-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
U3usSeHv2oPrkn4oA4iQQwAfF/xAqUMffEa52aZEYtVFGvIBIW+ggafZ62IVDXId
QpSdistTko8ZH2UYPg+y0w==
<SEC-DOCUMENT>0000950147-01-500531.txt : 20010313
<SEC-HEADER>0000950147-01-500531.hdr.sgml : 20010313
ACCESSION NUMBER: 0000950147-01-500531
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PILGRIM ADVISORY FUNDS INC
CENTRAL INDEX KEY: 0000944689
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
IRS NUMBER: 954532342
STATE OF INCORPORATION: MD
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: N-30D
SEC ACT:
SEC FILE NUMBER: 811-09040
FILM NUMBER: 1566069
BUSINESS ADDRESS:
STREET 1: 2 RENAISSANCE SQUARE 12TH FLR
STREET 2: 40 NORTH CENTRAL
CITY: PHOENIX
STATE: AZ
ZIP: 85004-4424
BUSINESS PHONE: 6024178100
MAIL ADDRESS:
STREET 1: 2 RENAISSANCE SQUARE 12TH FLR
STREET 2: 40 NORTH CENTRAL
CITY: PHOENIX
STATE: AZ
ZIP: 85004
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC/MD
CENTRAL INDEX KEY: 0000061448
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
IRS NUMBER: 136066974
STATE OF INCORPORATION: MD
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: N-30D
SEC ACT:
SEC FILE NUMBER: 811-01939
FILM NUMBER: 1566070
BUSINESS ADDRESS:
STREET 1: TWO RENAISSANCE SQUARE 40 N CENTRAL
STREET 2: STE 1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004-4424
BUSINESS PHONE: 6024178100
MAIL ADDRESS:
STREET 1: TWO RENAISSANCE SQ
STREET 2: 40 N CENTRAL STE 1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004-4424
FORMER COMPANY:
FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC
DATE OF NAME CHANGE: 19950503
FORMER COMPANY:
FORMER CONFORMED NAME: PILGRIM MAGNACAP FUND INC
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: MAGNACAP FUND INC
DATE OF NAME CHANGE: 19850701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PILGRIM GOVERNMENT SECURITIES INCOME FUND INC
CENTRAL INDEX KEY: 0000746575
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
IRS NUMBER: 222544280
STATE OF INCORPORATION: CA
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: N-30D
SEC ACT:
SEC FILE NUMBER: 811-04031
FILM NUMBER: 1566071
BUSINESS ADDRESS:
STREET 1: TWO RENAISSANC SQUARE 40 N CENTRAL
STREET 2: STE 1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004-4424
BUSINESS PHONE: 6024178100
MAIL ADDRESS:
STREET 1: TWO RENAISSANCE SQ
STREET 2: 40 N CENTRAL STE 1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004-4424
FORMER COMPANY:
FORMER CONFORMED NAME: PILGRIM GOVERNMENT SECURITIES INC
DATE OF NAME CHANGE: 19950530
FORMER COMPANY:
FORMER CONFORMED NAME: PILGRIM GNMA FUND
DATE OF NAME CHANGE: 19920703
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PILGRIM MUTUAL FUNDS
CENTRAL INDEX KEY: 0000895430
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
STATE OF INCORPORATION: CA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: N-30D
SEC ACT:
SEC FILE NUMBER: 811-07428
FILM NUMBER: 1566072
BUSINESS ADDRESS:
STREET 1: TWO RENAISSANCE SQUARE
STREET 2: 40 NORTH CENTRAL AVE #1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004
BUSINESS PHONE: 6024178100
MAIL ADDRESS:
STREET 1: TWO RENAISSANCE SQUARE
STREET 2: 40 NORTH CENTRAL AVE #1200
CITY: PHOENIX
STATE: AZ
ZIP: 85004
FORMER COMPANY:
FORMER CONFORMED NAME: NICHOLAS APPLEGATE MUTUAL FUNDS
DATE OF NAME CHANGE: 19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>e6473.txt
<DESCRIPTION>SEMI-ANNUAL REPORT DATED 12/31/2000
<TEXT>
Semi-Annual
[LOGO] Report
December 31, 2000
Class Q
U.S. EQUITY FUNDS
Pilgrim MagnaCap
Pilgrim LargeCap Leaders
Pilgrim LargeCap Growth
Pilgrim MidCap Value
Pilgrim MidCap Growth
Pilgrim SmallCap Growth
INCOME FUNDS
Pilgrim Government Securities Income
Pilgrim Strategic Income
Pilgrim High Yield
Pilgrim High Yield II
EQUITY & INCOME FUNDS
Pilgrim Balanced
Pilgrim Convertible
<PAGE>
- -------
Pilgrim
Funds
- -------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Letter to Shareholders .................... 1
Portfolio Managers' Reports:
U.S. Equity Funds ....................... 2
Income Funds ............................ 14
Equity & Income Funds ................... 22
Index Descriptions ........................ 26
Statements of Assets and Liabilities ...... 28
Statements of Operations .................. 34
Statements of Changes in Net Assets ....... 37
Financial Highlights ...................... 43
Notes to Financial Statements ............. 55
Portfolios of Investments ................. 73
Shareholder Meetings ...................... 100
<PAGE>
- -------
Pilgrim
Funds
- -------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to present the December 31, 2000 Semi-Annual Report for the Q
class of the Pilgrim Funds.(1)
On September 1, 2000, ING Groep N.V. (NYSE: ING) acquired ReliaStar Financial
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,
Inc., Administrator to the Funds. In conjunction with the acquisition, the
Adviser, Distributor and Administrator changed their names to ING Pilgrim
Investments, Inc. ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.,
respectively, effective September 8, 2000.
Our fund family now has many funds of varying types which provide core
investment choices for the serious investor. There are twelve Funds included in
this Semi-Annual Report.
At ING Pilgrim, we are dedicated to providing core investments for the serious
investor. We believe that the key to success is matching quality core
investments to the individual needs of investors. Core investments are the
foundation of every portfolio and the basis of other important investment
decisions. Pilgrim prides itself on providing a family of core investments
designed to help you reach your financial goals. Our goal is for every investor
to have a successful investment experience.(SM)
Sincerely,
ING Pilgrim Group, Inc.
February 8, 2001
- ----------
(1) The Semi-Annual Report for other Pilgrim Fund classes has been issued
separately.
1
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM MAGNACAP FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: Howard N. Kornblue, Senior Vice President and Senior
Portfolio Manager; G. David Underwood, CFA, Vice President and Director of
Research; Robert M. Kloss, Equity Analyst.
Goal: The Fund seeks growth of capital, with dividend income as a secondary
consideration. As a disciplined investment philosophy fund, MagnaCap invests in
a very select group of companies that have been able to sustain growth over a
10-year period. In selecting portfolio securities, companies are generally
assessed with reference to the following criteria as ideal:
* A company must pay or had the financial capability from its operations
to pay a dividend in 8 out of the last 10 years.
* A company must have increased its dividend or had the financial
capability from its operations to have increased its dividend at least
100% over the past 10 years.
* Dividend payout must be less than 65% of current earnings.
* Long-term debt should be no more than 25% of the company's total
capitalization, or a company's bonds must be rated at least A- or A-3.
* The current price should be in the lower half of the stock's
price/earnings ratio range for the past ten years, or the ratio of the
price of the company's stock at the time of purchase to its
anticipated future earnings must be an attractive value in relation to
the average for its industry peer group or that of the S&P 500
Composite Stock Price Index.
Market Overview: We have just completed one of the most extraordinary years in
stock market history. Last year's massacre of technology and Internet stocks
marked the end of one of the U.S.'s biggest financial mania's of the last 100
years. Yet it was a massacre that left much of the market relatively unscathed.
The Nasdaq Composite Index plunged 39.3% to 2,470.5, the worst year since it was
created in 1971, giving back almost all of 1999's record 86% gain. Its peak to
trough 54% plunge represented a loss of $3.3 trillion, equivalent to one third
of the houses in America disappearing. The Dow Jones Industrial Average fell
only 6.2% to 10,786.9 for the year. Though that broke a nine-year winning streak
and represented its worst calendar year since 1981, the Dow's peak to trough
decline of just 16% was less than that of 1990, failing to meet the 20% bear
market rule of thumb. The S&P 500 Index lost 10.1% to 1,320.3 last year, its
worst since 1977. The Dow and the S&P 500 have given up less than a sixth of
what they made when they tripled between 1995 and 1999. Excess in the market has
been liquidated without destroying the entire market. By contrast, the 1973-74
bear market took down everything. The NASDAQ's 60% slide then was the only time
it has fallen further than last year. The Dow lost 45% and the S&P 500 48%. Last
year tech stocks repeatedly took off in a series of short lived rallies after
their big drop in the spring, only to fall back to new lows each time. The top
performing stocks year, included some that had been given up for dead in the
previous notably utilities and health care stocks, including hospital companies,
drug distributors, medical device makers and drug companies. Among utility
stocks, the strongest were the natural gas producers, which benefited from
soaring natural gas prices and worries about winter shortages. The big losers
were almost all technology related, and included the names of beleaguered
Internet related companies whose businesses didn't hold up.
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
gained 1.33%, compared to the S&P 500 Index, which declined 9.11% for the same
period.
Portfolio Specifics: We believe that the Fund's past success can be attributed
to the very explicit investment criteria, which normally determine the kinds of
companies that qualify for inclusion in the portfolio. Out of a universe of
approximately 4,000 publicly traded companies, and based upon both in-house and
external research, we aim to select the 40 to 60 equities which we believe will
be most likely to exhibit a high degree of performance. Among the top performing
holdings were Alliance Capital Management (financial services), AFLAC
(insurance), Bank of New York (banking), Duke Energy (utilities), Philip Morris
(consumer), and Washington Mutual (financial services). At the end of December
2000, the top industry groups were telecommunications, oil and gas producers,
insurance, retail and banks. The top stock holdings were Baxter International,
Williams Companies, Conoco, McDonalds, and Automatic Data Processing.
Market Outlook: Going forward, we will continue to employ a "bottom-up" approach
to stock selection, drawing from the pool of companies that come closest to
meeting the Fund's strict investment criteria given market conditions, the
circumstances of the company and the sector within which it falls. There is a
question if last year's Nasdaq decline is the vanguard of a broad based bear
market. The answer depends mostly on whether the economy's downshift in recent
months is a pause in the longest expansion in a century the first stage of a
recession. Just as the Federal Reserve's raising interest rates through last May
eventually sank stocks and braked the speeding economy, as the Federal Reserve
now reverse course and lowers rates, the economy and stock prices should move
forward. Fed easing usually outweighs earnings deceleration in driving stock
prices. During the past thirty years, the equity market has risen on both a
six-month and one year horizon from the initiation of a Fed easing process, with
two key exceptions. Those exceptions were the mid-1970s and early 1980s, when
the U.S. economy fell into deep slumps that were still underway a year after the
Fed began to ease. Even including those two periods, the S&P 500 was up an
average of 12% one year after the Fed began easing policy. Excluding them, the
S&P 500 was up an average of 22%. Unless one believes the U.S. economy is about
to crumble, Fed easing would mark a buying opportunity for equities. We believe
stock prices can continue to rise selectively in 2001 in concert with
improvements in corporate earnings and cash flows.
Accordingly, we intend to remain almost fully invested, selecting stocks on the
basis described at the beginning of this paragraph.
2
<PAGE>
Portfolio
Managers' Report PILGRIM MAGNACAP FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the periods ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 11/22/99
------ --------
Class Q 1.33% 1.19%
S&P 500 Index(1) -9.11% -3.47%
Based upon a $10,000 intitial investment, the table above illustrates the total
return of Pilgrim MagnaCap Fund against the Standard & Poor's 500 Composite
Stock Price 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 the sales charges.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown from 12/01/99.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 26.
3
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM LARGECAP LEADERS FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: G. David Underwood, CFA, Senior Vice President and
Senior Portfolio Manager; Mariela Clark, Equities Research Analyst.
Goal: The LargeCap Leaders Fund seeks long-term capital appreciation by
investing in a portfolio of stocks of U.S. companies with market capitalizations
over $10 billion and believed to be leaders in their industry.
Market Overview: During the 6-month period ending December 31, 2000, the U.S.
equity market was characterized by:
* An early, modest recovery in the major averages followed by an
extended, but gradual decline into the end of 2000.
* A shift in investor sentiment from opportunistic, to mounting anxiety
and finally to capitulation.
* Long overdue reconnection of fundamentals, valuations and stock prices
lost under the recent mantle of "New Era" thinking.
The second half of the year 2000 proved to be one of the most rugged periods for
the equity markets. For example, both the S&P 500 and the NASDAQ Composite
indices lost ground in amounts not seen in 20-30 years. Even the venerable Dow
Jones Industrial gave up a modest amount.
As the period began, the market averages recovered nearly to the highs
experienced in early 2000. However, this gave way to declines as it became clear
that economic growth and corporate profits were decelerating, the result of
prolonged credit restraint by the Federal Reserve. The lofty valuations of
technology-related stocks, primarily, could no longer be substantiated. Since
these groups comprised the major proportion of the indices, the decline in the
market averages was visibly pronounced. This wasn't the case for smaller and
less technology-driven stocks, which held up rather well. In fact, "old
economy", defensive representatives such as utilities and financials turned in
strong performances.
Although discomforting to go through, in the long-term, the type of equity
markets we've just passed through are constructive. It was apparent entering
2000 the markets needed to redefine valuations on a number of counts. There had
been an unprecedented, extremely wide valuation disparity undermining the
balance of the markets. Investors deployed capital to the so-called "New Era"
companies and withheld it from more mainstream areas. Thus prices in the favored
sectors were overly inflated, while the others were unduly depressed. The 2000
markets narrowed this disparity and brought back into favor fundamental
approaches to portfolio construction in contrast to the momentum techniques that
held sway over the prior two years.
Performance: For the period from inception April 4, 2000 through December 31,
2000, the Fund's Class Q shares returned -3.17% compared to a return of -11.14%
for the S&P 500 Index and a return of 5.84% for the S&P/BARRA Value Index.
Portfolio Specifics: During the period, we positioned the fund to take advantage
of favorable fundamentals in natural gas. Thus Energy made the most positive
impact in addition to the Healthcare, Financial and Basic Industries sectors.
Holdings in Anadarko Petroleum, Merck, Merrill Lynch and Alcoa appreciated
significantly.
Market Outlook: A better overall balance within the markets and relaxing
monetary policy portend a very favorable environment for stocks. The economy is
now less prone to decline and with much more reasonable valuations underlying
them, we believe stocks should benefit, resuming a more sustainable price
advance.
4
<PAGE>
Portfolio
Managers' Report PILGRIM LARGECAP LEADERS FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the Period Ended December 31, 2000
----------------------------------
Since Inception
of Class Q
4/4/00
------
Class Q -3.17%
S&P 500 Index -11.14%(1)
S&P/BARRA Value Index 5.84%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim LargeCap Leaders Fund against the S&P 500 Index and the
S&P/Barra Value Index. The Indices have an inherent performance advantage over
the Fund since they have no cash in their portfolios, impose no sales charges
and incur no operating expenses. An investor cannot invest directly in an index.
The Fund's performance is shown both with and without the imposition of sales
charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown from 04/01/00.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 26.
5
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM LARGECAP GROWTH FUND Manager's Report
- --------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice-President and Portfolio
Manager.*
Goal: The LargeCap Growth Fund (the "Fund"or "LargeCap Growth") seeks to
maximize long-term capital appreciation by investing primarily in stocks from a
universe of U.S. companies with market capitalizations corresponding to the
upper 90% of the Russell 1000 Growth Index.
Market Overview: The second half of 2000 turned out to be almost a year in
itself, as the broad slide in the markets accelerated after the year began with
a strong surge through March. The Federal Reserve's policy of restraining the
U.S. economy's growth through interest rate hikes totaling 175 basis points was
successful, and it may have been too successful as the stock and bond markets
were pricing a severe slowdown or even an outright recession as we closed the
year 2000. While the U.S. economy grew 8.3% in the final quarter of 1999, the
Fed had engineered a slowdown to cut economic growth to 2.2% by the third
quarter of 2000. The final six months of the year saw a dramatic reduction in
the rate of earnings growth, particularly for technology and telecommunications
shares, and companies had difficulty in raising capital in this economic
backdrop. Adding to the economic woes plaguing the market was the political
uncertainty surrounding the Presidential election.
Equity investors were clearly defensive in this environment, as sectors such as
utilities, basic materials, and healthcare outperformed the market, while
financial stocks got a lift when the Federal Reserve signaled that it had
finished raising interest rates. After spectacular gains in 1999 and early 2000,
the telecommunications and technology sectors suffered as the demand outlook
dimmed, and their access to the capital markets virtually evaporated.
Returns were widely dispersed across the major U.S. equity benchmarks on both
the positive and negative sides. The Dow Industrials gained 3.24% in the second
half of the year, but finished the entire year 2000 down 6.18%. The best
performing benchmark, the S&P Midcap Index, continued to show strong returns in
the final six months of the year with a gain of 7.83%; in 2000, the benchmark
earned 17.50%. On the down side, the NASDAQ Composite plummeted 37.71% in the
back half of 2000, and the technology-heavy benchmark finished its worst year in
history with a negative 39.29% return. Small cap stocks also struggled, as the
Russell 2000 dropped 5.88% in the second half of 2000 and finished down 3.02%
for the year. Finally, the S&P 500 dropped 8.72% in the final six months of the
year and fell 9.11% for the year 2000.
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
returned -19.12% compared to a return of -22.42% for the Russell 1000 Growth
Index. The Fund was hurt by its heavy weightings in technology stocks, but it
was helped by its positions in healthcare and energy.
Portfolio Specifics: Early in the spring, the Fund moved out of technology
shares and into more "defensive" names, and we exited the year with significant
weightings in the healthcare, telecommunications and financial sectors. The
visibility of earnings growth makes the healthcare sector attractive, while
valuations in the telecommunications sector have created some buying
opportunities. We anticipate the Federal Reserve will be more accommodative with
monetary policy, providing an excellent backdrop for financial stocks. In
addition, we have been using a slightly higher cash balance to add select
telecommunications and semiconductor shares at attractive valuations. The market
began to price in a recession at the end of the fourth quarter, and looking
ahead, we would seek to get more aggressive in the technology sector as the
Federal Reserve lowers rates in response to the sharp economic slowdown.
Among the individual stocks that were significant contributors to performance
during the second half of 2000 were UnitedHealth Group, Fannie Mae,
Bristol-Myers Squibb, and Cablevision Systems.
Market Outlook: The political events that took place at the end of 2000
temporarily took the focus off a market that continues to increase in
complexity. The reality is that the US economy has slowed dramatically and that
the corporate earnings outlook has become increasingly unstable. However, this
instability will create opportunities for individual companies and money
managers to significantly outperform their peers, as the secular changes in the
modern economy will outweigh the cyclical changes. The powerful cyclical trends
of the recent past have masked many fundamental transformations that have taken
place due to technological innovation and globalization.
In an economy that will continue to grow but at a slower rate, company
performance will vary widely, and thus stock prices will vary as well. We have
referred to this in the past as a "market of stocks," where certain companies
can significantly outperform, versus a "stock market," where broad sector bets
are profitable. As we start to see dispersions in earnings growth within
sectors, active portfolio managers will have the opportunity to significantly
outperform their benchmarks. In this environment, the combination of a top-down
thematic approach and bottoms-up research with a focus on identifying inflection
points will provide a formula for identifying potential stocks within the
broader market that will flourish in the changing economy.
* Effective October 1, 2000 Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Nicholas Applegate Capital Management.
6
<PAGE>
Portfolio
Manager's Report PILGRIM LARGECAP GROWTH FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the periods ended December 31, 2000
-----------------------------------
Since Inception
1 Year 7/21/97
------ -------
Class Q -19.12% 33.90%
Russell 1000 Growth Index -22.42% 11.19%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the Index is shown from 8/1/97.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 26.
7
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM MIDCAP VALUE FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: G. David Underwood, CFA, Vice President and Senior
Portfolio Manager; Mariela Clark, Equities Research Analyst.
Goal: The MidCap Value Fund seeks long-term capital appreciation by investing in
a portfolio of attractively valued stocks of U.S. companies with market
capitalizations between $1.0 billion and $8.0 billion.
Market Overview: During the 6-month period ending December 31, 2000, the U.S.
equity market was characterized by:
* An early, modest recovery in the major averages followed by an
extended, but gradual decline into the end of 2000.
* A shift in investor sentiment from opportunistic, to mounting anxiety
and finally to capitulation.
* Long overdue reconnection of fundamentals, valuations and stock prices
lost under the recent mantle of "New Era" thinking.
The second half of the year 2000 proved to be one of the most rugged periods for
the equity markets. For example, both the S&P 500 and the NASDAQ Composite
indices lost ground in amounts not seen in 20-30 years. Even the venerable Dow
Jones Industrial gave up a modest amount.
As the period began, the market averages recovered nearly to the highs
experienced in early 2000. However, this gave way to declines as it became clear
that economic growth and corporate profits were decelerating, the result of
prolonged credit restraint by the Federal Reserve. The lofty valuations of
technology-related stocks, primarily, could no longer be substantiated. Since
these groups comprised the major proportion of the indices, the decline in the
market averages was visibly pronounced. This wasn't the case for smaller and
less technology-driven stocks, which held up rather well. In fact, "old
economy", defensive representatives such as utilities and financials turned in
strong performances.
Although discomforting to go through, in the long-term, the type of equity
markets we've just passed through are constructive. It was apparent entering
2000 the markets needed to redefine valuations on a number of counts. There had
been an unprecedented, extremely wide valuation disparity undermining the
balance of the markets. Investors deployed capital to the so-called "New Era"
companies and withheld it from more mainstream areas. Thus prices in the favored
sectors were overly inflated, while the others were unduly depressed. The 2000
markets narrowed this disparity and brought back into favor fundamental
approaches to portfolio construction in contrast to the momentum techniques that
held sway over the prior two years.
Performance: For the period from inception January 3, 2000 through December 31,
2000, the Fund's Class Q shares returned 9.31% compared to a return of 8.25% for
the Russell MidCap Index and a return of 19.18% for the Russell MidCap Value
Index.
Portfolio Specifics: Though fairly defensive throughout the period, the
portfolio produced a positive return. It profited from favorable industry
fundamentals in natural gas through very rewarding investments in Apache and
Devon Energy. Wellpoint Health Networks was a standout performer as was
Willamette Industries, which became takeover target.
Market Outlook: A better overall balance within the markets and relaxing
monetary policy portend a very favorable environment for stocks. The economy is
now less prone to decline and with much more reasonable valuations underlying
them, we believe stocks should benefit, resuming a more sustainable price
advance.
8
<PAGE>
Portfolio
Managers' Report PILGRIM MIDCAP VALUE FUND
- --------------------------------------------------------------------------------
Average Annual Total
Returns for the Period Ended
December 31, 2000
----------------------------
Since Inception
of Class Q
1/3/00
------
Class Q 9.31%
Russell MidCap Index 8.25%(1)
Russell MidCap Value Index 19.18%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim MidCap Value Fund against the Russell Midcap Index and Russell
MidCap Value Index. The Indices have an inherent performance advantage over the
Fund since they have no cash in their portfolio, impose no sales charges and
incur no operating expenses. An investor cannot invest directly in an index. The
Fund's performance is shown both with and without the imposition of sales
charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for index is shown from 01/01/00.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. To the extent the Fund invests in medium-sized
companies, it may entail greater price variability than investing in larger
companies.
See accompanying index descriptions on page 26.
9
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM MIDCAP GROWTH FUND Manager's Report
- --------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice-President and Portfolio
Manger.*
Goal: The MidCap Growth Fund (the "Fund" or "MidCap Growth") seeks long-term
capital appreciation by investing at least 65% of its total assets in equity
securities of medium-sized U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio managers feel have been above average
prospects for growth.
Market Overview: The second half of 2000 turned out to be almost a year in
itself, as the broad slide in the markets accelerated after the year began with
strong surge through March. The Federal Reserve's policy of restraining the US
economy's growth through interest rate hikes totaling 175 basis points was
successful, and it may have been too successful as the stock and bond markets
were pricing a severe slowdown or even an outright recession as we closed the
year 2000. While the US economy grew 8.3% in the final quarter of 1999, the Fed
had engineered a slowdown to cut economic growth to 2.2% by the third quarter of
2000. The final six months of the year saw a dramatic reduction in the rate of
earnings growth, particularly for technology and telecommunications shares, and
companies had difficulty in raising capital in this economic backdrop. Adding to
the economic woes plaguing the market was the political uncertainty surrounding
the Presidential election.
Equity investors were clearly defensive in this environment, as sectors such as
utilities, basic materials, and healthcare outperformed the market, while
financial stocks got a lift when the Federal Reserve signaled that it had
finished raising interest rates. After spectacular gains in 1999 and early 2000,
the telecommunications and technology sectors suffered as the demand outlook
dimmed, and their access to the capital markets virtually evaporated.
Returns were widely dispersed across the major US equity benchmarks on both the
positive and negative sides. The Dow Industrials gained 3.24% in the second half
of the year, but finished the entire year 2000 down 6.18%. The best performing
benchmark, the S&P Midcap Index, continued to show strong returns in the final
six months of the year with a gain of 7.83%; in 2000, the benchmark earned
17.50%. On the down side, the NASDAQ Composite plummeted 37.71% in the back half
of 2000, and the technology-heavy benchmark finished its worst year in history
with a negative 39.29% return. Small cap stocks also struggled, as the Russell
2000 dropped 5.88% in the second half of 2000 and finished down 3.02% for the
year. Finally, the S&P 500 dropped 8.72% in the final six months of the year and
fell 9.10% for the year 2000.
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
returned -4.47% compared to a return of -11.75% for the Russell MidCap Growth
Index.
Portfolio Specifics: Early in the spring, the Fund moved out of technology
shares and into more "defensive" names, and we exited the year with significant
weightings in themes such as "Re-Energizing America," the "Life Sciences
Revolution," and "Flourishing in the Managed Care Environment." These themes
position the Fund to take advantage of the visibility and earnings growth
prospects in the energy, utility, and select health care sectors. In addition,
we have been using a slightly higher cash balance to add select
telecommunications and semiconductor shares at attractive valuations. The market
began to price in a recession at the end of the fourth quarter, and looking
ahead, we would seek to get more aggressive in the technology sector as the
Federal Reserve lowers rates in response to the sharp economic slowdown.
Among the individual stocks that were significant contributors to performance
during the second half of 2000 were Community Health Systems, EOG Resources,
Quest Diagnostics, and PPL Corp.
Market Outlook: The political events that took place at the end of 2000
temporarily took the focus off a market that continues to increase in
complexity. The reality is that the US economy has slowed dramatically and that
the corporate earnings outlook has become increasingly unstable. However, this
instability will create opportunities for individual companies and money mangers
to significantly outperform their peers, as the secular changes in the modern
economy will outweigh the cyclical changes. The powerful cyclical trends of the
recent past have masked many fundamental transformations that have taken place
due to technological innovation and globalization.
In an economy that will continue to grow but at a slower rate, company
performance will vary widely, and thus stock prices will vary as well. We have
referred to this in the past as a "market of stocks," where certain companies
can significantly outperform, versus a "stock market," where broad sector bets
are profitable. As we start to see dispersions in earnings growth within
sectors, active portfolio managers will have the opportunity to significantly
outperform their benchmarks. In this environment, the combination of a top-down
thematic approach and bottoms-up research with a focus on identifying inflection
points will seek to provide a formula for identifying stocks within the broader
market that will flourish in the changing economy.
* Effective April 1, 2000 Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Nicholas Applegate Capital Management.
10
<PAGE>
Portfolio
Manager's Report PILGRIM MIDCAP GROWTH FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 5 Year 6/30/94
------ ------ -------
Class Q -4.47% 23.93% 24.28%
Russell MidCap Growth Index -11.75% 17.77% 19.63%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim MidCap Growth Fund against the Russell MidCap Growth Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown form 07/01/94.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. To the extent the Fund invests in mid-size companies,
stocks of mid-size companies may entail greater price volatility than those of
larger companies.
See accompanying index descriptions on page 26.
11
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
Portfolio
PILGRIM SMALLCAP GROWTH FUND Manager's Report
- --------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice-President and Portfolio
Manager.*
Goal: The SmallCap Growth Fund (the "Fund" or "SmallCap Growth") seeks maximum
long-term capital appreciation by investing at least 65% of its total assets in
equity securities of small U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio manager feels have above average prospects
for growth.
Market Overview: The second half of 2000 turned out to be almost a year in
itself, as the broad slide in the markets accelerated after the year began with
strong surge through March. The Federal Reserve's policy of restraining the US
economy's growth through interest rate hikes totaling 175 basis points was
successful, and it may have been too successful as the stock and bond markets
were pricing a severe slowdown or even an outright recession as we closed the
year 2000. While the US economy grew 8.3% in the final quarter of 1999, the Fed
had engineered a slowdown to cut economic growth to 2.2% by the third quarter of
2000. The final six months of the year saw a dramatic reduction in the rate of
earnings growth, particularly for technology and telecommunications shares, and
companies had difficulty in raising capital in this economic backdrop. Adding to
the economic woes plaguing the market was the political uncertainty surrounding
the Presidential election.
