Agreement requires a vote of the majority
of the outstanding shares of each Disappearing Fund, respectively, present in
person or by proxy if a quorum is present at the Special Meeting. Holders of
one-third of the outstanding shares present in person or by proxy shall
constitute a quorum.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF EACH DISAPPEARING
FUND, RESPECTIVELY, UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATIONS. THE BOARD
OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED REORGANIZATIONS.
- ----------
(1) ING Pilgrim has entered into expense limitation agreements that limit
expenses for Global Communications Fund to annual rates of 1.70%, 2.45% and
2.45% for Class A, Class B and Class C shares, respectively; and for
Internet Fund to annual rates of 1.90%, 2.65% and 2.65% for Class A, Class
B and Class C shares, respectively. The agreements are valid through
February 28, 2002. The Board of Trustees has approved expense limitation
agreements for Global Communications Fund and Internet Fund that will take
effect on March 1, 2002 and will expire on March 1, 2003. The expense
limits will remain the same under the new agreements. The expense
limitation agreements are contractual and shall renew automatically for one
year terms unless ING Pilgrim provides written notice of the termination of
the expense limitation agreement at least 30 days prior to the end of the
then current term or upon termination of the investment management
agreement. There is no assurance that the expense limitation agreements
will remain in effect after this date. Prior to March 1, 2001, the expense
limitation rates for Global Communications Fund for Class A, Class B and
Class C shares were 1.53%, 2.18% and 2.18%, respectively. Prior to March 1,
2001, the expense limitation rates for Internet Fund for Class A, Class B
and Class C shares were 1.59%, 2.24% and 2.24%, respectively.
(2) From December 19, 1998 through February 28, 2001, the ING Global Technology
Fund had entered into an expense limitation agreement with ING Mutual Funds
Management Co. LLC that limited expenses to annual rates of 1.59%, 2.24%
and 2.24% for Class A, Class B, and Class C shares, respectively. The Board
of Trustees approved a new expense limitation agreement with ING Pilgrim on
February 28, 2001 that limited expenses for the Fund to annual rates of
1.95%, 2.70% and 2.70% for Class A, Class B and Class C shares,
respectively. The Board of Trustees has approved an expense limitation
agreement for the Fund that will take effect on March 1, 2002 and will
expire on March 1, 2003. The expense limits will remain the same under the
new agreement. The expense limitation agreements are contractual and shall
renew automatically for one year terms unless ING Pilgrim provides written
notice of the termination of the expense limitation agreement at least 30
days prior to the end of the then current term or upon termination of the
investment management agreement. There is no assurance that the expense
limitation agreements will remain in effect after this date.
3
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
The following summarizes the investment objective, strategies and
management differences, if any, between the Funds.
GLOBAL COMMUNICATIONS FUND INTERNET FUND ING GLOBAL TECHNOLOGY FUND(1)
-------------------------- ------------- -----------------------------
INVESTMENT * Seeks long-term capital * Seeks long-term capital * Seeks long-term capital
OBJECTIVE appreciation. appreciation. appreciation.
INVESTMENT * Normally invests at least * Normally invests at * Normally invests at least 80%
STRATEGIES 65% of its total assets in least 65% of its total of its total assets in equity
equity securities of assets in a portfolio of securities and equity equivalent
communications companies. As equity securities of U.S. securities (preferred stock,
a general matter, the Fund and non-U.S. internet warrants and convertible
expects these investments to technology companies. securities) of U.S. and non-U.S.
be in common stocks of technology companies. The Fund
large-, mid- and small-sized * Defines an internet may invest in large-, mid- and
companies. This portion of technology company as one small-sized companies.
the portfolio will have with internet businesses or
investments located in at internet related consulting * Defines information technology
least three different or services businesses, or companies as companies with
countries, including the that derive at least 50% of businesses in or related to
United States. their total revenues or technology or technology services,
earnings from business or that commit at least 50% of
* Defines information operations in internet their assets or derive at least
technology companies as those related hardware, software 50% of their total revenues or
companies that derive at or infrastructure earnings from business operations
least 50% of their total industries. As a general in the following areas: internet
revenues or earnings from matter, the Fund expects activities, including internet
designing, developing, these investments to be in related hardware, software,
operating, financing, common stocks of large, infrastructure and networking
manufacturing or providing mid-sized or small equipment; media and entertainment
the following activities, companies. businesses, including radio,
products and services: television, satellite and cable
communications equipment and * Generally, the television, broadcasting and media
service (including television Sub-Adviser's overall stock content; telecommunications and
and radio, satellite, selection for the Fund will communications, including the
microwave and cable be based on an assessment design, manufacture, or operation
television); computer of a company's fundamental of telecommunications services and
equipment, mobile prospects. The Sub-Adviser equipment, voice, data, wireless,
telecommunications and anticipates, however, that paging and electronic components;
cellular radio and paging; a portion of the Fund's computer business, including
electronic mail; local and holdings will be invested hardware, software,
wide area networking and in newly issued securities semiconductors, semiconductor
linkage of work and data being sold in the primary capital equipment and server
processing systems. or secondary market. hardware producers; e-commerce
businesses, including equipment
* Generally, the * In choosing investments and communications activities such
Sub-Adviser's overall stock for the Fund, the as electronic mail, data
selection for the Fund will Sub-Adviser first processing, information systems,
be based on an assessment of identifies themes which it networking, office automation and
the company's fundamental believes will drive the on-line services; and companies
prospects. The Sub-Adviser internet in the future. involved in the distribution,
anticipates, however, that a Then, by conducting servicing, science and development
portion of the Fund's extensive fundamental of these businesses.
holdings will be invested in research, the Sub-Adviser
newly issued securities being analyzes individual * Uses broad industry analysis
sold in the primary or companies worldwide to and "bottom-up" company analysis
secondary market. identify those firms that to identify the stocks of
are most likely to benefit companies it believes will become
* Uses broad industry from the selected future information technology
analysis and "bottom-up" investment themes. leaders.
company analysis to identify
the stocks of companies it * The Fund is generally
believes will become future expected to engage in
communications leaders. frequent and active trading
of its portfolio securities.
- ----------
(1) Effective March 1, 2002, Global Information Technology Fund will change to
ING Global Technology Fund, and its name and its investment strategies will
be those as described in this section.
4
GLOBAL COMMUNICATIONS FUND INTERNET FUND ING GLOBAL TECHNOLOGY FUND(1)
-------------------------- ------------- -----------------------------
* First identifies themes
that address industry and
technological changes, then * First identifies themes that
analyzes individual companies address industry and technological
worldwide to find those firms changes, then analyzes individual
most likely to benefit from companies worldwide to find those
the selected investment firms most likely to benefit from
themes. the selected investment themes.
* The Fund is generally * The Sub-Adviser believes it is
expected to engage in likely that a portion of the
frequent and active trading Fund's holdings will be invested
of its portfolio securities. in newly issued securities
acquired in initial public
offerings or on the secondary
market.
* The Fund is generally expected
to engage in frequent and active
trading of its portfolio
securities.
INVESTMENT ING Pilgrim ING Pilgrim ING Pilgrim
ADVISER
SUB-ADVISER ING Investment Management ING Investment Management ING Investment Management
Advisors B.V. Advisors B.V. Advisors B.V.
PORTFOLIO Mr. Daniel Hayes Mr. Guy Uding Mr. Guy Uding
MANAGERS
As you can see from the chart above, the investment objectives and
strategies of the Funds are similar.
5
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of October 31, 2001:
(UNAUDITED)
ING GLOBAL
GLOBAL COMMUNICATIONS FUND INTERNET FUND TECHNOLOGY FUND(1)
-------------------------- ------------- ------------------
Net Assets $15,670,176 $18,622,108 $41,461,297
Number of Holdings 42 27 40
Portfolio Turnover 118 116 126
As a percentage of net assets:
Equity Securities 102% 100% 98%
Foreign Securities 30% -- 12%
U.S. Securities 72% 100% 86%
Companies with market caps of
(as % of net assets):
$10 billion or more 54% 46% 52%
$5 billion to less than $10
billion 19% 19% 27%
Less than $5 billion 29% 35% 19%
Top 10 Countries United States 71.68% United States 100% United States 85.64%
(as a % of net assets) United Kingdom 11.24% United Kingdom 5.57%
Finland 4.78% Canada 2.66%
Germany 3.86% Israel 2.00%
Japan 3.02% Ireland 1.31%
Netherlands 2.19% Japan 0.91%
Canada 1.68%
Singapore 1.40%
Hong Kong 1.13%
Spain 1.13%
- ----------
(1) Effective March 1, 2002, Global Information Technology Fund will change its
name to ING Global Technology Fund, and its investment strategies will be
those as previously described on pages 4 and 5. Information provided in
this table reflects the investment strategies currently in effect. Prior to
March 1, 2002, Global Information Technology Fund, will operate as a
diversified fund and invest, under normal market conditions, at least 65%
of its total assets in a portfolio of equity securities of information
technology companies.
6
(UNAUDITED)
GLOBAL COMMUNICATIONS FUND INTERNET FUND ING GLOBAL TECHNOLOGY FUND(1)
-------------------------- ------------- -----------------------------
Top 10 Holdings
(as a % of net assets) Vondafone Group 7.84% Cisco Systems, Inc. 6.97% International
Juniper Networks, Inc. 5.15% AOL Time Warner, Inc. 5.82% Business Machines 6.15%
Nokia (Ab) OY 4.78% eBay, Inc. 5.79% Electronic Data
Convergys Corp 3.97% Sun Microsystems, Inc. 5.49% Systems Corp. 5.67%
Worldcom, Internet Security Microsoft Corp. 5.14%
Inc./Worldcom Group 3.93% Systems 5.40% Nvidia Corp. 4.37%
Deutsche Telekom 3.86% Sungard Data Texas Instruments, Inc. 4.37%
Texas Instruments, Inc. 3.73% Systems, Inc. 5.39% Brocade Communications
Xilinx, Inc. 3.67% Broadcom Corp. 5.21% Systems, Inc. 4.24%
Cisco Systems, Inc. 3.40% Amazon.Com, Inc. 5.11% Cisco Systems, Inc. 3.92%
Ciena Corp. 3.30% First Data Corp. 4.29% Activision, Inc. 3.58%
Intel Corp. 4.16% THQ, Inc. 3.58%
Veritas Siftware Corp. 3.55%
Top 5 Industries Telecommunications 63.60% Internet 43.58% Computers 26.21%
(as a % of net assets) Semiconductors 19.13% Semiconductors 17.02% Semiconductors 24.07%
Software 5.08% Computers 10.88% Software 18.87%
Electronics 3.99% Telecommunication 9.78% Telecommunication 13.54%
Commercial Services 3.96% Software 8.39% Electronics 8.79%
- ----------
(1) Effective March 1, 2002, Global Information Technology Fund will change its
name to ING Global Technology Fund, and its investment strategies as
previously described on pages 4 and 5.
7
RELATIVE PERFORMANCE
The following table shows, for the periods shown, the average annual total
return for: (a) Class A shares of Global Communications Fund; (b) Class A shares
of Internet Fund; (c) Class A shares of ING Global Technology Fund; (d) the
Goldman Sachs Technology Industry Composite Index ("GSTI Index"); and (e) the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). Performance
of the Funds in the table does not reflect the deduction of sales loads, and
would be lower if it did. The index has inherent performance advantages over the
Funds 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 Fund's past performance is not an indication of its future
performance.
(UNAUDITED)
GLOBAL
COMMUNICATIONS ING GLOBAL GSTI S&P
PERIOD FUND(1) INTERNET FUND(2) TECHNOLOGY FUND(3) INDEX(4) 500 INDEX(5)
------ ------- ---------------- ------------------ -------- ------------
12/31/99 N/A N/A 140.15% 88.86% 21.04%
12/31/00 N/A -69.16% -29.01% -37.84% -9.11%
1/1/01 - 9/30/01(6) -71.72% -70.24% -61.55% -46.47% -20.39%
- ----------
(1) Global Communications Fund commenced operations on March 1, 2000.
(2) Internet Fund commenced operations on July 1, 1999.
(3) Global Information Technology Fund commenced operations on December 15,
1998. Effective March 1, 2002, Global Information Technology Fund will
change its name to ING Global Technology Fund, and its investment
strategies as previously described on pages 4 and 5. Performance
information provided in this table reflects the investment strategies
currently in effect.
(4) The GSTI Index is a widely recognized, unmanaged index of technology
stocks.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
(6) Not annualized.
8
PERFORMANCE OF ING GLOBAL TECHNOLOGY FUND(1)
The following bar chart and table provide an indication of the risks of
investing in ING Global Technology Fund by showing (on a calendar year basis)
changes in the ING Global Technology Fund's annual total return from year to
year and by showing (on a calendar year basis) how ING Global Technology Fund's
average annual returns for one year and since inception compare to those of the
GSTI Index and the S&P 500 Index. The information in the bar chart is based on
the performance of Class A shares of ING Global Technology 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.
ING Global Technology 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(2)(3)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
140.15% -29.01%
- ----------
(1) Returns shown were accomplished under the existing investment strategies
that will change effective March 1, 2002. Global Information Technology
Fund commenced operations on December 15, 1998. Effective March 1, 2002,
Global Information Technology Fund will change its name to ING Global
Technology Fund, and its investment strategies as previously described on
pages 4 and 5. Performance information provided in this table reflects the
investment strategies currently in effect.
(2) During the periods shown in the chart, the Fund's best quarterly
performance was up 78.51% for the quarter ended December 31, 1999, and the
Fund's worst quarterly performance was down 36.82% for the quarter ended
December 31, 2000. The Fund's year to date total return as of September 30,
2001 was down 61.55%.
(3) Returns in 1999 were primarily achieved during unusually favorable
conditions in the market, particularly for information technology
companies. You should not expect that such favorable returns can
consistently be achieved.
9
The following table shows what the average annual total returns of ING
Global Technology Fund would equal if you averaged out actual performance over
various lengths of time, assuming that a shareholder pays a front-end sales
charge of 5.75%, compared to the GSTI Index, an unmanaged index. The GSTI Index
has inherent performance advantages over ING Global Technology 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. ING Global Technology
Fund's performance reflected in the table assumes the deduction of the maximum
sales charge in all cases.
AVERAGE ANNUAL TOTAL RETURNS for the period ended December 31, 2000 (1)
SINCE
1 YEAR INCEPTION
------ ---------
ING Global Technology Fund - Class A(2) -33.10% 34.58%
ING Global Technology Fund - Class B(3) -31.94% 36.24%
ING Global Technology Fund - Class C(4) -30.00% 37.62%
GSTI Index(5) -37.84% 8.37%
- ----------
(1) Class A, Class B and Class C shares of the Fund commenced operations on
December 15, 1998. Effective March 1, 2002, Global Information Technology
Fund will change its name to ING Global Technology Fund, and its investment
strategies as previously described on pages 4 and 5. Performance
information provided in this table reflects the investment strategies
currently in effect.
(2) Reflects deduction of sales charge of 5.75%.
(3) Reflects deduction of deferred sales charge of 5% and 3%, respectively for
1 year and since inception returns.
(4) Reflects deduction of deferred sales charge of 1% for 1 year return.
(5) The GSTI Index is a widely recognized unmanaged index of technology stocks.
The following table shows the performance of ING Global Technology Fund if
sales charges are not reflected.
AVERAGE ANNUAL TOTAL RETURNS for the period ended December 31, 2000 (1)
SINCE
1 YEAR INCEPTION
------ ---------
ING Global Technology Fund - Class A -29.01% 38.52%
ING Global Technology Fund - Class B -29.54% 37.64%
ING Global Technology Fund - Class C -29.52% 37.62%
GSTI Index -37.84% 8.37%
- ----------
(1) Class A, Class B and Class C shares of the Fund commenced operations on
December 15, 1998. Effective March 1, 2002, Global Information Technology
Fund will change its name to ING Global Technology Fund, and its investment
strategies as previously described on pages 4 and 5. Performance
information provided in this table reflects the investment strategies
currently in effect.
For a discussion by the Adviser regarding the performance of ING Global
Technology Fund for the fiscal year ended October 31, 2001, see Appendix A to
this Proxy Statement/Prospectus. Additional information about ING Global
Technology Fund is included in Appendix C to this Proxy Statement/Prospectus.
10
COMPARISON OF INVESTMENT TECHNIQUES AND PRINCIPAL RISKS OF INVESTING IN THE
FUNDS
Because the Funds have investment objectives and policies that are similar
in many respects, many of the risks of investing in ING Global Technology Fund
are similar to the risks of investing in Global Communications Fund and Internet
Fund, respectively. You may lose money on your investment in any of the Funds.
Each Fund's shares may go up or down in value, sometimes rapidly and
unpredictably. Market conditions, financial conditions of issuers represented in
the portfolio, investment strategies, portfolio management, and other factors
affect the volatility of each Fund's shares. The following summarizes the
principal investment techniques and risks of investing in the Funds.
EQUITY SECURITIES. Each Fund is subject to risks associated with investing
primarily in equity securities and equity equivalent securities (preferred
stocks, convertible securities and warrants and other stock purchase rights)
including market risk, issuer risk, credit risk, price volatility risk and
market trends risk, among others. 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, each
Fund may invest in small and medium-sized companies, which may be more
susceptible to price swings than larger companies because they have fewer
financial resources, more limited product and market diversification and many
are dependent on a few key managers.
FOREIGN SECURITIES. Global Communications Fund and ING Global Technology
Fund normally invests in foreign securities; and Internet Fund may invest 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.
RISK OF EMERGING MARKET INVESTMENTS. Investments in emerging market
countries are generally riskier than other kinds of foreign investments. Because
of less developed markets and economies and, in some countries, less mature
governments or governmental institutions, the risks of investing in foreign
securities can be intensified in the case of investments in issuers domiciled or
doing substantial business in emerging market countries. These risks include:
high concentration of market capitalization and trading volume in a small number
of issuers representing a limited number of industries, as well as a high
concentration of investors and financial intermediaries; political and social
uncertainties; over dependence on exports, especially with respect to primary
commodities, making these economies vulnerable to changes in commodity prices;
overburdened infrastructure and obsolete financial systems; environmental
problems; less well developed legal systems; and less reliable custodial
services and settlement practices.
CORPORATE DEBT SECURITIES. Both Funds may invest up to 35% 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. Each Fund may invest in derivative securities.
Generally, derivatives can be characterized as financial instruments whose
performance is derived, at least in part, from the performance of an underlying
asset or assets. Some derivatives are sophisticated instruments that typically
involve a small investment of cash relative to the magnitude of the risks
assumed. These may include swap agreements, options, forwards and futures.
11
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.
CONVERTIBLE SECURITIES. The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.
RISK OF CONCENTRATION. Because each Fund concentrates its investments in
securities related to a group of a particular industry, the value of the Funds
may be subject to greater market fluctuations than a fund which has securities
representing a broader range of investment alternatives. Prior to the change in
the investment strategy of the Surviving Fund, each Fund invested in a sub-set
of a sector within the technology universe, making each Fund more volatile than
the technology group as a whole.
TECHNOLOGY RISK/MARKET TREND RISK. Investments in these sectors are
generally subject to the rate of change in technology, which is higher than
other industries. Products and services of companies engaged in internet and
internet-related activities are subject to relatively high risks of rapid
obsolescence caused by scientific and technological advances. Swings in investor
psychology or significant trading by large institutional investors can result in
significant price fluctuations and stock price declines. From time to time, the
stock market may not favor the tech-related securities in which the Funds
invest. For example, the market could favor value stocks, stocks in industries
to which the Fund is not exposed, such as "old economy" stocks, or may not favor
equities at all.
NON-DIVERSIFICATION RISK. Internet Fund is classified as a non-diversified
investment company, which means that, compared with other funds, Internet Fund
is not limited by the 1940 Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The investment of a larger
percentage of its assets in the securities of a small number of issuers may
cause the Fund's share price to fluctuate more than that of a diversified
investment company.
GOVERNMENT REGULATION. Global Communications Fund invests in the
communications industry which may be subject to greater governmental regulation
than many other industries. Accordingly, such industries may be subject to
changes in governmental policies and the need for regulatory approvals may have
a material effect on the products and services offered. Telephone operating
companies in the United States, for example, are subject both to federal and
state regulation affecting permitted rates of return and the kinds of service
that may be offered.
PORTFOLIO TURNOVER. Each Fund may engage in frequent and active trading of
portfolio securities to achieve their investment objectives. 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 a Fund. For the twelve-month period ended October 31, 2001, the
portfolio turnover rate for ING Global Technology Fund was 126%; the portfolio
turnover rate for Global Communications Fund was 118%; and the portfolio
turnover rate for Internet Fund was 116%.
INABILITY TO SELL SECURITIES. Some securities usually trade in lower volume
and may be less liquid than securities of large established companies. These
less liquid securities could include securities of small and mid-size companies,
securities that originate from small offerings, and foreign securities,
particularly those from companies in emerging markets. The Funds could lose
money if they cannot sell a security at the time and price that would be most
beneficial to the Funds.
TEMPORARY DEFENSIVE STRATEGIES. When the Adviser or sub-adviser to the
Funds anticipates unusual market or other conditions, the Funds may temporarily
depart from their principal investment strategies as a defensive measure. To the
extent either Fund is engaged in temporary defensive investments, it will not be
pursuing its investment objective.
12
COMPARISON OF FEES AND EXPENSES
The following discussion describes and compares the fees and expenses of
the Funds. For further information on the fees and expenses of ING Global
Technology Fund, see "Appendix C: Additional Information Regarding ING Global
Technology Fund."
MANAGEMENT FEES
Internet Fund and ING Global Technology Fund pay a management fee of 1.25%
of the Fund's average daily net assets for each Class of shares. The Global
Communications Fund pays a management fee of 1.00% of the Fund's average daily
net assets for each Class of shares.
ADMINISTRATION FEES
Each Fund pays an administration fee of 0.10% of the Fund's average daily
net assets for each Class of Shares.
DISTRIBUTION AND SERVICE FEES
Each Fund pays the same distribution (12b-1) and service fees for each
Class of shares, as described more fully below in the table below in the section
entitled "Annual Fund Operating Expenses."
EXPENSE LIMITATION ARRANGEMENTS
Expense limitation arrangements are in place for each Fund. Under the terms
of the expense limitation agreements, ING Pilgrim has agreed to limit expenses
of the Funds, excluding interest, taxes, brokerage and extraordinary expenses,
subject to possible recoupment by ING Pilgrim within three years. The expense
limitation agreements are contractual and shall renew automatically for one year
terms unless ING Pilgrim provides written notice of the termination of the
expense limitation agreement at least 30 days prior to the end of the then
current term or upon termination of the investment management agreement.
The current expense limitation agreement for ING Global Technology Fund
provides that it will remain in effect until February 28, 2002. The Board of
Trustees has approved an expense limitation agreement that will take effect on
March 1, 2002 and expires on March 1, 2003. The expense limits will remain the
same under the new agreement. There can be no assurance that the expense
limitation agreement will be continued after that date. The expense limitations
for Class A, Class B and Class C shares of ING Global Technology Fund are 1.95%,
2.70% and 2.70%, respectively.
The current expense limitation agreement for Global Communications Fund
provides that it will remain in effect until February 28, 2002. The Board of
Trustees has approved an expense limitation agreement that will take effect on
March 1, 2002 and expires on March 1, 2003. The expense limits will remain the
same under the new agreement. There can be no assurance that the expense
limitation agreement will be continued after that date. The expense limitations
for Class A, Class B and Class C shares of Global Communications Fund are 1.70%,
2.45% and 2.45%, respectively.
The current expense limitation agreement for Internet Fund provides that it
will remain in effect until February 28, 2002. The Board of Trustees has
approved an expense limitation agreement that will take effect on March 1, 2002
and expires on March 1, 2003. The expense limits will remain the same under the
new agreement. There can be no assurance that the expense limitation agreement
will be continued after that date. The expense limitations for Class A, Class B
and Class C shares of Internet Fund are 1.90%, 2.65% and 2.65%, respectively.
EXPENSE TABLE
The following tables show the current expenses of each of the Funds and
estimated PRO FORMA expenses giving effect to: (i) the proposed reorganization
of Internet Fund and Global Communications Fund into ING Global Technology Fund;
(ii) the proposed Reorganization of Internet Fund into ING Global Technology
Fund (assumes Reorganization of Global Communications Fund does not occur); and
(iii) the proposed Reorganization of Global Communications Fund into ING Global
Technology Fund (assumes Reorganization of Internet Fund does not occur).
Expenses are based upon the annual operating expenses incurred by Class A, Class
B and Class C shares of the Fund for the period ended October 31, 2001. PRO
FORMA fees show estimated fees of the Surviving Fund after giving effect to each
proposed Reorganizations as adjusted to reflect changes in contractual charges.
PRO FORMA numbers are estimated in good faith and are hypothetical.
13
PROFORMA I: Proposed Reorganization of Internet Fund and Global Communications
Fund into ING Global Technology Fund
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
(expenses that are deducted from Fund assets, shown as a ratio of expenses
to average daily net assets)(1)
DISTRIBUTION
(12b-1) AND
SHAREHOLDER TOTAL FUND
MANAGEMENT SERVICING OTHER OPERATING FEE WAIVER NET FUND
FEES FEES(2) EXPENSES EXPENSES BY ADVISER(3) EXPENSES
---- ------- -------- -------- ------------- --------
Class A
Global Communications Fund 1.00% 0.35% 0.89% 2.24% -0.65% 1.59%
Internet Fund 1.25% 0.35% 1.26% 2.86% -1.23% 1.63%
ING Global Technology Fund 1.25% 0.35% 0.87% 2.47% -0.64% 1.83%
After the Reorganizations
(PRO FORMA) 1.25% 0.35% 0.88% 2.48% -0.53% 1.95%
Class B
Global Communications Fund 1.00% 1.00% 0.98% 2.98% -0.68% 2.30%
Internet Fund 1.25% 1.00% 1.26% 3.51% -1.13% 2.38%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.88% 3.13% -0.43% 2.70%
Class C
Global Communications Fund 1.00% 1.00% 0.99% 2.99% -0.69% 2.30%
Internet Fund 1.25% 1.00% 1.26% 3.51% -1.13% 2.38%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.88% 3.13% -0.43% 2.70%
- ----------
(1) The fiscal year end for Global Communications Fund and ING Global
Technology Fund is October 31. The fiscal year end of Internet Fund is May
31. PRO FORMA expenses are adjusted for anticipated contractual changes.
(2) As a result of distribution (12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim has entered into expense limitation agreements that limit
expenses (excluding interest, taxes, brokerage and extraordinary expenses)
for Global Communications Fund to annual rates of 1.70%, 2.45% and 2.45%
for Class A, Class B and Class C shares, respectively; for Internet Fund to
annual rates of 1.90%, 2.65% and 2.65% for Class A, Class B and Class C
shares, respectively; and for ING Global Technology Fund to annual rates of
1.95%, 2.70% and 2.70% for Class A, Class B and Class C shares,
respectively. The agreements are valid until February 28, 2002. The Board
of Trustees has approved expense limitation agreements for Global
Communications, Internet and ING Global Technology Funds that will take
effect on March 1, 2002 and will expire on March 1, 2003. The expense
limits will remain the same under the new agreements. The expense
limitation agreements are contractual and shall renew automatically for one
year terms unless ING Pilgrim provides written notice of the termination of
the expense limitation agreement at least 30 days prior to the end of the
then current term or upon termination of the investment management
agreement. There is no assurance that the expense limitation agreements
will remain in effect after this date. Prior to March 1, 2001, the expense
limitation rates for Global Communications Fund for Class A, Class B and
Class C shares were 1.53%, 2.18% and 2.18%, respectively. Prior to March 1,
2001, the expense limitation rates for Internet Fund for Class A, Class B
and Class C shares were 1.59%, 2.24% and 2.24%, respectively. Prior to
March 1, 2001, the expense limitation rates for ING Global Technology Fund
for Class A, Class B and Class C shares were 1.59%, 2.24% and 2.24%,
respectively.
14
PROFORMA II: Proposed Reorganization of Internet Fund into
ING Global Technology Fund (assumes Reorganization of
Global Communications Fund does not occur).(1)
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
(expenses that are deducted from Fund assets, shown as a ratio of
expenses to average daily net assets)(1)
DISTRIBUTION
(12b-1) AND
SHAREHOLDER TOTAL FUND
MANAGEMENT SERVICING OTHER OPERATING FEE WAIVER NET FUND
FEES FEES(2) EXPENSES EXPENSES BY ADVISER(3) EXPENSES
---- ------- -------- -------- ------------- --------
Class A
Internet Fund 1.25% 0.35% 1.26% 2.86% -1.23% 1.63%
ING Global Technology Fund 1.25% 0.35% 0.87% 2.47% -0.64% 1.83%
After the Reorganizations
(PRO FORMA) 1.25% 0.35% 0.90% 2.50% -0.55% 1.95%
Class B
Internet Fund 1.25% 1.00% 1.26% 3.51% -1.13% 2.38%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.90% 3.15% -0.45% 2.70%
Class C
Internet Fund 1.25% 1.00% 1.26% 3.51% -1.13% 2.38%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.90% 3.15% -0.45% 2.70%
- ----------
(1) The fiscal year end for ING Global Technology Fund is October 31. The
fiscal year end of Internet Fund is May 31. Pro Forma expenses are adjusted
for anticipated contractual changes.
(2) As a result distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into expense limitation agreements that
limit expenses (excluding interest, taxes, brokerage and extraordinary
expenses) for Internet Fund to annual rates of 1.90%, 2.65% and 2.65% for
Class A, Class B and Class C shares, respectively; and for ING Global
Technology Fund to annual rates of 1.95%, 2.70% and 2.70% for Class A,
Class B and Class C shares, respectively. The agreements are valid through
February 28, 2002. The Board of Trustees has approved expense limitation
agreements for Internet and ING Global Technology Funds that will take
effect on March 1, 2002 and will expire on March 1, 2003. The expense
limits will remain the same under the new agreements. The expense
limitation agreements are contractual and shall renew automatically for one
year terms unless ING Pilgrim provides written notice of the termination of
the expense limitation agreement at least 30 days prior to the end of the
then current term or upon termination of the investment management
agreement. There is no assurance that the expense limitation agreements
will remain in effect after this date. Prior to March 1, 2001, the expense
limitation rates for Internet Fund for Class A, Class B and Class C shares
were 1.59%, 2.24% and 2.24%, respectively. Prior to March 1, 2001, the
expense limitation rates for ING Global Technology Fund for Class A, Class
B and Class C shares were 1.59%, 2.24% and 2.24%, respectively.
15
PROFORMA III: Proposed Reorganization of Global Communications Fund
into ING Global Technology Fund (assumes Reorganization of
Internet Fund does not occur).(1)
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
(expenses that are deducted from Fund assets, shown as a ratio of
expenses to average daily net assets)(1)
DISTRIBUTION
(12b-1) AND
SHAREHOLDER TOTAL FUND
MANAGEMENT SERVICING OTHER OPERATING FEE WAIVER NET FUND
FEES FEES(2) EXPENSES EXPENSES BY ADVISER(3) EXPENSES
---- ------- -------- -------- ------------- --------
Class A
Global Communications Fund 1.00% 0.35% 0.89% 2.24% -0.65% 1.59%
ING Global Technology Fund 1.25% 0.35% 0.87% 2.47% -0.64% 1.83%
After the Reorganizations
(PRO FORMA) 1.25% 0.35% 0.80% 2.40% -0.45% 1.95%
Class B
Global Communications Fund 1.00% 1.00% 0.98% 2.98% -0.68% 2.30%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.80% 3.05% -0.35% 2.70%
Class C
Global Communications Fund 1.00% 1.00% 0.99% 2.99% -0.69% 2.30%
ING Global Technology Fund 1.25% 1.00% 0.91% 3.16% -0.62% 2.54%
After the Reorganizations
(PRO FORMA) 1.25% 1.00% 0.80% 3.05% -0.35% 2.70%
- ----------
(1) The fiscal year end for Global Communications Fund and ING Global
Technology Fund is October 31. Pro Forma expenses are adjusted for
anticipated contractual changes.
(2) As a result distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc.
(3) ING Pilgrim Investments has entered into expense limitation agreements that
limit expenses (excluding interest, taxes, brokerage and extraordinary
expenses) for Global Communications Fund to annual rates of 1.70%, 2.45%
and 2.45% for Class A, Class B and Class C shares, respectively; and for
ING Global Technology Fund to annual rates of 1.95%, 2.70% and 2.70% for
Class A, Class B and Class C shares, respectively. The agreements are valid
through February 28, 2002. The Board of Trustees has approved expense
limitation agreements for Global Communications and ING Global Technology
Funds that will take effect on March 1, 2002 and will expire on March 1,
2003. The expense limits will remain the same under the new agreements. The
expense limitation agreements are contractual and shall renew automatically
for one year terms unless ING Pilgrim provides written notice of the
termination of the expense limitation agreement at least 30 days prior to
the end of the then current term or upon termination of the investment
management agreement. There is no assurance that the expense limitation
agreements will remain in effect after this date. Prior to March 1, 2001,
the expense limitation rates for Global Communications Fund for Class A,
Class B and Class C shares were 1.53%, 2.18% and 2.18%, respectively. Prior
to March 1, 2001, the expense limitation rates for ING Global Technology
Fund for Class A, Class B and Class C shares were 1.59%, 2.24% and 2.24%,
respectively.
16
Following the Reorganizations and in the ordinary course of business as a
mutual fund, certain holdings of each Disappearing Fund that are transferred to
the Surviving Fund in connection with the Reorganizations may be sold. Such
sales may result in increased transaction costs for the Surviving Fund, and the
realization of taxable gains or losses for the Surviving Fund.
EXAMPLES. The following examples are intended to help you compare the cost
of investing in 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. Your actual costs may be higher or lower.
You pay the following expenses if you redeemed your shares.
GLOBAL COMMUNICATIONS FUND INTERNET FUND
------------------------------------------ ----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
CLASS A $789 $1,235 $1,706 $3,002 $847 $1,410 $1,997 $3,577
CLASS B 801 1,221 1,767 3,126* 854 1,377 2,022 3,639*
CLASS C 402 924 1,572 3,308 454 1,077 1,822 3,783
ING GLOBAL TECHNOLOGY FUND PRO FORMA: THE FUNDS COMBINED**
------------------------------------------ ----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
CLASS A $811 $1,300 $1,815 $3,220 $812 $1,303 $1,820 $3,229
CLASS B 819 1,274 1,854 3,308* 816 1,266 1,840 3,289*
CLASS C 419 974 1,654 3,467 416 966 1,640 3,439
You would pay the following expenses if you did not redeem your shares:
GLOBAL COMMUNICATIONS FUND INTERNET FUND
------------------------------------------ ----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
CLASS A $789 $1,235 $1,706 $3,002 $847 $1,410 $1,997 $3,577
CLASS B 301 921 1,567 3,126* 354 1,077 1,822 3,639*
CLASS C 302 924 1,572 3,308 354 1,077 1,822 3,783
ING GLOBAL TECHNOLOGY FUND PRO FORMA: THE FUNDS COMBINED**
------------------------------------------ ----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
Class A $811 $1,300 $1,815 $3,220 $812 $1,303 $1,820 $3,229
Class B 319 974 1,654 3,308* 316 966 1,640 3,289*
Class C 319 974 1,654 3,467 316 966 1,640 3,439
- ----------
* 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.
17
GENERAL INFORMATION
Class A, Class B and Class C shares of ING Global Technology Fund issued to
a shareholder in connection with the Reorganizations will not be subject to an
initial sales charge, but will be subject to the same contingent deferred sales
charge, if any, applicable to the corresponding Class of shares of each
Disappearing Fund held by that shareholder immediately prior to the
Reorganizations.
In addition, the period that the shareholder held shares of each
Disappearing Fund will be included in the holding period of ING Global
Technology Fund shares for purposes of calculating any contingent deferred sales
charge. Similarly, Class B shares of ING Global Technology Fund issued to a
shareholder in connection with the Reorganizations will convert to Class A
shares eight years after the date that the Class B shares of each Disappearing
Fund were purchased by the shareholder. Each Fund is subject to the sales load
structure described in the table below on new investments.