Equity investors were clearly defensive in this environment, as sectors such as
utilities, basic materials, and healthcare outperformed the market, while
financial stocks got a lift when the Federal Reserve signaled that it had
finished raising interest rates. After spectacular gains in 1999 and early 2000,
the telecommunications and technology sectors suffered as the demand outlook
dimmed, and their access to the capital markets virtually evaporated.
Returns were widely dispersed across the major US equity benchmarks on both the
positive and negative sides. The Dow Industrials gained 3.24% in the second half
of the year, but finished the entire year 2000 down 6.18%. The best performing
benchmark, the S&P Midcap Index, continued to show strong returns in the final
six months of the year with a gain of 7.83%; in 2000, the benchmark earned
17.50%. On the down side, the NASDAQ Composite plummeted 37.71% in the back half
of 2000, and the technology-heavy benchmark finished its worst year in history
with a negative 39.29% return. Small cap stocks also struggled, as the Russell
2000 dropped 5.88% in the second half of 2000 and finished down 3.02% for the
year. Finally, the S&P 500 dropped 8.72% in the final six months of the year and
fell 9.10% for the year 2000.
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
returned -5.40% compared to a return of -22.43% for the Russell 2000 Growth
Index.
Portfolio Specifics: Early in the spring, the Fund moved out of technology
shares and into more "defensive" names, and we exited the year with significant
weightings in themes such as "Re-Energizing America," the "Life Sciences
Revolution," and "Flourishing in the Managed Care Environment." These themes
position the Fund to take advantage of the visibility and earnings growth
prospects of the energy, utility, and select health care industries. In
addition, we have been using a slightly higher cash balance to add select
telecommunications and semiconductor shares at attractive valuations. The market
began to price in a recession at the end of the fourth quarter, and looking
ahead, we would seek to get more aggressive in the technology sector as the
Federal Reserve lowers rates in response to the sharp economic slowdown.
Among the individual stocks that were significant contributors to performance
during the second half of 2000 were Laboratory Corporation of America, American
Eagle Outfitters, Lifepoint Hospitals, and Manugistics Group.
Market Outlook: The political events that took place at the end of 2000
temporarily took the focus off a market that continues to increase in
complexity. The reality is that the US economy has slowed dramatically and that
the corporate earnings outlook has become increasingly unstable. However, this
instability will create opportunities for individual companies and money mangers
to significantly outperform their peers, as the secular changes in the modern
economy will outweigh the cyclical changes. The powerful cyclical trends of the
recent past have masked many fundamental transformations that have taken place
due to technological innovation and globalization.
In an economy that will continue to grow but at a slower rate, company
performance will vary widely, and thus stock prices will vary as well. We have
referred to this in the past as a "market of stocks," where certain companies
can significantly outperform, versus a "stock market," where broad sector bets
are profitable. As we start to see dispersions in earnings growth within
sectors, active portfolio managers will have the opportunity to significantly
outperform their benchmarks. In this environment, the combination of a top-down
thematic approach and bottoms-up research with a focus on identifying inflection
points will seek to provide a formula for identifying stocks within the broader
market that will flourish in the changing economy.
* Effective April 1, 2000 Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Nicholas Applegate Capital Management.
12
<PAGE>
Portfolio
Manager's Report PILGRIM SMALLCAP GROWTH FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 5 Year 8/31/95
------ ------ -------
Class Q -5.40% 20.16% 19.77%
Russell 2000 Growth Index -22.43% 7.14% 7.39%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim SmallCap Growth Fund against the Russell 2000 Growth Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for index is shown from 9/1/95.
Principal Risk Factor(s): In exchange for higher growth potential, stocks of
smaller companies may entail greater price volatility than those of larger
companies.
See accompanying index descriptions on page 26.
13
<PAGE>
- ------
Income
Funds
- ------
PILGRIM GOVERNMENT Portfolio
SECURITIES INCOME FUND Manager's Report
- --------------------------------------------------------------------------------
Portfolio Management: Robert K. Kinsey, Vice-President & Senior Portfolio
Manger.
Goal: The Fund seeks high current income, consistent with liquidity and
preservation of capital, by investing in securities issued or guaranteed by the
U.S. Government and certain of its agencies and instrumentalities.
Bond Market Overview: The investment grade bond market posted handsome returns
in the year 2000 despite early pressure on the front end of the yield curve
resulting from Fed tightenings and some major "credit bombs" among corporate
issuers. The federal surplus enabled the Treasury Department to buyback
outstanding debt, which prompted a dramatic curve flattening through the first
half of the year. By the fourth quarter capital markets began to anticipate a
slowing economy and the likelihood of Fed easing in the near future. As interest
rates dropped dynamic hedgers became forced buyers, and owners of negatively
convex instruments (predominantly mortgages and callable agencies) rushed to
replenish duration. As the year closed markets were clearly priced for multiple
Federal Reserve easings in the face of a surprisingly slack economic
environment.
Performance: For the period from inception April 5, 2000 through December 31,
2000, the Fund's Class Q shares returned 7.35% compared to a return of 9.65% for
the Lehman Brothers Government/Mortgage Index and a return of 8.33% for the
Lehman Brothers Intermediate Treasury Index.
Portfolio Specifics: Designed to be defensive in nature, the Fund lagged the
longer duration benchmark indices, but provided a generous return for the year
of 9.61%. The Lehman Intermediate Treasury Index has returned 10.26% YTD. During
4Q 2000 the fund returned 3.43%. Owing to our restrictive guidelines, our
ongoing strategy is to provide the best dividend possible within the context of
the market and with few if any negative surprises.
Market Outlook: The duration of the Fund remains short of the Lehman Mortgage
Index, yet longer than the Lehman Intermediate Treasury Index in order to
maintain our dividend. The fund continues to be concentrated in high quality
mortgage backed securities. Going forward the fund will maintain its low
volatility and short duration product design.
14
<PAGE>
Portfolio PILGRIM GOVERNMENT
Manager's Report SECURITIES INCOME FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns
for the Period Ended
December 31, 2000
----------------------------
Since Inception
of Class Q
4/5/00
------
Class Q 7.35%
Lehman Brothers Government/
Mortgage Index 9.65%(1)
Lehman Brothers Intermediate
Treasury Index 8.33%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim Government Securities Income Fund against the Lehman Brothers
Government/Mortgage Index and the Lehman Brothers Intermediate Treasury Index.
The Indices have an inherent performance advantage over the Fund since they have
no cash in their portfolios, impose no sales charges and incur no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for index is shown from 04/01/00.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks
and prepayment risk on mortgage-related securities. Fluctuations in the value of
the Fund's shares can be expected in response to changes in interest rates. The
value of an investment in the Fund is not guaranteed and will fluctuate.
See accompanying index descriptions on page 26.
15
<PAGE>
- ------
Income
Funds
- ------
Portfolio
PILGRIM STRATEGIC INCOME FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: Robert Kinsey, Vice President and Senior Portfolio
Manager; Andy Mitchell, Vice President and Co-Portfolio Manager; Ed Schriver,
Senior Vice President and Senior Portfolio Manager; Russ Stiver, Vice President
and Co-Portfolio Manager.
Goals: Pilgrim Strategic Income Fund seeks maximum total return by investing
primarily in debt securities issued by U. S. and foreign entities, as well as U.
S. and foreign governments and their agencies and instrumentalities, that are
rated investment grade by a nationally recognized statistical rating agency, or
of comparable quality if unrated. Up to 40% of the fund's assets may be invested
in high yield securities rated below investment grade.
Bond Market Overview: The investment grade bond market posted handsome returns
in the year 2000 despite early pressure on the front end of the yield curve
resulting from Fed tightenings and some major "credit bombs" among corporate
issuers. Fatalities -- or at least near-death experiences -- included Xerox,
Lucent, Finova, and others. The federal surplus enabled the Treasury Department
to buyback outstanding debt which prompted a dramatic curve flattening through
the first half of the year. Spreads on corporate bonds reached levels not seen
since the last recession. By the fourth quarter capital markets began to
anticipate a slowing economy and the likelihood of Fed easing in the near
future. While Treasuries rallied and the curve steepened, investment grade debt
of issuers not tarnished by credit or earnings events rallied even more. As
interest rates dropped dynamic hedgers became forced buyers, and owners of
negatively convex instruments (predominantly mortgages and callable agencies)
rushed to replenish duration. As the year closed markets were clearly priced for
multiple Federal Reserve easings in the face of a surprisingly slack economic
environment.
High yield bonds had a dismal year. Most of the major indexes ended with a loss
of 4-6%. Spreads over treasuries widened considerably throughout the year from
about 4% early in the year to approximately 9.5% by the end of the year. The
sell off was particularly bad in lower rated credits and in the
telecommunications industry. Investors were concerned about a slowing economy
and rising default rates. Additionally, banks tightened their credit standards,
which contributed to a rising default rate and the public equity markets
retracted, which limited access to equity capital for some high yield companies.
Default rates escalated to 6% and the default rate is forecast to remain high
through 2001. However, we believe that the high yield market has priced in most
if not all of the bad news to come by year-end. In December, spreads were wider
than at any time since the last recession. Consequently, we positioned the high
yield portion of the fund aggressively in the fourth quarter.
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
returned 3.21% compared to a gain of 11.63% for the Lehman Brothers Aggregate
Index.
Portfolio Specifics: Despite some heavy winds in the high yield market,
Strategic Income placed in the top 26% of Morningstar multi-sector funds for the
year 2000. The investment grade component of the funds also posted strong
returns for the year. Fortunately, the fund avoided all of the credit bombs that
plagued the high grade corporate market in 2000; however, we did not avoid some
of the earnings disappointments that hurt bondholders as well as equity holders.
Holdings in Lucent, Albertsons, and News Corp were all a drag on performance in
the first half of the year, but we were able to exit the positions well before
the most dramatic underperformance occurred. Our early commitment to long-dated
Treasuries in the face of the debt buyback was a great boost as was our
overweight in agencies.
The high yield portion of the fund was not so fortunate. Particularly with
respect to the telecommunications holdings where five positions fell
approximately 60% on average and almost every telecom holding declined to some
extent. During the fourth quarter, we reduced our exposure in telecommunications
to a more modest over weighting and diversified the high yield holdings across
more industries. We invested in several mid and lower tier companies that
offered asset coverage, a high current yield and the potential for significant
price appreciation. For example, we purchased Doman Industries, a Canadian
forest products company with strong asset coverage; Owens Illinois, a glass
container manufacturer that we believe has a manageable exposure to asbestos
liabilities, and Neff Corp, a rental equipment manufacturer with strong asset
coverage and an attractive franchise.
Market Outlook: We anticipate that high yield will be the best performing bond
sector in the early months of 2001 and have raised our allocation to that
battered market accordingly. The investment grade component of the portfolio
remains invested in highly liquid names with maturities of ten years and under.
With Fed easings in the offing we look for the short to intermediate maturities
of the yield curve to outperform the thirty year area. Calling the high grade
corporate market will again be tough as capital markets sift out the winners and
losers in a profits recession -- or worse. Despite the rebound in spreads of
some tarnished names we will avoid the names prevalent in last years credit
debacles for the near term. We are also underweight in mortgages giving the
likelihood of upcoming Fed easings.
With respect to high yield, we believe that credit specific factors will be the
key to returns in 2001 as companies prove or disprove their ability to compete
in a slower growth
16
<PAGE>
Portfolio
Managers' Report PILGRIM STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
economy. Defaults will likely remain an issue in high yield in 2001, although
many of the probable bankruptcy candidates are already trading close to or below
liquidation values. High defaults are not inconsistent with high returns in the
high Yield market, as evidenced by 1991 when the default rate peaked at 13%, yet
the Merrill Lynch Cash-Pay High Yield Index returned 34.6%.
Most investors remain cautious regarding truly distressed credits, preferring
instead to add liquid second-tier securities more likely to survive a
significant downturn. While the High Yield market is likely to experience
continued volatility until the economic outlook becomes clearer, we believe that
now is an excellent time to invest in high yield and that long-term investors
are very well compensated for risks taken. The high yield portion of the Fund
will remain fully invested in a diversified portfolio of total return
investments that should perform well in an improving high yield market.
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
1 Year 7/27/98
------ -------
Class Q 3.21% 2.44%
Lehman Brothers Aggregate Index 11.63% 6.16%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim Strategic Income Fund against the Lehman Brothers Aggregate
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for index is shown from 08/01/98.
Principal Risk Factor(s): High yield bonds have exposure to financial, market
and interest rate risks. High yields reflect the higher credit risks associated
with certain lower rated securities in the Fund's portfolio, and in some cases,
the lower market prices for those instruments. The Fund's investments in
mortgage-related securities may entail prepayment risk. The Fund may invest up
to 30% of its total assets in securities payable in foreign currencies.
International investing does pose special risks, including currency fluctuation
and political risks not found in domestic investments.
See accompanying index descriptions on page 26.
17
<PAGE>
- ------
Income
Funds
- ------
Portfolio
PILGRIM HIGH YIELD FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: Ed Schriver, Senior Vice President and Senior
Portfolio Manager; Andy Mitchell, Vice President and Co-Portfolio Manager; Russ
Stiver, Vice President and Co-Portfolio Manager.
Goal: The High Yield Fund (the "Fund" or "High Yield") seeks to provide a high
level of current income, with capital appreciation as a secondary objective, by
investing in high yield debt securities.
Market Overview: Clearly the economy slowed much more quickly than economists
had expected during the quarter. In early January the federal reserve responded
by easing their benchmark rates by 50 basis points. While it will take 6 months
or more for the impact to be seen in the economy, the move sent a strong signal
as to future monetary policy. Further policy easing is anticipated in coming
months as economic slowing continues during the first half of 2001 and inventory
corrections play themselves out.
The slowing economy translated into widespread earnings warnings in virtually
every industry except energy during the quarter, leading to steep price declines
in both stocks and bonds. Most of the major High Yield indices returned
approximately -5% during the quarter, substantially outperforming the NASDAQ
composite index. Higher quality issues substantially outperformed lower quality
ones as investors flocked to the relative safety of BB's. Telecommunications,
automotive, metals & mining, and technology were the hardest hit sectors.
Yields on High Yield securities generally reflect an impending recession.
Spreads over Treasuries have widened from 549 basis points at the beginning of
the year to 959 basis points at the end of the year, the widest level seen since
the last recession in 1990/91. Quality spreads have also widened, illustrating
the markets desire for quality. Single-B issues yielded about 426 basis points
more than double-B issues at the end of 2000, versus about 170 basis points at
the beginning of the year and 288 basis points at the end of September.
Since High Yield spreads already reflect those of the last recession, further
downside appears limited. While greater clarity on the economy is still some
time away, the recent interest rate cuts provide some optimism that such clarity
will present itself sooner rather than later. Investors with a longer time
horizon may take advantage of the generous spreads to add High Yield exposure in
advance of the recovery. The market is likely to remain quite volatile however,
and market timing will be difficult at best.
Default rates remain well above the long-term market averages, attributed
primarily to a lack of discipline within the High Yield market in the 1997/98
timeframe rather than relating to broader economic weakness. While many of the
weaker issuers have already filed for bankruptcy, the weaker economy is likely
to prevent default rates from declining significantly during 2001. High default
rates do not necessarily preclude attractive returns however. In 1991, during
the last recession, default rates peaked at 13% while the DLJ High Yield Index
returned 43.75%.
Peformance: For the one year ended December 31, 2000, the Fund's Class Q shares
declined 20.96% compared to a decline of 5.21% for the First Boston High Yield
Index and a decline of 5.86% for the Lehman Brothers High Yield Index.
Portfolio Specifics: The Fund's underperformance was due to aggressive positions
in several lower quality credits, particularly in the telecommunications sector.
The bonds of Northpoint, a high-speed DSL network provider, lost approximately
90% of their value after Verizon Communications called off a planned acquisition
of the company. Both Rhythms Netconnections and Globix also declined sharply due
to concern over the future of web hosting businesses and the ability of dot-com
customers to pay their bills. Motorcoach Industries and Hollywood Entertainment
bonds also fell sharply on weaker earnings and liquidity concerns.
Market Outlook: The initial 20% cash position was reduced to 7% at year-end as
the fund took advantage of the weak market conditions to add first- and
second-tier credits at low prices. With the spread between bb's and b's at
recessionary levels, we intend to reduce cash to 3% over the coming weeks by
investing primarily in second-tier credits.
The fund is not set up to hold defaulted credits through the bankruptcy process.
Thus, we generally try to avoid third-tier credits in which we believe there is
material near-term default risk.
Telecommunications exposure is now approximately 23% of the fund. Over the past
several months we have
18
<PAGE>
Portfolio
Managers' Report PILGRIM HIGH YIELD FUND
- --------------------------------------------------------------------------------
reduced the size and upgraded the quality of our exposure to this sector. The
telecom sector is likely to be one of the areas of greatest default experience
in 2001, as several companies have insufficient funding to execute their plans
through the end of 2001. We are now comfortable with the weighting of
telecommunications within the portfolio.
We continue to look for opportunities to diversify the fund by adding
fundamentally sound companies in unrepresented industries. The aerospace,
publishing and advertising media sectors are targets for future investment. We
remain underweighted in cyclical basic industries, awaiting material
improvements in commodity inventories.
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 6/17/99
------ -------
Class Q -20.96% -14.57%
First Boston High Yield Index -5.21% -3.20%(1)
Lehman Brothers High Yield Index -5.86% -3.82%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim High Yield Fund against the First Boston High Yield Index and
the Lehman Brothers High Yield Index. The Indices have an inherent performance
advantage over the Fund since they have no cash in their portfolio, impose no
sales charges and incur no operating expenses. An investor cannot invest
directly in an index. The Fund's performance is shown both with and without the
imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown from 07/01/99.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
Higher yields reflect the higher credit risks associated with certain lower
rated securities in the Fund's portfolio, and in some cases, the lower market
prices for those instruments.
See accompanying index descriptions on page 26.
19
<PAGE>
- ------
Income
Funds
- ------
Portfolio
PILGRIM HIGH YIELD FUND II Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: Ed Schriver, Senior Vice President and Senior
Portfolio Manager; Andy Mitchell, Vice President and Co-Portfolio Manager; Russ
Stiver, Vice President and Co-Portfolio Manager.
Goal: The High Yield Fund II (the "Fund" or "High Yield II") seeks to provide a
high level of current income and capital growth by investing in high yield debt
securities.
Market Overview: Clearly the economy slowed much more quickly than economists
had expected during the quarter. In early January the federal reserve responded
by easing their benchmark rates by 50 basis points. While it will take 6 months
or more for the impact to be seen in the economy, the move sent a strong signal
as to future monetary policy. Further policy easing is anticipated in coming
months as economic slowing continues during the first half of 2001 and inventory
corrections play themselves out.
The slowing economy translated into widespread earnings warnings in virtually
every industry except energy during the quarter, leading to steep price declines
in both stocks and bonds. Most of the major High Yield indices returned
approximately -5% during the quarter, substantially outperforming the NASDAQ
composite index. Higher quality issues substantially outperformed lower quality
ones as investors flocked to the relative safety of BB's. Telecommunications,
automotive, metals & mining, and technology were the hardest hit sectors.
Yields on High Yield securities generally reflect an impending recession.
Spreads over Treasuries have widened from 549 basis points at the beginning of
the year to 959 basis points at the end of the year, the widest level seen since
the last recession in 1990/91. Quality spreads have also widened, illustrating
the markets desire for quality. Single-B issues yielded about 426 basis points
more than double-B issues at the end of 2000, versus about 170 basis points at
the beginning of the year and 288 basis points at the end of September. The
spread between single-B and CCC has widened from 1,002 on December 31, 1999 to
1,450 in September 2000 and nearly doubling year over year to 1,896 at the end
of 2000.
Since High Yield spreads already reflect those of the last recession, further
downside appears limited. While greater clarity on the economy is still some
time away, the recent interest rate cuts provide some optimism that such clarity
will present itself sooner rather than later. Investors with a longer time
horizon may take advantage of the generous spreads to add High Yield exposure in
advance of the recovery. The market is likely to remain quite volatile however,
and market timing will be difficult at best.
Default rates remain well above the long-term market averages, attributed
primarily to a lack of discipline within the High Yield market in the 1997/98
timeframe rather than relating to broader economic weakness. While many of the
weaker issuers have already filed for bankruptcy, the weaker economy is likely
to prevent default rates from declining significantly during 2001. High default
rates do not necessarily preclude attractive returns however. In 1991, during
the last recession, default rates peaked at 13% while the DLJ High Yield Index
returned 43.75%.
Peformance: For the one year ended December 31, 2000, the Fund's Class Q shares
declined 14.96% compared to a decline of 5.86% for the Lehman Brothers High
Yield Index.
Portfolio Specifics: The Fund returned -16.03% in the fourth quarter versus
- -5.04% for the DLJ High Yield Index. The Fund's underperformance was due to
aggressive positions in several lower quality credits, particularly in the
telecommunications sector. The bonds of Northpoint, a high-speed DSL network
provider, lost approximately 90% of their value after Verizon Communications
called off a planned acquisition of the company. Both Rhythms Netconnections and
Globix also declined sharply due to concern over the future of web hosting
businesses and the ability of dot-com customers to pay their bills. Hollywood
Entertainment bonds also fell sharply on weaker earnings and liquidity concerns.
Market Outlook: The initial 22% cash position was reduced to less than 2% at
year-end as the fund took advantage of the weak market conditions to add first,
second and third-tier credits at low prices. Given the exceptional long-term
value that we see in the high yield market, we intend to remain fully invested
over the foreseeable future.
Telecommunications exposure is now approximately 25% of the fund. Over the past
several months we have reduced the size of our exposure to this sector. The
telecom sector is likely to be one of the areas of greatest default experience
in 2001, as several companies have insufficient funding to execute their plans
through the end of 2001.
20
<PAGE>
Portfolio
Managers' Report PILGRIM HIGH YIELD FUND II
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 3/27/98
------ -------
Class Q -14.96% -4.07%
Lehman Brothers High Yield Index -5.86% -1.85%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim High Yield II Fund against the Lehman Brothers High Yield
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown from 04/01/98.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
Higher yields reflect the higher credit risks associated with certain lower
rated securities in the Fund's portfolio and in some cases, the lower market
price for those instruments. Up to 35% of total assets may be invested in
foreign securities. International investing does pose special risks, including
currency fluctuation and political risks not found in investments that are
solely domestic. Risks of foreign investing are generally intensified for
investments in emerging markets.
See accompanying index descriptions on page 26.
21
<PAGE>
- ------------
Equity &
Income Funds
- ------------
Portfolio
PILGRIM BALANCED FUND Managers' Report
- --------------------------------------------------------------------------------
Portfolio Management Team: G. David Underwood, CFA, Senior Vice ice President &
Senior Portfolio Manager; Robert K. Kinsey, Vice President & Senior Portfolio
Manager; Ed Schriver, Senior Vice President & Senior Portfolio Manager.
Goals: The fund seeks a balance of capital appreciation and current income by
investing in a blended portfolio of equity and debt securities with an emphasis
on overall total return.
The Markets
Equity: During the 6-month period ending December 31, 2000, the U.S. equity
market was characterized by:
* An early, modest recovery in the major averages followed by an
extended, but gradual decline into the end of 2000.
* A shift in investor sentiment from opportunistic, to mounting anxiety
and finally to capitulation.
* Long overdue reconnection of fundamentals, valuations and stock prices
lost under the recent mantle of "New Era" thinking.
The second half of the year 2000 proved to be one of the most rugged periods for
the equity markets. For example, both the S&P 500 and the NASDAQ Composite
indices lost ground in amounts not seen in 20-30 years. Even the venerable Dow
Jones Industrial gave up a modest amount.
As the period began, the market averages recovered nearly to the highs
experienced in early 2000. However, this gave way to declines as it became clear
that economic growth and corporate profits were decelerating, the result of
prolonged credit restraint by the Federal Reserve. The lofty valuations of
technology-related stocks, primarily, could no longer be substantiated. Since
these groups comprised the major proportion of the indices, the decline in the
market averages was visibly pronounced. This wasn't the case for smaller and
less technology-driven stocks, which held up rather well. In fact, "old
economy", defensive representatives such as utilities and financials turned in
strong performances.
Although discomforting to go through, in the long-term, the type of equity
markets we've just passed through are constructive. It was apparent entering
2000 the markets needed to redefine valuations on a number of counts. There had
been an unprecedented, extremely wide valuation disparity undermining the
balance of the markets. Investors deployed capital to the so-called "New Era"
companies and withheld it from more mainstream areas. Thus prices in the favored
sectors were overly inflated, while the others were unduly depressed. The 2000
markets narrowed this disparity and brought back into favor fundamental
approaches to portfolio construction in contrast to the momentum techniques that
held sway over the prior two years.
Investment Grade: The investment grade bond market posted handsome returns in
the year 2000 despite early pressure on the front end of the yield curve
resulting from Fed tightenings and some major "credit bombs" among corporate
issuers. Fatalities -- or at least near-death experiences -- included Xerox,
Lucent, Finova, and others. The federal surplus enabled the Treasury Department
to buyback outstanding debt which prompted a dramatic curve flattening through
the first half of the year. Spreads on corporate bonds reached levels not seen
since the last recession. By the fourth quarter, capital markets began to
anticipate a slowing economy and the likelihood of Fed easing in the near
future. While Treasuries rallied and the curve steepened, investment grade debt
of issuers not tarnished by credit or earnings events rallied even more. As
interest rates dropped dynamic hedgers became forced buyers, and owners of
negatively convex instruments (predominantly mortgages and callable agencies)
rushed to replenish duration. As the year closed markets were clearly priced for
multiple Federal Reserve easings in the face of a surprisingly slack economic
environment.
High Yield: High yield bonds had a dismal year. Most of the major indexes ended
with a loss of 4-6%. Spreads over treasuries widened considerably throughout the
year from about 4% early in the year to approximately 9.5% by the end of the
year. The sell off was particularly bad in lower rated credits and in the
telecommunications industry. Investors were concerned about a slowing economy
and rising default rates. Additionally, banks tightened their credit standards,
which contributed to a rising default rate and the public equity markets
retracted, which limited access to equity capital for some high yield companies.
Default rates escalated to 6% and the default rate is forecast to remain high
through 2001. However, we believe that the high yield market has priced in most
if not all of the bad news to come by year-end. In December, spreads were wider
than at any time since the last recession. Consequently, we positioned the high
yield portion of the fund aggressively in the fourth quarter.
The Fund
Performance: For the one year ended December 31, 2000, the Fund's Class Q shares
returned -3.06%. This compares to a -1.00% return composed of 60% of the S&P
500's return and 40% of the Lehman Aggregate Index's return.
Equity: During the period, we positioned the fund to take advantage of favorable
fundamentals in natural gas. Thus Energy made the most positive impact in
addition to the Healthcare, Financial and Basic Industries sectors. Holdings in
Anadarko Petroleum, Merck, Merrill Lynch and Alcoa appreciated significantly.
Investment Grade: The investment grade component of the funds also posted strong
returns for the year. Fortunately, the fund avoided all of the credit bombs that
plagued the high grade corporate market in 2000; however, we did not avoid some
of the earnings disappointments that hurt bondholders as well as equity holders.
Holdings in Lucent, Albertsons, and News Corp were all a drag on performance in
the first half of the year, but we were able to exit the positions well before
the most dramatic underperformance occurred. Our early commitment to long-dated
Treasuries in the face of the debt buyback was a great boost as was our
overweight in agencies.
High Yield: The high yield portion of the fund was not so fortunate.
Particularly with respect to the telecommunications holdings where five
positions fell approximately 60% on average and almost every telecom holding
declined to some extent. During the fourth quarter, we reduced our exposure in
telecommunications to a more modest over weighting and diversified the high
yield holdings across more industries. We invested in several mid and lower tier
companies that offered asset coverage, a high current yield and the potential
for significant price appreciation. For example, we purchased Doman Industries,
a Canadian forest products company with strong asset coverage; Owens Illinois, a
glass container manufacturer that we believe has a manageable exposure to
asbestos liabilities, and Neff Corp, a rental equipment manufacturer with strong
asset coverage and an attractive franchise.
Current Strategy
Equity: A better overall balance within the markets and relaxing monetary policy
portend opportunities for a very favorable environment
22
<PAGE>
Portfolio
Managers' Report PILGRIM BALANCED FUND
- --------------------------------------------------------------------------------
for stocks. The economy is now less prone to decline and with much more
reasonable valuations underlying them, stocks should benefit, resuming a more
sustainable price advance.
Investment Grade: We anticipate that high yield will be the best performing bond
sector in the early months of 2001 and have raised our allocation to that
battered market accordingly. The investment grade component of the portfolio
remains invested in highly liquid names with maturities of ten years and under.