TRANSACTION FEES ON NEW INVESTMENTS
(fees paid directly from your investment)
CLASS A CLASS B CLASS C
------- ------- -------
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 5.75%(1) none none
Maximum deferred sales charge (load) (as a percentage of the
lower of original purchase price or redemption proceeds) none(2) 5.00%(3) 1.00%(4)
- ----------
(1) Reduced for purchases of $50,000 and over. For information on reduced sales
loads for ING Global Technology Fund, see "Class A Shares: Initial Sales
Charge Alternative" in Appendix C.
(2) A contingent deferred sales charge of no more than 1.00% may be assessed on
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. See, "Class A
Shares: Initial Sales Charge Alternative" in Appendix C.
(3) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in this Appendix C.
(4) Imposed upon redemptions within a year from purchase.
Neither the Surviving Fund nor the Disappearing Funds have any redemption
fees, exchange fees or sales charges on reinvested dividends.
18
INFORMATION ABOUT THE REORGANIZATIONS
THE REORGANIZATION AGREEMENTS
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Agreements. Significant
provisions of the Reorganization Agreements are summarized below; however, this
summary is qualified in its entirety by reference to the Reorganization
Agreements, copies of which are attached as Appendix B-1 and Appendix B-2.
The Reorganization Agreements provide for (i) the transfer, as of the
Closing Date, of all of the assets of each Disappearing Fund in exchange for
shares of beneficial interest of the Surviving Fund and the assumption by the
Surviving Fund of each Disappearing Fund's liabilities; and (ii) the
distribution of shares of the Surviving Fund to shareholders of each
Disappearing Fund, as provided for in the Reorganization Agreements. The
Disappearing Funds will then be liquidated.
After the Reorganizations, each shareholder of the Disappearing Funds will
own shares of the Surviving Fund having an aggregate value equal to the
aggregate value of each respective Class of shares in each Disappearing Fund,
respectively, held by that shareholder as of the Closing Date. Shareholders of
each Class of shares of the Disappearing Funds will receive shares of the same
Class of shares of the Surviving Fund. In the interest of economy and
convenience, shares of the Surviving Fund generally will not be represented by
physical certificates, unless requested in writing.
Until the Closing Date, shareholders of each Disappearing Fund will
continue to be able to redeem their shares. Redemption requests received after
the Closing will be treated as requests received by the Surviving Fund for the
redemption of its shares.
The obligations of the Funds under the Reorganization Agreements are
subject to various conditions, including approval of the shareholders of each
Disappearing Fund. Each 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 each Reorganization Agreement. Each
Reorganization Agreement may be terminated by mutual agreement of the parties or
on certain other grounds. Please refer to Appendix B-1 and Appendix B-2 to
review the terms and conditions of each Reorganization Agreement.
REASONS FOR THE REORGANIZATIONS
Each Reorganization is one of several reorganizations that are proposed
among various Pilgrim Funds. The Pilgrim Funds complex has grown in recent years
through the addition of many funds. Management of the Pilgrim Funds has proposed
the consolidation of several of the 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 the complex, thereby
eliminating inefficiencies arising from having similar portfolios within the
same fund group and confusion about overlapping funds. ING Pilgrim also believes
that the Reorganizations may benefit fund shareholders by resulting in surviving
funds with a greater asset base. This is expected to achieve economies of scale
for shareholders and may provide greater investment opportunities for the
surviving funds or the potential to take larger portfolio positions.
The proposed Reorganizations were presented to the Board of Trustees of
each Disappearing Fund for consideration and approval at a meeting held on
November 2, 2001. For the reasons discussed below, the Trustees, including all
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
each Disappearing Fund, respectively, determined that the interests of the
shareholders of each Disappearing Fund will not be diluted as a result of the
proposed Reorganizations, and that the proposed Reorganizations are in the best
interests of the shareholders of each Disappearing Fund.
The Reorganizations will allow the shareholders of each Disappearing Fund
to continue to participate in a professionally-managed portfolio that seeks to
achieve an objective of long-term capital appreciation through investment in
technology related securities. As shareholders of ING Global Technology Fund,
shareholders will be able to exchange into other mutual funds in the group of
the Pilgrim Funds that offer the same Class of shares in which such shareholder
is currently invested. A list of the Pilgrim Funds and the Classes available
after the Reorganizations, is contained in Appendix D.
19
BOARD CONSIDERATIONS
The Board of Trustees of each Disappearing Fund in recommending the
proposed transaction, considered a number of factors, including the following:
* the plans of management to reduce the overlap in Funds in the Pilgrim
Funds complex;
* the relative size of the Funds and management's assertion that the
Disappearing Funds are so small that they are not viable;
* expense ratios and information regarding fees and expenses of the
Surviving Fund and each Disappearing Fund, including the expense
limitation arrangements offered by ING Pilgrim for Global
Communications Fund, Internet Fund and ING Global Technology Fund;
* whether the Reorganizations would dilute the interests of the current
shareholders of each Disappearing Fund;
* the relative historical investment performance of ING Global
Technology Fund as compared to each Disappearing Fund;
* the strategies of ING Global Technology Fund to invest in technology
related securities, permitting the Disappearing Funds to participate
in a technology related fund;
* the costs to be borne by ING Global Technology Fund, each Disappearing
Fund and ING Pilgrim; and
* the tax consequences of the Reorganizations to each Disappearing Fund
and their shareholders including the tax-free nature of the
transaction
ING Pilgrim recommended the Reorganizations to the Board of Trustees at a
meeting of the Board on November 2, 2001. In recommending the Reorganizations,
ING Pilgrim advised the Board that the Disappearing Funds were too small to be
viable. The Board of Trustees also considered the future potential benefits to
ING Pilgrim in that its costs to administer the Funds may be reduced if the
Reorganizations are approved.
THE TRUSTEES OF EACH DISAPPEARING FUND RECOMMEND THAT SHAREHOLDERS APPROVE
THE PROPOSED REORGANIZATIONS WITH ING GLOBAL TECHNOLOGY FUND.
TAX CONSIDERATIONS.
The Reorganizations are 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 the
shareholders of the Disappearing Funds nor the Surviving Fund are expected to
recognize any gain or loss for federal income tax purposes from the transactions
contemplated by the Reorganization Agreements. As a condition to the Closing of
the Reorganizations, the Funds will receive an opinion from the law firm of
Dechert to the effect that each 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 the
Trust.
Immediately prior to the Reorganizations, each Disappearing Fund will pay a
dividend or dividends which, together with all previous dividends, will have the
effect of distributing to its shareholders all of each Disappearing Fund's
investment company taxable income for taxable years ending on or prior to each
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 each Reorganization (after reduction for any available capital loss
carryforward). Such dividends will be included in the taxable income of each
Disappearing Fund's shareholders.
20
As of October 31, 2001, Global Communications Fund had accumulated capital
loss carryforwards in the amount of approximately $64,104,971. As of May 31,
2001, Internet Fund had accumulated capital loss carryforwards in the amount of
approximately $83,761,345. In addition, at October 31, 2001, Global
Communications Fund had $16,253,710 of unrealized depreciation of investments
and, at May 31, 2001, Internet Fund had $21,978,124 of unrealized depreciation
of investments. After the Reorganizations, these losses will be available to the
Surviving Fund to offset its capital gains, although a portion of the amount of
these losses which may offset the Surviving Fund's capital gains in any given
year may be limited. As a result of this limitation, it is possible that the
Surviving Fund may not be able to use such losses as rapidly as it might have
had the Reorganizations not occurred, and part of these losses may not be
useable at all. The ability of the Surviving Fund to absorb losses in the future
depends upon a variety of factors that cannot be known in advance, including the
existence of capital gains against which these losses may be offset. In
addition, the benefits of any of the Disappearing Fund's capital loss
carryforwards currently are available only to pre-Reorganization shareholders of
that Fund. After the Reorganizations, however, these benefits will inure to
benefit of all post-Reorganization shareholders of the Surviving Fund.
EXPENSES OF THE REORGANIZATIONS
ING Pilgrim, the investment adviser to ING Global Technology Fund, will
bear half the cost of the Reorganizations. The Funds will bear the other half of
the expenses relating to the proposed Reorganizations including, but not limited
to, the costs of solicitation of voting instructions and any necessary filings
with the Commission. Of the Reorganization expenses allocated to the Funds, each
Fund will bear a pro rata portion based on its relative net asset value
immediately before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORMS OF ORGANIZATION
ING Global Technology Fund and Global Communications Fund are diversified
series of Pilgrim Funds Trust (the "Trust"), an open-end management investment
company organized as a Delaware business trust. Internet Fund is a
non-diversified series of the Trust. The Trust is governed by a Board of
Trustees that is comprised of nine Trustees. For more information on the history
of the Funds, refer to the Funds' SAI.
DISTRIBUTOR
ING Pilgrim Securities, Inc. (the "Distributor"), whose address is 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, is the principal
distributor for the Funds.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund earns interest, dividends, and other income from its investments,
and distributes this income (less expenses) to shareholders as dividends. Each
Fund may realize capital gains from its investments, and distributes these gains
(less losses), if any to shareholders as capital gains distributions.
Each Fund pays 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 Agreements are approved by the shareholders of each
Disappearing Fund, then as soon as practicable before the Closing Date, each
Disappearing Fund will pay its shareholders a cash distribution of substantially
all undistributed net investment income and undistributed realized net capital
gains.
21
CAPITALIZATION
The following tables show on an unaudited basis the capitalization of each
of the Funds as of October 31, 2001 and on a PRO FORMA basis as of October 31,
2001 giving effect to the Reorganizations. The first table presents the
capitalization of each Fund assuming that the Reorganization of the Internet
Fund into ING Global Technology Fund is consummated, but not the Reorganization
with Global Communications Fund. The second table presents the capitalization of
each Fund assuming that the Reorganization of Global Communications Fund into
Global Technology Fund is consummated, but not the Reorganization of Internet
Fund. The third table presents the capitalization of each Fund assuming that the
Reorganizations with both the Global Communications Fund and Internet Fund are
consummated. The first two tables are presented in case one of the
Reorganizations are not consummated, which could occur if the Reorganization is
cancelled or because shareholders do not approve it.
PRO FORMA I: Proposed Reorganization of Internet Fund into ING Global Technology
Fund (assumes reorganization of Global Communications Fund does not occur).
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
INTERNET FUND
Class A $ 8,858,741 $ 2.05 4,330,637
Class B $ 6,878,314 $ 2.01 3,418,006
Class C $ 2,885,053 $ 2.01 1,435,776
ING GLOBAL TECHNOLOGY FUND
Class A $25,358,539 $ 5.77 4,394,888
Class B $11,726,411 $ 5.63 2,083,829
Class C $ 4,376,347 $ 5.61 780,009
PRO FORMA - SURVIVING FUND INCLUDING INTERNET FUND
Class A $34,217,280 $ 5.77 5,930,198
Class B $18,604,725 $ 5.63 3,305,554
Class C $ 7,261,400 $ 5.61 1,294,279
PRO FORMA II: Proposed Reorganization of Global Communications Fund into ING
Global Technology Fund (assumes reorganization of Internet Fund does not occur).
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
GLOBAL COMMUNICATIONS FUND
Class A $ 8,106,512 $ 1.74 4,649,427
Class B $ 6,144,753 $ 1.72 3,568,296
Class C $ 1,418,911 $ 1.72 823,316
ING GLOBAL TECHNOLOGY FUND
Class A $25,358,539 $ 5.77 4,394,888
Class B $11,726,411 $ 5.63 2,083,829
Class C $ 4,376,347 $ 5.61 780,009
PRO FORMA - SURVIVING FUND INCLUDING GLOBAL COMMUNICATIONS FUND
Class A $33,465,051 $ 5.77 5,799,829
Class B $17,871,164 $ 5.63 3,175,259
Class C $ 5,795,258 $ 5.61 1,032,934
22
PRO FORMA III: Proposed Reorganization of Internet Fund and Global
Communications Fund into ING Global Technology Fund.
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
INTERNET FUND
Class A $ 8,858,741 $ 2.05 4,330,637
Class B $ 6,878,314 $ 2.01 3,418,006
Class C $ 2,885,053 $ 2.01 1,435,776
GLOBAL COMMUNICATIONS FUND
Class A $ 8,106,512 $ 1.74 4,649,427
Class B $ 6,144,753 $ 1.72 3,568,296
Class C $ 1,418,911 $ 1.72 823,316
ING GLOBAL TECHNOLOGY FUND
Class A $25,358,539 $ 5.77 4,394,888
Class B $11,726,411 $ 5.63 2,083,829
Class C $ 4,376,347 $ 5.61 780,009
PRO FORMA - SURVIVING FUND INCLUDING GLOBAL
COMMUNICATIONS FUND AND INTERNET FUND
Class A $42,323,792 $ 5.77 7,335,140
Class B $24,749,478 $ 5.63 4,396,985
Class C $ 8,680,311 $ 5.61 1,547,204
PORTFOLIO MANAGER OF ING GLOBAL TECHNOLOGY FUND
ING Global Technology Fund is managed by the Sub-Adviser, ING Investment
Management Advisors B.V. ("IIMA"). Mr. Guy Uding has primary responsibility for
managing the Fund and heads a three-member team of investment professionals. Mr.
Uding has been employed by IIMA and its affiliates since 1995, and has five
years of investment experience.
23
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of the
Notice and this Proxy Statement with its enclosures on or about February 5,
2002. Shareholders of each Disappearing 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 and
its affiliates, without additional compensation, may solicit proxies in person
or by telephone, telegraph, facsimile or oral communication.
Each Disappearing Fund is using Shareholder Communications Corporation, a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the Special Meeting approaches, if we have not already
heard from you, you may receive a telephone call from Shareholder Communications
Corporation reminding you to exercise your right to vote.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with each Disappearing Fund, respectively, 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 Trustees of the Trust that may be
presented at the Meeting.
VOTING RIGHTS
Shareholders of each Disappearing 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 each Disappearing Fund at the close of business on January
11, 2002 (the "Record Date") will be entitled to be present and give voting
instructions for each Disappearing Fund, respectively, at the Special Meeting
with respect to their shares owned as of that Record Date. As of the Record
Date, [_______] shares of Global Communications Fund and [__________] shares of
Internet Fund were outstanding and entitled to vote.
Approval of each Reorganization Agreement requires a vote of the majority
of the outstanding shares of each Disappearing Fund, respectively, in person or
by proxy if a quorum is present at the Special Meeting. Holders of one-third of
the outstanding shares present in person or by proxy shall constitute a quorum.
In the absence of a quorum, a majority of outstanding shares entitled to vote
present in person or by proxy may adjourn the meeting from time to time until a
quorum is present.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the Special Meeting for purposes of determining a quorum. However, abstentions
and broker non-votes will not be deemed represented at the Special Meeting for
purposes of calculating the vote on any matter. As a result, an abstention or
broker non-vote will have the same effect as a vote against the Reorganizations.
Each Disappearing Fund expects that, before the Special Meeting,
broker-dealer firms holding shares of each Disappearing Fund in "street name"
for their customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date specified
in the broker-dealer firms' proxy solicitation materials, each Disappearing Fund
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.
To the knowledge of the Trust, as of January __, 2002, no current Director
owns 1% or more of the outstanding shares of either Disappearing Fund, and the
officers and Directors own, as a group, less than 1% of the shares of either
Disappearing Fund.
24
Appendix E hereto lists the persons that, as of January __, 2002, owned
beneficially or of record 5% or more of the outstanding shares of any of the
Funds.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The 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 proxy holders will
vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
The 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 either Disappearing Fund's management. Therefore it is not
practicable to specify a date by which shareholder proposals must be received in
order to be incorporated in an upcoming proxy statement for an annual meeting.
REPORTS TO SHAREHOLDERS
ING Pilgrim will furnish, without charge, a copy of the most recent Annual
Report regarding either Disappearing Fund and the most recent Semi-Annual Report
succeeding the Annual Report, if any, on request. Requests for such reports
should be directed to Pilgrim at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258-2034 or at 1-800-992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Kimberly A. Anderson,
Vice President and Secretary
February 5, 2002
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
25
APPENDIX A
ING GLOBAL TECHNOLOGY FUND
Set forth below is an excerpt from Global Information Technology Fund's
(which will be renamed ING Global Technology Fund as of March 1, 2002) Annual
Report, dated October 31, 2001.
Portfolio Management: Guy Uding, Portfolio Manager, ING Investment Management
Advisors B.V.
Goal: The Pilgrim Global Information Technology Fund (the "Fund") seeks
long-term capital appreciation by investing in equity securities of information
technology companies located throughout the world, including the United States.
Market Overview: During the period, the technology-rich Nasdaq Index lost almost
50% of its value. The negative outlook for the US economy plagued the technology
sector and the overall market throughout the year. In the spring, the US senate
passed an 11-year, $1.35 trillion tax cut bill that reduces the top income tax
rate to 35% and gave people a $300 refund in mid to late summer. Following the
September 11th terrorist attacks, the FED lowered interest rates aggressively
and provided additional liquidity in an effort to stabilize the further
weakening US economy. More fiscal policies are under discussion and may include
accelerated spending and additional tax cuts aimed at restoring consumer
confidence. Although consumer confidence remained quite strong during most of
the reporting period, in late October it plummeted to the lowest level in more
than seven years, as job cuts, the war in Afghanistan and anthrax scares take
their toll on the American consumer.
Early on in the reporting period many technology companies were reporting no
evidence of a slowdown in their businesses because they were selling
strategically critical applications or products that offered compelling ROI's.
In fact, many Tech companies increased guidance late 2000/early 2001 due to good
visibility following better-than-expected fourth quarter results. When the
slowdown continued, coupled with a dim outlook, companies began reducing
payrolls and trimming costs to make up for the slowdown in sales. Generally
companies postponed and cancelled IT initiatives after the attacks on the US.
Hardware was under pressure throughout the period as PC and Server demand
remained very weak due to the lack of a "killer" application to spur an upgrade
cycle. Customers delayed their spending as the economy slowed and the number of
start-ups going out of business grew. The component sector showed severe
weakness because of a slowdown in orders, coupled with inventory issues,
dampened the outlook even further, especially for the semiconductor companies.
Utilization rates for the semiconductor companies fell quickly as demand
weakened and the inventory issues continued. As a result, Semiconductor
companies reduced capital spending budgets aggressively and cancelled orders.
Outsourcing companies were relatively strong as the average lifetime of
contracts is five years giving those companies greater visibility going forward.
In addition, the number of deals is increasing as clients resort to outsourcing
to cut costs.
Performance: For the fiscal year ended October 31, 2001, the Fund's Class A
shares, excluding sales charges, provided a total return of -67.57% compared to
the Goldman Sachs Technology Industry Composite Index which returned -56.20% for
the same period.
Portfolio Specifics: Across the board, analysts and companies alike lowered
estimates aggressively. This fuelled further volatility and led to an active
trading environment. We increased the weighting in the outsourcing theme at the
beginning of the year by adding EDS to the portfolio. Visibility was improving
and research suggested a continuation of the underlying demand drivers.
During the year we switched from the enterprise software companies toward the
semiconductor companies. Evidence mounted that the inventory correction would be
largely over by the third quarter if demand stabilized. Of course, demand
plummeted after the attacks and the semiconductor sector came under selling
pressure once again. More recently semiconductor companies are stating that the
inventory issues are largely resolved. Companies like Texas Instruments are
reporting book-to-bill figures above parity as parts of the business are slowly
improving.
We added the gaming software sector to the portfolio. These names came under
pressure on investor fear that demand would fall following the terrorist
attacks. Sell through figures on consoles like the playstation2 didn't support
this fear and we added Activision, THQ and Nvidia to the portfolio.
Market Outlook: The Federal Reserve is providing liquidity, interest rates are
low and likely going lower, fiscal policy initiatives are under discussion and
additional tax cuts could restore consumer confidence. We expect that the
combination of these initiatives is likely to limit the duration and depth of an
economic downturn. Although investors are already looking at the second half of
next year for a recovery, the coming fourth quarter, traditionally the strongest
quarter in technology, lacks visibility. The market appears to be pricing in a
very dim set of figures and we expect investors to focus on the outlook from
companies rather than the here and now. In many cases the stock market is
proving immune to negative news pointing to a possible bottom for certain
sub-sectors. Most notable is the semiconductor sector where investors appear to
be warming up to it despite a continued lack of visibility.
Corporate IT budgets for 2002 are currently being set and given the weak
economic environment, it is likely that spending plans will be quite
conservative. When the economy actually recovers these budgets will open up. On
the hardware side, things are looking a bit brighter. Increasingly CIO's are
pointing to Windows and the subsequent upgrade of PC's as a top priority.
A-1
12/15/98 10/99 10/00 10/31/01
------- ------- ------- -------
Pilgrim Global Information Technology Fund Class A With Sales Charge $ 9,425 $16,381 $25,981 $ 8,426
Pilgrim Global Information Technology Fund Class A Without Sales Charge $10,000 $17,380 $27,566 $ 8,940
Goldman Sachs Technology Industry Composite Index $10,000 $16,032 $19,385 $ 8,491
Average Annual Total Returns
for the Periods Ended October 31, 2001
--------------------------------------
Since Inception
1 Year 12/15/98
------ --------
Including Sales Charge:
Class A (1) -69.43% -5.77%
Class B (2) -68.88% -5.07%
Class C (3) -68.11% -4.53%
Excluding Sales Charge:
Class A -67.57% -3.82%
Class B -67.81% -4.42%
Class C -67.90% -4.53%
Goldman Sachs Technology
Industry Composite Index -56.20% -5.45%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim Global Information Technology Fund against the Goldman
Sachs Technology Industry Composite Index. The Index has an inherent performance
advantage over the Fund since it has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. The Fund's performance is shown both with and without the imposition
of sales charges.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. Total returns would have been
lower had there been no waiver to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Fund holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the index is shown from 12/01/98.
Principal Risk Factor(s): International investing involves special risks
including currency fluctuations, lower liquidity, political and economic
uncertainties and differences in accounting standards. The Fund concentrates its
investments in information technology-related companies and will tend to
experience greater volatility than funds with more diversified portfolios. In
exchange for higher growth potential, investing in stocks of smaller and
mid-sized companies may entail greater price volatility than investing in stocks
of larger companies.
A-2
APPENDIX B-1
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2001, by and between Pilgrim Funds Trust, a
Delaware business trust (the "Trust"), with its principal place of business at
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, on behalf of
the ING Global Technology Fund (the "Acquiring Fund"), a separate series of the
Trust, and Pilgrim Funds Trust, on behalf of the Pilgrim Global Communications
Fund (the "Acquired Fund"), another separate series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B and
Class C voting shares of beneficial interest (no par value per share) of the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of all liabilities of the Acquired Fund, and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are separate series of
the Trust, an open-end, registered investment company of the management type,
and the Acquired Fund owns securities which generally are assets of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Trustees of the Trust have determined, with respect to the
Acquiring Fund, 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 Company, have determined, with respect to the
Acquired Fund, that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund
by the Acquiring Fund is in the best interests of the Acquired Fund and its
shareholders and that the interests of the existing shareholders of the Acquired
Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B
and Class C Acquiring Fund Shares, determined by dividing the value of the
Acquired Fund's net assets, 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 Date").
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 (collectively, the "Assets").
B-1-1
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, as defined in
paragraph 2.1 (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,
determined as of immediately after the close of business on the Closing Date
(the "Acquired Fund Shareholders"), on a PRO RATA basis, the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1, and will
completely liquidate. Such distribution and liquidation will be accomplished,
with respect to the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A, Class B and Class C Acquiring Fund Shares to be so credited to Class A,
Class B and Class C Acquired Fund Shareholders shall be equal to the aggregate
net asset value of the Acquired Fund shares 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.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent, as defined in paragraph 3.3.
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 U.S. Securities and Exchange Commission (the
"Commission"), any state securities commission, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures in the
then-current prospectus and statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Trustees.
2.2 The net asset value of Class A, Class B and Class C Acquiring Fund
Shares shall be the net asset value per share computed with respect to that
class as of the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus and statement of additional
information, and valuation procedures established by the Acquiring Fund's Board
of Trustees.
2.3 The number of Class A, Class B and Class C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Assets shall be determined by dividing the value of the net assets with respect
to the Class A, Class B and Class C shares of the Acquired Fund 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 ING Pilgrim Group, Inc., in
its capacity as administrator for the Trust, and State Bank and Trust Company,
in its capacity as accounting agent for the Trust, and shall be subject to
review by the Trust's independent accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be April 19, 2002, or such other date as the
parties may agree. All acts taking place at the closing of the transaction (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 Trust or at such
other time and/or place as the parties may agree.
B-1-2
3.2 The Trust shall direct Brown Brothers Harriman & Co., as custodian for
the Acquired Fund (the "Custodian"), to deliver, at the Closing, a certificate
of an authorized officer stating that (i) the Assets shall have been delivered
in proper form to the Acquiring Fund within two business days prior to or on the
Closing Date, and (ii) all necessary taxes in connection with the delivery of
the Assets, including all applicable federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made. The Acquired Fund's
portfolio securities represented by a certificate or other written instrument
shall be presented by the Acquired Fund Custodian to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date, and shall be transferred and delivered by the Acquired Fund as of
the Closing Date for the account of the Acquiring Fund duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof. The
Custodian shall deliver as of the Closing Date by book entry, in accordance with
the customary practices of such depositories and the Custodian, the Acquired
Fund's portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the Investment Company Act of 1940,
as amended (the "1940 Act"). 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 Trust 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 shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Secretary of
the Acquiring Fund, or provide evidence satisfactory to the Acquired Fund that
such Acquiring Fund Shares have been credited to the Acquired Fund's account on
the books of the Acquiring Fund. At the Closing each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board of Trustees
of the Trust, accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund, respectively, is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust, on behalf of the Acquired Fund, represents and warrants as
follows:
(a) The Acquired Fund is duly organized as a series of the Trust, which is
a business Trust duly organized, validly existing and in good standing under the
laws of the State of Delaware with power under the Trust's Declaration of Trust,
as amended ("Declaration of Trust") to own all of its Assets and to carry on its
business as it is now being conducted;
(b) The Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of shares of the
Acquired Fund under the Securities Act of 1933, as amended ("1933 Act"), is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used at all times 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
B-1-3
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 Trust, on behalf of 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 Trust, on behalf of 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 Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Company on behalf
of the Acquired Fund is a party or by which it is bound, or (ii) the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust on behalf of the Acquired Fund is a party or by which it is bound;
(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts, including options, futures
and forward contracts) will terminate without liability to the Acquired Fund on
or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the Trust,
on behalf of the Acquiring Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to its knowledge, threatened against the Company on behalf of the Acquired
Fund or any of its properties or assets that, if adversely determined, would
materially and adversely affect its financial condition or the conduct of its
business. The Trust, on behalf of the Acquired Fund, knows of no facts which
might form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Schedule of Investments of the Acquired Fund at
October 31, 2001, have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which have been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquired Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(j) Since October 31, 2001, 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
B-1-4
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 Company and have been offered and sold in every state and
the District of Columbia in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws. All of the
issued and outstanding shares of the Acquired Fund will, at the time of Closing,
be held by the persons and in the amounts set forth in the records of the
Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3.
The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the shares of the Acquired Fund, nor
is there outstanding any security convertible into any of the Acquired Fund
shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the 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, 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 The Trust, on behalf of the Acquiring Fund, represents and warrants to
the Company as follows:
(a) The Acquiring Fund is duly organized as a series of the Trust, which is
a business trust duly organized, validly existing and in good standing under the
laws of the State of Delaware with power under the Trust's Declaration of Trust
to own all of its Assets and to carry on its business as it is now being
conducted;
(b) The Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act and the registration of shares of the
Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
B-1-5
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 Trust, on behalf of the Acquiring Fund will
have good and marketable title to the Acquiring Fund's assets, free of any liens
of other encumbrances, except those liens or encumbrances as to which the
Acquired Fund has received notice and necessary documentation at or prior to the
Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the Trust
on behalf of the Acquiring Fund is a party or by which it is bound, or (ii) the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust on behalf of the Acquiring Fund is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by the 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 Trust on behalf of the Acquiring
Fund or any of the Acquiring Fund's properties or assets that, if adversely
determined, would materially and adversely affect the Acquiring Fund's financial
condition or the conduct of the Acquiring Fund's business. The Trust on behalf
of the Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects the Acquiring Fund's business or the
Acquiring Fund's ability to consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Schedule of Investments of the Acquiring Fund at
October 31, 2001, have been audited by PricewaterhouseCoopers LLP, independent
accountants, 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 October 31, 2001, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund. For purposes of this subparagraph (i), a
decline in net asset value per share of the Acquiring Fund due to declines in
market values of securities in the Acquiring Fund's portfolio, the discharge of
Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a material adverse
change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(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 (recognizing that, under Delaware law, it is theoretically
possible that shareholders of the Acquired Fund could, under certain
circumstances, be held personally liable for obligations of the Acquired Fund)
and have been offered and sold in every state and the District of Columbia in
B-1-6
compliance in all material respects with applicable registration requirements of
the 1933 Act and state securities laws. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Trust on behalf of the Acquiring Fund and
this Agreement will constitute a valid and binding obligation of the Trust on
behalf of the Acquiring Fund, enforceable in accordance with its terms, subject,
as to enforcement, bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(n) 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 (recognizing that, under Delaware law, it
is theoretically possible that shareholders of the Acquired Fund could, under
certain circumstances, be held personally liable for obligations of the Acquired
Fund);
(o) The information to be furnished by Trust for use in the registration
statements, proxy materials and other documents that may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations applicable thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Trust will call a meeting of the shareholders of the Acquired Fund
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B and Class C
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Agreement.
5.4 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.
5.5 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A, Class B and Class C Acquiring Fund Shares received at the Closing.
B-1-7
5.6 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.
5.7 The Trust, on behalf of the Acquired Fund, covenants that the Company
will, from time to time, as and when reasonably requested by the Trust on behalf
of the Acquiring Fund, execute and deliver or cause to be executed and delivered
all such assignments and other instruments, and will take or cause to be taken
such further action as the Trust on behalf of the Acquiring Fund may reasonably
deem necessary or desirable in order to vest in and confirm (a) the Company's on
behalf of the Acquired Fund's title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and (b) the Trust's on behalf of the Acquiring
Fund's title to and possession of all the assets, and to carry out the intent
and purpose of this Agreement.
5.8 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 Trust, on behalf of the Acquired Fund, to consummate
the transactions provided for herein shall be subject, at the Trust's election,
to the performance by the Trust, on behalf of the Acquiring Fund, of all the
obligations to be performed by it hereunder on or before the Closing Date, and,
in addition thereto, the following further conditions:
6.1 All representations and warranties of the Trust, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
6.2 The Trust, on behalf of the Acquiring Fund, shall have performed all of
the covenants and complied with all of the provisions required by this Agreement
to be performed or complied with by the Trust, on behalf of the Acquiring Fund
on or before the Closing Date;
6.3 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares to be issued in connection
with the Reorganization after such number has been calculated in accordance with
paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Trust, on behalf of the Acquiring Fund, to complete
the transactions provided for herein shall be subject, at the Trust's election,
to the performance by the Trust, on behalf of the Acquired Fund, of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations and warranties of the 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 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 Trust;
7.3. The 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 Trust, on behalf of the Acquired Fund, on or
before the Closing Date;
B-1-8
7.4 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; and
7.5 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 Trust, on behalf of the Acquired
Fund, or the Trust, on behalf of the Acquiring Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Trust's Declaration of
Trust, the Trust's By-Laws, applicable Delaware law and the 1940 Act.
Notwithstanding anything herein to the contrary, neither the 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 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, counsel to the
Trust, addressed to the Trust substantially to the effect that, based upon based
upon certain facts, assumptions, and representations, the transaction
contemplated by this Agreement shall constitute a tax-free reorganization for
Federal income tax purposes. The delivery of such opinion is conditioned upon
receipt by Dechert of representations it shall request of the Trust.
Notwithstanding anything herein to the contrary, neither the Trust may waive the
condition set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Company on behalf of the Acquired Fund and the Trust on behalf of
the Acquiring Fund represent and warrant to each other that there are no brokers
or finders entitled to receive any payments in connection with the transactions
provided for herein.
9.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquired
and Acquiring Funds, and (2) half are borne by the Acquired and Acquiring Funds
and will be paid by the Acquired Fund and Acquiring Fund PRO RATA based upon the
relative net assets of the Acquired Fund and Acquiring Fund as of the close of
business on the record date for determining the shareholders of the Acquired
Fund entitled to vote on the Reorganization. The costs of the Reorganization
shall include, but not be limited to, costs associated with obtaining any
necessary order of exemption from the 1940 Act, preparation of the Registration
Statement, printing and distributing the Acquiring Fund's prospectus and the
Acquired Fund's proxy materials, legal fees, accounting fees, securities
registration fees, and expenses of holding shareholders' meetings.
B-1-9
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust has not made any representation, warranty or covenant not
set forth herein and that this Agreement constitutes the entire agreement
between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement 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.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of the Company
and the Trust; provided, however, that following the meeting of the shareholders
of the Acquired Fund called by the Acquired Fund pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of the Class A Acquiring Fund Shares to be issued to
the Acquired Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the Trust,
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, attn: James M.
Hennessy, in each case with a copy to Dechert, 1775 Eye Street, N.W.,
Washington, D.C. 20006, attn: Jeffrey S. Puretz.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
B-1-10
14.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Directors/Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of the Acquiring Fund, as provided in the Declaration of Trust of
the Trust. The execution and delivery by such officers shall not be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of such party as
provided in the Declaration of Trust.
B-1-11
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
PILGRIM FUNDS TRUST ON BEHALF OF ITS
Attest: ING GLOBAL TECHNOLOGY FUND SERIES
By:
- ---------------------------------- ------------------------------------
SECRETARY
Title:
---------------------------------
PILGRIM FUNDS TRUST ON BEHALF OF ITS
PILGRIM GLOBAL COMMUNICATIONS
Attest: FUND SERIES
By:
- ---------------------------------- ------------------------------------
SECRETARY
Title:
---------------------------------
B-1-12
APPENDIX B-2
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 2001, by and between Pilgrim Funds Trust, a
Delaware business trust (the "Trust"), with its principal place of business at
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, on behalf of
the ING Global Technology Fund (the "Acquiring Fund"), a separate series of the
Trust, and Pilgrim Funds Trust on behalf of the Pilgrim Internet Fund (the
"Acquired Fund"), another separate series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B and
Class C voting shares of beneficial interest (no par value per share) of the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of all liabilities of the Acquired Fund, and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are separate series of
the Trust, an open-end, registered investment company of the management type,
and the Acquired Fund owns securities which generally are assets of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Trustees of the Trust have determined, with respect to the
Acquiring Fund, 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 Company, have determined, with respect to the
Acquired Fund, that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund
by the Acquiring Fund is in the best interests of the Acquired Fund and its
shareholders and that the interests of the existing shareholders of the Acquired
Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund shareholders and
the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to
the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of full and fractional Class A, Class B
and Class C Acquiring Fund Shares, determined by dividing the value of the
Acquired Fund's net assets, 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 Date").
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 (collectively, the "Assets").
B-2-1
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, as defined in
paragraph 2.1 (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,
determined as of immediately after the close of business on the Closing Date
(the "Acquired Fund Shareholders"), on a PRO RATA basis, the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1, and will
completely liquidate. Such distribution and liquidation will be accomplished,
with respect to the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A, Class B and Class C Acquiring Fund Shares to be so credited to Class A,
Class B and Class C Acquired Fund Shareholders shall be equal to the aggregate
net asset value of the Acquired Fund shares 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.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent, as defined in paragraph 3.3.
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 U.S. Securities and Exchange Commission (the
"Commission"), any state securities commission, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Assets shall be the value computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures in the
then-current prospectus and statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the Acquiring Fund's
Board of Trustees.
2.2 The net asset value of Class A, Class B and Class C Acquiring Fund
Shares shall be the net asset value per share computed with respect to that
class as of the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus and statement of additional
information, and valuation procedures established by the Acquiring Fund's Board
of Trustees.
2.3 The number of Class A, Class B and Class C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Assets shall be determined by dividing the value of the net assets with respect
to the Class A, Class B and Class C shares of the Acquired Fund 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 ING Pilgrim Group, Inc., in
its capacity as administrator for the Trust, and State Bank and Trust Company,
in its capacity as accounting agent for the Trust, and shall be subject to
review by the Trust's independent accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be April 19, 2002, or such other date as the
parties may agree. All acts taking place at the closing of the transaction (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 Trust or at such
other time and/or place as the parties may agree.