With Fed easings in the offing we look for the short to intermediate maturities
of the yield curve to outperform the thirty year area. Calling the high grade
corporate market will again be tough as capital markets sift out the winners and
losers in a profits recession -- or worse. Despite the rebound in spreads of
some tarnished names we will avoid the names prevalent in last years credit
debacles for the near term. We are also underweight in mortgages giving the
likelihood of upcoming Fed easings.
High Yield: We believe that credit specific factors will be the key to returns
in 2001 as companies prove or disprove their ability to compete in a slower
growth economy. Defaults will likely remain an issue in high yield in 2001,
although many of the probable bankruptcy candidates are already trading close to
or below liquidation values. High defaults are not inconsistent with high
returns in the high Yield market, as evidenced by 1991 when the default rate
peaked at 13%, yet the Merrill Lynch Cash-Pay High Yield Index returned 34.6%.
Most investors remain cautious regarding truly distressed credits, preferring
instead to add liquid second-tier securities more likely to survive a
significant downturn. While the High Yield market is likely to experience
continued volatility until the economic outlook becomes clearer, we believe that
now is an excellent time to invest in high yield and that long-term investors
are very well compensated for risks taken. The high yield portion of the fund
will remain fully invested in a diversified portfolio of total return
investments that will perform well in an improving high yield market.
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 5 Year 8/31/95
------ ------ -------
Class Q -3.06% 13.06% 12.10%
60% S&P 500 Index/40% Lehman
Aggregate Index -1.00% 13.78% 14.58%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim Balanced Fund against the 60% S&P 500 Index, 40% Lehman
Aggregate Index. The Index has an inherent performance advantage over the Fund
since it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the index is shown from 9/1/95.
Principal Risk Factor(s): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany debt investments. The Fund may invest up to 20% of its total assets in
foreign securities. International investing does pose special risks, including
currency fluctuation, economic and political risks not found in investments that
are solely domestic. Higher yields reflect the higher credit risks associated
with certain lower rated securities in the Fund's portfolio and in some cases,
the lower market prices for those instruments.
See accompanying index descriptions on page 26.
23
<PAGE>
- ------------
Equity &
Income Funds
- ------------
Portfolio
PILGRIM CONVERTIBLE FUND Manager's Report
- --------------------------------------------------------------------------------
Portfolio Management: Andrew Chow, Vice-President and Portfolio Manager.*
Goal: The Fund seeks to maximize long-term total return by investing primarily
in convertible securities, while maintaining aggregate risk measures similar to
that of the overall convertible universe.
Market Overview: The domestic equity markets had a rude awakening in the year
2000 and posted their worst results in nearly 25 years. The S&P 500 returned
- -9.10% on the year, the lowest return since 1977. The technology heavy NASDAQ
Composite was down 39.18% for the year. The convertible universe as represented
by the Merrill Lynch Convertible Index (excluding mandatories) was down 12.86%,
reflecting the heavier influence of technology issuers in the convertible
market.
Performance: For the year ended December 31, 2000 the Fund's Class Q shares
provided a total return of -8.74% compared to a return of -7.83% for the First
Boston Convertible Index.
Portfolio Specifics: The strategy of your Pilgrim Convertible Fund is to remain
fully invested in the marketplace at all times. And by fully invested, we do not
mean only that we will have low levels of cash. In fact we mean that we will
have an overall sensitivity to the underlying stocks in your portfolio that is
similar to the sensitivity the overall convertible market has to the names in
its composition.
It is not our intention to attempt to time the market or to guess when to shift
into "defensive" or "offensive" mode. Instead our objective is to offer to
investors a vehicle in which they can participate in an asset class (convertible
securities) that over the course of many business cycles offers attractive risk
adjusted returns compared to other asset classes. Our investment strategy is
then to pick individual issuers who we think will outperform their peers, and by
doing so to hopefully craft a portfolio that provides value relative to our
benchmark index.
Over the course of the year we shifted out of several Internet and software
related names and added to our holdings in the energy and healthcare sectors. In
particular we purchased positions in Wellpoint Health Networks and Kerr-McGee
Corp.
Market Outlook: Despite the radical (and more realistic) revaluation of the
market in the year 2000, I believe some segments of the market remain
overvalued. This is somewhat sobering when one recognizes that many of these
sectors were down 70+% during the past year. Even with the lower valuations it's
still difficult to rationalize many of the stock prices seen in the Internet and
software sectors. Those segments of the market could continue to drag down
overall market returns in 2001.
In fact by traditional valuation measures the broad US equity indicies are not
cheap. They are rather fairly priced versus historical averages. Some sectors
might appear cheap and others rich. In such an environment (and in my opinion in
any environment), it is useful for investors to think about long run returns and
their personal tolerance for risk when seeking those long run returns. It is in
such a framework that I think investors will find convertible securities to be
an attractive proposition.
* Effective October 1, 2000, Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Nicholas Applegate Capital Management.
24
<PAGE>
Portfolio
Manager's Report PILGRIM CONVERTIBLE FUND
- --------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended December 31, 2000
-----------------------------------
Since Inception
of Class Q
1 Year 5 Year 8/31/95
------ ------ -------
Class Q -8.74% 19.88% 19.29%
First Boston Convertible Index -7.83% 13.21% 12.83%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim Convertible Fund against the First Boston Convertible Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower had there been no
deferral to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for index is shown from 09/01/95.
Principal Risk Factor(s): The credit standing of the issuer and other factors
may affect the investment value of a convertible security. The market value of
convertible debt securities tends to vary inversely with the level of interest
rates. Lower rated securities may be less liquid than higher quality
investments. This fund also has exposure to financial, market and interest rate
risks. Higher yields reflect the higher credit risks associated with certain
lower rated securities in the Fund's portfolio and in some cases, the lower
market prices for those instruments. The Fund may also invest in small and
medium sized companies, which may be more susceptible to greater price swings
than larger companies.
See accompanying index descriptions on page 26.
25
<PAGE>
- -------
Pilgrim
Funds
- -------
INDEX DESCRIPTIONS
- --------------------------------------------------------------------------------
The S&P 500 Index is a widely recognized index of 500 common stocks.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry.
The S&P Barra Value Index ia a capitalization-weighted index of all the stocks
in the S&P 500 Index that have low price-to-book ratios
The Russell 1000 Growth Index is an index that measures the performance of those
Russell 1000 Index companies with higher price-to-book ratios and higher
forecasted growth values.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of all
NASDAQ National Market & SmallCap stocks.
The Russell MidCap Index is generally representative of the smallest 800 stocks
in the Russell 1000 Index as ranked by total market capitalization.
The Russell MidCap Value Index measures the performance of the 800 smallest
companies in the Russell 1000 Index with lower price-to-book ratios and lower
forecasted growth values.
The Russell MidCap Growth Index consists of securities with capitalizations
between $450 million and $3.8 billion with greater than average growth
orientation.
The Russell 2000 Growth Index measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values.
The Russell 2000 Index consists of the smallest 2000 companies in the Russell
3000 Index.
The Lehman Brothers Aggregate Bond Index is an index of fixed income securities.
The Lehman Brothers Government/Mortgage Index measures the performance of U.S.
Government agencies and instrumentalities, as well as mortgage pass-through
instruments issued by FNMA, FHLMC and GNMA.
The Lehman Brothers Intermediate Treasury Index is an index that measures the
performance of U.S. Treasuries with maturities of less than ten years.
The Lehman Brothers High Yield Bond Index is comprised of non-investment grade
bonds with maturities between seven to ten years.
The Credit Suisse First Boston High Yield Index is an index of high yield bonds
rated BB or below.
The Credit Suisse First Boston Convertible Index is an index representing the
universe of convertible securities.
All Indices are unmanaged
See Accompanying Notes to Financial Statements
26
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
27
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF ASSETS AND LIABILITIES as of December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap
MagnaCap Leaders Growth Value
Fund Fund Fund Fund
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at market
value* $ 387,728,472 $ 35,199,255 $ 523,511,141 $ 34,266,536
Short-term investments at
amortized cost 15,197,509 2,988,000 109,209,000 7,638,679
Cash 20,377 10,934 10,169 1,957,039
Receivables:
Fund shares sold -- 156,023 7,383,686 481,278
Dividends and interest 542,573 30,878 394,089 22,603
Investment securities sold 214,849 -- -- --
Other 49,705 23,124 -- --
Prepaid expenses 68,760 23,098 89,647 22,801
------------- ------------- ------------- -------------
Total Assets 403,822,245 38,431,312 640,597,732 44,388,936
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities
purchased -- 100,929 14,161,056 7,644,612
Payable for fund shares redeemed 1,544,395 -- 2,755,631 162,910
Payable to affiliate 243,756 26,516 390,852 24,890
Other accrued expenses and
liabilities 493,362 59,209 363,780 79,352
------------- ------------- ------------- -------------
Total Liabilities 2,281,513 186,654 17,671,319 7,911,764
------------- ------------- ------------- -------------
NET ASSETS 401,540,732 38,244,658 622,926,413 36,477,172
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital 303,222,522 32,914,812 653,233,692 34,826,237
Undistributed (overdistributed)
net investment income (232,943) 86,683 (3,826,480) (52,063)
Accumulated net realized gain
(loss) on investments 4,974,221 (928,816) (54,305,263) (540,814)
Net unrealized appreciation of
investments 93,576,932 5,169,979 27,824,464 2,243,812
------------- ------------- ------------- -------------
Net Assets $ 401,540,732 $ 38,244,658 $ 622,926,413 $ 36,477,172
============= ============= ============= =============
* Cost of securities $ 294,151,540 $ 30,029,276 $ 495,686,677 $ 32,022,724
MidCap SmallCap
Growth Growth
Fund Fund
------------- -------------
ASSETS:
Investments in securities at market
value* $ 452,509,443 $ 423,706,905
Short-term investments at
amortized cost 34,558,000 23,493,000
Cash 24,271 1,628,514
Receivables:
Fund shares sold 3,276,836 1,143,576
Dividends and interest 163,932 59,082
Investment securities sold -- 4,475,309
Other 69,571 205
Prepaid expenses 963 66,671
------------- -------------
Total Assets 490,603,016 454,573,262
------------- -------------
LIABILITIES:
Payable for investment securities
purchased 3,597,950 1,618,901
Payable for fund shares redeemed 4,121,712 6,381,373
Payable to affiliate 295,998 361,601
Other accrued expenses and
liabilities 491,901 375,913
------------- -------------
Total Liabilities 8,507,561 8,737,788
------------- -------------
NET ASSETS 482,095,455 445,835,474
============= =============
NET ASSETS CONSIST OF:
Paid-in capital 397,501,791 340,696,816
Undistributed (overdistributed)
net investment income (3,238,590) (3,538,019)
Accumulated net realized gain
(loss) on investments 5,223,777 (7,951,490)
Net unrealized appreciation of
investments 82,608,477 116,628,167
------------- -------------
Net Assets $ 482,095,455 $ 445,835,474
============= =============
* Cost of securities $ 369,900,966 $ 307,078,738
</TABLE>
See Accompanying Notes to Financial Statements
28
<PAGE>
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap
MagnaCap Leaders Growth Value
Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A:
Net Assets $292,799,697 $ 9,884,771 $170,040,946 $ 16,227,467
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000
Par Value 1.00 0.10 0.00 0.00
Shares outstanding 20,229,499 658,920 5,280,629 1,187,012
Net asset value and redemption
price per share $ 14.47 $ 15.00 $ 32.20 $ 13.67
Maximum offering price per
share(1) $ 15.35 $ 15.92 $ 34.17 $ 14.50
Class B:
Net Assets $ 80,844,732 $ 21,309,750 $287,655,517 $ 15,028,291
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000
Par Value 1.00 0.10 0.00 0.00
Shares outstanding 5,737,252 1,485,111 9,005,734 1,148,938
Net asset value and redemption
price per share(2) $ 14.09 $ 14.35 $ 31.94 $ 13.08
Maximum offering price per
share $ 14.09 $ 14.35 $ 31.94 $ 13.08
Class C:
Net Assets $ 4,944,416 $ 2,066,541 $147,541,621 $ 1,837,187
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000
Par Value 1.00 0.10 0.00 0.00
Shares outstanding 350,785 143,817 4,631,627 140,390
Net asset value and redemption
price per share(2) $ 14.10 $ 14.37 $ 31.86 $ 13.09
Maximum offering price per
share $ 14.10 $ 14.37 $ 31.86 $ 13.09
Class M:
Net Assets $ 11,918,731 $ 4,317,678 n/a $ 3,349,373
Shares authorized 40,000,000 14,000,000 n/a 14,000,000
Par Value 1.00 0.10 n/a 0.00
Shares outstanding 832,622 295,833 n/a 253,160
Net asset value and redemption
price per share $ 14.31 $ 14.59 n/a $ 13.23
Maximum offering price per
share(3) $ 14.83 $ 15.12 n/a $ 13.71
Class Q:
Net Assets $ 11,033,156 $ 665,918 $ 17,688,329 $ 34,854
Shares authorized 40,000,000 28,000,000 unlimited 28,000,000
Par Value 1.00 0.10 0.00 0.00
Shares outstanding 762,736 44,393 541,866 2,551
Net asset value and redemption
price per share $ 14.47 $ 15.00 $ 32.64 $ 13.66
Maximum offering price per
share $ 14.47 $ 15.00 $ 32.64 $ 13.66
MidCap SmallCap
Growth Growth
Fund Fund
------------ ------------
Class A:
Net Assets $130,723,191 $146,707,641
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 6,487,193 10,039,351
Net asset value and redemption
price per share $ 20.15 $ 14.61
Maximum offering price per
share(1) $ 21.38 $ 15.50
Class B:
Net Assets $114,287,546 $ 91,084,621
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 4,851,111 4,993,424
Net asset value and redemption
price per share(2) $ 23.56 $ 18.24
Maximum offering price per
share $ 23.56 $ 18.24
Class C:
Net Assets $217,463,218 $196,043,951
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 11,758,575 13,737,437
Net asset value and redemption
price per share(2) $ 18.49 $ 14.27
Maximum offering price per
share $ 18.49 $ 14.27
Class M:
Net Assets n/a n/a
Shares authorized n/a n/a
Par Value n/a n/a
Shares outstanding n/a n/a
Net asset value and redemption
price per share n/a n/a
Maximum offering price per
share(3) n/a n/a
Class Q:
Net Assets $ 19,621,500 $ 11,999,261
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 768,537 736,986
Net asset value and redemption
price per share $ 25.53 $ 16.28
Maximum offering price per
share $ 25.53 $ 16.28
</TABLE>
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
29
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF ASSETS AND LIABILITIES as of December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield
Income Fund Fund Fund Fund II
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at market
value* $ 109,422,989 $ 11,999,336 $ 181,971,598 $ 125,412,138
Short-term investments at
amortized cost 5,647,000 836,000 13,058,834 1,576,000
Cash 62 108,723 23,503 865
Receivables:
Fund shares sold 15,851,993 90,221 1,108,575 381,004
Dividends and Interest 711,091 189,797 5,393,460 4,048,147
Investment securities sold -- -- 657,387 --
Other -- 1,327 -- --
Prepaid expenses 88,197 18,284 69,082 66,293
Reimbursement due from
Manager -- 195 -- --
------------- ------------- ------------- -------------
Total Assets 131,721,332 13,243,883 202,282,439 131,484,447
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities
purchased -- 518,786 1,206,547 --
Payable for fund shares redeemed -- 1,354 1,323,276 661,664
Payable to custodian -- -- -- --
Payable to affiliate 48,208 -- 211,267 173,337
Other accrued expenses and
liabilities 108,549 55,985 259,345 855,373
------------- ------------- ------------- -------------
Total Liabilities 156,757 576,125 3,000,435 1,690,374
------------- ------------- ------------- -------------
NET ASSETS $ 131,564,575 $ 12,667,758 $ 199,282,004 $ 129,794,073
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 137,144,828 $ 14,194,922 $ 370,776,051 $ 205,834,414
Undistributed (overdistributed)
net investment income (98,125) 507,044 (2,774,623) (226,043)
Accumulated net realized loss
on investments and foreign
currency transactions (7,446,251) (1,994,671) (136,203,498) (32,841,222)
Net unrealized appreciation
(depreciation) of investments 1,964,123 (39,537) (32,515,926) (42,973,076)
------------- ------------- ------------- -------------
Net Assets $ 131,564,575 $ 12,667,758 $ 199,282,004 $ 129,794,073
============= ============= ============= =============
* Cost of securities $ 107,458,866 $ 12,038,873 $ 214,487,524 $ 168,385,214
</TABLE>
See Accompanying Notes to Financial Statements
30
<PAGE>
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield
Income Fund Fund Fund Fund II
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Class A:
Net Assets $ 65,307,700 $ 2,983,856 $ 53,054,079 $ 23,248,188
Shares authorized 1,000,000,000 unlimited 90,000,000 unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 5,302,984 256,154 13,600,631 2,752,631
Net asset value and redemption
price per share $ 12.32 $ 11.65 $ 3.90 $ 8.45
Maximum offering price per
share(1) $ 13.07 $ 12.36 $ 4.14 $ 8.96
Class B:
Net Assets $ 40,069,078 $ 5,765,241 $ 134,691,750 $ 71,241,832
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 3,266,437 506,671 34,617,288 8,428,124
Net asset value and redemption
price per share(2) $ 12.27 $ 11.38 $ 3.89 $ 8.45
Maximum offering price per
share $ 12.27 $ 11.38 $ 3.89 $ 8.45
Class C:
Net Assets $ 6,770,342 $ 3,691,230 $ 4,203,085 $ 14,123,962
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 546,992 310,740 1,081,600 1,670,911
Net asset value and redemption
price per share(2) $ 12.38 $ 11.88 $ 3.89 $ 8.45
Maximum offering price per
share $ 12.38 $ 11.88 $ 3.89 $ 8.45
Class M:
Net Assets $ 503,622 n/a $ 7,333,063 n/a
Shares authorized 1,000,000,000 n/a 40,000,000 n/a
Par Value 0.00 n/a n/a n/a
Shares outstanding 40,928 n/a 1,882,693 n/a
Net asset value and redemption
price per share $ 12.31 n/a $ 3.89 n/a
Maximum offering price per
share(3) $ 12.72 n/a $ 4.03 n/a
Class Q:
Net Assets $ 332,088 $ 227,431 $ 27 $ 1,441,715
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 26,965 20,618 6 170,491
Net asset value and redemption
price per share $ 12.32 $ 11.03 $ 4.50 $ 8.46
Maximum offering price per
share $ 12.32 $ 11.03 $ 4.50 $ 8.46
Class T:
Net Assets $ 18,581,745 n/a n/a $ 19,738,136
Shares authorized 1,000,000,000 n/a n/a unlimited
Par Value 0.00 n/a n/a 0.00
Shares outstanding 1,513,341 n/a n/a 2,336,188
Net asset value and redemption
price per share(2) $ 12.28 n/a n/a $ 8.45
Maximum offering price per
share $ 12.28 n/a n/a $ 8.45
</TABLE>
(1) Maximum offering price is computed at 100/95.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced (with the
exception of the Money Market Fund).
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.75 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
31
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF ASSETS AND LIABILITIES as of December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Convertible
Fund Fund
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* $ 124,613,545 $ 405,269,656
Short-term investments at amortized cost 4,090,000 11,999,000
Cash 1,568 --
Receivables:
Fund shares sold 313,745 1,580,740
Investment securities sold 17,156 4,326,264
Dividends and interest 997,900 2,272,823
Prepaid expenses 46,292 73,903
------------- -------------
Total Assets 130,080,206 425,522,386
------------- -------------
LIABILITIES:
Payable for investment securities purchased -- 1,764,000
Payable for fund shares redeemed 266,389 3,541,514
Payable to custodian -- 11,244
Payable to affiliate 113,502 562,881
Other accrued expenses and liabilities 368,181 151,216
------------- -------------
Total Liabilities 748,072 6,030,855
------------- -------------
NET ASSETS $ 129,332,134 $ 419,491,531
============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 126,900,209 $ 444,321,017
Undistributed (overdistributed) net investment income (151,922) 262,132
Accumulated net realized gain (loss) on investments and
foreign currency (891,931) 5,144,545
Net unrealized appreciation (depreciation) of investments 3,475,778 (30,236,163)
------------- -------------
Net Assets $ 129,332,134 $ 419,491,531
============= =============
* Cost of securities $ 121,137,767 $ 435,495,772
</TABLE>
See Accompanying Notes to Financial Statements
32
<PAGE>
<TABLE>
<CAPTION>
Balanced Convertible
Fund Fund
------------ ------------
<S> <C> <C>
Class A:
Net Assets $ 59,930,594 $113,796,177
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 4,423,776 6,063,162
Net asset value and redemption price per share $ 13.55 $ 18.77
Maximum offering price per share $ 14.37 $ 19.91
Class B:
Net Assets $ 36,688,078 $132,201,152
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 2,520,568 6,443,195
Net asset value and redemption price per share $ 14.56 $ 20.52
Maximum offering price per share $ 14.56 $ 20.52
Class C:
Net Assets $ 23,300,074 $131,870,193
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 1,786,898 6,855,734
Net asset value and redemption price per share $ 13.04 $ 19.24
Maximum offering price per share $ 13.04 $ 19.24
Class Q:
Net Assets $ 358,176 $ 41,624,009
Shares authorized unlimited unlimited
Par Value 0.00 0.00
Shares outstanding 26,602 2,289,819
Net asset value and redemption price per share $ 13.46 $ 18.18
Maximum offering price per share $ 13.46 $ 18.18
Class T:
Net Assets $ 9,055,212 n/a
Shares authorized unlimited n/a
Par Value 0.00 n/a
Shares outstanding 623,714 n/a
Net asset value and redemption price per share $ 14.52 n/a
Maximum offering price per share $ 14.52 n/a
</TABLE>
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
33
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF OPERATIONS for the six months ended December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap
MagnaCap Leaders Growth Value
Fund Fund Fund Fund
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of
$38,299, $927, $1,085, $0, $0, $0 and
$0, respectively) $ 3,114,497 $ 436,740 $ 772,491 $ 164,475
Interest 510,716 46,045 1,465,626 101,585
------------- ------------- ------------- -------------
Total Investment Income 3,625,213 482,785 2,238,117 266,060
------------- ------------- ------------- -------------
EXPENSES:
Investment management fees 1,492,520 159,909 2,647,427 124,648
Distribution fees:
Class A 453,210 12,482 340,757 11,850
Class B 427,228 105,507 1,649,923 74,516
Class C 20,538 7,832 787,941 6,615
Class M 48,049 17,097 -- 13,167
Class Q 13,239 516 29,610 141
Transfer agent fees 268,161 30,085 349,950 27,174
Shareholder reporting fees 134,093 11,795 137,201 25,061
Registration and filing fees 39,310 26,365 35,606 21,621
Recordkeeping and pricing fees 13,998 3,450 17,400 996
Professional fees 29,606 2,454 18,818 2,392
Custody fees 25,800 3,660 18,098 2,707
Shareholder servicing fees 5,675 1,027 10,218 6,934
Directors' fees 15,123 1,764 5,820 1,819
Insurance fees 976 33 605 53
Miscellaneous fees 4,111 9,870 697 622
Interest and credit facility fees 3,885 256 4,364 253
Organization fees -- -- -- 2,905
------------- ------------- ------------- -------------
Total expenses 2,995,522 394,102 6,054,435 323,474
------------- ------------- ------------- -------------
Less waived and reimbursed
fees/(recoupment) -- -- (10,162) 5,351
------------- ------------- ------------- -------------
Net expenses 2,995,522 394,102 6,064,597 318,123
------------- ------------- ------------- -------------
Net investment income (loss) 629,691 88,683 (3,826,480) (52,063)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 22,096,881 3,736 (53,416,827) (452,799)
Net change in unrealized appreciation
(depreciation) of investments (6,793,132) 507,564 (135,256,988) 1,602,614
Net realized and unrealized gain (loss)
on investments 15,303,749 511,300 (188,673,815) 1,149,815
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting
from operations $ 15,933,440 $ 599,983 $(192,500,295) $ 1,097,752
============= ============= ============= =============
MidCap SmallCap
Growth Growth
Fund Fund
------------- -------------
INVESTMENT INCOME:
Dividends (net of withholding tax of
$38,299, $927, $1,085, $0, $0, $0 and
$0, respectively) $ 787,622 $ 314,169
Interest 822,540 1,161,020
------------- ------------
Total Investment Income 1,610,162 1,475,189
------------- ------------
EXPENSES:
Investment management fees 2,056,552 2,488,223
Distribution fees:
Class A 274,848 204,832
Class B 606,339 370,534
Class C 1,246,265 833,646
Class M -- --
Class Q 26,047 --
Transfer agent fees 317,678 347,447
Shareholder reporting fees 143,810 77,096
Registration and filing fees 43,839 41,323
Recordkeeping and pricing fees 26,989 499,058
Professional fees 27,589 25,576
Custody fees 33,494 48,392
Shareholder servicing fees 8,595 --
Directors' fees 7,805 11,040
Insurance fees 471 439
Miscellaneous fees 989 59,800
Interest and credit facility fees 3,395 3,179
Organization fees -- --
------------- ------------
Total expenses 4,824,705 5,010,585
------------- ------------
Less waived and reimbursed
fees/(recoupment) (24,047) (2,623)
------------- ------------
Net expenses 4,848,752 5,013,208
------------- ------------
Net investment income (loss) (3,238,590) (3,538,019)
------------- ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 33,716,117 21,731,434
Net change in unrealized appreciation
(depreciation) of investments (102,286,709) (69,712,967)
Net realized and unrealized gain (loss)
on investments (68,570,592) (47,981,533)
------------- ------------
Increase (decrease) in net assets resulting
from operations $ (71,809,182) $(51,519,552)
============= ============
</TABLE>
See Accompanying Notes to Financial Statements
34
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF OPERATIONS for the six months ended December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield
Income Fund Fund Fund Fund II
------------ ------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 32,121 $ -- $ 57,600
Interest 3,798,948 463,176 15,201,392 10,562,405
------------ ------------ ------------ ------------
Total Investment Income 3,798,948 495,297 15,201,392 10,620,005
------------ ------------ ------------ ------------
EXPENSES:
Investment management fees 278,070 28,255 765,315 502,190
Distribution fees:
Class A 65,207 5,192 86,196 50,180
Class B 170,873 18,386 852,536 457,981
Class C 19,796 16,674 26,439 97,502
Class M 1,910 -- 38,770 --
Class Q 187 302 19 4,567
Class T 65,876 -- -- 85,110
Transfer agent fees 72,447 12,825 176,775 138,118
Shareholder reporting fees 52,725 4,721 55,703 33,261
Registration and filing fees 25,216 21,695 41,013 88,409
Recordkeeping and pricing fees 6,000 2,470 9,000 1,800
Professional fees 11,924 1,621 40,434 19,906
Custody fees 14,076 5,221 39,078 30,568
Shareholder servicing fees 905 2,463 5,835 1,617
Directors' fees 1,194 504 11,595 3,694
Insurance fees -- 19 502 920
Miscellaneous fees 1,457 30,408 49,098 936
Interest and credit facility fees -- 93 2,462 --
Organization fees -- -- -- --
Administrative fees -- -- -- --
------------ ------------ ------------ ------------
Total expenses 787,863 150,849 2,200,770 1,516,759
------------ ------------ ------------ ------------
Less waived and reimbursed fees/(recoupment) -- 72,643 109,813 184,765
------------ ------------ ------------ ------------
Net expenses 787,863 78,206 2,090,957 1,331,994
------------ ------------ ------------ ------------
Net investment income 3,011,085 417,091 13,110,435 9,288,011
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments (70,957) (651,700) (69,393,557) (23,284,108)
Net realized loss on foreign currency -- -- (1,040) --
Net change in unrealized appreciation
(depreciation) of investments 3,731,901 169,709 8,596,753 (16,105,086)
Net realized and unrealized gain (loss)
on investments 3,660,944 (481,991) (60,797,844) (39,389,194)
------------ ------------ ------------ ------------
Increase (decrease) in net assets resulting
from operations $ 6,672,029 $ (64,900) $(47,687,409) $(30,101,183)
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
35
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF OPERATIONS for the six months ended December 31, 2000 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Convertible
Fund Fund
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $6,329 and $0, respectively) $ 610,174 $ 2,605,817
Interest 2,536,242 5,558,394
------------- -------------
Total Investment Income 3,146,416 8,164,211
------------- -------------
EXPENSES:
Investment management fees 505,702 1,835,770
Distribution fees:
Class A 108,197 234,552
Class B 196,792 730,689
Class C 107,872 773,072
Class Q 367 207,447
Class T 43,931 --
Transfer agent fees 99,955 219,723
Shareholder reporting fees 73,399 71,086
Registration and filing fees 35,373 33,623
Recordkeeping and pricing fees -- 30,689
Professional fees 24,455 19,517
Custody fees 3,720 9,605
Shareholder servicing fees 5,107 7,830
Directors' fees 10,082 6,181
Insurance fees -- 427
Miscellaneous fees 15,653 2,713
Interest and credit facility fees -- 4,904
------------- -------------
Total expenses 1,230,605 4,187,828
------------- -------------
Less waived and reimbursed fees/(recoupment) 77,654 (27,934)
------------- -------------
Net expenses 1,152,951 4,215,762