B-2-2
3.2 The Trust shall direct Brown Brothers Harriman & Co., as custodian for
the Acquired Fund (the "Custodian"), to deliver, at the Closing, a certificate
of an authorized officer stating that (i) the Assets shall have been delivered
in proper form to the Acquiring Fund within two business days prior to or on the
Closing Date, and (ii) all necessary taxes in connection with the delivery of
the Assets, including all applicable federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made. The Acquired Fund's
portfolio securities represented by a certificate or other written instrument
shall be presented by the Acquired Fund Custodian to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date, and shall be transferred and delivered by the Acquired Fund as of
the Closing Date for the account of the Acquiring Fund duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof. The
Custodian shall deliver as of the Closing Date by book entry, in accordance with
the customary practices of such depositories and the Custodian, the Acquired
Fund's portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the Investment Company Act of 1940,
as amended (the "1940 Act"). 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 Trust 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 shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Secretary of
the Acquiring Fund, or provide evidence satisfactory to the Acquired Fund that
such Acquiring Fund Shares have been credited to the Acquired Fund's account on
the books of the Acquiring Fund. At the Closing each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board of Trustees
of the Trust, accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund, respectively, is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust, on behalf of the Acquired Fund, represents and warrants as
follows:
(a) The Acquired Fund is duly organized as a series of the Trust, which is
a business Trust duly organized, validly existing and in good standing under the
laws of the State of Delaware with power under the Trust's Declaration of Trust,
as amended ("Declaration of Trust") to own all of its Assets and to carry on its
business as it is now being conducted;
(b) The Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of shares of the
Acquired Fund under the Securities Act of 1933, as amended ("1933 Act"), is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used at all times 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
B-2-3
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 Trust, on behalf of 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 Trust, on behalf of 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 Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Company on behalf
of the Acquired Fund is a party or by which it is bound, or (ii) the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust on behalf of the Acquired Fund is a party or by which it is bound;
(g) All material contracts or other commitments of the Acquired Fund (other
than this Agreement and certain investment contracts, including options, futures
and forward contracts) will terminate without liability to the Acquired Fund on
or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the Trust,
on behalf of the Acquiring Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to its knowledge, threatened against the Company on behalf of the Acquired
Fund or any of its properties or assets that, if adversely determined, would
materially and adversely affect its financial condition or the conduct of its
business. The Trust, on behalf of the Acquired Fund, knows of no facts which
might form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Schedule of Investments of the Acquired Fund at May
31, 2001, have been audited by KMPG 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 May 31, 2001, 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
B-2-4
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 Company and have been offered and sold in every state and
the District of Columbia in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws. All of the
issued and outstanding shares of the Acquired Fund will, at the time of Closing,
be held by the persons and in the amounts set forth in the records of the
Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3.
The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the shares of the Acquired Fund, nor
is there outstanding any security convertible into any of the Acquired Fund
shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the 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, 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 The Trust, on behalf of the Acquiring Fund, represents and warrants to
the Company as follows:
(a) The Acquiring Fund is duly organized as a series of the Trust, which is
a business trust duly organized, validly existing and in good standing under the
laws of the State of Delaware with power under the Trust's Declaration of Trust
to own all of its Assets and to carry on its business as it is now being
conducted;
(b) The Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act and the registration of shares of the
Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
B-2-5
(e) On the Closing Date, the Trust, on behalf of the Acquiring Fund will
have good and marketable title to the Acquiring Fund's assets, free of any liens
of other encumbrances, except those liens or encumbrances as to which the
Acquired Fund has received notice and necessary documentation at or prior to the
Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the Trust
on behalf of the Acquiring Fund is a party or by which it is bound, or (ii) the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust on behalf of the Acquiring Fund is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by the 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 Trust on behalf of the Acquiring
Fund or any of the Acquiring Fund's properties or assets that, if adversely
determined, would materially and adversely affect the Acquiring Fund's financial
condition or the conduct of the Acquiring Fund's business. The Trust on behalf
of the Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects the Acquiring Fund's business or the
Acquiring Fund's ability to consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Schedule of Investments of the Acquiring Fund at
October 31, 2001, have been audited by PricewaterhouseCoopers LLP, independent
accountants, 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 October 31, 2001, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund. For purposes of this subparagraph (i), a
decline in net asset value per share of the Acquiring Fund due to declines in
market values of securities in the Acquiring Fund's portfolio, the discharge of
Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a material adverse
change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund required by
law to have been filed by such date (including any extensions) shall have been
filed and are or will be correct in all material respects, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation (including the taxable year
including the Closing Date), the Acquiring Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(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 (recognizing that, under Delaware law, it is theoretically
possible that shareholders of the Acquired Fund could, under certain
circumstances, be held personally liable for obligations of the Acquired Fund)
and have been offered and sold in every state and the District of Columbia in
B-2-6
compliance in all material respects with applicable registration requirements of
the 1933 Act and state securities laws. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Trust on behalf of the Acquiring Fund and
this Agreement will constitute a valid and binding obligation of the Trust on
behalf 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) 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 (recognizing that, under Delaware law, it
is theoretically possible that shareholders of the Acquired Fund could, under
certain circumstances, be held personally liable for obligations of the Acquired
Fund);
(o) The information to be furnished by Trust for use in the registration
statements, proxy materials and other documents that may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations applicable thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, and the
proxy materials of the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the foregoing, will, from the
effective date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading provided,
however, that the representations and warranties in this subparagraph (p) shall
not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 The Trust will call a meeting of the shareholders of the Acquired Fund
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B and Class C
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Agreement.
5.4 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.
5.5 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A, Class B and Class C Acquiring Fund Shares received at the Closing.
B-2-7
5.6 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.
5.7 The Trust, on behalf of the Acquired Fund, covenants that the Company
will, from time to time, as and when reasonably requested by the Trust on behalf
of the Acquiring Fund, execute and deliver or cause to be executed and delivered
all such assignments and other instruments, and will take or cause to be taken
such further action as the Trust on behalf of the Acquiring Fund may reasonably
deem necessary or desirable in order to vest in and confirm (a) the Company's on
behalf of the Acquired Fund's title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and (b) the Trust's on behalf of the Acquiring
Fund's title to and possession of all the assets, and to carry out the intent
and purpose of this Agreement.
5.8 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 Trust, on behalf of the Acquired Fund, to consummate
the transactions provided for herein shall be subject, at the Trust's election,
to the performance by the Trust, on behalf of the Acquiring Fund, of all the
obligations to be performed by it hereunder on or before the Closing Date, and,
in addition thereto, the following further conditions:
6.1 All representations and warranties of the Trust, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
6.2 The Trust, on behalf of the Acquiring Fund, shall have performed all of
the covenants and complied with all of the provisions required by this Agreement
to be performed or complied with by the Trust, on behalf of the Acquiring Fund
on or before the Closing Date;
6.3 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares to be issued in connection
with the Reorganization after such number has been calculated in accordance with
paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Trust, on behalf of the Acquiring Fund, to complete
the transactions provided for herein shall be subject, at the Trust's election,
to the performance by the Trust, on behalf of the Acquired Fund, of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations and warranties of the 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 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 Trust;
7.3. The 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 Trust, on behalf of the Acquired Fund, on or
before the Closing Date;
B-2-8
7.4 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; and
7.5 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 Trust, on behalf of the Acquired
Fund, or the Trust, on behalf of the Acquiring Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Trust's Declaration of
Trust, the Trust's By-Laws, applicable Delaware law and the 1940 Act.
Notwithstanding anything herein to the contrary, neither the 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 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, counsel to the
Trust, addressed to the Trust substantially to the effect that, based upon based
upon certain facts, assumptions, and representations, the transaction
contemplated by this Agreement shall constitute a tax-free reorganization for
Federal income tax purposes. The delivery of such opinion is conditioned upon
receipt by Dechert of representations it shall request of the Trust.
Notwithstanding anything herein to the contrary, neither the Trust may waive the
condition set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Company on behalf of the Acquired Fund and the Trust on behalf of
the Acquiring Fund represent and warrant to each other that there are no brokers
or finders entitled to receive any payments in connection with the transactions
provided for herein.
9.2 The expenses relating to the proposed Reorganization will be shared so
that (1) half of such costs are borne by the investment adviser to the Acquired
and Acquiring Funds, and (2) half are borne by the Acquired and Acquiring Funds
and will be paid by the Acquired Fund and Acquiring Fund PRO RATA based upon the
relative net assets of the Acquired Fund and Acquiring Fund as of the close of
business on the record date for determining the shareholders of the Acquired
Fund entitled to vote on the Reorganization. The costs of the Reorganization
shall include, but not be limited to, costs associated with obtaining any
necessary order of exemption from the 1940 Act, preparation of the Registration
Statement, printing and distributing the Acquiring Fund's prospectus and the
Acquired Fund's proxy materials, legal fees, accounting fees, securities
registration fees, and expenses of holding shareholders' meetings.
B-2-9
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
another person of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust has not made any representation, warranty or covenant not
set forth herein and that this Agreement constitutes the entire agreement
between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement 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.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be deemed necessary or advisable by the authorized officers of the Company
and the Trust; provided, however, that following the meeting of the shareholders
of the Acquired Fund called by the Acquired Fund pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of the Class A Acquiring Fund Shares to be issued to
the Acquired Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the Trust,
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, attn: James M.
Hennessy, in each case with a copy to Dechert, 1775 Eye Street, N.W.,
Washington, D.C. 20006, attn: Jeffrey S. Puretz.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
B-2-10
14.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Directors/Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of the Acquiring Fund, as provided in the Declaration of Trust of
the Trust. The execution and delivery by such officers shall not be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of such party as
provided in the Declaration of Trust.
B-2-11
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
PILGRIM FUNDS TRUST ON BEHALF OF ITS
Attest: ING GLOBAL TECHNOLOGY FUND SERIES
By:
- ---------------------------------- ------------------------------------
SECRETARY
Title:
---------------------------------
PILGRIM FUNDS TRUST ON BEHALF OF ITS
Attest: PILGRIM INTERNET FUND SERIES
By:
- ---------------------------------- ------------------------------------
SECRETARY
Title:
---------------------------------
B-2-12
APPENDIX C
ADDITIONAL INFORMATION REGARDING ING GLOBAL TECHNOLOGY FUND
(THE "FUND")
SHAREHOLDER GUIDE
PILGRIM PURCHASE OPTIONS(TM)
This Proxy Statement/Prospectus relates to three separate Classes of the
Fund: Class A, Class B and Class C, each of which represents an identical
interest in the Fund's investment portfolio, but are offered with different
sales charges and distribution (Rule 12b-1) and service fee arrangements. As
described below and elsewhere in this Proxy Statement/Prospectus, the contingent
deferred sales load structure and conversion characteristics of the Fund shares
that will be issued to you in the Reorganization will be the same as those that
apply to either Pilgrim Global Communications Fund or Pilgrim Internet Fund
shares held by you immediately prior to the Reorganization, and the period that
you held shares of either Pilgrim Global Communications Fund or Pilgrim Internet
Fund will be included in the holding period of the Fund for purposes of
calculating contingent deferred sales charges and determining conversion rights.
Purchases of the shares of the Fund after the Reorganizations will be subject to
the sales load structure and conversion rights discussed below.
The sales charges and fees for each Class of shares of the Fund involved in
the Reorganization are shown and contrasted in the chart below.
CLASS A CLASS B CLASS C
------- ------- -------
Maximum Initial Sales Charge on Purchases 5.75%(1) None None
Contingent Deferred Sales Charge ("CDSC") None(2) 5.00%(3) 1.00%(4)
Annual Distribution (12b-1) and Service Fees (5) 0.35 1.00% 1.00%
Maximum Purchase Unlimited $250,000 Unlimited
Automatic Conversion to Class A N/A 8 Years(6) N/A
- ----------
(1) Reduced for purchases of $50,000 and over.
(2) For investments of $1 million or more, a CDSC of no more than 1% may be
assessed on redemptions of shares made within 2 years of purchase. See
"Class A Shares: Initial Sales Charge Alternative" in this Appendix C.
(3) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative" in this Appendix C.
(4) Imposed upon redemption within 1 year from purchase.
(5) Annual asset-based distribution charge.
(6) Class B shares of the Fund issued to shareholders of Pilgrim Global
Communications and Pilgrim Internet Fund in the Reorganizations will
convert to Class A shares in the eighth year from the original date of
purchase of the Class B shares of ING Global Technology Fund.
The relative impact of the initial sales charges and ongoing annual
expenses will depend on the length of time a share is held. Orders for Class B
shares in excess of $250,000 will be accepted as orders for Class A shares or
declined.
C-1
CLASS A SHARES: INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the
Fund are sold at the net asset value ("NAV") per share in effect plus a sales
charge as described in the following table. For waivers or reductions of the
Class A shares sales charges, see "Special Purchases Without A Sales Charge" and
"Reduced Sales Charges" below.
AS A % OF THE AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV
--------------- -------------- ------
Less than $50,000 5.75% 6.10%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $1,000,000 2.00% 2.04%
There is no initial sales charge on purchases of $1,000,000 or more.
However, the shares will be subject to a CDSC if they are redeemed within one or
two years of purchase, depending on the amount of the purchase, as follows:
PERIOD DURING
WHICH CDSC
YOUR INVESTMENT 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
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 complex 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 ("SAI") for the Fund for details on the Letter of Intent
option or contact the Shareholder Servicing Agent at 1-800-992-0180 for more
information.
A sales charge may also be reduced by taking into account the current value
of your existing holdings in the Fund or any other open-end funds in the Pilgrim
Funds complex (excluding the money market funds offered by ING Pilgrim
Investments, LLC) ("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 SAI for the Fund for details or contact the Shareholder Servicing
Agent at 1-800-992-0180 for more information.
For the purposes of Rights of Accumulation and the Letter of Intent
privilege, shares held by investors in the Pilgrim Funds which impose a CDSC may
be combined with Class A shares for a reduced sales charge but will not affect
any CDSC which may be imposed upon the redemption of shares of the Fund which
imposes a CDSC.
SPECIAL PURCHASES WITHOUT A SALES CHARGE. Class A shares may be purchased
without a sales charge by certain individuals and institutions. For additional
information, contact the Shareholder Servicing Agent at 1-800-992-0180, or see
the SAI.
C-2
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 Reorganizations with respect to Class B shares of either Pilgrim Global
Communications Fund or Pilgrim Internet Fund will convert to Class A shares
eight years after the purchase of the original shares of either Pilgrim Global
Communications Fund or Pilgrim Internet Fund. For additional information on the
CDSC and the conversion of Class B, see the Fund's SAI.
CLASS C SHARES. Class C shares are offered at their NAV per share without
an initial sales charge. Class C shares may be subject to a CDSC of 1% if
redeemed within one year of purchase. The amount of the CDSC is based on the
lesser of the NAV of the Class C shares at the time of purchase or redemption.
There is no CDSC on Class C shares acquired through the reinvestment of
dividends and capital gains distributions.
WAIVERS OF CDSC. The CDSC will be waived in the following cases. In
determining whether a CDSC is applicable, it will be assumed that shares held in
the shareholder's account that are not subject to such charge are redeemed
first.
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.
The CDSC also may be waived for Class B shares redeemed pursuant to a
Systematic Withdrawal Plan, as described in the Pilgrim Prospectus, up to a
maximum of 12% per year of a shareholder's account value based on the value of
the account at the time the plan is established and annually thereafter,
provided all dividends and distributions are reinvested and the total
redemptions do not exceed 12% annually.
The CDSC also will be waived in the case of mandatory distributions from a
tax-deferred retirement plan or an IRA.
If you think you may be eligible for a CDSC waiver, contact the Shareholder
Servicing Agent at 1-800-992-0180.
REINSTATEMENT PRIVILEGE. Class B and Class C shareholders who have redeemed
their shares in any open-end Pilgrim Fund may reinvest some or all of the
proceeds in the same share Class within 90 days without a sales charge.
C-3
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 SAI for the Fund for details or contact the Shareholder
Servicing Agent at 1-800-992-0180 for more information.
RULE 12B-1 PLAN. The Fund has a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended applicable to each Class of
shares of the Fund ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, ING Pilgrim
Securities, Inc. (the "Distributor") may receive from the Fund an annual fee in
connection with the offering, sale and shareholder servicing of the Fund's Class
A, Class B and Class C shares.
DISTRIBUTION AND SERVICING FEES. As compensation for services rendered and
expenses borne by the Distributor in connection with the distribution of shares
of the Fund and in connection with services rendered to shareholders of the
Fund, the Fund pays the Distributor servicing fees and distribution fees up to
the annual rates set forth below (calculated as a percentage of the Fund's
average daily net assets attributable to that class):
SERVICING FEE DISTRIBUTION FEE
------------- ----------------
Class A 0.25% 0.10%
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Fees paid under the Rule 12b-1 Plan may be used to cover the expenses of
the Distributor from the sale of Class A, Class B and Class C shares of the
Fund, including payments to Authorized Dealers, and for shareholder servicing.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
OTHER EXPENSES. In addition to the management fee and other fees described
previously, the Fund pays other expenses, such as legal, audit, transfer agency
and custodian fees, proxy solicitation costs and the compensation of Trustees
who are not affiliated with ING Pilgrim Investments, LLC ("ING Pilgrim
Investments"). Most Fund expenses are allocated proportionately among all of the
outstanding shares of that Fund. However, the Rule 12b-1 Plan fees for each
Class of shares are charged proportionately only to the outstanding shares of
that Class.
PURCHASING SHARES
The Fund reserves the right to liquidate sufficient shares to recover
annual Transfer Agent fees should the investor fail to maintain his/her account
value at a minimum of $1,000.00 ($250 for IRAs). The minimum initial investment
in the Fund is $1,000 ($250 for IRAs), and the minimum for additional investment
in the Fund is $100. The minimum initial investment for a pre-authorized
retirement plan is $100, plus monthly investments of at least $100.
The Fund and the Distributor reserve the right to reject any purchase
order. Please note cash, travelers checks, third party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) will not be accepted. ING Pilgrim Investments reserves the right to waive
minimum investment amounts.
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable
sales charge. When you sell shares, you receive the NAV minus any applicable
deferred sales charge. Exchange orders are effected at NAV.