------------- -------------
Net investment income 1,993,465 3,948,449
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) on investments (502,718) 31,464,133
Net realized loss on foreign currency (120) --
Net change in unrealized depreciation of investments (1,118,161) (109,799,491)
------------- -------------
Net realized and unrealized loss on investments (1,620,999) (78,335,358)
------------- -------------
Increase (decrease) in net assets resulting from operations $ 372,466 $ (74,386,909)
============= =============
</TABLE>
See Accompanying Notes to Financial Statements
36
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MagnaCap Fund LargeCap Leaders Fund
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 629,691 $ 1,079,687 $ 88,683 $ (315,614)
Net realized gain (loss) on investments 22,096,881 29,968,024 3,736 2,990,062
Net change in unrealized appreciation (depreciation) of
investments (6,793,132) (35,597,984) 507,564 (1,997,225)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 15,933,440 (4,550,273) 599,983 677,223
Distributions to shareholders:
Net investment income
Class A (1,640,900) -- -- --
Class B (22,115) -- -- --
Class C (945) -- -- --
Class M (4,557) -- -- --
Class Q (66,993) -- -- --
Retail Classes -- (1,051,329) -- --
Net realized gain from investments (47,090,684) (48,878,271) (2,678,979) (4,377,644)
------------- ------------- ------------- -------------
Total distributions (48,826,194) (49,929,600) (2,678,979) (4,377,644)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 20,727,618 169,844,202 6,406,421 18,374,425
Shares resulting from dividend reinvestments 40,311,960 45,853,052 2,114,804 4,014,953
------------- ------------- ------------- -------------
61,039,578 215,697,254 8,521,225 22,389,378
Cost of shares redeemed (44,274,076) (245,236,862) (6,005,557) (19,261,366)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from capital
share transactions 16,765,502 (29,539,608) 2,515,668 3,128,012
Net increase (decrease) in net assets (16,127,252) (84,019,481) 436,672 (572,409)
Net assets, beginning of period 417,667,984 501,687,465 37,807,986 38,380,395
------------- ------------- ------------- -------------
Net assets, end of period $ 401,540,732 $ 417,667,984 $ 38,244,658 $ 37,807,986
============= ============= ============= =============
Undistributed net investment income (loss) $ (232,943) $ 872,876 $ 88,683 $ --
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
37
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap Growth Fund MidCap Value Fund
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (3,826,480) $ (5,317,970) $ (52,063) $ (387,792)
Net realized gain (loss) on investments (53,416,827) 13,498,698 (452,799) 2,719,300
Net change in unrealized appreciation (depreciation) of
investments (135,256,988) 147,558,169 1,602,614 (9,096,135)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations (192,500,295) 155,738,897 1,097,752 (6,764,627)
Distributions to shareholders:
Net investment income
Class A -- -- -- --
Class B -- -- -- --
Class C -- -- -- --
Class M -- -- -- --
Class Q -- -- -- --
Retail Classes -- -- -- (275,268)
Net realized gain from investments (8,506,742) (3,085,512) (2,008,796) --
------------- ------------- ------------- -------------
Total distributions (8,506,742) (3,085,512) (2,008,796) (275,268)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 219,260,397 532,535,020 11,995,297 8,647,560
Shares resulting from dividend reinvestments 5,063,112 2,521,879 1,654,564 249,416
------------- ------------- ------------- -------------
224,323,509 535,056,899 13,649,861 8,896,976
Cost of shares redeemed (97,427,811) (93,636,480) (7,677,115) (30,837,351)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from capital
share transactions 126,895,698 441,420,419 5,972,746 (21,940,375)
Net increase (decrease) in net assets (74,111,339) 594,073,804 5,061,702 (28,980,270)
Net assets, beginning of period 697,037,752 102,963,948 31,415,470 60,395,740
------------- ------------- ------------- -------------
Net assets, end of period $ 622,926,413 $ 697,037,752 $ 36,477,172 $ 31,415,470
============= ============= ============= =============
Undistributed net investment income (loss) $ (3,826,480) $ -- $ (52,063) $ --
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
38
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MidCap Growth Fund SmallCap Growth Fund
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (3,238,590) $ (6,452,374) $ (3,538,019) $ (7,259,094)
Net realized gain (loss) on investments 33,716,117 85,093,448 21,731,434 85,003,902
Net change in unrealized appreciation
(depreciation) of investments (102,286,709) 119,946,995 (69,712,967) 102,235,975
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations (71,809,182) 198,588,069 (51,519,552) 179,980,783
------------- ------------- ------------- -------------
Distributions to shareholders:
Net investment income
Class A -- -- -- --
Class B -- -- -- --
Class C -- -- -- --
Class M -- -- -- --
Class Q -- -- -- --
Retail Classes -- -- -- --
Net realized gain from investments (93,905,974) (88,397,148) (55,575,913) (158,396,508)
------------- ------------- ------------- -------------
Total distributions (93,905,974) (88,397,148) (55,575,913) (158,396,508)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 167,826,518 353,806,052 154,451,419 364,010,289
Shares resulting from dividend reinvestments 44,621,199 78,987,177 23,223,919 136,805,877
------------- ------------- ------------- -------------
212,447,717 432,793,229 177,675,338 500,816,166
Cost of shares redeemed (105,993,699) (281,762,942) (132,263,654) (331,453,908)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 106,454,018 151,030,287 45,411,684 169,362,258
Net increase (decrease) in net assets (59,261,138) 261,221,208 (61,683,781) 190,946,533
Net assets, beginning of period 541,356,593 280,135,385 507,519,255 316,572,722
------------- ------------- ------------- -------------
Net assets, end of period $ 482,095,455 $ 541,356,593 $ 445,835,474 $ 507,519,255
============= ============= ============= =============
Undistributed net investment income (loss) $ (3,238,590) $ -- $ (3,538,019) $ --
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
39
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Securities Income Fund Strategic Income Fund
--------------------------------- ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income $ 3,011,085 $ 2,938,280 $ 417,091 $ 970,594
Net realized loss on investments (70,957) (942,655) (651,700) (764,277)
Net change in unrealized appreciation
(depreciation) of investments 3,731,901 192,297 169,709 133,421
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 6,672,029 2,187,922 (64,900) 339,738
------------- ------------- ------------- -------------
Distributions to shareholders:
Net investment income
Class A (1,523,390) -- (96,316) --
Class B (889,840) -- (153,744) --
Class C (97,169) -- (140,829) --
Class M (13,932) -- (10,397) --
Class Q (3,715) -- -- --
Class T (581,164) -- -- --
Retail Classes -- (2,747,609) -- (951,573)
Advisory and Institutional Classes -- (51) -- (14,213)
------------- ------------- ------------- -------------
Total distributions (3,109,210) (2,747,660) (401,286) (965,786)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 135,920,772 92,583,796 10,941,579 17,563,244
Net proceeds from shares issued in merger -- -- -- --
Shares resulting from dividend reinvestments 1,874,264 82,467,112 30,251 496,450
------------- ------------- ------------- -------------
137,795,036 175,050,908 10,971,830 18,059,694
Cost of shares redeemed (123,158,412) (95,368,858) (9,218,070) (22,583,786)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
capital share transactions 14,636,624 79,682,050 1,753,760 (4,524,092)
Net increase (decrease) in net assets 18,199,443 79,122,312 1,287,574 (5,150,140)
Net assets, beginning of period 113,365,132 34,242,820 11,380,184 16,530,324
------------- ------------- ------------- -------------
Net assets, end of period $ 131,564,575 $ 113,365,132 $ 12,667,758 $ 11,380,184
============= ============= ============= =============
Undistributed (overdistributed) net investment
income $ (98,125) $ -- $ 507,044 $ 491,239
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
40
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Yield Fund High Yield Fund II
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 13,110,435 $ 36,230,377 $ 9,288,011 $ 10,617,663
Net realized loss on investments and
foreign currency (69,394,597) (25,618,407) (23,284,108) (5,014,882)
Net change in unrealized appreciation
(depreciation) of investments 8,596,753 (31,769,051) (16,105,086) (2,564,989)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (47,687,409) (21,157,081) (30,101,183) 3,037,792
------------- ------------- ------------- -------------
Distributions to shareholders:
Net investment income
Class A (4,477,242) -- (1,633,761) --
Class B (10,433,433) -- (4,920,527) --
Class C (324,051) -- (1,046,113) --
Class M (649,371) -- -- --
Class Q (961) -- (205,395) --
Class T -- -- (1,451,305) --
Retail Classes -- (36,230,374) -- (10,642,507)
Advisory and Institutional Classes -- (3) -- (408,689)
Tax return of capital
Retail Classes -- (2,218,003) -- --
------------- ------------- ------------- -------------
Total distributions (15,885,058) (38,448,380) (9,257,101) (11,051,196)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 45,058,663 169,075,396 13,704,007 52,761,331
Net proceeds from shares issued in
merger -- -- -- 142,232,354
Shares resulting from dividend
reinvestments 5,362,371 14,545,896 3,554,757 4,467,190
------------- ------------- ------------- -------------
50,421,034 183,621,292 17,258,764 199,460,875
Cost of shares redeemed (91,714,239) (237,672,115) (47,315,458) (72,762,619)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from capital share
transactions (41,293,205) (54,050,823) (30,056,694) 126,698,256
Net increase (decrease) in net assets (104,865,672) (113,656,284) (69,414,978) 118,684,852
Net assets, beginning of period 304,147,676 417,803,960 199,209,051 80,524,199
------------- ------------- ------------- -------------
Net assets, end of period $ 199,282,004 $ 304,147,676 $ 129,794,073 $ 199,209,051
============= ============= ============= =============
Undistributed (overdistributed) net
investment income $ (2,774,623) $ -- $ (226,043) $ --
============= ============= ============= =============
</TABLE>
* Fund commenced operations on July 12, 1999
See Accompanying Notes to Financial Statements
41
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund Convertible Fund
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income $ 1,993,465 $ 1,744,544 $ 3,948,449 $ 4,826,371
Net realized gain (loss) on investments (502,718) 10,481,616 31,464,133 70,655,086
Net realized loss on foreign currency (120) -- -- --
Net change in unrealized appreciation (depreciation)
of investments (1,118,161) (17,791,175) (109,799,491) 29,680,606
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 372,466 (5,565,015) (74,386,909) 105,162,063
------------- ------------- ------------- -------------
Distributions to shareholders:
Net investment income
Class A (1,650,212) -- (2,216,541) --
Class B (752,555) -- (1,521,323) --
Class C (514,309) -- (1,752,931) --
Class Q (7,624) -- (957,920) --
Class T (230,603) -- -- --
Retail Classes -- (788,708) -- (2,701,792)
Advisory and Institutional Classes -- (4,652) -- (450,509)
Net realized gain from investments (10,205,280) (7,355,531) (91,080,549) (42,129,281)
------------- ------------- ------------- -------------
Total distributions (13,360,583) (8,148,891) (97,529,264) (45,281,582)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 12,027,261 14,115,466 121,273,131 220,047,461
Net proceeds from shares issued in merger -- 6,982,714 -- --
Shares resulting from dividend reinvestments 10,310,587 120,445,073 61,319,614 38,566,753
------------- ------------- ------------- -------------
22,337,848 141,543,253 182,592,745 258,614,214
Cost of shares redeemed (21,656,891) (24,486,297) (74,865,246) (93,851,800)
------------- ------------- ------------- -------------
Net increase in net assets resulting from capital share
transactions 680,957 117,056,956 107,727,499 164,762,414
Net increase (decrease) in net assets (12,307,160) 103,343,050 (64,188,674) 224,642,895
Net assets, beginning of period 141,639,294 38,296,244 483,680,205 259,037,310
------------- ------------- ------------- -------------
Net assets, end of period $ 129,332,134 $ 141,639,294 $ 419,491,531 $ 483,680,205
============= ============= ============= =============
Undistributed (overdistributed) net investment income $ (151,922) $ 1,009,916 $ 262,132 $ 2,762,398
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
42
<PAGE>
FINANCIAL
HIGHLIGHTS
PILGRIM MAGNACAP FUND (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Nov. 22, 1999(1)
December 31, to
2000 June 30, 2000
---- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 15.84 16.26
Income from investment operations:
Net investment income $ 0.06 0.05
Net realized and unrealized gain (loss) on investments $ 0.55 (0.47)
Total from investment operations $ 0.61 (0.42)
Less distributions from:
Net investment income $ 0.10 --
Net realized gains on investments $ 1.88 --
Net asset value, end of period $ 14.47 15.84
Total Return(2): % 4.02 (2.58)
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,033 9,928
Ratios to average net assets:
Expenses(3) % 1.23 1.24
Net investment income(3) % 0.53 0.46
Portfolio turnover % 28 26
</TABLE>
- ----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
43
<PAGE>
FINANCIAL
PILGRIM LARGECAP LEADERS FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months April 4,
Ended 2000(1) to
December 31, June 30,
2000 2000
---- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 15.88 16.67
Income from investment operations:
Net investment income $ 0.02 --
Net realized and unrealized gain (loss) on investments $ 0.23 (0.79)
Total from investment operations $ 0.25 (0.79)
Less distributions from:
Net realized gains on investments $ 1.13 --
Net asset value, end of period $ 15.00 15.88
Total Return(2): % 1.65 (4.74)
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 666 199
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.58 1.75
Gross expenses prior to expense reimbursement(3) % 1.58 1.84
Net investment income (loss) after expense
reimbursement(3)(4) % 0.54 (0.27)
Portfolio turnover % 16 39
</TABLE>
- ----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
44
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM LARGECAP GROWTH FUND (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three months Year July 21,
Ended Ended Ended Ended 1997(1) to
December 31, June 30, June 30, March 31, March 31,
2000 2000 1999(2) 1999 1998
---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 43.71 28.43 25.24 15.66 12.50
Income from investment operations:
Net investment loss $ (0.13) (0.20) (0.03) (0.02) (0.01)
Net realized and unrealized gain (loss) on investments $ (10.48) 15.86 3.22 9.87 3.26
Total from investment operations $ (10.61) 15.66 3.19 9.85 3.25
Less distributions from:
Net investment income $ -- -- -- -- 0.01
Net realized gains on investments $ 0.46 0.38 -- 0.27 0.08
Net asset value, end of period $ 32.64 43.71 28.43 25.24 15.66
Total Return(3): % (24.33) 55.57 12.64 63.76 62.47
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 17,688 24,838 6,044 4,908 799
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.18 1.26 1.23 1.26 1.25
Gross expenses prior to expense reimbursement(4) % 1.18 1.26 1.25 1.91 10.45
Net investment loss after expense reimbursement(4)(5) % (0.57) (0.77) (0.36) (0.28) (0.62)
Portfolio turnover % 121 139 27 253 306
</TABLE>
- ----------
(1) The Fund commenced operations on July 21, 1997.
(2) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment
Manager of the Fund; concurrently, Nicholas-Applegate Capital Management
was appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
45
<PAGE>
FINANCIAL
PILGRIM MIDCAP VALUE FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months January 3,
Ended 2000(1) to
December 31, June 30,
2000 2000
---- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 14.29 13.53
Income from investment operations:
Net investment loss $ (0.02) (0.02)
Net realized and unrealized gains on investments $ 0.47 0.78
Total from investment operations $ 0.45 0.76
Less distributions from:
Net realized gains on investments $ 1.08 --
Net asset value, end of period $ 13.66 14.29
Total Return(2): % 3.50 5.62
Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 35 139
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.69 1.75
Gross expenses prior to expense reimbursement(3) % 1.69 1.88
Net investment loss after expense reimbursement(3)(4) % (0.08) (0.49)
Portfolio turnover % 29 122
</TABLE>
- ----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
46
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM MIDCAP GROWTH FUND (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three months
Ended Ended Ended Year Ended March 31,
December 31, June 30, June 30, --------------------------------
2000 2000 1999(1) 1999 1998 1997 1996
---- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 35.67 26.94 25.14 23.30 18.01 17.99 13.66
Income from investment operations:
Net investment loss $ (0.08) (0.29) (0.06) (0.12) (0.21) (0.04) (0.07)
Net realized and unrealized gain (loss) on investments $ (4.10) 17.92 1.86 3.56 7.48 0.32 4.86
Total from investment operations $ (4.18) 17.63 1.80 3.44 7.27 0.28 4.79
Less distributions from:
Net realized gains on investments $ 5.96 8.90 -- 1.60 1.98 0.26 0.46
Net asset value, end of period $ 25.53 35.67 26.94 25.14 23.30 18.01 17.99
Total Return(2): % (12.43) 77.87 7.16 15.77 42.00 1.39 35.37
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 19,622 19,792 19,383 14,350 12,204 13,115 4,274
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.24 1.26 1.24 1.23 1.22 1.25 1.23
Gross expenses prior to expense reimbursement(3) % 1.24 1.26 1.25 1.31 1.95 1.84 2.84
Net investment loss after expense reimbursement(3)(4) % (0.65) (1.00) (0.95) (0.71) (0.97) (0.69) (0.57)
Portfolio turnover % 29 148 55 154 200 153 114
</TABLE>
- ----------
(1) Effective May 24, 1999, Pilgrim Investments, Inc. became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
47
<PAGE>
FINANCIAL
PILGRIM SMALLCAP GROWTH FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three months August 31,
Ended Ended Ended Year Ended March 31, 1995(2) to
December 31, June 30, June 30, ---------------------- March 31,
2000 2000 1999(1) 1999 1998 1997 1996
---- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 20.47 21.19 18.56 19.27 13.19 14.16 12.50
Income from investment operations:
Net investment income (loss) $ (0.09) (0.21) (0.06) (0.15) 0.03 (0.07) (0.03)
Net realized and unrealized gain (loss) on investments $ (1.86) 10.30 2.69 0.22 6.16 (0.77) 1.69
Total from investment operations $ (1.95) 10.09 2.63 0.07 6.19 (0.84) 1.66
Less distributions from:
Net realized gains on investments $ 2.24 10.81 -- 0.78 0.11 0.13 --
Net asset value, end of period $ 16.28 20.47 21.19 18.56 19.27 13.19 14.16
Total Return(3): % (9.84) 61.08 14.17 0.96 47.01 (6.03) 13.28
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,999 12,569 11,013 9,107 12,508 1,013 314
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.50 1.52 1.45 1.53 1.52 1.51 1.49
Gross expenses prior to expense reimbursement(4) % 1.50 1.57 1.49 1.63 2.39 10.79 37.86
Net investment loss after expense reimbursement(4)(5) % (0.91) (1.21) (1.21) (0.97) (1.52) (1.02) (1.05)
Portfolio turnover % 63 127 32 90 92 113 130
</TABLE>
- ----------
(1) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
48
<PAGE>
FINANCIAL
PILGRIM GOVERNMENT SECURITIES INCOME FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months April 5,
Ended 2000(1) to
December 31, June 30,
2000 2000
---- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.94 11.88
Income from investment operations:
Net investment income $ 0.66 0.15
Net realized and unrealized gain on investments $ 0.08 0.03
Total from investment operations $ 0.74 0.18
Less distributions from:
Net investment income $ 0.36 0.12
Net asset value, end of period $ 12.32 11.94
Total Return(2): % 6.35 0.94
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 332 22
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.08 1.35
Gross expenses prior to expense reimbursement(3) % 1.08 1.35
Net investment income after expense reimbursement(3)(4) % 5.70 5.87
Portfolio turnover % 31 44
</TABLE>
- ----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
49
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM STRATEGIC INCOME FUND (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three months July 27
Ended Ended Ended 1998(1) to
December 31, June 30, June 30, March 31,
2000 2000 1999(2) 1999
---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.45 11.99 12.26 12.43
Income from investment operations:
Net investment income $ 0.31 0.94 0.25 0.48
Net realized and unrealized loss on investments $ (0.33) (0.54) (0.38) (0.04)
Total from investment operations $ (0.02) 0.40 (0.13) 0.44
Less distributions from:
Net investment income $ 0.40 0.94 0.14 0.50
Net realized gains on investments $ -- -- -- 0.11
Net asset value, end of period $ 11.03 11.45 11.99 12.26
Total Return(3): % (0.15) 3.55 1.16 5.78
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 227 228 171 314
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.85 0.86 0.71 0.69
Gross expenses prior to expense reimbursement(4) % 2.01 2.54 1.37 1.74
Net investment income after expense reimbursement(4)(5) % 7.10 7.79 6.07 6.03
Portfolio turnover % 77 168 69 274
</TABLE>
- ----------
(1) The Fund commenced operations on July 27, 1998.
(2) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
50
<PAGE>
FINANCIAL
PILGRIM HIGH YIELD FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year From June 17
Ended Ended thru
December 31, June 30, June 30,
2000 2000 1999(1)
---- ---- -------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 5.60 5.93 5.91
Income (loss) from investment operations:
Net investment income $ 0.23 0.60 0.02
Net realized and unrealized loss on investments $ (1.03) (0.33) --
Total from investment operation $ (0.80) (0.27) 0.02
Less distributions from:
Net investment income $ 0.30 0.60 --
Total distributions $ 0.30 0.60 --
Net asset value, end of period $ 4.50 5.60 5.93
Total Return(2): % (19.20) (5.29) 0.34
Ratios/Supplemental Data:
Net assets, end of period (000's) $ -- -- --
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.02 1.05 --
Gross expenses prior to expense reimbursement(3) % 1.10 1.17 --
Net investment income after expense reimbursement(3)(4) % 10.92 10.41 --
Portfolio turnover rate % 71 89 184
</TABLE>
- ----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(3 Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
51
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM HIGH YIELD FUND II (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three months Year March 27,
Ended Ended Ended Ended 1998(1) to
December 31, June 30, June 30, March 31, March 31,
2000 2000 1999(2) 1999 1998
---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.82 11.59 11.68 12.72 12.70
Income from investment operations:
Net investment income $ 0.57 1.20 0.30 1.16 0.01
Net realized and unrealized gain (loss) on investments $ (2.36) (0.76) (0.11) (1.01) 0.01
Total from investment operations $ (1.79) 0.44 0.19 0.15 0.02
Less distributions from:
Net investment income $ 0.57 1.21 0.28 1.19 --
Net asset value, end of period $ 8.46 10.82 11.59 11.68 12.72
Total Return(3): % (17.01) 4.04 1.63 1.40 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 1,442 6,882 3,229 6,502 567
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.00 1.08 0.90 0.87 0.97
Gross expenses prior to expense reimbursement(4) % 1.22 1.27 1.17 1.28 0.97
Net investment income after expense reimbursement(4)(5) % 11.54 10.73 9.88 10.01 7.53
Portfolio turnover % 70 113 44 242 484
</TABLE>
- ----------
(1) The Fund commenced operations on March 27, 1998.
(2) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses
See Accompanying Notes to Financial Statements
52
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM BALANCED FUND (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three Months August 31,
Ended Ended Ended Year Ended March 31, 1995(1) to
December 31, June 30, June 30, ---------------------- March 31,
2000 2000 1999(2) 1999 1998 1997 1996
---- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 14.94 19.04 18.85 18.48 13.42 12.69 12.50
Income from investment operations:
Net investment income $ 0.27 0.54 0.11 0.44 0.30 0.24 0.15
Net realized and unrealized gain (loss) on investments $ (0.24) (0.57) 0.16 2.50 5.07 0.73 0.19
Total from investment operations $ 0.03 (0.03) 0.27 2.94 5.37 0.97 0.34
Less distributions from:
Net investment income $ 0.36 0.40 0.08 0.50 0.31 0.24 0.15
Net realized gains on investments $ 1.15 3.67 -- 2.07 -- -- --
Net asset value, end of period $ 13.46 14.94 19.04 18.85 18.48 13.42 12.69
Total Return(3): % (0.18) (0.60) 1.44 17.49 40.21 7.60 2.77
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 358 230 190 176 166 73 1
Ratio to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.13 1.30 1.25 1.25 1.26 1.26 1.25
Gross expenses prior to expense reimbursement(4) % 1.25 1.51 1.51 1.63 11.28 126.75 3,094.48
Net investment income after expense reimbursement(4)(5) % 3.48 3.36 2.30 2.41 4.09 2.15 2.16
Portfolio turnover % 27 173 63 165 260 213 197
</TABLE>
- ----------
(1) Commencement of offering of shares.
(2) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses
See Accompanying Notes to Financial Statements
53
<PAGE>
FINANCIAL
PILGRIM CONVERTIBLE FUND (UNAUDITED) HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months Year Three Months August 31,
Ended Ended Ended Year Ended March 31, 1995(2) to
December 31, June 30, June 30, -------------------- March 31,
2000 2000 1999(1) 1999 1998 1997 1996
---- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 26.85 22.51 21.22 18.47 15.19 13.72 12.50
Income from investment operations:
Net investment income $ 0.26 0.44 0.09 0.43 0.48 0.42 0.17
Net realized and unrealized gain (loss) on investments $ (3.80) 7.82 1.31 3.09 4.19 1.50 1.22
Total from investment operations $ (3.54) 8.26 1.40 3.52 4.67 1.92 1.39
Less distributions from:
Net investment income $ 0.43 0.35 0.11 0.46 0.48 0.42 0.17
Net realized gains on investments $ 4.70 3.57 -- 0.31 0.91 0.03 --
Net asset value, end of period $ 18.18 26.85 22.51 21.22 18.47 15.19 13.72
Total Return(3): % (14.17) 40.36 6.62 19.66 31.54 14.13 11.13
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 41,624 56,165 17,537 8,741 7,080 4,599 1,085
Ratio to average net assets:
Net expenses after expense reimbursement
(recoupment)(4)(5) % 1.25 1.25 1.23 1.23 1.22 1.25 1.25
Gross expenses prior to expense reimbursement
(recoupment)(4) % 1.23 1.25 1.23 1.35 2.35 2.90 9.21
Net investment income after expense reimbursement
(recoupment)(4)(5) % 2.10 1.88 2.04 2.37 5.99 3.29 3.59
Portfolio turnover % 109 129 28 138 160 167 145
</TABLE>
- ----------
(1) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
54
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Organization. The Pilgrim Funds are comprised of Pilgrim Mutual Funds ("PMF"),
Pilgrim Investment Funds, Inc. ("PIF"), Pilgrim Advisory Funds, Inc. ("PAF") and
Pilgrim Government Securities Income Fund ("Government Securities Income Fund")
which are each open-end investment management companies registered under the
Investment Company Act of 1940, as amended.
PMF is a Delaware business trust organized in 1992 with twelve separate series
(Portfolios). Seven of the "Funds" in this report are: Pilgrim LargeCap Growth
Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim
Strategic Income Fund (formerly High Quality Bond Fund), Pilgrim High Yield Fund
II, Pilgrim Balanced Fund and Pilgrim Convertible Fund. PIF, a Maryland
Corporation organized in 1969, consists of Pilgrim MagnaCap Fund and Pilgrim
High Yield Fund. PAF, a Maryland Corporation organized in 1995, consists of
three series (Portfolios). Two of the "Funds" in this report are: Pilgrim MidCap
Value Fund and Pilgrim LargeCap Leaders Fund. Government Securities Income Fund,
a California Corporation organized in 1984, is the single series of Government
Securities Income Fund. The investment objective of each Fund is described in
each Fund's prospectus.
Each Fund offers at least two of the following classes of shares: Class A, Class
B, Class C, Class M, Class Q and Class T. The separate classes of shares differ
principally in the applicable sales charges (if any), distribution fees,
shareholder servicing fees and transfer agency fees. Shareholders of each class
also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are determined separately for each
class based on income and expenses allocable to each class. Realized gains are
allocated to each class pro rata based on the net assets of each class on the
date of distribution. No class has preferential dividend rights. Differences in
per share dividend rates generally result from the relative weighting of pro
rata income and realized gain allocations and from differences in separate class
expenses, including distribution, and shareholder servicing fees. Class B
shares, along with their pro rata reinvested dividend shares, automatically
convert to Class A shares approximately eight years after purchase.
On September 1, 2000, ING Group N.V. (NYSE:ING) acquired ReliaStar Financial
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,
Inc., Administrator to the Funds. In conjunction with the acquistions the
Adviser, Distributor and Administrator changed their names to ING Pilgrim
Investments, Inc., ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.
effective September 8, 2000.
Reorganizations. Before a shareholder approved reorganization effective July 24,
1998, the funds comprising PMF invested all of their assets in corresponding
portfolios of Nicholas-Applegate Investment Trust, an arrangement known as a
"master/feeder" structure. Upon the reorganization, the Institutional Portfolio
series of the Trust were renamed Funds and were authorized to issue multiple
classes of shares, and their outstanding shares were classified as Class I
shares. At the same time, the A, B, C and Advisory Portfolios of the Trust
transferred their assets to the corresponding Funds, and their shareholders
received Class A, B, C and Q shares of the Funds on a tax-free basis. Effective
May 7, 1999 and concurrent with the change in investment adviser, from Nicholas
Applegate Capital Management to Pilgrim Investments, Inc. the Institutional
Classes of PMF were transferred in a tax free reorganization to new funds being
managed by Nicholas-Applegate Capital Management.
On November 16, 1999 the Boards of Trustees and Directors of the following funds
approved a plan of reorganization for the transfer of assets and liabilities of
the following:
* Pilgrim Government Securities Fund into the Pilgrim Government Securities
Income Fund
* Pilgrim High Yield III Fund into the Pilgrim High Yield II Fund, and
* Pilgrim Income & Growth Fund and Pilgrim Balance Sheet Opportunities Fund
into the Pilgrim Balanced Fund
55
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
This plan of reorganization was subsequently approved by shareholders on March
20, 2000 and effective on March 31, 2000 the transfer of all assets and
liabilites between the respective Funds was accomplished through a tax free
exchange of shares.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Funds in the preparation of their financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Security Valuation. Investments in equity securities traded on a national
securities exchange or included on the NASDAQ National Market System are
valued at the last reported sale price. Securities traded on an exchange or
NASDAQ for which there has been no sale and securities traded in the
over-the-counter-market are valued at the mean between the last reported
bid and ask prices. All investments quoted in foreign currencies will be
valued daily in U.S. dollars on the basis of the foreign currency exchange
rates prevailing at the time such valuation is determined by each Fund's
custodian. Debt securities in Pilgrim Strategic Income Fund, Pilgrim
Balanced Fund and Pilgrim High Yield Fund II are valued at bid prices,
(Pilgrim High Yield Fund, including securities sold short, is valued at the
mean between the bid and ask prices) obtained from independent services or
from one or more dealers making markets in the securities. U.S. Government
obligations are valued by using market quotations or independent pricing
services which uses prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Securities for which market quotations are not
readily available are valued at their respective fair values as determined
in good faith and in accordance with policies set by the Board of
Directors. Investments in securities maturing in less than 60 days are
valued at cost, which, when combined with accrued interest, approximates
market value.
B. Security Transactions and Revenue Recognition. Securities transactions are
accounted for on the trade date. Realized gains and losses are reported on
the basis of identified cost of securities delivered. Interest income is
recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date, or for certain foreign securities, when the information
becomes available to the funds. Premium amortization and discount accretion
are determined by the effective yield method.
C. Foreign Currency Translation. The books and records of the funds are
maintained in U.S. dollars. Any foreign currency amounts are translated
into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and liabilities --
at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses --
at the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion
of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gains or losses from investments. For securities
which are subject to foreign withholding tax upon disposition, liabilities
are recorded on the statement of assets and liabilities for the estimated
tax withholding based on the securities current market value. Upon
disposition, realized gains or losses on such securities are recorded net
of foreign withholding tax.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and
the U.S. dollar equivalent of the amounts
56
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in the
exchange rate. Foreign security and currency transactions may involve
certain considerations and risks not typically associated with investing in
U.S. companies and the U.S. Government. These risks include but are not
limited to re-evaluation of currencies and future adverse political and
economic developments which could cause securities and their markets to be
less liquid and prices more volatile than those of comparable U.S.
companies and the U.S. Government.
D. Foreign Currency Transactions. Certain funds may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to and from the U.S. dollar in connection with the planned
purchases or sales of securities. The Funds either enter into these
transactions on a spot basis at the spot rate prevailing in the foreign
currency exchange market or use forward foreign currency contracts to
purchase or sell foreign currencies. When the contract is fulfilled or
closed, gains or losses are realized. Until then, the gain or loss is
included in unrealized appreciation or depreciation. Risks may arise upon
entering into forward contracts from the potential inability of
counterparties to meet the terms of their forward contracts and from the
potential inability of counterparties to meet the terms of their forward
contracts and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar.
Each Fund may enter into futures contracts involving foreign currency,
interest rates, securities and securities indices, for hedging purposes
only. A futures contract obligates the seller of the contract to deliver
and the purchaser of the contract to take delivery of the type of foreign
currency, financial instrument or security called for in the contract at a
specified future time for a specified price. Upon entering into such a
contract, a Fund is required to deposit and maintain as collateral such
initial margin as required by the exchange on which the contract is traded.
Pursuant to the contract, a Fund agrees to receive from or pay to the
broker an amount equal to the daily fluctuations in the value of the
contract. Such receipts or payments are known as variation margins and are
recorded as unrealized gains or losses by the Fund. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
at the time it was closed. There were no open futures contracts at December
31, 2000.
E. Distributions to Shareholders. The Funds record distributions to their
shareholders on ex-date. Each Fund pays dividends, if any, as follows:
Annually Semi-Annually Quarterly Monthly
-------- ------------- --------- -------
LargeCap MagnaCap Balanced Strategic
Leaders Convertible Income
LargeCap Government
Growth Securities
MidCap Income
Value High Yield
MidCap High
Growth Yield II
SmallCap
Growth
Pilgrim High Yield II declares and goes ex-dividend daily and pays
dividends monthly. Each Fund distributes capital gains, to the extent
available, annually.
The amount of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. Key differences are the treatment of short-term
capital gains, foreign currency transactions, organization costs and other
temporary differences. To the extent that these differences are permanent
in nature, such amounts are reclassified within the capital accounts based
on their federal tax-basis treatment; temporary differences do not require
reclassifications. Distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes, are reported as distributions in excess of net investment income
and/or net realized capital gains. To the extent they exceed net investment
income and/or net realized
57
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
capital gains for tax purposes, they are reported as distributions of
paid-in capital.
F. 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 capital gains to their shareholders.
Therefore, a federal income tax or excise tax provision is not required. In
addition, by distributing during each calendar year substantially all of
its net investment income and net realized capital gains, each Fund intends
not to be subject to any federal excise tax.
The Board of Directors intends to offset any net capital gains with any
available capital loss carryforward until each carryforward has been fully
utilized or expires. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or
expires.
G. Use of Estimates. Management of the Funds has made certain estimates and
assumptions relating to the reporting of assets, liabilities, income, and
expenses to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.
H. Repurchase Agreements. Each Fund may invest in repurchase agreements only
with government securities dealers recognized by the Board of Governors of
the Federal Reserve System or with member banks of the Federal Reserve
System. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The resale price is
in excess of the purchase price and reflects an agreed upon interest rate
for the period of time the agreement is outstanding. The period of the
repurchase agreements is usually short, from overnight to one week, while
the underlying securities generally have longer maturities. Each Fund will
always receive as collateral securities acceptable to it whose market value
is equal to at least 100% of the amount being invested by the Fund. If the
seller defaults, a Fund might incur a loss or delay in the realization of
proceeds if the value of the collateral securing the repurchase agreement
declines, and it might incur disposition costs in liquidating the
collateral.
I. Deferred Organization Expenses. Expenses incurred in connection with the
organization and registration of the MidCap Value Fund under the Investment
Company Act of 1940 and the Securities Act of 1933 were amortized a period
of five years from the date of commencement of its operations.
J. Securities Lending. Each Fund had the option to temporarily loan 331|M/3%
of its total assets to brokers, dealers or other financial institutions in
exchange for a negotiated lender's fee. The borrower is required to fully
collateralize the loans with cash, letters of credit or U.S. Government
securities.
58
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 3 -- INVESTMENT TRANSACTIONS
For the six months ended December 31, 2000, the cost of purchases and proceeds
from the sales of securities, excluding short-term securities, were as follows:
Purchases Sales
------------ ------------
MagnaCap Fund $110,309,655 $144,488,715
LargeCap Leaders Fund 5,585,639 7,625,618
LargeCap Growth Fund 793,013,788 772,454,906
MidCap Value Fund 11,435,615 7,725,366
MidCap Growth 476,465,378 495,757,948
SmallCap Growth Fund 286,484,714 315,600,216
Government Securities Income Fund 38,800,560 34,187,425
Strategic Income Fund 10,562,547 8,972,231
High Yield Fund 155,771,369 193,640,778
High Yield Fund II 104,451,199 115,869,117
Balanced Fund 35,634,549 42,947,179
Convertible Fund 520,570,740 500,852,602
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
Each of the Funds has entered into an Investment Management Agreement with ING
Pilgrim Investments, Inc. ("the Manager"), a wholly-owned subsidiary of ING
Groep N.V. The investment management agreements compensate the Manager with a
fee, computed daily and payable monthly, based on the average daily net assets
of each Fund, at the following annual rates:
For SmallCap Growth -- 1.00%; for LargeCap Leaders and MidCap Value -- 0.85%;
for LargeCap Growth, MidCap Growth, Balanced and Convertible -- 0.75% for the
first $500 million, 0.675% of the next $500 million and 0.65% in excess of $1.0
billion; for High Yield and High Yield II -- 0.60%; for Strategic Income --
0.45% for the first $500 million, 0.40% of the next $250 million and 0.35% in
excess of $750 million; for MagnaCap -- 1.00% for the first $30 million, 0.75%
of the next $220 million, 0.625% of the next $250 million and 0.50% in excess of
$500 million; for Government Securities Income -- 0.50% for the first $500
million, 0.45% of the next $500 million and 0.40% in excess of $1.0 billion.
NOTE 5 -- DISTRIBUTION FEES
Each share class of the Funds has adopted a Plan pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plans"), whereby ING Pilgrim Securities, Inc. (the
"Distributor") is reimbursed or compensated (depending on the class of shares)
by the Funds for expenses incurred in the distribution of each Funds' shares.
Pursuant to the 12b-1 Plans, the Distributor is entitled to payment each month
for actual expenses incurred in the distribution and promotion of each Fund's
shares, including the printing of prospectuses and reports used for sales
purposes, expenses of preparation and printing of sales literature and other
such distribution related expenses, including any distribution or service fees
paid to securities dealers who have executed a distribution agreement with the
Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the
Distributor the following annual fees:
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
MagnaCap 0.30% 1.00% 1.00% 0.75% 0.25% N/A
LargeCap Leaders 0.25 1.00 1.00 0.75 0.25 N/A
LargeCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
MidCap Value 0.25 1.00 1.00 0.75 0.25 N/A
MidCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
SmallCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
Government
Securities
Income 0.25 1.00 1.00 0.75 0.25 0.65%
Strategic Income 0.35 0.75 0.75 N/A 0.25 N/A
High Yield 0.25 1.00 1.00 0.75 0.25 N/A
High Yield II 0.35 1.00 1.00 N/A 0.25 0.65
Balanced 0.35 1.00 1.00 N/A 0.25 0.75
Convertible 0.35 1.00 1.00 N/A 0.25 N/A
For the six months ended December 31, 2000 the Funds paid the following
distribution fees by class to the Distributor.
<TABLE>
<CAPTION>
Class A Class B Class C Class M Class Q Class T
-------- ---------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
MagnaCap $453,210 $ 427,228 $ 20,538 $48,049 $ 13,239 N/A
LargeCap Leaders 12,482 105,507 7,832 17,097 516 N/A
LargeCap Growth 340,757 1,649,923 787,941 N/A 29,610 N/A
MidCap Value 11,850 74,516 6,615 13,167 141 N/A
MidCap Growth 274,848 606,339 1,246,265 N/A 26,047 N/A
SmallCap Growth 204,832 370,534 833,646 N/A N/A N/A
Government
Securities
Income 65,207 170,873 19,796 1,910 187 $65,876
Strategic Income 5,192 18,386 16,674 N/A 302 N/A
High Yield 86,196 852,536 26,439 38,770 19 N/A
High Yield II 50,180 457,981 97,502 N/A 4,567 85,110
Balanced 78,313 149,073 91,745 N/A N/A 37,875
Convertible 167,476 547,944 579,472 N/A N/A N/A
</TABLE>
59
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 6 -- SHAREHOLDER SERVICING FEES
Each of the Funds has entered into a Service Agreement with ING Pilgrim Group,
Inc. ("IPGI") whereby IPGI will act as Shareholder Service Agent for each Fund.
The agreement provides that IPGI will be compensated for incoming and outgoing
shareholder telephone calls and letters, and all reasonable out-of-pocket
expenses incurred in connection with the performance of such services. Fees
accrued during the six months ended December 31, 2000 are shown in the
accompanying Statements of Operations.
NOTE 7 -- EXPENSE WAIVERS
For the following Funds, the Investment Manager has voluntarily agreed to limit
expenses, excluding interest, taxes, brokerage and extraordinary expenses to the
levels listed below:
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
LargeCap Leaders 1.75% 2.50% 2.50% 2.25% 1.75% N/A
LargeCap Growth 1.60 2.25 2.25 N/A 1.25 N/A
MidCap Value 1.75 2.50 2.50 2.25 1.75 N/A
MidCap Growth 1.60 2.25 2.25 N/A 1.25 N/A
SmallCap Growth 1.95 2.60 2.60 N/A 1.50 N/A
Government
Securities
Income (1) (1) (1) (1) (1) (1)
Strategic Income 0.95 1.35 1.35 N/A 0.85 N/A
High Yield 1.10 1.85 1.85 1.60 1.10 N/A
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
High Yield II 1.10 1.75 1.75 N/A 1.00 1.40%
Balanced 1.60 2.25 2.25 N/A 1.25 1.75
Convertible 1.60 2.25 2.25 N/A 1.25 N/A
- ----------
(1) The Investment Manager has agreed to reimburse the Government Securities
Income Fund for all gross operating expenses and costs of the Fund,
excluding any interest, taxes, brokerage commissions, amortization of
organizational expenses, extraordinary expenses, and distribution fees in
excess of 0.25% which exceed 1.50% of the Fund's daily average net assets
on the first $40 million of net assets and 1.00% of average daily net
assets in excess of $40 million for any one fiscal year. The expense
limitations cannot be changed without shareholder approval.
NOTE 8 -- LINE OF CREDIT
The Funds, in addition to certain other funds managed by the Advisor, have
entered into an unsecured committed revolving line of credit agreement (the
"Credit Agreement") with State Street Bank and Trust Company for an aggregate
amount of $125,000,000. The proceeds may be used only to: (1) temporarily
finance the purchase and sale of securities; (2) finance the redemption of
shares of an investor in the Funds; and (3) enable the Funds to meet other
emergency expenses as defined in the Credit Agreement. The Funds to which the
line of credit is available pay a commitment fee equal to 0.08% per annum on the
daily unused portion of the committed line amount payable quarterly in arrears.
During the year ended December 31, 2000, the Funds did not have any loans
outstanding.
60
<PAGE>
NOTE 9 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
MagnaCap Fund
(Number of Shares)
Shares sold 788,987 8,302,663 363,356 1,126,639
Shares issued as
reinvestments of dividends 2,066,846 2,042,086 547,903 670,172
Shares redeemed (1,811,315) (11,985,501) (819,184) (2,847,837)
------------ ------------- ------------ ------------
Net increase (decrease)
in shares outstanding 1,044,518 (1,640,752) 92,075 (1,051,026)
============ ============= ============ ============
MagnaCap Fund ($)
Shares sold $ 11,946,238 $ 134,588,976 $ 5,351,285 $ 18,234,831
Shares issued as
reinvestments of dividends 29,598,142 33,390,241 7,628,566 10,716,050
Shares redeemed (28,674,109) (193,866,999) $(12,525,418) (44,525,122)
------------ ------------- ------------ ------------
Net increase (decrease)
in shares outstanding $ 12,870,271 $ (25,887,782) $ 454,433 $(15,574,241)
============ ============= ============ ============
Class C Shares Class M Shares Class Q Shares
--------------------------- --------------------------- -----------------------------
Six Months Year Six Months Year Six Months
Ended Ended Ended Ended Ended Nov. 22, 1999
December 31, June 30, December 31, June 30, December 31, to
2000 2000 2000 2000 2000 June 30, 2000
----------- ----------- ----------- ----------- ----------- -------------
MagnaCap Fund
(Number of Shares)
Shares sold 128,844 355,043 13,778 71,735 82,316 627,893
Shares issued as
reinvestments of dividends 29,256 13,431 95,725 94,820 92,505 --
Shares redeemed (44,326) (166,071) (111,360) (265,773) (38,829) (1,149)
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in shares outstanding 113,774 202,403 (1,857) (99,218) 135,992 626,744
=========== =========== =========== =========== =========== ============
MagnaCap Fund ($)
Shares sold $ 1,909,403 $ 5,649,398 $ 212,336 $ 1,164,803 $ 1,308,356 $ 10,206,194
Shares issued as
reinvestments of dividends 407,606 214,760 1,353,961 1,532,001 1,323,685 --
Shares redeemed (668,475) (2,597,664) (1,756,645) (4,228,665) (649,429) (18,412)
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in shares outstanding $ 1,648,534 $ 3,266,494 $ (190,348) $(1,531,861) $ 1,982,612 $ 10,187,782
=========== =========== =========== =========== =========== ============
</TABLE>
61
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------- ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
LargeCap Leaders Fund
(Number of Shares)
Shares sold 98,957 301,942 205,661 559,630
Shares issued as reinvestment
of dividends 38,731 58,405 77,765 160,941
Shares redeemed (109,836) (219,637) (206,229) (745,133)
----------- ----------- ----------- ------------
Net increase (decrease) in
shares outstanding 27,852 140,710 77,197 (24,562)
=========== =========== =========== ============
LargeCap Leaders Fund ($)
Shares sold $ 1,593,089 $ 4,943,290 $ 3,009,571 $ 8,870,343
Shares issued as reinvestment
of dividends 577,497 929,814 1,110,520 2,481,716
Shares redeemed (1,751,486) (3,554,645) (3,202,473) (11,733,890)
----------- ----------- ----------- ------------
Net increase (decrease) in
shares outstanding $ 419,100 $ 2,318,459 $ 917,618 $ (381,831)
=========== =========== =========== ============
Class C Shares Class M Shares Class Q Shares
-------------------------- ------------------------- -----------------------
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
December 31, June 30, December 31, June 30, December 31, June 30,
2000 2000 2000 2000 2000 2000
--------- ----------- --------- ----------- --------- ---------
LargeCap Leaders Fund
(Number of Shares)
Shares sold 64,927 226,352 5,000 47,521 47,877 13,049
Shares issued as reinvestment
of dividends 5,847 664 20,536 38,024 3,017 --
Shares redeemed (15,963) (138,012) (31,023) (115,601) (19,035) (515)
--------- ----------- --------- ----------- --------- ---------
Net increase (decrease) in
shares outstanding 54,811 89,004 (5,487) (30,056) 31,859 12,534
========= =========== ========= =========== ========= =========
LargeCap Leaders Fund ($)
Shares sold $ 965,308 $ 3,583,768 $ 77,567 $ 764,132 $ 760,886 $ 212,892
Shares issued as reinvestment
of dividends 83,608 10,256 298,196 593,167 44,983 --
Shares redeemed (245,266) (2,131,218) (489,598) (1,833,459) (316,734) (8,154)
--------- ----------- --------- ----------- --------- ---------
Net increase (decrease) in
shares outstanding $ 803,650 $ 1,462,806 $(113,835) $ (476,160) $ 489,135 $ 204,738
========= =========== ========= =========== ========= =========
Class A Shares Class B Shares
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ -------------
LargeCap Growth Fund
(Number of Shares)
Shares sold 2,092,343 4,427,459 1,989,330 6,775,370
Shares issued as reinvestments
of dividends 47,168 21,754 61,219 38,999
Shares redeemed (1,178,461) (1,201,487) (804,972) (796,940)
------------ ------------- ------------ -------------
Net increase in shares
outstanding 961,050 3,247,726 1,245,577 6,017,429
============ ============= ============ =============
LargeCap Growth Fund ($)
Shares sold $ 81,911,233 $ 159,716,404 $ 76,887,747 $ 236,388,229
Shares issued as reinvestments
of dividends 1,672,129 708,311 2,155,565 1,276,968
Shares redeemed (44,671,867) (45,373,374) (30,913,181) (30,088,529)
------------ ------------- ------------ -------------
Net increase in shares
outstanding $ 38,911,495 $ 115,051,341 $ 48,130,131 $ 207,576,668
============ ============= ============ =============
</TABLE>
62
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
------------------------------ ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
LargeCap Growth Fund
(Number of Shares)
Shares sold 1,497,965 3,308,222 86,441 424,166
Shares issued as reinvestments
of dividends 28,132 13,490 6,871 2,730
Shares redeemed (459,874) (388,728) (119,686) (71,210)
------------ ------------- ----------- ------------
Net increase (decrease) in
shares outstanding 1,066,223 2,932,984 (26,374) 355,686
============ ============= =========== ============
LargeCap Growth Fund ($)
Shares sold $ 56,897,070 $ 120,907,907 $ 3,564,346 $ 15,522,480
Shares issued as reinvestments
of dividends 988,414 443,449 247,005 93,151
Shares redeemed (17,422,833) (15,356,494) (4,419,930) (2,818,083)
------------ ------------- ----------- ------------
Net increase (decrease) in
shares outstanding $ 40,462,651 $ 105,994,862 $ (608,579) $ 12,797,548
============ ============= =========== ============
Class A Shares Class B Shares Class C Shares
--------------------------- ---------------------------- ----------------------------
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
December 31, June 30, December 31, June 30, December 31, June 30,
2000 2000 2000 2000 2000 2000
----------- ----------- ----------- ------------ ----------- -----------
MidCap Value Fund
(Number of Shares)
Shares sold 725,096 162,042 105,622 196,849 73,143 197,031
Shares issued as reinvestment
of dividends 34,671 5,045 70,336 10,124 5,839 50
Shares redeemed (193,542) (736,267) (176,598) (1,110,013) (133,620) (5,154)
----------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in
shares outstanding 566,225 (569,180) (640) 903,040 (54,638) 191,927
=========== =========== =========== ============ =========== ===========
MidCap Value Fund ($)
Shares sold $ 9,553,437 $ 2,287,701 $ 1,374,672 $ 2,617,803 $ 941,521 $ 2,726,555
Shares issued as reinvestment
of dividends 456,631 69,464 887,644 135,051 73,695 671
Shares redeemed (2,699,364) (9,944,036) (2,387,574) (14,482,052) (1,769,121) (67,227)
----------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in
shares outstanding $ 7,310,704 $(7,586,871) $ (125,258) $(11,729,198) $ (753,905) $ 2,659,999
=========== =========== =========== ============ =========== ===========
Class M Shares Class Q Shares
-------------------------------- --------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
-------------- --------------- -------------- ---------
MidCap Value Fund
(Number of Shares)
Shares sold 9,090 65,235 0 9,749
Shares issued as reinvestment
of dividends 18,358 3,293 193 --
Shares redeemed (52,761) (476,778) (7,391) --
------- -------- ------ -----
Net increase (decrease) in
shares outstanding (25,313) (408,250) (7,198) 9,749
======= ======== ====== =====
MidCap Value Fund ($)
Shares sold $ 125,667 $ 881,691 $ -- 133,810
Shares issued as reinvestment
of dividends 234,242 44,230 2,352 --
Shares redeemed (725,343) (6,344,036) (95,713) --
---------- ------------ --------- -------
Net increase (decrease) in
shares outstanding $ (365,434) $ (5,418,115) $ (93,361) 133,810
========== ============ ========= =======
</TABLE>
63
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
MidCap Growth Fund
(Number of Shares)
Shares sold 3,711,827 9,111,415 1,314,258 1,509,894
Shares issued as reinvestments
of dividends 730,596 974,160 562,821 643,222
Shares redeemed (3,488,208) (7,669,485) (490,761) (591,401)
------------ ------------- ------------ ------------
Net increase in shares
outstanding 954,215 2,416,090 1,386,318 1,561,715
============ ============= ============ ============
MidCap Growth Fund ($)
Shares sold $ 81,793,409 $ 250,678,628 $ 32,903,629 $ 49,598,444
Shares issued as reinvestments
of dividends 15,356,798 19,950,802 13,845,392 15,501,828
Shares redeemed (75,319,805) (210,070,998) (11,073,911) (18,149,395)
------------ ------------- ------------ ------------
Net increase in shares
outstanding $ 21,830,402 $ 60,558,432 $ 35,675,110 $ 46,950,877
============ ============= ============ ============
Class C Shares Class Q Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ ------------
MidCap Growth Fund
(Number of Shares)
Shares sold 2,392,132 1,413,615 242,799 428,283
Shares issued as reinvestments
of dividends 612,243 2,159,370 135,012 102,573
Shares redeemed (973,515) (1,287,410) (122,419) (695,575)
------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 2,030,860 2,285,575 255,392 (164,719)
============ ============ =========== ============
MidCap Growth Fund ($)
Shares sold $ 47,239,580 $ 37,423,320 $ 5,889,900 $ 16,105,660
Shares issued as reinvestments
of dividends 11,822,295 40,876,879 3,596,714 2,657,668
Shares redeemed (16,420,502) (31,578,669) (3,179,481) (21,963,880)
------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 42,641,373 $ 46,721,530 $ 6,307,133 $ (3,200,552)
============ ============ =========== ============
</TABLE>
64
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold $ 5,842,720 15,288,354 894,480 1,419,656
Shares issued as reinvestments
of dividends 552,081 3,070,550 350,679 1,314,209
Shares redeemed (5,506,185) (14,588,761) (474,604) (566,759)
------------- ------------- ------------ ------------
Net increase in shares
outstanding 888,616 3,770,143 770,555 2,167,106
============= ============= ============ ============
SmallCap Growth Fund ($)
Shares sold $ 101,914,249 $ 278,913,445 $ 18,725,404 $ 34,348,864
Shares issued as reinvestments
of dividends 8,314,343 44,737,909 6,596,272 23,529,097
Shares redeemed (97,227,250) (268,674,614) (9,667,834) (13,214,538)
------------- ------------- ------------ ------------
Net increase in shares
outstanding $ 13,001,342 $ 54,976,740 $ 15,653,842 $ 44,663,423
============= ============= ============ ============
Class C Shares Class Q Shares
------------------------------ ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------ ----------- ------------
SmallCap Growth Fund
(Number of Shares)
Shares sold 1,858,749 1,763,791 267,292 752,728
Shares issued as reinvestments
of dividends 471,155 4,523,712 82,164 226,472
Shares redeemed (1,331,049) (1,707,156) (226,611) (884,884)
------------ ------------ ----------- ------------
Net increase in shares
outstanding 998,855 4,580,347 122,845 94,316
============ ============ =========== ============
SmallCap Growth Fund ($)
Shares sold $ 28,760,990 $ 33,117,558 $ 5,050,776 $ 17,630,422
Shares issued as reinvestments
of dividends 6,935,409 64,870,028 1,377,895 3,668,843
Shares redeemed (21,172,914) (30,746,993) (4,195,656) (18,817,763)
------------ ------------ ----------- ------------
Net increase in shares
outstanding $ 14,523,485 $ 67,240,594 $ 2,233,015 2,481,502
============ ============ =========== ============
</TABLE>
65
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government Securities
Income Fund
(Number of Shares)
Shares sold 9,390,771 6,308,160 1,100,920 776,377
Shares issued in merger -- 2,562,644 -- 1,997,672
Shares issued as
reinvestment of dividends 71,043 64,916 41,562 33,839
Shares redeemed (8,704,132) (6,095,948) (710,676) (983,135)
------------- ------------- ------------ -------------
Net increase in shares
outstanding 757,682 2,839,772 431,806 1,824,753
============= ============= ============ =============
Government Securities
Income Fund ($)
Shares sold $ 113,539,206 $ 74,777,810 $ 13,323,414 $ 9,254,431
Shares issued in merger -- 30,325,611 -- 23,574,822
Shares issued as
reinvestment of dividends 852,840 773,501 496,955 401,442
Shares redeemed (104,971,738) (72,308,346) (8,543,847) (11,700,469)
------------- ------------- ------------ -------------
Net increase in shares
outstanding $ 9,420,308 $ 33,568,576 $ 5,276,522 $ 21,530,226
============= ============= ============ =============
Class C Class M
----------------------------- -----------------------------
Six Months ended Year Ended Six Months ended Year Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
----------- ----------- ----------- ------------
Government Securities Income Fund
(Number of Shares)
Shares sold 706,074 674,348 2,059 28,709
Shares issued in merger -- 135,166 -- --
Shares issued as reinvestment
of dividends 4,878 2,322 534 1,916
Shares redeemed (334,415) (641,939) (4,455) (48,662)
----------- ----------- ----------- ------------
Net increase (decrease) in
shares outstanding 376,537 169,897 (1,862) (18,037)
=========== =========== =========== ============
Government Securities
Income Fund ($)
Shares sold $ 8,577,586 $ 8,182,795 $ 24,838 $ 345,778
Shares issued in merger -- 1,611,381 -- --
Shares issued as reinvestment
of dividends 58,875 27,745 6,392 22,982
Shares redeemed (4,057,830) (7,762,416) (53,785) (581,080)
----------- ----------- ----------- ------------
Net increase (decrease) in shares
outstanding $ 4,578,631 $ 2,059,505 $ (22,555) $ (212,320)
=========== =========== =========== ============
Class Q Shares Class T Shares
----------------------------- -----------------------------
Six Months ended Year Ended Six Months ended Year Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
----------- ----------- ----------- ------------
Government Securities Income Fund
(Number of Shares)
Shares sold 34,351 1,851 3,383 116
Shares issued in merger -- -- -- 2,165,118
Shares issued as reinvestment
of dividends 313 4 38,083 15,202
Shares redeemed (9,518) (36) (452,564) (255,997)
----------- ----------- ----------- ------------
Net increase (decrease) in
shares outstanding 25,146 1,819 (411,098) 1,924,439
=========== =========== =========== ============
Government Securities
Income Fund ($)
Shares sold $ 415,030 $ 21,936 $ 40,698 $ 1,046
Shares issued in merger -- -- -- 25,550,874
Shares issued as reinvestment
of dividends 3,715 50 455,487 178,704
Shares redeemed (114,939) (418) (5,416,273) (3,016,129)
----------- ----------- ----------- ------------
Net increase (decrease) in
shares outstanding $ 303,806 $ 21,568 $(4,920,088) $ 22,714,495
=========== =========== =========== ============
</TABLE>
66
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------- -------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Strategic Income Fund (Number of Shares)
Shares sold 22,607 604,669 54,612 235,490
Shares issued in merger -- -- -- --
Shares issued as reinvestment of dividends 799 11,483 1,135 16,764
Shares redeemed (2,224) (607,655) (7,162) (333,238)
--------- ------------ --------- -----------
Net increase (decrease) in shares outstanding 21,182 8,497 48,585 (80,984)
========= ============ ========= ===========
Strategic Income Fund ($)
Shares sold $ 262,611 $ 7,329,922 $ 617,930 $ 2,807,321
Shares issued in merger -- -- -- --
Shares issued as reinvestment of dividends 9,091 139,358 12,627 199,456
Shares redeemed (25,834) (7,363,256) (81,221) (3,971,439)
--------- ------------ --------- -----------
Net increase (decrease) in shares outstanding $ 245,868 $ 106,024 $ 549,336 $ (964,662)
========= ============ ========= ===========
Class C Shares Class Q Shares
-------------------------- -------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
---------- ----------- --------- -----------
Strategic Income Fund (Number of Shares)
Shares sold 33,228 594,925 -- 5,652
Shares issued in merger -- -- -- --
Shares issued as reinvestment of dividends 627 11,584 116 1,233
Shares redeemed (28,164) (905,931) -- (1,293)
--------- ------------ --------- -----------
Net increase (decrease) in shares outstanding 5,691 (299,422) 116 5,592
========= ============ ========= ===========
Strategic Income Fund ($)
Shares sold $ 394,097 $ 7,361,851 -- $ 64,150
Shares issued in merger -- -- -- --
Shares issued as reinvestment of dividends 7,282 143,424 $ 1,251 14,212
Shares redeemed (331,778) (11,234,101) -- (14,990)
--------- ------------ --------- -----------
Net increase (decrease) in shares outstanding $ 69,601 $ (3,728,826) $ 1,251 $ 63,372
========= ============ ========= ===========
</TABLE>
(1) Classes commenced operations on 7/27/98.