DETERMINATION OF NET ASSET VALUE. The NAV of each Class of the Fund's
shares is determined daily as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. Eastern time) on each day that it is open
for business. The NAV of each Class represents that Class' pro rata share of
that Fund's net assets as adjusted for any class specific expenses (such as fees
C-4
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, for short-term debt securities, and for situations where market
quotations are deemed unreliable. The NAV per share of each Class of the Fund
will fluctuate in response to changes in market conditions and other factors.
Portfolio securities for which market quotations are readily available are
stated at market value. Short-term debt securities having a maturity of 60 days
or less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Trustees. Valuing securities at fair
value involves greater reliance on judgment than valuing securities that have
readily available market quotations. For information on valuing foreign
securities, see the Fund's SAI.
PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized
investment plan to purchase shares with automatic bank account debiting. For
further information on pre-authorized investment plans, contact the Shareholder
Servicing Agent at 1-800-992-0180.
RETIREMENT PLANS. The Fund has available prototype qualified retirement
plans for both corporations and for self-employed individuals. Also available
are prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. State Street Bank
and Trust Company ("SSB") acts as the custodian under these plans. For further
information, contact the Shareholder Servicing Agent at 1-800-992-0180. SSB
currently receives a $12 custodian fee annually for the maintenance of such
accounts.
EXECUTION OF REQUESTS. Purchase and sale requests are executed at the NAV
next determined after the order is received in proper form by the Transfer Agent
or Distributor. A purchase order will be deemed to be in proper form when all of
the required steps set forth under "How to Purchase Shares" in the Pilgrim
Prospectus 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
1-800-992-0180. There is no specific limit on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle. ING
Pilgrim Investments reserves the right to prohibit excessive exchanges (more
C-5
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 any Class of the Fund generally may be exchanged for shares of
that same Class of any other open-end Pilgrim Fund without payment of any
additional sales charge in most instances. 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 should carefully review the
Prospectus of that fund. Exchanges of shares are sales and may result in a gain
or loss for federal and state income tax purposes. You will automatically be
assigned the telephone exchange privilege unless you mark the box on the Account
Application that signifies you do not wish to have this privilege. The exchange
privilege is only available in states where shares of the fund being acquired
may be legally sold.
You will automatically have the ability to request an exchange by calling
the Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege.
SYSTEMATIC EXCHANGE PRIVILEGE. With an initial account balance of at least
$5,000 and subject to the information and limitations outlined above, you may
elect to have a specified dollar amount of shares systematically exchanged,
monthly, quarterly, semi-annually or annually (on or about the 10th of the
applicable month), from your account to an identically registered account in the
same Class of any other open-end Pilgrim Fund. This exchange privilege may be
modified at any time or terminated upon 60 days' written notice to shareholders.
SMALL ACCOUNTS. Due to the relatively high cost of handling small
investments, the Fund reserves the right upon 30 days' written notice to redeem,
at NAV, the shares of any shareholder whose account (except for IRAs) has a
value of less than $1,000, other than as a result of a decline in the NAV per
share.
HOW TO REDEEM SHARES
Shares of the Fund will be redeemed at the NAV (less any applicable CDSC
and/or federal income tax withholding) next determined after receipt of a
redemption request in good form on any day the New York Stock Exchange is open
for business.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to have monthly, quarterly,
semi-annual or annual payments in any fixed amount of $100 or more made to
yourself, or to anyone else you properly designate, as long as the account has a
current value of at least $10,000. For additional information, contact the
Shareholder Servicing Agent at 1-800-992-0180, or see the Fund's SAI.
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 U.S. 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.
C-6
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. ING Pilgrim Investments has overall responsibility for
the management of the Fund. The Fund and ING Pilgrim Investments have entered
into an agreement that requires ING Pilgrim Investments to provide or oversee
all investment advisory and portfolio management services for the Fund ING
Pilgrim Investments provides the Fund with office space, equipment and personnel
necessary to administer the Fund. The agreement with ING Pilgrim Investments can
be canceled by the Board of Trustees of the Fund upon 60 days' written notice.
Organized in December 1994, ING Pilgrim Investments is registered as an
investment adviser with the U.S. Securities and Exchange Commission. As of
October 31, 2001, ING Pilgrim Investments managed over $16.6 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.
INVESTMENT PERSONNEL. ING Global Technology Fund is managed by the
Sub-Adviser, ING Investment Management Advisors B.V. ("IIMA"). Mr. Guy Uding has
primary responsibility for managing the Fund and heads a three-member team of
investment professionals. Mr. Uding has been employed by IIMA and its affiliates
since 1995, and has five years of investment experience.
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.
ING Global Technology Fund also offers Class I shares. For more information
about this Class of shares, please contact the Shareholder Servicing Agent at
1-800-992-0180.
SHAREHOLDER SERVICING AGENT. ING Pilgrim Group, LLC 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 AND 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, Class B or Class C account in the Fund invested into a Pilgrim
Fund which offers Class A, Class B, or Class C shares.
C-7
FEDERAL TAXES. The following information is meant as a general summary for
U.S. shareholders. Please see the Fund's SAI for additional information. You
should rely on your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in the Fund.
The Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Fund will not be taxed on
amounts it distributes, most shareholders will be taxed on amounts they receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held your Fund
shares or whether you elect to receive your distributions in cash or reinvest
them in additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid
during the following January may be treated as having been received by
shareholders in the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital
gains distributions.
If you invest through a tax-deferred account, such as a retirement plan,
you generally will not have to pay tax on dividends until they are distributed
from the account. These accounts are subject to complex tax rules, and you
should consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You
will generally have a capital gain or loss, which will be long-term or
short-term, generally depending on how long you hold those shares. If you
exchange shares, you may be treated as if you sold them. You are responsible for
any tax liabilities generated by your transactions.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
C-8
FINANCIAL
PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
For the year ended October 31, 2001, the information in the table below has been
audited by PricewaterhouseCoopers LLP, independent accountants. For all periods
ending prior to October 31, 2001, the financial information was audited by other
independent auditors.
Selected data for a share of beneficial interest outstanding throughout each
period.
Class A Class B
-------------------------------- -------------------------------
Year Ended October 31, Year Ended October 31,
2001(5) 2000 1999(1) 2001(5) 2000 1999(1)
------- ---- ------- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 26.62 17.38 10.00 26.33 17.28 10.00
Income from investment operations:
Net investment loss $ (0.18) (0.33) (0.13) (0.27) (0.41) (0.08)
Net realized and unrealized gain
(loss) on investments $ (13.05) 10.41 7.51 (12.81) 10.30 7.36
Total from investment operations $ (13.23) 10.08 7.38 (13.08) 9.89 7.28
Less distributions from:
Net realized gain on investments $ 7.62 0.84 -- 7.62 0.84 --
Total distributions $ 7.62 0.84 -- 7.62 0.84 --
Net asset value, end of period $ 5.77 26.62 17.38 5.63 26.33 17.28
Total Return(2) % (67.57) 58.61 73.80 (67.81) 57.82 72.80
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 25,359 108,763 54,798 11,726 37,915 5,964
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.83 1.53 1.57 2.54 2.17 2.25
Gross expenses prior to expense
reimbursement(3) % 2.47 2.65 2.95 3.16 2.89 3.22
Net investment loss after expense
reimbursement(3)(4) % (1.66) (1.30) (1.29) (2.44) (1.94) (2.04)
Portfolio turnover rate % 126 77 57 126 77 57
Class C
--------------------------------
Year Ended October 31,
2001(5) 2000 1999(1)
------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 26.32 17.28 10.00
Income from investment operations:
Net investment loss $ (0.26) (0.42) (0.05)
Net realized and unrealized gain
(loss) on investments $ (12.83) 10.30 7.33
Total from investment operations $ (13.09) 9.88 7.28
Less distributions from:
Net realized gain on investments $ 7.62 0.84 --
Total distributions $ 7.62 0.84 --
Net asset value, end of period $ 5.61 26.32 17.28
Total Return(2) % (67.90) 57.77 72.80
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 4,376 18,486 2,102
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 2.54 2.17 2.24
Gross expenses prior to expense
reimbursement(3) % 3.16 2.89 3.20
Net investment loss after expense
reimbursement(3)(4) % (2.33) (1.94) (2.05)
Portfolio turnover rate % 126 77 57
- ----------
(1) The Fund commenced operations on December 15, 1998.
(2) Total return is calculated assuming reinvestment of all dividend and
capital gain distribution at net asset value and excluding the deduction of
sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses excluding interest,
taxes, brokerage and extraordinary expenses.
(5) Effective April 30, 2001, ING Pilgrim Investments LLC became the Investment
Manager of the Fund.
C-9
APPENDIX D
The following is a list of the Pilgrim Funds and the Classes of shares of
each Fund that are expected to be offered at or shortly after the
Reorganizations:
FUND CLASSES OFFERED
- ---- ---------------
U.S. EQUITY
Balanced Fund A, B, C, Q and T
Biotechnology Fund A, B, C and Q
Convertible Fund A, B, C and Q
Corporate Leaders Trust Fund A
Financial Services Fund A, C and Q
Growth and Income Fund A, B, C, I 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, I and Q
MagnaCap Fund A, B, C, I, Q and M
MidCap Opportunities Fund A, B, C, Q and I
Principal Protection Fund A, B and C
Principal Protection Fund II A, B and C
Research Enhanced Index Fund A, B, C, Q and I
SmallCap Opportunities Fund A, B, C, Q, I and T
Tax-Efficient Equity Fund A, B, and C
GLOBAL/INTERNATIONAL EQUITY
Asia-Pacific Equity Fund A, B, C, Q and M
Emerging Countries Fund A, B, C and Q
European Equity Fund A, B, and C
Global Technology Fund A, B, C, I and Q
Global Real Estate Fund A, B, C and Q
International Fund A, B, C, I and Q
International SmallCap Growth Fund A, B, C and Q
International Value Fund A, B, C, I and Q
Precious Metals Fund A, B, C and Q
Russia Fund A, C and Q
Worldwide Growth Fund A, B, C and Q
FIXED INCOME
GNMA Income Fund A, B, C, I, M, Q and T
High Yield Fund II A, B, C, M, Q and T
High Yield Bond Fund A, B, and C
ING Pilgrim Money Market Fund A, B, C and I
Intermediate Bond Fund A, B, C and I
Lexington Money Market Trust A
National Tax-Exempt Bond Fund A, B and C
Pilgrim Money Market Fund A, B and C
Senior Income Fund A, B, C and Q
Strategic Income Fund A, B, C and Q
D-1
APPENDIX E
As of January __, 2002, the following persons owned beneficially or of
record 5% or more of the outstanding shares of ING Global Technology Fund: ___
CLASS AND % OF CLASS % OF FUND % OF FUND
TYPE OF BEFORE BEFORE AFTER
NAME AND ADDRESS OWNERSHIP REORGANIZATION REORGANIZATION REORGANIZATION
- ---------------- --------- -------------- -------------- --------------
As of January __, 2002 the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified Class of Pilgrim
Global Communications Fund:
CLASS AND % OF CLASS % OF FUND % OF FUND
TYPE OF BEFORE BEFORE AFTER
NAME AND ADDRESS OWNERSHIP REORGANIZATION REORGANIZATION REORGANIZATION
- ---------------- --------- -------------- -------------- --------------
As of January __, 2002 the following persons owned beneficially or of
record 5% or more of the outstanding shares of the specified class of Pilgrim
Internet Fund:
CLASS AND % OF CLASS % OF FUND % OF FUND
TYPE OF BEFORE BEFORE AFTER
NAME AND ADDRESS OWNERSHIP REORGANIZATION REORGANIZATION REORGANIZATION
- ---------------- --------- -------------- -------------- --------------
E-1
PART B
PILGRIM FUNDS TRUST
- --------------------------------------------------------------------------------
Statement of Additional Information
February ___, 2002
- --------------------------------------------------------------------------------
Acquisition of the Assets and Liabilities of By and in Exchange for Shares of
Pilgrim Global Communications Fund and Pilgrim Global Information
Pilgrim Internet Fund Technology Fund
7337 East Doubletree Ranch Road 7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034 Scottsdale, Arizona 85258-2034
This Statement of Additional Information is available to the Shareholders of
Pilgrim Global Communications Fund and Pilgrim Internet Fund, each a separate
series of Pilgrim Funds Trust (the "Trust"), in connection with a proposed
transaction whereby all of the assets and liabilities of Pilgrim Global
Communications Fund and Pilgrim Internet Fund will be transferred to Pilgrim
Global Information Technology Fund, also a separate series of the Trust that
will be renamed "ING Global Technology Fund" as of March 1, 2002, in exchange
for shares of Pilgrim Global Information Technology Fund.
This Statement of Additional Information of Pilgrim Funds Trust consists of this
cover page and the following documents, each of which was filed electronically
with the U.S. Securities and Exchange Commission and is incorporated by
reference herein:
1. The Statement of Additional Information for Pilgrim Global Communications
Fund and Pilgrim Global Information Technology Fund dated March 1, 2001, as
filed on March 1, 2001.
2. The Statement of Additional Information for Pilgrim Internet Fund dated
November 9, 2001, as filed on November 9, 2001.
3. The Financial Statements of Pilgrim Global Communications Fund and Pilgrim
Global Information Technology Fund are included in the Annual Report of
Pilgrim Funds Trust dated October 31, 2001, as filed on December 27, 2001.
4. The Financial Statements of Pilgrim Internet Fund are included in the
Annual Report of Pilgrim Funds Trust dated May 31, 2001, as filed on July
31, 2001.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated ________ ___, 2002 relating to the Reorganization of Pilgrim
Global Communications Fund and Pilgrim Internet Fund may be obtained, without
charge, by writing to ING Pilgrim at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034 or calling 1-800-992-0180. This Statement of
Additional Information should be read in conjunction with the Prospectus/Proxy
Statement.
B-1
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 October 31, 2001. 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 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).
PRO FORMA STATEMENTS OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2001
(UNAUDITED)
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM
TECHNOLOGY COMMUNICATIONS INTERNET PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS COMBINED
------------- ------------- ------------- ------------- ------------
ASSETS:
Investments in securities, at value* $ 40,668,059 $ 16,000,165 $ 18,683,432 $ 75,351,656
Short-term investments at amortized cost -- -- 49,000 49,000
Cash -- -- 672 672
Receivables:
Investment securities sold 1,259,993 231,376 254,662 1,746,031
Fund shares sold 3,492 1,885 36,718 42,095
Dividends and interest 25,872 8,734 3 34,609
Other 277,058 46 71,030 348,134
Prepaid expenses 30,330 12,933 1,667 44,930
Reimbursement due from manager 225,989 43,141 153,664 422,794
------------- ------------- ------------- ------------- ------------
Total Assets 42,490,793 16,298,280 19,250,848 -- 78,039,921
------------- ------------- ------------- ------------- ------------
LIABILITIES:
Payable for investment securities purchased -- 282,309 358,507 640,816
Payable for fund shares redeemed 26,233 16,335 33,844 76,412
Payable to affiliates 76,729 60,839 75,362 212,930
Payable to custodian 695,611 102,628 -- 798,239
Other accrued expenses and liabilities 230,923 165,993 161,027 557,943
------------- ------------- ------------- ------------- ------------
Total Liabilities 1,029,496 628,104 628,740 -- 2,286,340
------------- ------------- ------------- ------------- ------------
NET ASSETS $ 41,461,297 $ 15,670,176 $ 18,622,108 $ -- $ 75,753,581
============= ============= ============= ============= ============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 135,728,378 $ 109,689,130 $ 154,478,373 $399,895,881
Undistributed net investment loss -- -- (889,324) (889,324)
Accumulated net realized loss on investments
and foreign currencies (71,936,976) (77,765,244) (121,896,476) (271,598,696)
Net unrealized depreciation of investments
and foreign currencies (22,330,105) (16,253,710) (13,070,465) (51,654,280)
------------- ------------- ------------- ------------- ------------
NET ASSETS $ 41,461,297 $ 15,670,176 $ 18,622,108 $ -- $ 75,753,581
============= ============= ============= ============= ============
*Cost of securities $ 62,998,154 $ 32,253,212 $ 31,753,897 $127,005,263
CLASS A:
Net Assets $ 25,358,539 $ 8,106,512 $ 8,858,741 $ 42,323,792
Shares outstanding 4,394,888 4,649,427 4,330,637 (6,039,812)(A) 7,335,140
Net asset value and redemption price per share $ 5.77 $ 1.74 $ 2.05 $ 5.77
Maximum offering price per share (5.75%) $ 6.12 $ 1.85 $ 2.18 $ 6.12
CLASS B:
Net Assets $ 11,726,411 $ 6,144,753 $ 6,878,314 $ 24,749,478
Shares outstanding 2,083,829 3,568,296 3,418,006 (4,673,146)(A) 4,396,985
Net asset value and redemption price per share $ 5.63 $ 1.72 $ 2.01 $ 5.63
Maximum offering price per share $ 5.63 $ 1.72 $ 2.01 $ 5.63
CLASS C:
Net Assets $ 4,376,347 $ 1,418,911 $ 2,885,053 $ 8,680,311
Shares outstanding 780,009 823,316 1,435,776 (1,491,897)(A) 1,547,204
Net asset value and redemption price per share $ 5.61 $ 1.72 $ 2.01 $ 5.61
Maximum offering price per share $ 5.61 $ 1.72 $ 2.01 $ 5.61
- ----------
(A) Reflects new shares issued, net of retired shares of Global Communications
Fund and Internet Fund. (Calculation: Net Assets / NAV per share)
See Accompanying Notes to Pro Forma Financial Statements.