67
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
High Yield Fund (Number of Shares)
Shares sold 5,656,616 18,403,831 2,572,847 10,007,643
Shares issued as reinvestment of dividends 413,075 992,628 674,880 1,441,815
Shares redeemed (9,505,367) (24,529,807) (8,318,780) (15,933,643)
------------ ------------- ------------ ------------
Net increase (decrease) in shares outstanding (3,435,676) (5,133,348) (5,071,053) (4,484,185)
============ ============= ============ ============
High Yield Fund ($)
Shares sold $ 25,777,299 $ 97,912,317 $ 11,428,764 $ 55,282,605
Shares issued as reinvestment of dividends 1,878,729 5,460,638 3,051,208 7,894,426
Shares redeemed (43,410,499) (131,398,105) (36,830,386) (86,943,865)
------------ ------------- ------------ ------------
Net increase (decrease) in shares outstanding $(15,754,471) $ (28,025,150) $(22,350,414) $(23,766,834)
============ ============= ============ ============
Class C Shares Class M Shares
------------------------------ -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
2000 2000 2000 2000
------------ ------------- ------------ ------------
High Yield Fund (Number of Shares)
Shares sold 1,692,720 2,837,111 14,313 127,747
Shares issued as reinvestment of dividends 23,380 28,522 71,976 188,400
Shares redeemed (1,814,860) (1,778,397) (731,895) (1,858,983)
----------- ------------ ----------- ------------
Net increase (decrease) in shares outstanding (98,760) 1,087,236 (645,606) (1,542,836)
=========== ============ =========== ============
High Yield Fund ($)
Shares sold $ 7,770,423 $ 15,174,843 $ 63,057 $ 705,631
Shares issued as reinvestment of dividends 105,189 153,864 326,284 1,036,966
Shares redeemed (8,259,290) (9,243,746) (3,198,152) (10,086,399)
----------- ------------ ----------- ------------
Net increase (decrease) in shares outstanding $ (383,678) $ 6,084,961 $(2,808,811) $ (8,343,802)
=========== ============ =========== ============
Class Q Shares
--------------------------------
Six Months Ended Year Ended
December 31, June 30,
2000 2000
--------- ------
High Yield Fund (Number of Shares)
Shares sold 3,863 --
Shares issued as reinvestment of dividends 218 --
Shares redeemed (4,080) --
--------- ------
Net increase in shares outstanding 1 --
========= ======
High Yield Fund ($)
Shares sold $ 19,120 $ --
Shares issued as reinvestment of dividends 961 2
Shares redeemed (15,912) --
--------- ------
Net increase in shares outstanding $ 4,169 $ 2
========= ======
</TABLE>
68
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------- -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
High Yield Fund II (Number of Shares)
Shares sold 628,435 2,024,176 435,876 696,890
Shares issued in merger -- 1,920,197 -- 6,815,662
Shares issued as reinvestments of dividends 87,053 85,848 152,654 173,796
Shares redeemed (1,148,200) (2,296,078) (1,707,745) (1,757,346)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (432,712) 1,734,143 (1,119,215) 5,929,002
============ ============ ============ ============
High Yield Fund II ($)
Shares sold $ 6,195,720 $ 22,289,353 $ 4,292,728 $ 7,778,149
Shares issued in merger -- 21,258,924 -- 75,437,662
Shares issued as reinvestments of dividends 835,205 948,687 1,467,419 1,923,761
Shares redeemed (11,459,266) (25,459,352) (16,358,526) (19,459,549)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding $ (4,428,341) $ 19,037,612 $(10,598,379) $ 65,680,023
============ ============ ============ ============
Class C Shares Class Q Shares Class T Shares
---------------------------- ---------------------------- -----------------------------
Six Months Year Six Months Year Six Months Period
Ended Ended Ended Ended Ended Ended
December 31, June 30, December 31, June 30, December 31, June 30,
2000 2000 2000 2000 2000 2000
----------- ------------ ----------- ------------ ----------- ------------
High Yield Fund II
(Number of Shares)
Shares sold 229,940 835,807 96,390 1,176,601 2,514 42,193
Shares issued in merger -- 876,081 -- -- -- 3,237,823
Shares issued as reinvestments
of dividends 26,148 60,087 20,683 38,331 82,474 45,794
Shares redeemed (741,863) (1,223,652) (582,470) (857,666) (648,230) (426,380)
----------- ------------ ----------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding (485,775) 548,323 (465,397) 357,266 (563,242) 2,899,430
=========== ============ =========== ============ =========== ============
High Yield Fund II ($)
Shares sold $ 2,241,364 $ 9,284,852 $ 948,525 $ 12,941,570 $ 25,670 $ 467,407
Shares issued in merger -- 9,698,640 -- -- -- 35,837,128
Shares issued as reinvestments
of dividends 251,201 667,948 205,518 431,200 795,414 495,594
Shares redeemed (7,230,757) (13,540,976) (5,865,040) (9,622,674) (6,401,869) (4,680,068)
----------- ------------ ----------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $(4,738,192) $ 6,110,464 $(4,710,997) $ 3,750,096 $(5,580,785) $ 32,120,061
=========== ============ =========== ============ =========== ============
</TABLE>
69
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------- ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Balanced Fund (Number of Shares)
Shares sold 401,013 462,023 220,298 236,780
Shares issued in merger -- 3,669,160 -- 2,263,054
Shares issued as reinvestments of dividends 396,658 120,353 168,287 87,982
Shares redeemed (601,902) (523,820) (417,087) (386,298)
----------- ------------ ----------- ------------
Net increase (decrease) in shares outstanding 195,769 3,727,716 (28,502) 2,201,518
=========== ============ =========== ============
Balanced Fund ($)
Shares sold $ 5,821,498 $ 7,288,215 $ 3,399,362 $ 4,171,242
Shares issued in merger -- 57,648,201 -- 38,096,820
Shares issued as reinvestments of dividends 5,483,573 1,895,528 2,485,948 1,483,448
Shares redeemed (8,939,640) (8,162,726) (6,542,007) (6,483,178)
----------- ------------ ----------- ------------
Net increase (decrease) in shares outstanding $ 2,365,431 $ 58,669,218 $ (656,697) $ 37,268,332
=========== ============ =========== ============
Class C Shares Class Q Shares
---------------------------- ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
----------- ------------ ----------- ------------
Balanced Fund (Number of Shares)
Shares sold 183,853 168,630 19,710 4,284
Shares issued in merger -- 813,022 -- --
Shares issued as reinvestments of dividends 105,392 235,394 2,557 2,693
Shares redeemed (290,926) (579,424) (11,044) (1,565)
----------- ------------ --------- --------
Net increase (decrease) in shares outstanding (1,681) 637,622 11,223 5,412
=========== ============ ========= ========
Balanced Fund ($)
Shares sold $ 2,471,348 $ 2,578,680 $ 289,967 $ 66,184
Shares issued in merger -- 12,280,463 -- --
Shares issued as reinvestments of dividends 1,397,111 3,561,673 34,958 42,058
Shares redeemed (4,109,734) (8,869,902) (155,107) (24,419)
----------- ------------ --------- --------
Net increase (decrease) in shares outstanding $ (241,275) $ 9,550,914 $ 169,818 $ 83,823
=========== ============ ========= ========
</TABLE>
Class T Shares
-----------------------------
Six Months Period
Ended Ended
December 31, June 30,
2000 2000
----------- ------------
Balanced Fund (Number of Shares)
Shares sold 2,984 1,889
Shares issued in merger -- 737,757
Shares issued as reinvestments of dividends 61,460 --
Shares redeemed (121,120) (59,256)
----------- ------------
Net increase (decrease) in shares
outstanding (56,676) 680,390
=========== ============
Balanced Fund ($)
Shares sold$ $ 45,086 $ 11,145
Shares issued in merger 908,997 12,419,589
Shares issued as reinvestment of dividends -- 7
Shares redeemed (1,910,403) (946,072)
----------- ------------
Net increase (decrease) in shares
outstanding $ (956,320) $ 11,484,669
=========== ============
70
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------- -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Convertible Fund (Number of Shares)
Shares sold 1,539,024 2,765,285 1,518,121 2,212,800
Shares issued as reinvestments
of dividends 966,619 432,032 908,961 446,940
Shares redeemed (1,179,353) (1,602,580) (610,023) (721,161)
------------ ------------ ------------ ------------
Net increase in shares outstanding 1,326,290 1,594,737 1,817,059 1,938,579
============ ============ ============ ============
Convertible Fund ($)
Shares sold $ 36,948,292 $ 74,411,486 $ 40,429,911 $ 62,613,451
Shares issued as reinvestments
of dividends 19,441,732 10,028,609 19,845,575 11,247,841
Shares redeemed (26,644,982) (41,141,454) (15,848,270) (20,328,894)
------------ ------------ ------------ ------------
Net increase in shares outstanding $ 29,745,042 $ 43,298,641 $ 44,427,216 $ 53,532,398
============ ============ ============ ============
Class C Shares Class Q Shares
----------------------------- -----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, June 30, December 31, June 30,
2000 2000 2000 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Convertible Fund (Number of Shares)
Shares sold 1,346,446 1,543,879 534,344 1,566,620
Shares issued as reinvestments
of dividends 652,805 594,205 442,122 144,983
Shares redeemed (671,647) (827,109) (778,398) (398,796)
------------ ------------ ------------ ------------
Net increase in shares outstanding 1,327,604 1,310,975 198,068 1,312,807
============ ============ ============ ============
Convertible Fund ($)
Shares sold $ 31,372,577 $ 41,908,144 $ 12,522,351 $ 41,114,380
Shares issued as reinvestments
of dividends 13,378,593 14,012,886 8,653,714 3,277,417
Shares redeemed (15,616,793) (22,139,549) (16,755,201) (10,241,903)
------------ ------------ ------------ ------------
Net increase in shares outstanding $ 29,134,377 $ 33,781,481 $ 4,420,864 $ 34,149,894
============ ============ ============ ============
</TABLE>
71
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 10 -- CUSTODIAL AGREEMENT
State Street Kansas City ("SSKC") (formerly Investors Fiduciary Trust Company)
and State Street Boston ("SSB") serve as the Funds' custodian and recordkeeper.
Custody fees paid to SSKC or SSB are reduced by an earnings credit based on the
cash balances held by SSKC or SSB for each of the Funds.
NOTE 11 -- SUBSEQUENT EVENTS
On November 2, 2000, the Boards of Directors and Trustees approved the following
reorganizations:
* ING Focus Fund and ING LargeCap Growth merging into Pilgrim LargeCap Growth
Fund.
* ING International Bond Fund and Pilgrim Global Income Fund merging into
Pilgrim Strategic Income Fund.
* Pilgrim MidCap Value Fund merging into Pilgrim MagnaCap Fund.
* Pilgrim Government Securities Income Fund merging into Pilgrim GNMA Income
Fund.
Proxy statements dated January 19 and 22, 2001 for these reorganizations were
mailed to the shareholders. Special Meetings of shareholders were held on
February 22, 2001 to approve such reorganizations and the reorganizations
occured after the close of business on February 23, 2001.
On November 2, 2000 the Boards of Directors and Trustees also approved the
following reorganizations:
* Pilgrim High Total Return I and II Funds merging into Pilgrim High Yield II
Fund.
* Pilgrim LargeCap Leaders Fund merging into Pilgrim MagnaCap Fund.
Proxy statements dated January 19 and 25, 2001 for these reorganizations were
mailed to shareholders. Special meetings of shareholders were to be held on
February 22, 2000 but were adjourned to reconvene on March 22, 2001.
Subsequent to December 31, 2000 the following funds declared dividends from net
investment income of:
Per Share
Amount Payable Date Record Date
------ ------------ -----------
Goverment Securities
Income
Class A $ 0.0600 February 5, 2001 January 31, 2001
Class B 0.0520 February 5, 2001 January 31, 2001
Class C 0.0520 February 5, 2001 January 31, 2001
Class M 0.0540 February 5, 2001 January 31, 2001
Class Q 0.0600 February 5, 2001 January 31, 2001
Class T 0.0560 February 5, 2001 January 31, 2001
Class A 0.0600 February 22, 2001 February 20, 2001
Class B 0.0542 February 22, 2001 February 20, 2001
Class C 0.0542 February 22, 2001 February 20, 2001
Class M 0.0558 February 22, 2001 February 20, 2001
Class Q 0.0601 February 22, 2001 February 20, 2001
Class T 0.0568 February 22, 2001 February 20, 2001
Strategic Income
Class A 0.0650 February 5, 2001 January 31, 2001
Class B 0.0600 February 5, 2001 January 31, 2001
Class C 0.0600 February 5, 2001 January 31, 2001
Class Q 0.0650 February 5, 2001 January 31, 2001
Class A 0.0658 February 22, 2001 February 20, 2001
Class B 0.0629 February 22, 2001 February 20, 2001
Class C 0.0626 February 22, 2001 February 20, 2001
Class Q 0.0667 February 22, 2001 February 20, 2001
High Yield
Class A 0.0450 February 5, 2001 January 31, 2001
Class B 0.0420 February 5, 2001 January 31, 2001
Class C 0.0420 February 5, 2001 January 31, 2001
Class M 0.0430 February 5, 2001 January 31, 2001
Class Q 0.0450 February 5, 2001 January 31, 2001
High Yield II
Class A 0.0980 February 5, 2001 January 31, 2001
Class B 0.0930 February 5, 2001 January 31, 2001
Class C 0.0930 February 5, 2001 January 31, 2001
Class Q 0.0980 February 5, 2001 January 31, 2001
Class T 0.0960 February 5, 2001 January 31, 2001
Class A 0.0900 March 01, 2001 February 28, 2001
Class B 0.0840 March 01, 2001 February 28, 2001
Class C 0.0840 March 01, 2001 February 28, 2001
Class Q 0.0910 March 01, 2001 February 28, 2001
Class T 0.0870 March 01, 2001 February 28, 2001
72
<PAGE>
- --------
Pilgrim
MagnaCap
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 96.56%
Banks: 6.39%
35,000 Bank of New York Co, Inc. $ 1,931,563
210,000 FleetBoston Financial Corp. 7,888,125
165,000 J.P. Morgan Chase & Co. 7,497,187
150,000 Wells Fargo & Co. 8,353,125
-----------
25,670,000
-----------
Beverages: 3.51%
190,000 Anheuser-Busch Cos., Inc. 8,645,000
110,000 Pepsico, Inc. 5,451,875
-----------
14,096,875
-----------
Chemicals: 0.00%
200 Praxair, Inc. 8,875
-----------
Computers: 4.27%
255,000 Compaq Computer Corp. 3,837,750
97,000 @ Computer Sciences Corp. 5,832,125
99,000 Hewlett-Packard Co. 3,124,688
156,000 @ Sun Microsystems, Inc. 4,348,500
-----------
17,143,063
-----------
Diversified Financial Services: 5.91%
120,000 Alliance Capital Management Holdings 6,075,000
156,666 Citigroup, Inc. 7,999,758
140,000 Freddie Mac 9,642,500
-----------
23,717,258
-----------
Electric: 2.34%
110,000 Duke Energy Corp. 9,377,500
-----------
Electrical Components & Equipment: 1.96%
100,000 Emerson Electric Co. 7,881,250
-----------
Electronics: 2.15%
255,000 @ Solectron Corp. 8,644,500
-----------
Food: 1.38%
225,000 Sara Lee Corp. 5,526,563
-----------
Healthcare -- Products: 4.68%
157,000 Baxter Int'l, Inc. 13,865,062
47,000 Johnson & Johnson 4,937,938
-----------
18,803,000
-----------
Household Products/Wares: 1.35%
98,500 Avery-Dennison Corp. 5,405,187
-----------
Insurance: 5.46%
140,000 Aflac, Inc. 10,106,250
84,530 American Int'l Group 8,331,488
29,800 Marsh & McLennan Cos. 3,486,600
-----------
21,924,338
-----------
Leisure Time: 1.92%
250,000 Carnival Corp. 7,703,125
-----------
Machinery -- Diversified: 1.96%
165,000 Rockwell Int'l Corp. 7,858,125
-----------
Media: 1.30%
180,000 Walt Disney Co. 5,208,750
-----------
Mining: 1.54%
185,000 Alcoa, Inc. 6,197,500
-----------
Miscellaneous Manufacturing: 5.10%
105,700 General Electric Co. 5,066,994
60,000 Minnesota Mining & Manufacturing Co. 7,230,000
147,500 @@ Tyco Int'l, Ltd. 8,186,250
-----------
20,483,244
-----------
Oil & Gas Producers: 6.99%
145,000 @@ BP Amoco PLC ADR 6,941,875
119,000 Chevron Corp. 10,048,063
382,413 Conoco, Inc. 11,066,076
-----------
28,056,014
-----------
Oil & Gas Services: 3.51%
159,700 Halliburton Co. 5,789,125
104,000 Schlumberger, Ltd. 8,313,500
-----------
14,102,625
-----------
Pharmaceuticals: 5.26%
167,000 Abbott Laboratories 8,089,062
72,600 Merck & Co., Inc. 6,797,175
110,000 Schering-Plough Corp. 6,242,500
-----------
21,128,737
-----------
Pipelines: 2.98%
300,000 Williams Cos., Inc. 11,981,250
-----------
Retail: 6.05%
65,500 Home Depot, Inc. 2,992,531
310,000 McDonald's Corp. 10,540,000
240,000 TJX Cos., Inc. 6,660,000
77,500 Wal-Mart Stores, Inc. 4,117,187
-----------
24,309,718
-----------
Savings & Loans: 1.59%
120,000 Washington Mutual, Inc. 6,367,500
-----------
Semiconductors: 0.89%
118,100 Intel Corp. 3,572,525
-----------
Software: 3.10%
166,000 Automatic Data Processing 10,509,875
45,000 @ Microsoft Corp. 1,951,875
-----------
12,461,750
-----------
Telecommunications: 12.89%
130,000 Alltel Corp. 8,116,875
108,500 @ Cisco Systems, Inc. 4,150,125
160,000 @@ Nokia OYJ ADR 6,960,000
185,500 SBC Communications, Inc. 8,857,625
182,500 @ Tellabs, Inc. 10,311,250
186,600 Verizon Communications, Inc. 9,353,325
285,000 @ Worldcom, Inc. 3,990,000
-----------
51,739,200
-----------
Tobacco: 2.08%
190,000 Philip Morris Cos., Inc. 8,360,000
-----------
Total Common Stock (Cost $294,151,540) 387,728,472
-----------
Total Long-Term Investments (Cost $294,151,540) 387,728,472
-----------
See Accompanying Notes to Financial Statements
73
<PAGE>
- --------
Pilgrim
MagnaCap
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.78%
Commercial Paper: 3.78%
$15,200,000 General Electric Capital Corp., 5.900%,
due 01/02/01 $ 15,197,509
-------------
Total Short-Term Investments (Cost $15,197,509) 15,197,509
-------------
Total Investments in Securities
(Cost $309,349,049)* 100.34% $ 402,925,981
Other Assets and Liabilities - Net -0.34% (1,385,249)
------ -------------
Net Assets 100.00% $ 401,540,732
====== =============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciaition $ 107,155,826
Gross Unrealized Depreciaition (13,578,894)
-------------
Net Unrealized Appreciation $ 93,576,932
=============
See Accompanying Notes to Financial Statements
74
<PAGE>
Pilgrim
LargeCap
Leaders
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 92.04%
Banks: 1.42%
11,950 J.P. Morgan Chase & Co. $ 542,978
----------
Beverages: 4.80%
14,600 Anheuser-Busch Cos., Inc. 664,300
9,100 Coca-Cola Co. 554,531
12,400 Pepsico, Inc. 614,575
----------
1,833,406
----------
Chemicals: 0.06%
2,122 @@@ Syngenta AG ADR 23,209
----------
Computers: 4.15%
22,600 Compaq Computer Corp. 340,130
6,100 @ Dell Computer Corp. 106,369
7,500 @ EMC Corp. 498,750
8,000 Hewlett-Packard Co. 252,500
14,000 @ Sun Microsystems, Inc. 390,250
----------
1,587,999
----------
Cosmetics/Personal Care: 1.77%
10,500 Colgate-Palmolive Co. 677,775
----------
Diversified Financial Services: 8.29%
9,200 American Express Co. 505,425
10,866 Citigroup, Inc. 554,845
9,000 Fannie Mae 780,750
10,900 Freddie Mac 750,737
8,500 Merrill Lynch & Co., Inc. 579,594
----------
3,171,351
----------
Electric: 3.87%
9,200 Duke Energy Corp. 784,300
20,900 Southern Co. 694,925
----------
1,479,225
----------
Electrical Component & Equipment: 1.65%
8,000 Emerson Electric Co. 630,500
----------
Electronics: 3.12%
25,500 @@@ Flextronics Int'l, Ltd. 726,750
13,800 @ Solectron Corp. 467,820
----------
1,194,570
----------
Food: 1.77%
10,800 @ Safeway, Inc. 675,000
----------
Forest Products & Paper: 2.36%
22,100 Int'l Paper Co. 901,956
----------
Home Furnishings: 0.89%
4,900 @@ Sony Corp. ADR 341,775
----------
Insurance: 3.32%
7,537 American Int'l Group 742,865
4,500 Marsh & McLennan Cos. 526,500
----------
1,269,365
----------
Internet: 0.81%
8,900 @ America Online, Inc. 309,720
----------
Leisure Time: 1.87%
23,200 Carnival Corp. 714,850
----------
Machinery-Diversified: 1.62%
13,500 Deere & Co. 618,469
----------
Media: 3.52%
12,100 @ Comcast Corp. 505,175
7,700 Gannett Co., Inc. 485,581
6,800 Time Warner, Inc. 355,232
----------
1,345,988
----------
Mining: 1.67%
19,100 Alcoa, Inc. 639,850
----------
Miscellaneous Manufacturing: 4.08%
10,000 General Electric Co. 479,375
3,500 Minnesota Mining & Manufacturing Co. 421,750
11,900 @@ Tyco Int'l, Ltd. 660,450
----------
1,561,575
----------
Oil & Gas Producers: 8.14%
10,900 Anadarko Petroleum Corp. 774,772
16,100 Burlington Resources, Inc. 813,050
5,175 Chevron Corp. 436,964
6,600 Exxon Mobil Corp. 573,788
8,500 @@ Royal Dutch Petroleum Co. ADR 514,781
----------
3,113,355
----------
Oil & Gas Services: 1.46%
7,000 Schlumberger, Ltd. 559,563
----------
Pharmaceuticals: 8.51%
14,900 Abbott Laboratories 721,719
8,100 Merck & Co., Inc. 758,362
19,600 @@ Novartis ADR 877,100
19,500 Pfizer, Inc. 897,000
----------
3,254,181
----------
Pipelines: 2.26%
10,400 Enron Corp. 864,500
----------
Retail: 6.77%
9,500 Home Depot, Inc. 434,031
14,400 McDonald's Corp. 489,600
17,100 Sears, Roebuck And Co. 594,225
15,100 Walgreen Co. 631,369
8,300 Wal-Mart Stores, Inc. 440,938
----------
2,590,163
----------
Savings & Loans: 2.43%
17,500 Washington Mutual, Inc. 928,594
----------
Semiconductors: 2.12%
15,000 @ Advanced Micro Devices 207,188
8,100 Intel Corp. 245,025
7,600 Texas Instruments, Inc. 360,050
----------
812,263
----------
Software: 0.75%
6,600 @ Microsoft Corp. 286,275
----------
Telecommunications: 5.11%
10,000 @ Cisco Systems, Inc. 382,500
9,900 @@ Nokia OYJ ADR 430,650
11,600 SBC Communications, Inc. 553,900
8,720 Verizon Communications, Inc. 437,090
10,600 @ WorldCom, Inc. 148,400
----------
1,952,540
----------
Tobacco: 2.04%
17,700 Philip Morris Cos., Inc. 778,800
----------
Transportation: 1.41%
13,500 @ FedEx Corp. 539,460
----------
Total Common Stock (Cost $30,029,276) 35,199,255
----------
Total Long-Term Investments (Cost $30,029,276) 35,199,255
----------
See Accompanying Notes to Financial Statements
75
<PAGE>
Pilgrim
LargeCap
Leaders
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 7.81%
Repurchase Agreement: 7.81%
$2,988,000 State Street Bank & Trust Repurchase Agreement,
5.75% due 01/02/01 (Collateralized by
$2,330,000 U.S. Treasury Bonds, 8.000% Due
11/15/21, Market Value $3,049,471) $ 2,988,000
-----------
Total Short-Term Investments (Cost $2,988,000) 2,988,000
-----------
Total Investments in Securities
(Cost $33,017,276)* 99.85% $38,187,255
Other Assets and Liabilities-Net 0.15% 57,403
------ -----------
Net Assets 100.00% $38,244,658
====== ===========
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 7,319,688
Gross Unrealized Depreciation (2,149,709)
-----------
Net Unrealized Appreciation $ 5,169,979
===========
See Accompanying Notes to Financial Statements
76
<PAGE>
Pilgrim
LargeCap
Growth
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 84.04%
Banks: 2.73%
378,500 J.P. Morgan Chase & Co. $ 17,014,521
------------
Beverages: 0.88%
89,700 Coca-Cola Co. 5,466,094
------------
Biotechnology: 3.54%
270,800 @ Genentech, Inc. 22,070,200
------------
Computers: 5.06%
186,400 @ Brocade Communications System 17,113,850
164,625 @ Veritas Software Corp. 14,404,688
------------
31,518,538
------------
Cosmetics/Personal Care: 1.73%
83,500 Kimberly-Clark Corp. 5,902,615
62,100 Procter & Gamble Co. 4,870,969
------------
10,773,584
------------
Diversified Financial Services: 7.08%
538,633 Citigroup, Inc. 27,503,947
191,700 Fannie Mae 16,629,975
------------
44,133,922
------------
Food: 2.83%
281,500 @ Safeway, Inc. 17,593,750
------------
Healthcare-Products: 1.73%
122,100 Baxter Int'l, Inc. 10,782,956
------------
Healthcare-Services: 6.33%
426,000 HCA - The Healthcare Co. 18,748,260
337,226 UnitedHealth Group, Inc. 20,697,246
------------
39,445,506
------------
Internet: 1.94%
346,400 America Online, Inc. 12,054,720
------------
Media: 6.35%
224,961 @ Cablevision Systems Corp. 19,107,625
349,300 Comcast Corp. 14,583,275
121,300 Clear Channel Communications 5,875,469
------------
39,566,369
------------
Miscellaneous Manufacturing: 3.32%
298,400 General Electric Co. $ 14,304,550
53,100 Minnesota Mining & Manufacturing Co. 6,398,550
------------
20,703,100
------------
Oil & Gas Services: 5.17%
380,400 Baker Hughes, Inc. 15,810,375
205,200 Schlumberger, Ltd. 16,403,175
------------
32,213,550
------------
Pharmaceuticals: 11.00%
271,400 Bristol-Myers Squibb Co. 20,066,637
231,505 Merck & Co., Inc. 21,674,656
151,328 Pfizer, Inc. 6,961,088
349,400 Schering-Plough Corp. 19,828,450
------------
68,530,831
------------
Pipelines: 3.13%
234,300 Enron Corp. 19,476,188
------------
Retail: 2.66%
465,400 Gap, Inc. 11,867,700
103,200 Home Depot, Inc. 4,714,950
------------
16,582,650
------------
Semiconductors: 2.00%
73,500 @ Applied Materials, Inc. 2,806,781
88,900 @ Applied Micro Circuits Corp. 6,671,667
62,200 Texas Instruments, Inc. 2,946,725
------------
12,425,173
------------
Software: 2.49%
230,808 @ BEA Systems, Inc. 15,536,264
------------
Telecommunications: 14.07%
129,600 @ CIENA Corp. 10,546,200
128,900 @ Comverse Technology, Inc. 14,001,763
169,900 Corning, Inc. 8,972,844
100,800 @ Juniper Networks, Inc. 12,707,100
502,200 Motorola, Inc. 10,169,550
277,800 @@ Nokia OYJ ADR 12,084,300
232,900 @ Qualcomm, Inc. 19,141,468
------------
87,623,225
------------
Total Long-Term Investments
(Cost $495,686,677) 523,511,141
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 17.53%
Repurchase Agreements: 17.53%
$109,209,000 State Street Repurchase Agreement,
5.75% due 1/02/01 (Collateralized by
$85,115,000 U.S. Treasury Bonds,
8.000% Due 11/15/21, Market
Value $111,397,320) $109,209,000
------------
Total Short-Term Investments
(Cost $109,209,000) 109,209,000
------------
Total Investments in Securities
(Cost $ 604,895,677)* 101.57% $632,720,141
Other Assets and Liabilities-Net -1.57% (9,793,728)
------ ------------
Net Assets 100.00% $622,926,413
====== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 45,485,505
Gross Unrealized Depreciation (17,661,041)
------------
Net Unrealized Appreciation $ 27,824,464
============
See Accompanying Notes to Financial Statements
77
<PAGE>
Pilgrim
MidCap
Value
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 93.94%
Banks: 2.72%
23,332 Commerce Bancshares, Inc. $ 991,610
------------
Beverages: 2.42%
11,000 Coors (Adolph) 883,438
------------
Chemicals: 3.88%
16,000 Rohm & Haas Co. 581,000
21,200 Sigma-Aldrich Corp. 833,425
------------
1,414,425
------------
Commercial Services: 4.92%
10,500 @ Convergys Corp. 475,781
20,000 Equifax, Inc. 573,750
18,000 H & R Block, Inc. 744,750
------------
1,794,281
------------
Distribution/Wholesale: 4.90%
13,300 Fastenal Co. 729,838
29,000 Grainger (W.W.), Inc. 1,058,500
------------
1,788,338
------------
Electric: 2.55%
26,500 Cinergy Corp. 930,813
------------
Electrical Components & Equipment: 1.35%
39,700 @ American Power Conversion 491,288
------------
Electronics: 1.48%
16,000 @ APW, Ltd. 540,000
------------
Environmental Control: 2.48%
52,700 @ Republic Services, Inc. 905,781
------------
Forest Products & Paper: 3.43%
15,900 Mead Corp. 498,863
16,000 Willamette Industries 751,000
------------
1,249,863
------------
Healthcare-Products: 1.52%
9,000 St. Jude Medical, Inc. 552,938
------------
Healthcare-Services: 1.93%
6,100 @ Wellpoint Health Networks, Inc. 703,025
------------
Household Products/Wares: 2.87%
38,000 Dial Corp. 418,000
21,000 Fortune Brands, Inc. 630,000
------------
1,048,000
------------
Insurance: 2.28%
17,500 Nationwide Financial Services, Inc. $ 831,250
------------
Leisure Time: 2.54%
35,000 Royal Caribbean Cruises, Ltd. 925,750
------------
Lodging: 2.33%
24,100 Starwood Hotels & Resorts Worldwide 849,525
------------
Media: 2.75%
20,500 @ Hispanic Broadcasting Corp. 522,750
12,000 New York Times Co. 480,750
------------
1,003,500
------------
Miscellaneous Manufacturing: 3.32%
23,000 Donaldson, Inc. 639,688
10,322 Tyco Int'l, Ltd. 572,893
------------
1,212,581
------------
Oil & Gas Producers: 12.45%
12,200 Amerada Hess Corp. 891,363
13,800 Apache Corp. 966,862
16,000 Devon Energy Corp. 975,520
22,100 Helmerich & Payne, Inc. 969,637
23,000 Santa Fe Int'l Corp. 737,437
------------
4,540,819
------------
Oil & Gas Services: 2.19%
36,500 @ Grant Pride, Inc. 800,718
------------
Pharmaceuticals: 2.92%
49,300 Omnicare, Inc. 1,066,112
------------
Pipelines: 2.24%
11,400 El Paso Energy Corp. 816,525
------------
Retail: 7.93%
23,600 @ B.J.'s Wholesale
Club, Inc. 905,650
52,400 Blockbuster, Inc. 438,850
33,000 Ross Stores 556,875
72,700 @ Shopko Stores, Inc. 363,500
19,000 @ Tricon Global Restaurants 627,000
------------
2,891,875
------------
Savings & Loans: 4.39%
35,500 Charter One Financial, Inc. $ 1,025,062
71,000 Sovereign Bancorp, Inc. 576,875
------------
1,601,937
------------
Semiconductors: 1.66%
33,000 @ Lattice Semiconductor Corp. 606,375
------------
Telecommunications: 10.49%
30,000 @ ADC Telecommunications, Inc. 543,750
21,500 @ Andrew Corp. 467,625
26,500 @ Broadwing, Inc. 604,531
22,000 Centurytel, Inc. 786,500
21,500 @ Crown Castle Int'l Corp. 581,844
20,000 @@ Gilat Satellite Networks, Ltd. 510,000
10,000 @ McleodUSA , Inc. 141,250
9,396 Motorola, Inc. 190,269
------------
3,825,769
------------
Total Common Stocks
(Cost $32,022,724) 34,266,536
------------
Total Long-Term Investments
(Cost $32,022,724) 34,266,536
------------
See Accompanying Notes to Financial Statements
78
<PAGE>
Pilgrim
MidCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 20.94%
Repurchase Agreements: 10.47%
$3,819,342 State Street Bank & Trust Short
Term Investment Fund, 6.200%
due 01/02/01 $ 3,819,342
------------
Commercial Paper: 10.47%
1,909,687 General Electric, 5.90% due 01/02/01 1,909,687
1,909,650 Long Lane Master, 6.600% due 01/02/01 1,909,650
------------
Total Commercial Paper 3,819,337
------------
Total Short-Term Investments
(Cost $7,638,679) 7,638,679
------------
Total Investments in Securities
(Cost $ 39,661,403)* 114.88% $ 41,905,215
Other Assets and Liabilities-Net -14.88% (5,428,043)
------ ------------
Net Assets 100.00% $ 36,477,172
====== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 4,596,957
Gross Unrealized Depreciation (2,353,145)
------------
Net Unrealized Appreciation $ 2,243,812
============
See Accompanying Notes to Financial Statements
79
<PAGE>
Pilgrim
MidCap
Growth
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 93.86%
Advertising: 0.64%
96,500 @ Getty Images, Inc. $ 3,088,000
------------
Apparel: 0.91%
136,800 @ Jones Apparel Group, Inc. 4,403,250
------------
Banks: 1.03%
111,800 TCF Financial Corp. 4,982,087
------------
Biotechnology: 6.35%
23,302 @ Diacrin, Inc. 116,510
102,600 @ Enzon, Inc. 6,367,613
92,200 @ Genentech, Inc. 7,514,300
66,000 @ Genzyme Corp. -- General Division 5,935,875
68,100 @ Invitrogen Corp. 5,882,137
11,100 @ Millennium Pharmaceuticals 686,813
47,300 @ Protein Design Labs, Inc. 4,109,187
------------
30,612,435
------------
Commercial Services: 2.10%
127,100 @ Concord EFS, Inc. 5,584,456
171,600 @ Robert Half Int'l, Inc. 4,547,400
------------
10,131,856
------------
Computers: 2.86%
81,400 @ Brocade Communication Systems 7,473,537
72,275 @ Veritas Software Corp. 6,324,063
------------
13,797,600
------------
Electric: 4.09%
66,700 @ AES Corp. 3,693,512
63,900 Cinergy Corp. 2,244,488
163,200 Nisource, Inc. 5,018,400
193,700 PPL Corp. 8,752,819
------------
19,709,219
------------
Electronics: 6.19%
103,500 Applera Corp. 9,735,468
47,400 PerkinElmer, Inc. 4,977,000
134,900 @ Sawtek, Inc. 6,230,694
299,300 @ Thermo Electron Corp. 8,904,175
------------
29,847,337
------------
Gas: 0.66%
75,100 Keyspan Corp. 3,182,363
------------
Healthcare -- Services: 6.91%
335,300 @ Community Health Systems, Inc. $ 11,735,500
140,900 @ Health Management Associates, Inc. 2,923,675
233,200 @ Oxford Health Plans 9,211,400
66,500 @ Quest Diagnostics, Inc. 9,443,000
------------
33,313,575
------------
Insurance: 7.28%
213,200 ACE, Ltd. 9,047,675
43,800 Fidelity National Financial, Inc. 1,617,862
82,700 PMI Group, Inc. 5,597,756
68,800 Progressive Corp. -- Ohio 7,129,400
91,800 Radian Group, Inc. 6,890,738
54,800 XL Capital, Ltd. 4,788,150
------------
35,071,581
------------
Internet: 1.08%
70,200 @ VeriSign, Inc. 5,207,963
------------
Leisure Time: 0.66%
120,100 Royal Caribbean Cruises, Ltd. 3,176,645
------------
Machinery -- Diversified: 0.84%
88,900 Deere & Co. 4,072,731
------------
Media: 3.12%
394,200 @ Charter Communications, Inc. 8,943,412
238,200 @ Hispanic Broadcasting Corp. 6,074,100
------------
15,017,512
------------
Oil & Gas Producers: 5.97%
104,300 Ensco Int'l, Inc. 3,552,719
183,400 EOG Resources, Inc. 10,029,687
134,500 @ Global Marine, Inc. 3,816,437
122,100 @ Nabors Industries, Inc. 7,222,215
90,100 Noble Affiliates, Inc. 4,144,600
------------
28,765,658
------------
Oil & Gas Services: 7.55%
140,000 Baker Hughes, Inc. 5,818,750
115,700 @ BJ Services Co. 7,968,837
94,400 @ Cooper Cameron Corp. 6,236,300
251,400 @ National-Oilwell, Inc. 9,726,038
141,000 @ Weatherford Int'l, Inc. 6,662,250
------------
36,412,175
------------
Pharmaceuticals: 7.68%
20,500 @ Abgenix, Inc. $ 1,210,781
154,800 @ COR Therapeutics, Inc. 5,447,025
86,200 @ Express Scripts, Inc. 8,813,950
32,800 @ Forest Laboratories, Inc. 4,358,300
104,100 @ Gilead Sciences, Inc. 8,633,795
47,900 @ OSI Pharmaceuticals, Inc. 3,837,987
66,300 @ Vertex Pharmaceuticals, Inc. 4,740,450
------------
37,042,288
------------
Pipelines: 4.49%
123,100 EL Paso Energy Corp. 8,817,037
68,200 Equitable Resources, Inc. 4,552,350
158,700 Kinder Morgan, Inc. 8,282,156
------------
21,651,543
------------
Retail: 4.00%
267,300 Family Dollar Stores 5,730,244
81,600 @ Kohls Corp. 4,977,600
130,300 @ Starbucks Corp. 5,765,775
100,400 TJX Cos., Inc. 2,786,100
------------
19,259,719
------------
Semiconductors: 3.71%
16,400 @ Cirrus Logic, Inc. 307,500
98,300 @ Novellus Systems, Inc. 3,532,656
41,500 @ Qlogic Corp. 3,195,500
43,300 @ Teradyne, Inc. 1,612,925
107,900 @ Triquint Semiconductor, Inc. 4,713,882
81,800 @ Vitesse Semiconductor Corp. 4,524,563
------------
17,887,026
------------
Software: 6.21%
139,500 @ Acxiom Corp. 5,431,781
176,600 @ Cadence Design Systems, Inc. 4,856,500
144,700 @ Cerner Corp. 6,692,375
238,600 @ Citrix Systems, Inc. 5,368,500
74,400 @ Manugistics Group, Inc. 4,240,800
136,700 @ Peregrine Systems, Inc. 2,699,825
45,300 @ Progress Software Corp. 654,019
------------
29,943,800
------------
See Accompanying Notes to Financial Statements
80
<PAGE>
Pilgrim
MidCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Telecommunications: 9.53%
290,000 @ Aeroflex, Inc. $ 8,360,156
69,500 @ Comverse Technology, Inc. 7,549,438
114,200 @ Crown Castle Int'l Corp. 3,090,538
64,500 @ Emulex Corp. 5,155,969
30,900 Newport Corp. 2,429,030
159,200 @ Powerwave Technologies, Inc. 9,313,200
129,200 @ RF Micro Devices, Inc. 3,544,925
83,400 @ Time Warner Telecom, Inc. 5,290,687
102,600 @ WinStar Communications, Inc. 1,199,137
------------
45,933,080
------------
Total Common Stock
(Cost $ 369,900,966) 452,509,443
------------
Total Long-Term Investments
(Cost $ 369,900,966) 452,509,443
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 7.17%
Repurchase Agreement: 7.17%
$34,558,000 State Street Bank & Trust Repurchase
Agreement, 5.750%, Due 01/02/01
(Collateralized by $26,935,000 U.S.
Treasury Bonds, 8.000%, Due 11/15/21,
Market Value $35,252,151) $ 34,558,000
------------
Total Short-Term Investments
(Cost $34,558,000) 34,558,000
------------
Total Investments in Securities
(Cost $ 404,458,966)* 101.03% $487,067,443
Other Assets and Liabilities-Net -1.03% (4,971,988)
------ ------------
Net Assets 100.00% $482,095,455
====== ============
@ Non-income producing security
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $102,976,668
Gross Unrealized Depreciaition (20,368,191)
------------
Net Unrealized Appreciation $ 82,608,477
============
See Accompanying Notes to Financial Statements
81
<PAGE>
Pilgrim
SmallCap
Growth
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 95.04%
Advertising: 0.73%
100,700 @ Getty Images, Inc. $ 3,222,400
------------
Apparel: 2.08%
170,002 @ Coach, Inc. 4,887,558
65,600 @ Timberland Co. 4,387,000
------------
9,274,558
------------
Banks: 2.29%
61,000 Commerce Bancorp, Inc. 4,170,875
135,500 TCF Financial Corp. 6,038,219
------------
10,209,094
------------
Biotechnology: 8.18%
89,000 @ Arena Pharmaceuticals, Inc. 1,379,500
166,200 @ Arqule, Inc. 5,318,400
191,600 @ Curis, Inc. 1,700,450
20,767 @ Diacrin, Inc. 103,835
131,000 @ Eden Bioscience Corp. 3,921,814
42,500 @ Enzon, Inc. 2,637,656
67,100 @ Genaissance Pharmaceuticals 1,207,800
94,900 @ Invitrogen Corp. 8,196,987
91,400 @ Millenium Pharmaceuticals 5,655,375
41,900 @ Myriad Genetics, Inc. 3,467,225
33,300 @ Protein Design Labs, Inc. 2,892,938
------------
36,481,980
------------
Chemicals: 0.03%
3,600 Symyx Technologies, Inc. 129,600
------------
Commercial Services: 2.36%
429,300 @ Caremark Rx 5,822,382
36,600 @ On Assignment, Inc. 1,043,100
73,900 @ Pharmaceutical Product Development, Inc. 3,671,906
------------
10,537,388
------------
Computers: 2.87%
35,200 @ Affiliated Computer Services, Inc. 2,136,200
162,700 @ Carreker Corp. 5,653,825
117,800 @ Manhattan Associates, Inc. 5,021,225
------------
12,811,250
------------
Diversified Financial Services: 1.21%
176,000 Heller Financial, Inc. $ 5,401,000
------------
Electric: 0.82%
132,700 Kansas City Power & Light 3,640,956
------------
Electrical Components & Equipment: 0.10%
15,200 @ Wilson Great Batch Technology 429,400
------------
Electronics: 1.67%
32,900 @ Molecular Devices Corp. 2,251,594
81,300 @ Sawtek, Inc. 3,755,044
42,900 @ Varian, Inc. 1,453,238
------------
7,459,876
------------
Energy-Alternate Sources: 0.15%
86,800 @ H PWR Corp. 667,275
------------
Engineering & Construction: 0.28%
35,025 @ Dycom Industries, Inc. 1,258,711
------------
Entertainment: 1.44%
86,600 @ Macrovision Corp. 6,409,753
------------
Environmental Control: 1.48%
198,900 @ Waste Connections, Inc. 6,576,131
------------
Healthcare-Products: 3.42%
191,500 @ Curon Medical, Inc. 768,991
64,600 @ Henry Schein, Inc. 2,236,775
103,300 @ Inverness Medical Technology, Inc. 4,022,244
81,500 @ Kensey Nash Corp. 825,187
63,900 @ Resmed, Inc. 2,548,013
299,800 @ Steris Corp. 4,834,275
------------
15,235,485
------------
Healthcare Services: 17.57%
3,300 @ Apria Healthcare Group, Inc. $ 98,175
194,600 @ Community Health Systems, Inc. 6,811,000
65,300 @ Coventry Health Care, Inc. 1,742,694
83,200 @ Impath, Inc. 5,532,800
63,000 @ Laboratory Corp. of America Holdings 11,088,000
185,800 @ Lifepoint Hospitals, Inc. 9,313,225
185,300 @ Manor Care, Inc. 3,821,813
151,900 @ Oxford Health Plans, Inc. 6,000,050
191,850 @ Province Healthcare Co. 7,554,094
69,800 @ Quest Diagnostics, Inc. 9,911,600
47,600 @ Specialty Laboratories, Inc. 1,576,750
237,300 @ Triad Hospitals, Inc. 7,727,081
92,100 @ Trigon Healthcare, Inc. 7,166,531
------------
78,343,813
------------
Insurance: 1.24%
73,400 Radian Group, Inc. 5,509,588
------------
Internet: 1.69%
31,600 @ Globix Corp. 86,900
27,400 @ Indymac Bancorp, Inc. 808,300
64,800 @ Internet Security Systems, Inc. 5,082,750
28,425 @ Openwave Systems, Inc. 1,362,639
7,300 @ Retek, Inc. 177,938
------------
7,518,527
------------
Machinery-Diversified: 1.53%
32,900 @ Brooks Automation, Inc. 923,256
259,400 Stewart & Stevenson Services 5,889,191
------------
6,812,447
------------
Media: 1.32%
222,100 @ Entravision Communications Corp. 4,081,088
69,200 @ Pegasus Communications Corp. 1,781,900
------------
5,862,988
------------
See Accompanying Notes to Financial Statements
82
<PAGE>
Pilgrim
SmallCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Metal Fabricate/Hardware: 1.29%
115,200 @ Shaw Group, Inc. $ 5,760,000
------------
Oil & Gas Producers: 8.76%
329,400 Cross Timbers Oil Co. 9,140,850
91,700 @ HS Resources, Inc. 3,885,787
125,600 @ Marine Drilling Cos., Inc. 3,359,800
36,647 @ Nabors Industries, Inc. 2,167,670
144,100 @ Precision Drilling Corp. 5,412,756
216,750 @ Pride Int'l, Inc. 5,337,468
149,400 @ Spinnaker Exploration Co. 6,349,500
155,000 @ Westport Resources Corp. 3,400,313
------------
39,054,144
------------
Oil & Gas Services: 2.40%
329,400 BJ Services Co. 2,865,200
91,700 @ Grant Pride, Inc. 2,053,350
125,600 @ National Oilwell, Inc. 2,688,781
36,647 @ Universal Compression Holdings 3,090,375
------------
10,697,706
------------
Pharmaceuticals: 9.39%
18,100 @ Abgenix, Inc. 1,069,031
99,700 @ Aerogen, Inc. 1,059,312
232,900 @ Alliance Pharmaceutical Corp. 2,008,762
99,200 @ Cor Therapeutics, Inc. 3,490,600
108,500 @ Esperion Therapeutics 1,179,937
161,100 @ Inspire Phamaceutical, Inc. 4,198,669
41,600 @ Intrabiotics Pharmaceuticals 400,400
151,678 @ King Pharmaceuticals, Inc. 7,839,857
126,800 @ Neopharm, Inc. 4,802,550
39,700 @ OSI Pharmaceuticals, Inc. 3,180,962
148,800 @ Syncor Int'l Corp. 5,412,600
66,926 @ Trimeris, Inc. 3,672,564
50,000 @ Vertex Pharmaceuticals, Inc. 3,575,000
------------
41,890,244
------------
Pipelines: 0.65%
96,500 Questar Corp. $ 2,901,031
------------
Retail: 8.44%
290,100 @ Abercrombie & Fitch Co. 5,802,000
113,400 @ American Eagle Outfitters, Inc. 4,791,150
146,000 @ California Pizza Kitchen, Inc. 4,124,500
55,300 @ Coldwater Creek, Inc. 1,717,756
191,200 @ Hot Topic, Inc. 3,142,850
13,400 @ Krispy Kreme Doughnuts, Inc. 1,112,200
77,000 @ Linens 'N Things, Inc. 2,127,125
214,400 @ Mens Wearhouse, Inc. 5,842,401
114,400 @ PF Chang's China Bistro, Inc. 3,596,451
81,900 TJX Cos., Inc. 2,272,725
151,600 @ Wet Seal, Inc. 3,117,275
------------
37,646,433
------------
Semiconductors: 3.28%
84,100 @ Alpha Industries, Inc. 3,111,700
88,500 @ Celeritek, Inc. 3,374,062
80,500 @ Photronics, Inc. 1,886,719
60,500 @ Qlogic Corp. 4,658,500
53,200 @ Rudolph Technologies, Inc. 1,605,975
------------
14,636,956
------------
Software: 5.12%
75,300 @ Cerner Corp. 3,482,625
38,000 @ Documentum, Inc. 1,888,125
175,400 @ Manugistics Group, Inc. 9,997,800
50,100 @ Numerical Technologies, Inc. 904,932
143,100 @ OTG Software, Inc. 2,309,723
4,400 @ Quest Software, Inc. 123,475
121,000 @ Serena Software, Inc. 4,142,359
------------
22,849,039
------------
Telecommunication: 3.06%
46,526 @ ADC Telecommunications, Inc. $ 843,284
37,400 @ Advanced Fibre Communications 675,537
157,400 @ Aeroflex, Inc. 4,537,547
96,500 @ Ixia 2,207,437
40,400 @ Proxim, Inc. 1,737,200
63,400 @ Stanford Microdevices, Inc. 2,282,400
78,500 @ Stratos Lightwave, Inc. 1,339,406
------------
13,622,811
------------
Transportation: 0.19%
22,950 @ Forward Air Corp. 856,321
------------
Total Common Stocks
(Cost $307,078,738) 423,706,905
------------
Total Long-Term Investments
(Cost $307,078,738) 423,706,905
------------
See Accompanying Notes to Financial Statements
83
<PAGE>
Pilgrim
SmallCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 5.27%
Repurchase Agreement: 5.27%
$23,493,000 State Street Bank & Trust Repurchase
Agreement 5.750% due 01/02/01
(Collateraized by $18,310,000 U.S.
Treasury Bonds, 8.000% Due 11/15/21,
Market Value $23,963,872) $ 23,493,000
------------
Total Short-Term Investments
(Cost $23,493,000) 23,493,000
------------
Total Investments in Securities
(Cost $ 330,571,738)* 100.31% $447,199,905
Other Assets and Liabilities-Net -0.31% (1,364,431)
------ ------------
Net Assets 100.00% $445,835,474
====== ============
@ Non-income producing security
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $135,666,162
Gross Unrealized Depreciation (19,037,995)
------------
Net Unrealized Appreciation $116,628,167
============
See Accompanying Notes to Financial Statements
84
<PAGE>
Pilgrim
Government
Securities Income
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Principal Market
Amount Rate Maturity Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 76.84%
Federal Home Loan
Mortgage Corportation: 29.33%
$ 9,877,625 6.500% due 06/01/16 $ 9,923,951
9,109,596 6.500% due 06/01/19 9,096,752
1,896,455 7.000% due 06/01/29 1,900,590
3,667,399 7.000% due 11/01/14 3,706,347
3,809,974 7.500% due 01/01/30 3,868,305
6,091,150 7.500% due 12/01/14 6,218,699
3,017,591 8.000% due 01/01/30 3,093,966
96,022 8.500% due 06/01/17 98,752
75,599 9.000% due 05/01/21 77,819
82,878 9.000% due 10/01/06 86,011
78,075 9.500% due 06/01/14 80,486
3,661 9.500% due 10/01/05 3,864
362,671 9.500% due 12/01/05 382,730
59,243 9.905% due 07/01/20 62,903
------------
Total Federal Home Loan
Mortgage Corporation 38,601,175
------------
Federal National Mortgage
Corportation: 30.42%
4,068,740 6.000% due 05/01/19 3,981,303
3,925,280 6.160% due 03/01/06 3,876,214
2,751,789 6.350% due 01/01/04 2,768,129
10,396,655 6.500% due 01/01/26 10,295,912
927,626 6.500% due 06/01/14 927,329
589,854 6.500% due 08/01/15 589,866
2,704,473 6.500% due 10/01/28 2,668,991
2,525,386 6.500% due 12/01/18 2,508,163
1,704,648 7.000% due 03/01/15 1,725,172
1,935,381 7.500% due 05/01/28 1,965,012
231,600 8.000% due 05/01/23 239,222
2,207,620 8.500% due 05/01/15 2,275,901
57,739 8.500% due 07/01/21 58,352
1,632,394 8.500% due 08/01/11 1,682,884
776,624 8.500% due 08/01/15 801,981
1,938,125 8.500% due 09/01/15 2,001,405
267,115 8.500% due 11/01/17 274,287
62,344 9.000% due 08/01/17 64,581
74,648 9.250% due 01/01/09 77,095
24,426 9.250% due 08/01/16 25,754
61,862 9.250% due 10/01/16 64,983
52,957 9.250% due 11/01/16 55,837
57,523 9.250% due 12/01/15 59,616
90,269 9.750% due 12/01/08 95,125
33,869 10.000% due 08/01/07 34,477
44,829 10.000% due 09/01/12 47,967
122,986 11.000% due 04/01/17 128,578
13,778 11.000% due 07/01/17 13,853
73,881 11.000% due 09/01/17 77,610
311,581 11.500% due 06/01/19 350,818
33,466 12.000% due 05/01/07 33,858
52,549 12.500% due 08/01/07 54,413
4,644 13.500% due 08/01/07 4,681
44,204 13.500% due 08/01/07 45,550
$ 11,808 13.500% due 08/01/12 $ 13,790
111,375 13.500% due 09/01/17 130,412
------------
Total Federal National
Mortgage Association 40,019,121
------------
Government National Mortgage
Association: 17.09%
3,927,210 6.500% due 02/15/26 3,894,064
6,681,024 6.500% due 07/20/29 6,582,946
446,850 7.000% due 02/20/16 451,153
384,587 7.000% due 03/20/17 388,310
2,716,120 7.000% due 09/15/23 2,736,491
405,825 7.500% due 08/15/23 414,067
6,347,036 7.500% due 12/15/28 6,458,109
249,482 8.000% due 03/15/23 256,964
344,444 8.000% due 10/15/24 354,237
12,486 9.000% due 01/15/17 13,173
12,421 9.000% due 01/15/17 13,104
11,154 9.000% due 02/15/17 11,767
91,360 9.000% due 03/15/22 96,042
40,221 9.000% due 05/15/16 42,433
25,517 9.000% due 07/15/16 26,846
11,700 9.000% due 08/15/16 12,344
133,827 9.000% due 09/15/13 140,607
15,214 9.000% due 09/15/16 16,050
2,001 9.000% due 09/15/16 2,112
30,588 9.000% due 09/15/16 32,270
58,638 9.000% due 10/15/16 61,863
50,755 9.000% due 10/15/16 53,546
33,298 9.000% due 12/15/16 35,129
90,268 9.250% due 04/15/17 96,247
88,849 9.250% due 05/15/21 94,513
133,904 9.250% due 12/15/16 142,774
44,794 13.000% due 10/20/14 50,684
------------
Total Government National
Mortgage Association 22,477,845
------------
Total U.S. Government
Agency Obligations 101,098,141
------------
U.S. TREASURY NOTES: 6.33%
4,000,000 5.750% due 11/15/05 4,131,408
4,000,000 5.750% due 08/15/10 4,193,440
------------
Total U.S. Treasury Notes 8,324,848
------------
Total Long-Term Investments
(Cost $107,458,866) 109,422,989
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 4.29%
Repurchase Agreement: 4.29%
$ 5,647,000 State Street Bank & Trust Repurchase
Agreement, 5.750% due 01/02/01
(Collateralized by $4,675,000 U.S.