1
PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2001
(UNAUDITED)
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM
TECHNOLOGY COMMUNICATIONS INTERNET PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS COMBINED
------------- ------------ ------------- ------------- -------------
INVESTMENT INCOME:
Dividends (net of foreign taxes)* $ 83,821 $ 44,152 $ 13,874 $ 141,847
Interest 40,577 10,086 16,240 66,903
------------- ------------ ------------- ------------- -------------
Total Investment Income 124,398 54,238 30,114 208,750
------------- ------------ ------------- ------------- -------------
EXPENSES:
Investment advisory and management fees 1,005,614 402,328 549,457 90,527(A) 2,047,926
Distibution and service fees:
Class A 168,208 75,774 74,632 318,614
Class B 232,492 150,284 161,322 544,098
Class C 88,147 34,646 64,202 186,995
Transfer agent fees and expenses:
Class A 125,838 37,772 57,730 221,340
Class B 60,368 25,762 43,427 129,557
Class C 23,143 5,906 17,276 46,325
Administrative and service fees 80,049 41,467 57,317 178,833
Custodian and fund accounting expenses 129,380 88,850 75,345 293,575
Printing and postage expenses 60,414 34,001 70,415 164,830
Registration fees 68,500 97,240 159,350 (102,636)(B) 222,454
Professional fees 33,503 24,991 43,928 (27,568)(B) 74,854
Trustee expenses 5,695 8,020 6,027 19,742
Merger expenses 58,379 -- -- (58,379) --
Miscellaneous expenses 56,338 6,944 20,818 84,100
------------- ------------ ------------- ------------- -------------
2,196,068 1,033,985 1,401,246 (98,056) 4,533,243
Less:
Waived and reimbursed fees 504,929 266,751 496,324 (569,647)(A) 698,357
------------- ------------ ------------- ------------- -------------
Total expenses 1,691,139 767,234 904,922 471,591 3,834,886
------------- ------------ ------------- ------------- -------------
Net investment loss (1,566,741) (712,996) (874,808) (471,591) (3,626,136)
------------- ------------ ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments (69,738,004) (67,967,106) (116,164,477) (253,869,587)
Net realized loss on foreign currencies (1,785,917) (1,489,607) (39,545) (3,315,069)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currencies (34,281,108) 8,667,180 33,428,810 7,814,882
------------- ------------ ------------- ------------- -------------
Net realized and unrealized loss on
investments and foreign currencies (105,805,029) (60,789,533) (82,775,212) (249,369,774)
------------- ------------ ------------- ------------- -------------
DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(107,371,770) $(61,502,529) $ (83,650,020) $ (471,591) $(252,995,910)
============= ============ ============= ============= =============
* Foreign taxes $ 5,326 $ 4,907 $ -- $ 10,233
- ----------
(A) Reflects adjustment in expenses due to effects of new contractual rates.
(B) Reflects adjustment in expenses due to elimination of duplicative services.
See Accompanying Notes to Pro Forma Financial Statements.
2
PRO FORMA PORTFOLIO OF INVESTMENTS (UNAUDITED)
As of October 31, 2001
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM PRO FORMA
TECHNOLOGY COMMUNICATIONS INTERNET SHARES
---------- -------------- -------- ------
COMMON STOCK: 99.47%
CANADA: 1.80%
32,100 -- 32,100 @ Celestica Inc.
- 45,300 - 45,300 Nortel Networks Corp.
TOTAL CANADA
FINLAND: 0.99%
- 35,850 - 35,850 Nokia OYJ
TOTAL FINLAND
GERMANY: 0.80%
- 39,100 - 39,100 Deutsche Telekom
TOTAL GERMANY
HONG KONG: 0.23%
- 58,220 - 58,220 @ China Mobile Hong Kong Ltd.
TOTAL HONG KONG
IRELAND: 0.72%
33,105 - - 33,105 @ SmartForce PLC ADR
TOTAL IRELAND
ISRAEL: 1.10%
28,100 - - 28,100 @ Check Point Software Technologies
TOTAL ISRAEL
JAPAN: 1.12%
13 - - 13 NTT Data Corp.
13 35 - 48 NTT Docomo, Inc.
3,800 - - 3,800 Sony Corp.
TOTAL JAPAN
NETHERLANDS: 0.45%
- 14,800 - 14,800 @ Equant NV
- 6,700 - 6,700 STMicroelectronics NV
TOTAL NETHERLANDS
SINGAPORE: 0.29%
- 11,000 - 11,000 @ Flextronics Intl. Ltd.
TOTAL SINGAPORE
SPAIN: 0.23%
- 14,700 - 14,700 @ Telefonica SA
TOTAL SPAIN
UNITED KINGDOM: 5.37%
48,310 - - 48,310 @ Amdocs Ltd.
124,692 - - 124,692 CMG PLC
- 177,342 - 177,342 @ Colt Telecom Group PLC
60,044 21,290 - 81,334 Logica PLC
- 532,154 - 532,154 Vodafone Group PLC
TOTAL UNITED KINGDOM
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM
TECHNOLOGY COMMUNICATIONS INTERNET PRO FORMA
----------- -------------- ------------ -----------
CANADA: 1.80%
Celestica Inc. $ 1,101,672 $ -- $ -- $ 1,101,672
Nortel Networks Corp. -- 263,193 -- 263,193
----------- ------------ ------------ -----------
TOTAL CANADA 1,101,672 263,193 -- 1,364,865
----------- ------------ ------------ -----------
FINLAND: 0.99%
Nokia OYJ -- 749,058 -- 749,058
----------- ------------ ------------ -----------
TOTAL FINLAND -- 749,058 -- 749,058
----------- ------------ ------------ -----------
GERMANY: 0.80%
Deutsche Telekom -- 604,546 -- 604,546
----------- ------------ ------------ -----------
TOTAL GERMANY -- 604,546 -- 604,546
----------- ------------ ------------ -----------
HONG KONG: 0.23%
China Mobile Hong Kong Ltd. -- 176,526 -- 176,526
----------- ------------ ------------ -----------
TOTAL HONG KONG -- 176,526 -- 176,526
----------- ------------ ------------ -----------
IRELAND: 0.72%
SmartForce PLC ADR 544,908 -- -- 544,908
----------- ------------ ------------ -----------
TOTAL IRELAND 544,908 -- -- 544,908
----------- ------------ ------------ -----------
ISRAEL: 1.10%
Check Point Software Technologies 829,512 -- -- 829,512
----------- ------------ ------------ -----------
TOTAL ISRAEL 829,512 -- -- 829,512
----------- ------------ ------------ -----------
JAPAN: 1.12%
NTT Data Corp. 56,755 -- -- 56,755
NTT Docomo, Inc. 176,099 474,112 -- 650,211
Sony Corp. 143,572 -- -- 143,572
----------- ------------ ------------ -----------
TOTAL JAPAN 376,426 474,112 -- 850,538
----------- ------------ ------------ -----------
NETHERLANDS: 0.45%
Equant NV -- 153,752 -- 153,752
STMicroelectronics NV -- 189,226 -- 189,226
----------- ------------ ------------ -----------
TOTAL NETHERLANDS -- 342,978 -- 342,978
----------- ------------ ------------ -----------
SINGAPORE: 0.29%
Flextronics Intl. Ltd. -- 218,900 -- 218,900
----------- ------------ ------------ -----------
TOTAL SINGAPORE -- 218,900 -- 218,900
----------- ------------ ------------ -----------
SPAIN: 0.23%
Telefonica SA -- 176,380 -- 176,380
----------- ------------ ------------ -----------
TOTAL SPAIN -- 176,380 -- 176,380
----------- ------------ ------------ -----------
UNITED KINGDOM: 5.37%
Amdocs Ltd. 1,261,374 -- -- 1,261,374
CMG PLC 397,026 -- -- 397,026
Colt Telecom Group PLC -- 302,709 -- 302,709
Logica PLC 648,961 230,104 -- 879,065
Vodafone Group PLC -- 1,229,166 -- 1,229,166
----------- ------------ ------------ -----------
TOTAL UNITED KINGDOM 2,307,361 1,761,979 -- 4,069,340
----------- ------------ ------------ -----------
3
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM PRO FORMA
TECHNOLOGY COMMUNICATIONS INTERNET SHARES
---------- -------------- -------- ------
UNITED STATES: 86.37%
41,100 - - 41,100 @ Activision, Inc.
72,300 - 74,200 146,500 @ Advanced Micro Devices
- 2,200 - 2,200 Alltel Corp.
- 136,250 136,250 @ Amazon.Com, Inc.
- 18,430 - 18,430 @ Amdocs Ltd.
36,400 - - 36,400 @ Analog Devices, Inc.
26,575 - 34,730 61,305 @ AOL Time Warner, Inc.
- 38,100 - 38,100 @ Applied Micro Circuits Corp.
- 9,500 - 9,500 @ AT&T Wireless Services, Inc.
- 18,600 18,600 @ BEA Systems, Inc.
37,700 - 28,194 65,894 @ Broadcom Corp.
71,600 - - 71,600 @ Brocade Communications System
- 40,500 40,500 @ Cendant Corp.
- 23,880 23,880 @ Check Point Software Technologies
35,518 31,780 - 67,298 @ CIENA Corp.
95,982 31,500 76,670 204,152 @ Cisco Systems, Inc.
12,293 - - 12,293 @ Computer Sciences Corp.
- 8,000 - 8,000 @ Comverse Technology, Inc.
- 13,900 13,900 @ Concord EFS, Inc.
24,009 22,140 - 46,149 @ Convergys Corp.
- 10,040 - 10,040 @ CSG Systems Intl.
- 20,550 20,550 @ eBay, Inc.
23,500 - - 23,500 @ Electronic Arts, Inc.
36,500 - - 36,500 Electronic Data Systems Corp.
- 25,200 - 25,200 @ Extreme Networks
- 11,830 11,830 First Data Corp.
30,271 - 31,700 61,971 @ Intel Corp.
23,592 - - 23,592 International Business Machines Corp.
- 38,020 38,020 @ Internet Security Systems
63,300 - - 63,300 @ Jabil Circuit, Inc.
90,388 39,060 - 129,448 @ JDS Uniphase Corp.
- 36,210 - 36,210 @ Juniper Networks, Inc.
6,000 31,500 - 37,500 @ Lucent Technologies, Inc.
43,700 52,100 - 95,800 @ Micromuse, Inc.
61,440 20,100 - 81,540 @ Micron Technology, Inc.
36,644 - - 36,644 @ Microsoft Corp.
- 9,800 - 9,800 Motorola, Inc.
- 33,600 33,600 @ Network Associates, Inc.
- 28,000 - 28,000 @ Nextel Communications, Inc.
42,300 - 16,200 58,500 @ Nvidia Corp.
33,979 32,260 60,478 126,717 @ Openwave Systems, Inc.
41,692 - - 41,692 @ Oracle Corp.
- 37,200 37,200 @ Peregrine Systems, Inc.
- 25,240 - 25,240 @ PMC - Sierra, Inc.
- 9,050 40,500 49,550 Qwest Communications Intl.
- 21,200 21,200 @ Retek, Inc.
56,502 17,940 - 74,442 @ RF Micro Devices, Inc.
- 28,400 - 28,400 @ Riverstone Networks, Inc.
25,000 - - 25,000 @ SAFLINK Corp.
79,000 26,800 - 105,800 @ Sanmina Corp.
- 18,600 - 18,600 Scientific-Atlanta, Inc.
- 39,600 39,600 @ SonicWall, Inc.
- 18,990 - 18,990 @ Sprint Corp. (PCS Group)
123,116 - 100,800 223,916 @ Sun Microsystems, Inc.
- 39,800 39,800 @ Sungard Data Systems, Inc.
- 28,660 - 28,660 @ Sycamore Networks, Inc.
64,700 20,900 - 85,600 Texas Instruments, Inc.
29,800 - - 29,800 @ THQ, Inc.
- 37,055 37,055 @ Tibco Software, Inc.
- 22,900 22,900 @ TMP Worldwide, Inc.
- 13,540 13,540 @ VeriSign, Inc.
51,840 - - 51,840 @ Veritas Software Corp.
87,500 38,220 - 125,720 @ Vitesse Semiconductor Corp.
- 30,700 30,700 @ webMethods, Inc.
- 45,800 - 45,800 @ WorldCom, Inc.
- 18,900 - 18,900 @ Xilinx, Inc.
- 42,920 42,920 @ Yahoo, Inc.
TOTAL UNITED STATES
Total Common Stock (Cost $62,998,154,
$32,253,212, $31,753,897, $127,005,263)
Total Long-Term Investments (Cost $62,998,154,
$32,253,212, $31,753,897, $127,005,263)
PRINCIPAL AMOUNT
- --------------------------------------------------
REPURCHASE AGREEMENT: 0.06%
- - 49,000 49,000 State Street Bank Repurchase Agreement 2.520%,
due 11/01/01
Total Short-Term Investments (Cost $0, $0,
$49,000, $49,000)
TOTAL INVESTMENTS IN SECURITIES (COST $62,998,154,
$32,253,212, $31,802,897, $127,054,263)
OTHER ASSETS AND LIABILITIES-NET
NET ASSETS
PILGRIM
GLOBAL PILGRIM
INFORMATION GLOBAL PILGRIM
TECHNOLOGY COMMUNICATIONS INTERNET PRO FORMA
----------- -------------- ------------ -----------
UNITED STATES: 86.37%
Activision, Inc. 1,485,765 -- -- 1,485,765
Advanced Micro Devices 711,432 -- 730,128 1,441,560
Alltel Corp. -- 125,708 -- 125,708
Amazon.Com, Inc. -- -- 951,025 951,025
Amdocs Ltd. -- 481,207 -- 481,207
Analog Devices, Inc. 1,383,200 -- -- 1,383,200
AOL Time Warner, Inc. 829,406 -- 1,083,923 1,913,329
Applied Micro Circuits Corp. -- 420,243 -- 420,243
AT&T Wireless Services, Inc. -- 137,180 -- 137,180
BEA Systems, Inc. -- -- 225,804 225,804
Broadcom Corp. 1,297,257 -- 970,156 2,267,413
Brocade Communications System 1,757,780 -- -- 1,757,780
Cendant Corp. -- -- 524,880 524,880
Check Point Software Technologies -- -- 704,938 704,938
CIENA Corp. 577,523 516,743 -- 1,094,266
Cisco Systems, Inc. 1,624,015 532,980 1,297,256 3,454,251
Computer Sciences Corp. 441,442 -- -- 441,442
Comverse Technology, Inc. -- 150,480 -- 150,480
Concord EFS, Inc. -- -- 380,443 380,443
Convergys Corp. 674,653 622,134 -- 1,296,787
CSG Systems Intl -- 313,850 -- 313,850
eBay, Inc. -- -- 1,078,464 1,078,464
Electronic Arts, Inc. 1,209,310 -- -- 1,209,310
Electronic Data Systems Corp. 2,349,505 -- -- 2,349,505
Extreme Networks -- 294,588 -- 294,588
First Data Corp. -- -- 799,353 799,353
Intel Corp. 739,218 -- 774,114 1,513,332
International Business Machines Corp. 2,549,587 -- -- 2,549,587
Internet Security Systems -- -- 1,005,629 1,005,629
Jabil Circuit, Inc. 1,341,960 -- -- 1,341,960
JDS Uniphase Corp. 722,200 312,089 -- 1,034,289
Juniper Networks, Inc. -- 807,121 -- 807,121
Lucent Technologies, Inc. 40,200 211,050 -- 251,250
Micromuse, Inc. 404,225 481,925 -- 886,150
Micron Technology, Inc. 1,398,374 457,476 -- 1,855,850
Microsoft Corp. 2,130,849 -- -- 2,130,849
Motorola, Inc. -- 160,426 -- 160,426
Network Associates, Inc. -- -- 645,120 645,120
Nextel Communications, Inc. -- 222,600 -- 222,600
Nvidia Corp. 1,812,978 -- 694,332 2,507,310
Openwave Systems, Inc. 262,658 249,370 467,495 979,523
Oracle Corp. 565,343 -- -- 565,343
Peregrine Systems, Inc. -- -- 537,168 537,168
PMC - Sierra, Inc. -- 409,645 -- 409,645
Qwest Communications Intl -- 117,198 524,475 641,673
Retek, Inc. -- -- 430,784 430,784
RF Micro Devices, Inc. 1,154,901 366,694 -- 1,521,595
Riverstone Networks, Inc. -- 361,248 -- 361,248
SAFLINK Corp. 6,500 -- -- 6,500
Sanmina Corp. 1,196,060 405,752 -- 1,601,812
Scientific-Atlanta, Inc. -- 388,182 -- 388,182
SonicWall, Inc. -- -- 562,320 562,320
Sprint Corp. (PCS Group) -- 423,477 -- 423,477
Sun Microsystems, Inc. 1,249,627 -- 1,023,120 2,272,747
Sungard Data Systems, Inc. -- -- 1,002,960 1,002,960
Sycamore Networks, Inc. -- 126,391 -- 126,391
Texas Instruments, Inc. 1,810,953 584,991 -- 2,395,944
THQ, Inc. 1,484,040 -- -- 1,484,040
Tibco Software, Inc. -- -- 312,744 312,744
TMP Worldwide, Inc. -- -- 683,565 683,565
VeriSign, Inc. -- -- 524,133 524,133
Veritas Software Corp. 1,471,219 -- -- 1,471,219
Vitesse Semiconductor Corp. 826,000 360,797 -- 1,186,797
webMethods, Inc. -- -- 282,133 282,133
WorldCom, Inc. -- 616,010 -- 616,010
Xilinx, Inc. -- 574,938 -- 574,938
Yahoo, Inc. -- -- 466,970 466,970
----------- ------------ ------------ -----------
TOTAL UNITED STATES 35,508,180 11,232,493 18,683,432 65,424,105
----------- ------------ ------------ -----------
Total Common Stock (Cost $62,998,154,
$32,253,212, $31,753,897, $127,005,263) 40,668,059 16,000,165 18,683,432 75,351,656
----------- ------------ ------------ -----------
Total Long-Term Investments (Cost $62,998,154,
$32,253,212, $31,753,897, $127,005,263) 40,668,059 16,000,165 18,683,432 75,351,656
----------- ------------ ------------ -----------
SHORT-TERM INVESTMENTS: 0.06%
REPURCHASE AGREEMENT: 0.06%
State Street Bank Repurchase Agreement 2.520%,
due 11/01/01 -- -- 49,000 49,000
----------- ------------ ------------ -----------
-- -- 49,000 49,000
----------- ------------ ------------ -----------
Total Short-Term Investments (Cost $0, $0,
$49,000, $49,000) -- -- 49,000 49,000
----------- ------------ ------------ -----------
TOTAL INVESTMENTS IN SECURITIES (COST $62,998,154,
$32,253,212, $31,802,897, $127,054,263) 99.53% $40,668,059 $ 16,000,165 $ 18,732,432 $75,400,656
OTHER ASSETS AND LIABILITIES-NET 0.47% 793,238 (329,989) (110,324) 352,925
------- ----------- ------------ ------------ -----------
NET ASSETS 100.00% $41,461,297 $ 15,670,176 $ 18,622,108 $75,753,581
======= =========== ============ ============ ===========
@ Non-income producing security
ADR American Depository Receipt
See Accompanying Notes to Pro Forma Financial Statements.
4
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Combination:
On November 2, 2001, the Boards of Pilgrim Internet Fund ("Internet Fund"),
Pilgrim Global Communications Fund ("Global Communications Fund") and Pilgrim
Global Information Technology Fund ("Global Information Technology Fund")
(collectively the "Funds"), approved an Agreement and Plan of Reorganization
(the "Plan") whereby, subject to approval by the shareholders of Internet Fund
and Global Communications Fund, Global Information Technology Fund will acquire
all of the assets of the Internet Fund and Global Communications Fund subject to
the liabilities of such Funds, in exchange for a number of shares of Global
Information Technology Fund equal in value to the net assets of the Internet
Fund and Global Communications 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 October 31, 2001. The unaudited pro forma portfolio
of investments, and statement of assets and liabilities reflect the financial
position of Internet Fund, Global Communications Fund and Global Information
Technology Fund at October 31, 2001. The unaudited pro forma statement of
operations reflects the results of operations of Internet Fund, Global
Communications Fund and Global Information Technology Fund for the year ended
October 31, 2001. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the date
indicated above for Internet Fund, Global Communications Fund and Global
Information Technology Fund under generally accepted accounting principles. The
historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of Global Information Technology
Fund for pre-combination periods will not be restated.
The unaudited pro forma portfolio of investments, and unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
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 amortized cost, which, when combined with accrued interest,
approximates market value.
Note 3 - 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 Internet
Fund and Global Communications Fund by Global Information Technology Fund as of
October 31, 2001. The number of additional shares issued was calculated by
dividing the net asset value of each Class of Internet Fund and Global
Communications Fund by the respective Class net asset value per share of Global
Information Technology Fund.
Note 4 - Unaudited Pro Forma Adjustments:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on October 31, 2001. Internet
Fund and Global Communications Fund expenses were adjusted assuming Global
Information Technology Fund's fee structure was in effect for the year ended
October 31, 2001.
5
Note 5 - Merger Costs:
Merger costs are estimated at approximately $125,000 and are not included
in the unaudited pro forma statement of operations since these costs are not
recurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger. ING Pilgrim Investments LLC, Investment Adviser to the Funds,
will bear half of the cost of the Reorganization. The Funds will bear the other
half of the expenses relating to the proposed Reorganization.
Note 6 - Federal Income Taxes:
It is the policy of the Funds, to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Fund intends not to be subject to any federal excise tax.
The Fund intends to offset any net capital gains with any available capital
loss carryforward until each carryforward has been fully utilized or expires.
The amount of capital loss carryforward, which may offset Global Information
Technology Fund's capital gains in any given year may be limited as a result of
previous reorganizations. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or expires.
6
PILGRIM GLOBAL COMMUNICATIONS FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON APRIL 4, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) James M. Hennessy and Kimberly A. Anderson or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the Pilgrim Global Communications Fund (the "Fund") which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Fund to be held at the offices of the Fund at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034 on April 4, 2002 at 8:00 a.m., local time, and at
any adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Pilgrim Global Communications Fund by ING
Global Technology Fund in exchange for shares of common stock of beneficial
interest ING Global Technology Fund and the assumption by ING Global Technology
Fund of all of the liabilities of Pilgrim Global Communications Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
- --------------------------------------- ------------
Signature Date
- --------------------------------------- ------------
Signature (if held jointly) Date
PILGRIM INTERNET FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON APRIL 4, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) James M. Hennessy and Kimberly A. Anderson or
any one or more of them, proxies, with full power of substitution, to vote all
shares of the Pilgrim Internet Fund (the "Fund") which the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Fund to be held
at the offices of the Fund at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258-2034 on April 4, 2002 at 8:00 a.m., local time, and at any
adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of Pilgrim Internet Fund by ING Global
Technology Fund in exchange for shares of common stock of beneficial interest of
ING Global Technology Fund and the assumption by ING Global Technology Fund of
all of the liabilities of Pilgrim Internet Fund.
For [ ] Against [ ] Abstain [ ]
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
- --------------------------------------- ------------
Signature Date
- --------------------------------------- ------------
Signature (if held jointly) Date
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article X of the Registrant's Trust Instrument provides the following:
Section 10.1 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
under Delaware law shall protect any Trustee against any liability to the Trust
or to Shareholders 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 the office of Trustee hereunder.
Section 10.2 Indemnification.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every Person who is, or has been a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
Interested Persons, as defined in the Trust Instrument, of the Trust nor
are parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or
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(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification therein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person, as defined in the
Trust Instrument, may now or hereafter be entitled, shall continue as to a
person who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust personnel,
other than Covered Persons, and other persons may be entitled by contract or
otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 10.2 may be paid by the Trust or a Series thereof
from time to time, prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.2; provided, however, that
either (a) such Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any such
advance payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 10.2.
Article IX of the Registrant's By-Laws provides the following:
The Trust may purchase and maintain insurance on behalf of any Covered
Person or employee of the Trust, including any Covered Person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that protects
or purports to protect any Trustee or officer of the Trust against any liability
to the Trust or its Shareholder to which he would otherwise be subject by reason
or willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
Reference is made to Article IX of Registrants By-Laws and paragraph 1.11
of the Distribution Agreement.
The Registrant is covered under an insurance policy insuring its officers
and trustees against liabilities, and certain costs of defending claims against
such officers and trustees, to the extent such officers and trustees are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
C-2
Section 12 of the Management Agreement between Registrant and Manager,
Section 8 of the Sub-Advisory Agreements and Section 20 of the Distribution
Agreement between the Registrant and Distributor limit the liability of Manager,
the Sub-Advisors and the Distributor to liabilities arising from willful
misfeasance, bad faith or gross negligence in the performance of their
respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Trust Instrument, By-Laws, Management Agreement and
Distribution Agreement in a manner consistent with Release No. 11330 of the U.S.
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act") so long as the interpretations of Section
17(h) and 17(i) of such Act remain in effect and are consistently applied.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant understands that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
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ITEM 16. EXHIBITS
(1) (A) Declaration of Trust - filed as an exhibit to Pre-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A filed
electronically on October 28, 1998, and incorporated herein by
reference.
(B) Certificate of Amendment to Declaration of Trust -- previously filed
as an Exhibit to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A filed electronically on March 1,
2001 and incorporated herein by reference.
(C) Certificate of Amendment to Declaration of Trust -- previously filed
as an Exhibit to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A on June 15, 2001 and incorporated
herein by reference.
(2) Bylaws - filed as an exhibit to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A filed electronically on
October 28, 1998, and incorporated herein by reference.
(3) Not Applicable
(4) (A) Form of Agreement and Plan of Reorganization between Pilgrim Funds
Trust, on behalf of its Pilgrim Global Communications Fund series and
Pilgrim Funds Trust, on behalf of its ING Global Technology Fund
series - filed herewith.
(B) Form of Agreement and Plan of Reorganization between Pilgrim Funds
Trust, on behalf of its Pilgrim Internet Fund series and Pilgrim Funds
Trust, on behalf of its ING Global Technology Fund series - filed
herewith.
(5) The rights of holders of the securities being registered are set out in
Articles II, VII, IX and X of the Declaration of Trust referenced in
Exhibit (1) above and in Articles IV, VI and XIII of the By-Laws referenced
in Exhibit (2) above.
(6) (A) Form of Restated Investment Management Agreement between Registrant
and ING Pilgrim Investments, LLC -- previously filed as an Exhibit to
Post-Effective Amendment No. 12 to the Registrant's Registration
Statement on Form N-1A filed electronically on October 1, 2001 and
incorporated herein by reference.
(B) Form of Investment Management Agreement between Registrant and ING
Pilgrim Investments, LLC with respect to Pilgrim Global Real Estate
Fund -- previously filed as an Exhibit to Post-Effective Amendment No.
10 to the Registrant's Registration Statement on Form N-1A filed
electronically on July 27, 2001 and incorporated herein by reference.
(C) Form of Investment Management Agreement between Registrant and ING
Mutual Funds Management Co. LLC ("IMFC") -- previously filed as an
Exhibit to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A filed electronically on November
6, 2000 and incorporated herein by reference.
(D) Sub-Advisory Agreement between IMFC and Baring Asset Management, Inc.
-- previously filed as an Exhibit to Post-Effective Amendment No. 6 to
the Registrant's Registration Statement on Form N-1A filed
electronically on November 6, 2000 and incorporated herein by
reference.
C-4
(E) Form of Sub-Advisory Agreement between IMFC and Baring International
Investment Limited -- previously filed as an Exhibit to Post-Effective
Amendment No. 6 to the Registrant's Registration Statement on Form
N-1A filed electronically on November 6, 2000 and incorporated herein
by reference.
(F) Form of Sub-Advisory Agreement between IMFC and Baring Asset
Management (Asia) Limited -- previously filed as an Exhibit to
Post-Effective Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A filed electronically on November 6, 2000 and
incorporated herein by reference.
(G) First Amendment to Sub-Advisory Agreement between IMFC and ING
Investment Management Advisors B.V. -- previously filed as an Exhibit
to Post-Effective Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A filed electronically on November 6, 2000 and
incorporated herein by reference.
(H) Form of Sub-Advisory Agreement between IMFC and ING Investment
Management Advisors B.V. -- previously filed as an Exhibit to
Post-Effective Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A filed electronically on November 6, 2000 and
incorporated herein by reference.
(I) Form of Sub-Advisory Agreement between IMFC and ING Investment
Management LLC -- previously filed as an Exhibit to Post-Effective
Amendment No. 6 to the Registrant's Registration Statement on Form
N-1A filed electronically on November 6, 2000 and incorporated herein
by reference.
(J) Form of Restated Sub-Advisory Agreement between ING Pilgrim
Investments, LLC and ING Investment Management LLC -- previously filed
as an Exhibit to Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on Form N-1A filed electronically on October 1,
2001 and incorporated herein by reference.
(K) Form of Sub-Advisory Agreement between IMFC and Furman Selz Capital
Management LLC -- previously filed as an Exhibit to Post-Effective
Amendment No. 6 to the Registrant's Registration Statement on Form
N-1A filed electronically on November 6, 2000 and incorporated herein
by reference.
(L) Form of Restated Sub-Advisory Agreement between ING Pilgrim
Investments, LLC and Furman Selz Capital Management LLC -- previously
filed as an Exhibit to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A filed electronically
on October 1, 2001 and incorporated herein by reference.
(M) Form of Sub-Advisory Agreement between IMFC and Furman Selz Capital
Management on behalf of Delta Asset Management -- previously filed as
an Exhibit to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A filed electronically on November
6, 2000 and incorporated herein by reference.
(N) Form of Restated Sub-Advisory Agreement between ING Pilgrim
Investments, LLC and Furman Selz Capital Management on behalf of Delta
Asset Management -- previously filed as an Exhibit to Post-Effective
Amendment No. 12 to the Registrant's Registration Statement on Form
N-1A filed electronically on October 1, 2001 and incorporated herein
by reference.
C-5
(O) Form of Sub-Advisory Agreement between ING Pilgrim Investments, LLC
and CRA Real Estate Securities L.P. with respect to Pilgrim Global
Real Estate Fund -- previously filed as an Exhibit to Post-Effective
Amendment No. 10 to the Registrant's Registration Statement on Form
N-1A filed electronically on July 27, 2001 and incorporated herein by
reference.
(P) Form of Sub-Advisory Agreement between IMFC and CRA Real Estate
Securities, L.P. -- previously filed as an Exhibit to Post-Effective
Amendment No. 6 to the Registrant's Registration Statement on Form
N-1A filed electronically on November 6, 2000 and incorporated herein
by reference.
(7) (A) Form of Underwriting Agreement between Registrant and ING Pilgrim
Securities, Inc. - Filed as an exhibit to Post Effective Amendment No.
6 to Registrant's Registration Statement on Form N-1A filed
electronically on November 6, 2000 and incorporated herein by
reference.
(B) Form of Financial Institution Selling Group Agreement - Filed as an
exhibit to Post Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A filed electronically on November 6, 2000 and
incorporated herein by reference.
(C) Form of Selling Group Agreement - Filed as an exhibit to Post
Effective Amendment No. 6 to Registrant's Registration Statement on
Form N-1A filed electronically on November 6, 2000 and incorporated
herein by reference.
(9) (A) Form of Custodian Agreement between Registrant and State Street Bank
and Trust Company, with respect to the Registrants U.S. Funds - Filed
as an exhibit to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A filed electronically on November
6, 2000, and incorporated herein by reference.
(B) Form of Custodian Agreement between Registrant and Brown Brothers
Harriman & Co., with respect to the Registrants Global and
International Funds - Filed as an exhibit to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A filed
electronically on November 6, 2000, and incorporated herein by
reference.
(C) Form of Amendment to the Custodian Agreement between Registrant and
Brown Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
(D) Form of Appendix A to Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
(E) Form of Appendix B to Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
(F) Form of Appendix C to Custodian Agreement between Registrant and Brown
Brothers Harriman & Co. - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
C-6
(10) (A) Rule 12b-1 Distribution Plan and Agreement with respect to Class A
Shares - Filed as an exhibit to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A filed electronically
on November 6, 2000, and incorporated herein by reference.
(B) Rule 12b-1 Distribution Plan and Agreement with respect to Class B,
Class C and Class X Shares - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
(C) Form of Amended and Restated Distribution Plan and Agreement with
respect to Class B shares - previously filed as an Exhibit to
Post-Effective Amendment No. 11 to Registrant's Registration Statement
on Form N-1A filed electronically on July 31, 2001 and incorporated
herein by reference.
(D) Form 18f-3 Plan - Filed as an exhibit to Post-Effective Amendment No.
10 to Registrant's Registration Statement on Form N-1A filed
electronically on July 27, 2001, and incorporated herein by reference.
(E) Amended and Restated Rule 18f-3 Plan - previously filed as an Exhibit
to Post-Effective Amendment No. 15 to the Registrant's Registration
Statement on Form N-1A filed electronically on November 9, 2001 and
incorporated herein by reference.
(11) Form of Opinion and Consent of Counsel - filed herewith.
(12) (A) Form of Opinion and Consent of Counsel Supporting Tax Matters and
Consequences - filed herewith.
(B) Form of Opinion and Consent of Counsel Supporting Tax Matters and
Consequences - filed herewith.
(13) (A) Form of Service Agreement - Filed as an exhibit to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
filed electronically on November 6, 2000, and incorporated herein by
reference.
(B) Fund Services Agreement between Registrant and ING Fund Services Co.
LLC - filed as an exhibit to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A filed electronically
on April 15, 1999, and incorporated herein by reference.
(C) Form of Recordkeeping Agreement with State Street Bank and Trust
Company - filed as an exhibit to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A filed electronically
on November 6, 2000, and incorporated herein by reference.
(D) Form of Shareholder Servicing Plan - previously filed an Exhibit to
Post-Effective Amendment No. 9 to Registrant's Registration Statement
on Form N-1A filed electronically on June 15, 2001 and incorporated
herein by reference.
(E) Amended and Restated Shareholder Servicing Plan - filed as an exhibit
to Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A filed electronically on November 6, 2000, and
incorporated herein by reference.
(F) Form of Administration Agreement - filed as an exhibit to
Post-Effective Amendment No. 6 to Registrant's Registration Statement
on Form N-1A filed electronically on November 6, 2000, and
incorporated herein by reference.
C-7
(G) Form of Expense Limitation Agreement among ING Pilgrim Investments,
LLC, Clarion CRA Securities L.P. and Pilgrim Funds Trust with respect
to Pilgrim Global Real Estate Fund - filed as an Exhibit to
Post-Effective Amendment No. 10 to the Registration's Registration
Statement on Form N-1A on July 27, 2001 and incorporated herein by
reference.
(H) Form of Expense Limitation Agreement - previously filed as an Exhibit
to Post-Efective Amendment No. 8 to the Registrant's Registration
Statement on Form N-1A filed electronically on March 1, 2001 and
incorporated herein by reference.
(14) (A) Consent of PricewaterhouseCoopers LLP - filed herewith.
(B) Consent of KPMG LLP - filed herewith.
(15) Not Applicable
(16) Powers of Attorney - filed herewith.
(17) Not Applicable
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus, which is a part of
this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act 17 CFR
230.145(c), the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the Registrant has duly caused this Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the city of Scottsdale and the State of Arizona on the 31st day of December,
2001.
PILGRIM FUNDS TRUST
By: /s/ Kimberly A. Anderson
------------------------------------
Kimberly A. Anderson
Vice President and Secretary
Pursuant to the requirements of the 1933 Act, this Registration Statement
has been signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
--------- ----- ----
Trustee and Chairman December 31, 2001
- -----------------------
John G. Turner*
President and Chief December 31, 2001
- ----------------------- Executive Officer
James M. Hennessy*
Senior Vice President and December 31, 2001
- ----------------------- Principal Financial Officer
Michael J. Roland*
Trustee December 31, 2001
- -----------------------
Paul S. Doherty*
C-9
Signature Title Date
--------- ----- ----
Trustee December 31, 2001
- -----------------------
Walter H. May, Jr.*
Trustee December 31, 2001
- -----------------------
Thomas J. McInerney*
Trustee December 31, 2001
- -----------------------
Jock Patton*
Trustee December 31, 2001
- -----------------------
David W.C. Putnam*
Trustee December 31, 2001
- -----------------------
Blaine E. Rieke*
Trustee December 31, 2001
- -----------------------
Richard A. Wedemeyer*
* By: /s/ Kimberly A. Anderson
-------------------------------
Kimberly A. Anderson
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
C-10
EXHIBIT INDEX
(4) (A) Form of Agreement and Plan of Reorganization between Pilgrim Funds
Trust, on behalf of its Pilgrim Global Communications Fund series and
Pilgrim Funds Trust, on behalf of its ING Global Technology Fund
series
(B) Form of Agreement and Plan of Reorganization between Pilgrim Funds
Trust, on behalf of its Pilgrim Internet Fund series and Pilgrim Funds
Trust, on behalf of its ING Global Technology Fund series
(11) Form of Opinion and Consent of Counsel
(12) (A) Form of Opinion of Counsel Supporting Tax Matters and Consequences
(B) Form of Opinion of Counsel Supporting Tax Matters and Consequences
(14) (A) Consent of PricewaterhouseCoopers LLP
(B) Consent of KPMG LLP
(16) Powers of Attorney