Treasury Notes, 7.25% Due 08/15/22,
Market Value $5,764,860) $ 5,647,000
------------
Total Short-Term Investments
(Cost $5,647,000) 5,647,000
------------
Total Investments in Securities
(Cost $ 113,105,866)* 87.46% $115,069,989
Other Assets and Liabilities-Net 12.54% 16,494,586
------ ------------
Net Assets 100.00% $131,564,575
====== ============
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 2,241,264
Gross Unrealized Depreciation (277,141)
------------
Net Unrealized Appreciation $ 1,964,123
============
See Accompanying Notes to Financial Statements
85
<PAGE>
Pilgrim
Strategic
Income
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 23.66%
Airlines: 0.47%
60,000 Atlas Air, Inc., 9.375%, due 11/15/06 $ 59,100
-----------
Banks: 2.77%
155,000 @@ Banco Santander-Chile, 6.500%,
due 11/01/05 150,396
200,000 Wachovia Corp., 6.605%, due 10/01/25 200,924
-----------
351,320
-----------
Commercial Services: 1.15%
160,000 Neff Corp., 10.250%, due 06/01/08 71,200
25,000 United Rentals, Inc., 8.800%, due 08/15/08 18,750
75,000 United Rentals, Inc., 9.000%, due 04/01/09 56,250
-----------
146,200
-----------
Diversified Financial
Services: 2.61%
60,000 # @@ Cerro Negro Finance, Ltd., 7.330%,
due 12/01/09 55,093
200,000 Household Finance Corp., 8.000%,
due 05/09/05 209,913
100,000 Madison River Capital, LLC/Madison
River Finance Corp., 13.250%,
due 03/01/10 65,500
-----------
330,506
-----------
Electric: 1.75%
50,000 AES Corp., 9.375%, due 09/15/10 51,125
55,000 Calpine Corp., 8.625%, due 08/15/10 53,267
100,000 East Coast Power, LLC, 7.536%,
due 06/30/17 97,453
20,000 @@ Enersis SA (Chile), 6.600%,
due 12/01/26 19,712
-----------
221,557
-----------
Electronics: 1.27%
95,000 @@ Celestica Int'l, Inc., 10.500%,
due 12/31/06 $ 98,800
65,000 @@ Flextronics Int'l, Ltd., 8.750%,
[]due 10/15/07 61,750
-----------
160,550
-----------
Forest Products and Paper: 0.33%
100,000 Doman Industries, Ltd., 8.750%,
due 03/15/04 42,500
-----------
Healthcare-Services: 0.38%
50,000 HCA-The Healthcare Co., 7.250%,
due 05/20/08 47,705
-----------
Holding Companies-Diversified: 0.40%
50,000 # Kansas City Southern Railway, 9.500%,
due 10/01/08 51,250
-----------
Home Builders: 0.59%
25,000 Lennar Corp., 7.625%, due 03/01/09 23,128
50,000 Lennar Corp., 9.950%, due 05/01/10 51,000
-----------
74,128
-----------
Iron/Steel: 0.85%
25,000 AK Steel Corp., 7.875%, due 02/15/09 22,187
65,000 AK Steel Corp., 9.125%, due 12/15/06 61,913
25,000 Armco, Inc., 9.000%, due 09/15/07 23,000
-----------
107,100
-----------
Lodging: 0.40%
25,000 Prime Hospitality Corp., 9.750%,
due 04/1/07 25,125
25,000 Station Casinos, Inc., 9.875%,
due 07/1/10 25,656
-----------
50,781
-----------
Machinery-Construction and Mining: 0.10%
15,000 Terex Corp., 8.875%, due 04/01/08 12,919
-----------
Media: 4.99%
85,000 Adelphia Communications, 10.875%,
due 10/01/10 $ 82,450
600,000 Charter Communications Holdings,
LLC/Charter Holdings Cap. Corp.,
11.750%, due 01/15/10 348,000
75,000 Echostar DBS Corp., 9.250%,
due 02/01/06 72,937
450,000 @@ UPC, 13.750%, due 02/01/10 128,250
-----------
631,637
-----------
Oil and Gas Producers: 1.01%
200,000 United Refining Co., 10.750%,
due 06/15/07 128,000
-----------
Packaging and Containers: 0.64%
135,000 Owens-Illinois, Inc., 7.850%,
due 05/15/04 81,000
-----------
Retail - Discount: 0.56%
175,000 Hollywood Entertainment Corp.,
10.625%, due 08/15/04 70,875
-----------
Telecommunications: 3.21%
200,000 @@ Call-Net Enterprises, Inc., 8.000%,
due 08/15/08 78,000
25,000 Fairchild Semiconductor Int'l, Inc.,
10.125%, due 03/15/07 23,250
60,000 Global Crossing Holding Ltd., 9.500%,
due 11/15/09 57,000
100,000 MGC Communications, Inc./Mpower
Communications, 13.000%, due 04/01/10 45,000
200,000 Motorola, Inc., 6.500%, due 09/01/25 203,286
-----------
406,536
-----------
See Accompanying Notes to Financial Statements
86
<PAGE>
Pilgrim
Strategic
Income
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Transportation: 0.18%
25,000 Gulfmark Offshore, Inc., 8.750%,
due 06/01/08 $ 23,313
------------
Total Corporate Bonds
(Cost $3,161,519) 2,996,977
------------
U.S. TREASURY OBLIGATIONS: 31.10%
Governments: 31.10%
1,000,000 U.S. Treasury Note, 6.000%, due 08/15/04 1,028,280
1,150,000 U.S. Treasury Note, 6.500%, due 02/15/10 1,258,169
600,000 U.S. Treasury Bond, 7.250%, due 05/15/16 705,750
200,000 U.S. Treasury Note, 6.750%, due 05/15/05 213,031
675,000 U.S. Treasury Bond, 6.125%, due 08/15/29 734,171
------------
3,939,401
------------
Total U.S. Treasury Obligations
(Cost $ 3,734,228) 3,939,401
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 28.76%
Federal Home Loan
Mortgage Corporation: 6.04%
89,983 5.500%, due 02/01/14 87,565
10,750 9.000%, due 06/01/06 11,287
174,612 5.500%, due 01/01/14 169,919
450,741 7.000%, due 06/01/29 451,727
12,087 10.000%, due 10/01/03 12,725
30,555 9.500%, due 11/01/05 32,093
------------
765,316
------------
Federal National Mortgage
Association: 16.11%
200,000 6.625%, due 11/15/30 211,594
500,000 7.250%, due 01/15/10 542,970
316,143 7.000%, due 03/01/15 319,602
393,236 6.500%, due 08/01/15 393,110
15,938 9.500%, due 05/01/07 16,820
79,910 6.500%, due 02/01/09 79,935
14,178 10.000%, due 10/01/04 $ 15,051
13,008 9.500%, due 06/01/05 13,728
12,958 9.500%, due 07/01/06 13,675
143,973 8.000%, due 08/01/30 147,526
275,179 6.350%, due 01/01/04 286,186
------------
2,040,197
------------
Government National Mortgage
Association: 6.61%
296,268 7.500%, due 11/15/29 301,358
141,954 8.000%, due 07/15/30 145,568
390,584 6.500%, due 06/15/29 386,189
647 11.500%, due 07/15/13 711
3,510 8.500%, due 02/15/21 3,640
350 11.500%, due 02/15/13 390
------------
837,856
------------
Total U.S. Government Agency Obligations
(Cost $3,514,471) 3,643,369
------------
Collateralized Mortgage Obligations and
Asset-Backed Securities: 6.34%
Mortgage -- Commercial: 3.93%
210,000 # Allied Capital Commercial Mortgage
Trust, 6.710%, due 12/25/04 210,695
279,599 GMAC Commercial Mortgage Securities,
Inc., 6.974%, due 05/15/05 287,670
------------
498,365
------------
Mortgage -- Residential: 2.41%
300,000 Emergent Home Equity Loan Trust,
7.080%, due 12/15/28 305,516
------------
Total CMO's and Asset Backed Securities
(Cost $ 777,159) 803,881
------------
PREFERRED STOCK: 1.04%
Telecommunications: 1.04%
2,853 XO Communications, Inc. $ 131,958
------------
Total Preferred Stock
(Cost $240,842) 131,958
------------
MUTUAL FUNDS: 3.82%
Investment Companies: 3.82%
64,500 ++ Pilgrim Prime Rate Trust 483,750
------------
Total Mutual Funds
(Cost $610,654) 483,750
------------
Total Long-Term Investments:
(Cost $ 12,038,873) 11,999,336
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 6.60%
Repurchase Agreements: 6.60%
$ 836,000 State Street Repurchase Agreement,
5.750% Due 01/02/01 (Collateralized
by $857,255 U.S. Treasury Bond, 8.000%
Market Value $655,000 Due 11/15/21) $ 836,000
------------
Total Short-Term Investments
(Cost $836,000) 836,000
------------
Total Investments in Securities
(Cost $ 12,874,872)* 101.32% $ 12,835,336
Other Assets and
Liabilities-Net -1.32% (167,578)
------ ------------
Net Assets 100.00% $ 12,667,758
====== ============
++ Related party.
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign issuer.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 399,500
Gross Unrealized Depreciation (439,037)
------------
Net Unrealized Depreciation $ (39,537)
============
See Accompanying Notes to Financial Statements
87
<PAGE>
Pilgrim
High Yield
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 91.31%
Airlines: 3.76%
2,500,000 Amtran, Inc., 10.500%, due 08/01/04 $ 2,150,000
4,000,000 Atlas Air, Inc., 9.375%, due 11/15/06 3,940,000
2,000,000 Worldwide Flight Services, Inc.,
12.250%, due 08/15/07 1,410,000
------------
7,500,000
------------
Automotive: 1.85%
4,050,000 Lear Corp., 8.110%, due 05/15/09 3,686,359
------------
Building Materials: 0.89%
2,000,000 Dayton Superior Corp., 13.000%,
due 06/15/09 1,780,000
------------
Broadcasting: 3.00%
3,000,000 Sinclair Broadcast Group, Inc., 10.000%,
due 09/30/05 2,925,000
3,025,000 Young Broadcasting, Inc., 11.750%,
due 11/15/04 3,062,813
------------
5,987,813
------------
Cable: 8.42%
4,000,000 Charter Communications, 8.625%,
due 04/01/09 3,650,000
2,000,000 Echostar DBS Corp., 9.375%, due 02/01/09 1,950,000
2,000,000 Echostar DBS Corp., 9.250%, due 02/01/06 1,945,000
3,500,000 Intermedia Communications, Inc., 9.500%,
due 03/01/09 2,467,500
3,000,000 Pegasus Communications Corp.,
9.750%, due 12/01/06 2,805,000
3,750,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 3,960,938
------------
16,778,438
------------
Capital Goods: 1.82%
2,440,000 Terex Corp., 8.875%, due 04/01/08 $ 2,113,650
595,000 Terex Corp. series D, 8.875%, due 04/01/08 515,419
4,000,000 Transportation Mfg. Operations, 11.250%,
due 05/01/09 1,000,000
------------
3,629,069
------------
Chemicals: 1.46%
3,000,000 Lyondell Chemical Co., 9.875%, due 05/01/07 2,910,000
------------
Consumer Products: 1.40%
3,000,000 Simmons Co., 10.250%, due 03/15/09 2,790,000
------------
Containers: 1.11%
2,160,000 Owens Ill, Inc., 7.850%, due 05/15/04 1,306,800
900,000 Stone Container Corp., 10.750%, due 04/01/02 898,875
------------
2,205,675
------------
Electrical Utilities: 3.42%
900,000 AES Corp., 9.500%, due 06/01/09 936,000
2,675,000 AES Corp., 9.375%, due 09/15/10 2,748,563
3,225,000 Calpine Corp., 8.625%, due 08/15/10 3,128,395
------------
6,812,958
------------
Energy: 7.01%
1,360,000 Clark Refining & Marketing, Inc.,
8.375%, due 11/15/07 1,026,800
1,325,000 @@# Compagnie Generale De Geophysi, 10.625%,
due 11/15/07 1,364,750
5,575,000 Energy Corp. America, 9.500%, due 05/15/07 4,446,063
3,425,000 Parker Drilling Co., 9.750%, due 11/15/06 3,459,250
1,500,000 RBF Finance Co., 11.000%, due 03/15/06 1,743,750
3,100,000 United Refining Co., 10.750%, due 06/15/07 1,922,000
------------
13,962,613
------------
Environmental: 2.33%
4,900,000 Allied Waste North America, Inc.,
10.000%, due 08/01/09 $ 4,642,750
------------
Entertainment: 0.41%
2,000,000 Hollywood Entertainment Corp., 10.625%,
due 08/15/04 810,000
------------
Finance: 3.45%
3,000,000 Neff Corp., 10.250%, due 06/01/08 1,335,000
3,000,000 Penhall Int'l Corp., 12.000%, due 08/01/06 2,700,000
325,000 United Rentals, Inc., 8.800%, due 08/15/08 245,375
1,400,000 United Rentals, Inc., 9.250%, due 01/15/09 1,071,000
2,025,000 United Rentals, Inc., 9.000%, due 04/01/09 1,528,875
------------
6,880,250
------------
Food/Beverage: 1.55%
3,875,000 Packaged Ice, Inc., 9.750%, due 02/01/05 3,080,625
------------
Gaming: 7.01%
1,750,000 # Anchor Gaming, 9.875%, due 10/15/08 1,806,875
2,125,000 # Autotote Corp., 12.500%, due 08/15/10 2,008,125
1,000,000 Hollywood Casino Shreveport, 13.000%,
due 08/01/06 1,070,000
2,000,000 Int'l Game Technology, 8.375%, due 05/15/09 2,005,000
3,250,000 Park Place Enertainment Corp., 8.875%,
due 09/15/08 3,298,750
2,675,000 Station Casinos, Inc., 9.875%, due 07/01/10 2,758,594
1,000,000 Station Casinos, Inc., 9.750%, due 04/15/07 1,017,500
------------
13,964,844
------------
See Accompanying Notes to Financial Statements
88
<PAGE>
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)(Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Health Care: 2.03%
2,100,000 Columbia/HCA Healthcare Corp., 7.250%,
due 05/20/08 $ 2,006,390
2,000,000 Tenet Healthcare Corp., 8.125%, due 12/01/08 2,030,000
------------
4,036,390
------------
Homebuilders: 2.75%
3,000,000 D R Horton, Inc., 8.375%, due 06/15/04 2,895,000
1,500,000 Lennar Corp., 9.950%, due 05/01/10 1,537,500
1,125,000 Lennar Corp., 7.625%, due 03/01/09 1,042,289
------------
5,474,789
------------
Hotels: 1.50%
1,800,000 HMH Properties, Inc., 7.875%, due 08/01/08 1,737,000
1,250,000 Prime Hospitality Corp., 9.750%,
due 04/01/07 1,262,500
------------
2,999,500
------------
Internet - DSL: 0.67%
5,250,000 Rhythms Netconnections, Inc., 12.750%,
due 04/15/09 1,338,750
------------
Internet - ISP: 2.48%
3,000,000 # Colo.Com, 13.875%, due 03/15/10 1,350,000
3,000,000 Exodus Communications, Inc., 11.250%,
due 07/01/08 2,685,000
1,425,000 Globix Corp., 12.500%, due 02/01/10 534,375
5,000,000 North Point Communications, 12.875%,
due 02/15/10 375,000
------------
4,944,375
------------
Paper: 0.46%
2,175,000 @@ Doman Industries, Ltd., 8.750%, due 03/15/04 924,375
------------
Rail Transportation: 1.03%
2,000,000 # Kansas City Southern Railway Co., 9.500%,
due 10/01/08 2,060,000
------------
Specialty Retail: 3.17%
2,000,000 Big 5 Corp., 10.875%, due 11/15/07 $ 1,765,000
1,875,000 JoAnn Stores, Inc., 10.375%, due 05/01/07 1,115,625
1,000,000 Musicland Group, Inc., 9.875%, due 03/15/08 1,005,000
3,088,000 Tuesday Morning Corp., 11.000%, due 12/15/07 2,424,080
------------
6,309,705
------------
Steel: 2.22%
1,705,000 AK Steel Corp., 9.125%, due 12/15/06 1,632,537
1,875,000 AK Steel Corp., 7.875%, due 02/15/09 1,673,438
325,000 Armco, Inc., 9.000%, due 09/15/07 300,625
1,400,000 Metals USA, Inc., 8.625%, due 02/15/08 819,000
------------
4,425,600
------------
Technology: 5.45%
500,000 Amkor Technology, Inc., 9.250%, due 05/01/06 473,750
1,975,000 Fairchild Semiconductor Corp., 10.125%,
due 03/15/07 1,846,625
2,795,000 @@ Flextronics Int'l, Ltd., 8.750%, due 10/15/07 2,669,225
2,500,000 @@# Seagate Technology, 12.500%, due 11/15/07 2,375,000
5,825,000 Zilog, Inc., 9.500%, due 03/01/05 3,495,000
------------
10,859,600
------------
Transportation: 1.92%
3,055,000 Gulfmark Offshore, Inc., 8.750%,
due 06/01/08 2,864,063
1,000,000 # Travelcenters America, Inc., 12.750%,
due 05/01/09 970,000
------------
3,834,063
------------
Wireless - Cellular: 3.21%
2,350,000 Crown Castle Int'l Corp., 9.500%,
due 08/01/11 $ 2,320,624
4,350,000 Nextel Communications, 9.375%, 11/15/09 4,067,250
------------
6,387,874
------------
Wireless - Sat/Fixed: 1.09%
5,000,000 @@ Call Net Enterprises, Inc., 9.375%,
due 05/15/09 2,175,000
------------
Wireline - CLEC: 5.20%
2,500,000 Adelphia Communications Corp., 10.875%,
due 10/01/10 2,425,000
2,000,000 Hyperion Telecommunication, Inc., 12.000%,
due 11/01/07 800,000
4,000,000 Madison River Capital Finance Corp., 13.250%,
due 03/01/10 2,500,000
2,000,000 MGC Communications, Inc., 13.000%,
due 04/01/10 900,000
4,500,000 Nextlink Communications, 10.750%,
due 11/15/08 3,735,000
------------
10,360,000
------------
Wireline - Long Distance: 7.34%
4,000,000 @@ Flag Telecom Holdings, Ltd., 11.625%,
due 03/30/10 3,140,000
3,000,000 ITC Deltacom, Inc., 9.750%, due 11/15/08 2,160,000
4,350,000 Level 3 Communications, Inc., 9.125%,
due 05/01/08 3,534,373
4,000,000 Metromedia Fiber Network, Inc., 10.000%,
due 11/15/08 3,340,000
5,790,000 Northeast Optic, 12.750%, due 08/15/08 2,460,750
------------
14,635,123
------------
See Accompanying Notes to Financial Statements
89
<PAGE>
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)(Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Wireline - Submarine: 1.90%
1,000,000 @@ Global Crossings Holdings, Ltd.,
9.500%, due 11/15/09 $ 950,000
3,000,000 @@ Global Crossings Holdings, Ltd.,
9.625%, due 05/15/08 2,835,000
------------
3,785,000
------------
Total Corporate Bonds
(Cost $214,487,524) 181,971,538
------------
WARRANTS: 0.00%
Airlines: 0.00%
2,000 @# Worldwide Flight Services, Inc.,
expires 08/15/07 20
------------
Building Materials: 0.00%
4,000 @# Dayton Superior Corp., expires 06/15/09 40
------------
Total Warrants (Cost $0) 60
------------
Total Long - Term Investments
(Cost $214,487,524) 181,971,598
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 6.56%
Commercial Paper: 6.56%
$10,005,000 General Electric, 5.900%, due 01/02/01 $ 10,003,360
3,056,000 State Street Boston, 6.200%, due 01/02/01 3,055,474
------------
Total Short-Term Investments
(Cost $13,402,935) 13,058,834
------------
Total Investments in Securities
(Cost $ 227,546,358)* 97.87% $195,030,432
Other Assets and Liabilities-Net 2.13% 4,251,572
------ ------------
Net Assets 100.00% $199,282,004
====== ============
@ Non-Income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
* Cost for federal Income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 2,353,711
Gross Unrealized Depreciation (34,869,637)
------------
Net Unrealized Depreciation $(32,515,926)
============
See Accompanying Notes to Financial Statements
90
<PAGE>
Pilgrim
High Yield
Fund II PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 94.06%
Airlines: 2.15%
1,500,000 Amtran, Inc., 10.500%, due 08/01/04 $ 1,290,000
1,525,000 Atlas Air, Inc., 9.375%, due 11/15/06 1,502,125
------------
2,792,125
------------
Building Materials: 1.39%
2,000,000 Dayton Superior Corp., 13.000%,
due 06/15/09 1,810,000
------------
Broadcasting: 4.14%
3,250,000 Sinclair Broadcast Group, Inc., 10.000%,
due 09/30/05 3,168,750
2,175,000 Young Broadcasting, Inc., 11.750%,
due 11/15/04 2,202,188
------------
5,370,938
------------
Cable: 6.23%
4,000,000 @ Century Communications Corp., 0.000%,
due 01/15/08 1,560,000
1,500,000 Charter Communications Holdings,
0/9.920%, due 04/01/11 873,750
3,000,000 Echostar DBS Corp., 9.250%, due 02/01/06 2,917,500
2,375,000 Intermedia Communications, Inc., 9.500%,
due 03/01/09 1,674,375
1,000,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 1,056,250
------------
8,081,875
------------
Capital Goods: 1.13%
1,640,000 Terex Corp., 8.875%, due 04/01/08 1,420,650
55,000 Terex Corp. series D, 8.875%, due 04/01/08 47,644
------------
1,468,294
------------
Consumer Products: 2.26%
3,150,000 Simmons Co., 10.250%, due 03/15/09 2,929,500
------------
Containers: 1.27%
1,605,000 Owens Ill, Inc., 7.850%, due 05/15/04 $ 971,025
5,000,000 Russell Stanley Holdings, Inc., 10.875%,
due 02/15/09 675,000
------------
1,646,025
------------
Electrical Utilities: 3.95%
1,865,000 AES Corp., 9.375%, due 09/15/10 1,916,288
750,000 AES Corp., 9.500%, due 06/01/09 780,000
2,500,000 Calpine Corp., 8.625%, due 08/15/10 2,425,112
------------
5,121,400
------------
Energy: 10.05%
1,000,000 Clark Refining & Marketing, Inc., 8.375%,
due 11/15/07 755,000
875,000 # @@ Compagnie Generale De Geophysique, 10.625%,
due 11/15/07 901,250
3,755,000 Energy Corp. of America, 9.500%,
due 05/15/07 2,994,613
4,500,000 @@ Northern Offshore Asa, 10.000%, due 05/15/05 3,037,500
2,350,000 Parker Drilling Co., 9.750%, due 11/15/06 2,373,500
1,500,000 RBF Finance Co., 11.000%, due 03/15/06 1,743,750
2,000,000 United Refining Co., 10.750%, due 06/15/07 1,240,000
------------
13,045,613
------------
Entertainment: 4.13%
4,100,000 Ascent Entertainment Group, Inc.,
0/11.875%, due 12/15/04 3,336,375
5,000,000 Hollywood Entertainment Corp., 10.625%,
due 08/15/04 2,025,000
------------
5,361,375
------------
Environmental: 1.82%
2,500,000 Allied Waste North America, Inc., 10.000%,
due 08/01/09 2,368,750
------------
Finance: 4.51%
2,850,000 Neff Corp., 10.250%, due 06/01/08 $ 1,268,250
2,000,000 Penhall Int'l Corp., 12.000%, due 08/01/06 1,800,000
1,000,000 United Rentals, Inc., 9.250%, due 01/15/09 765,000
1,475,000 United Rentals, Inc., 9.000%, due 04/01/09 1,113,625
225,000 United Rentals, Inc., 8.800%, due 08/15/08 169,875
750,000 United Rentals, Inc., 9.500%, due 06/01/08 588,750
500,000 # @@ Westways Funding II, Ltd., 22.125%,
due 01/29/03 150,000
------------
5,855,500
------------
Food/Beverage: 2.10%
3,500,000 Standard Commercial Corp., 8.875%,
due 08/01/05 2,730,000
------------
Gaming: 5.65%
1,250,000 # Anchor Gaming, 9.875%, due 10/15/08 1,290,625
1,500,000 # Autotote Corp., 12.500%, due 08/15/10 1,417,500
2,250,000 Park Pacel Entertainment Corp., 8.875%,
due 09/15/08 2,283,750
475,000 Station Casinos, Inc., 9.750%, due 04/15/07 483,313
1,800,000 Station Casinos, Inc., 9.875%, due 07/01/10 1,856,250
------------
7,331,438
------------
Health Care: 1.20%
1,475,000 Columbia/HCA Healthcare Corp., 7.250%,
due 05/20/08 1,409,250
184,074 @ Intracel, 11.500%, due 03/25/10 55,222
5,941,463 @ Intracel, 1.000%, due 03/20/10 --
300,000 @ Intracel, 1.000%, due 03/20/10 90,000
------------
1,554,472
------------
See Accompanying Notes to Financial Statements
91
<PAGE>
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)(Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Homebuilders: 0.64%
150,000 Lennar Corp., 9.950%, due 05/01/10 $ 153,750
725,000 Lennar Corp., 7.625%, due 03/01/09 671,697
------------
825,447
------------
Hotels: 2.34%
2,000,000 Courtyard Marriott II, Ltd. Partnership,
10.750%, due 02/01/08 2,030,000
1,000,000 Prime Hospitality Corp., 9.750%,
due 04/01/07 1,010,000
------------
3,040,000
------------
Internet - DSL: 0.92%
3,500,000 Rhythms Netconnections, Inc., 12.750%,
due 04/15/09 892,500
1,300,000 Rhythms Netconnections, Inc., 14.000%,
due 02/15/10 305,500
------------
1,198,000
------------
Internet - ISP: 2.06%
3,000,000 # Colo.com, 13.875%, due 03/15/10 1,350,000
2,125,000 Globix Corp., 12.500%, due 02/01/10 796,875
7,000,000 North Point Communications, 12.875%,
due 02/15/10 525,000
------------
2,671,875
------------
Paper: 0.92%
2,825,000 @@ Doman Industries, Ltd., 8.750%, due 03/15/04 1,200,625
------------
Rail Transportation: 1.09%
1,375,000 # Kansas City Southern Railway Co., 9.500%,
due 10/01/08 1,416,250
------------
Supermarkets: 3.25%
5,000,000 Fleming Companies, Inc., 10.500%,
due 12/01/04 $ 3,900,000
4,250,000 Richmont Marketing Specialists, 10.125%,
due 12/15/07 318,750
------------
4,218,750
------------
Specialty Retail: 1.67%
1,000,000 Big 5 Corp., 10.875%, due 11/15/07 882,500
1,000,000 JoAnn Stores, Inc., 10.375%, due 05/01/07 605,000
675,000 Musicland Group, Inc., 9.875%, due 03/15/08 678,375
------------
2,165,875
------------
Steel: 2.38%
1,350,000 AK Steel Corp., 7.875%, due 02/15/09 1,204,875
1,175,000 AK Steel Corp., 9.125%, due 12/15/06 1,125,063
225,000 Armco, Inc., 9.000%, due 09/15/07 208,125
950,000 Metals USA, Inc., 8.625%, due 02/15/08 555,750
------------
3,093,813
------------
Technology: 4.71%
1,350,000 Fairchild Semiconductor Corp., 10.125%,
due 03/15/07 1,262,250
1,610,000 @@ Flextronics Int'l, Ltd., 8.750%,
due 10/15/07 1,537,550
1,250,000 # @@ Seagate Technology, 12.500%, due 11/15/07 1,187,500
3,550,000 Zilog, Inc., 9.500%, due 03/01/05 2,130,000
------------
6,117,300
------------
Telephone: 2.91%
3,150,000 NTL, Inc., 0/9.750%, due 04/01/08 $ 1,740,375
1,340,000 United Int'l Holdings, Inc., 10.750%,
due 02/15/08 556,100
5,100,000 @@ United Pan Europe NV, 13.750%, due 02/01/10 1,479,000
------------
3,775,475
------------
Transport: 2.99%
2,065,000 Gulfmark Offshore, Inc., 8.750%,
due 06/01/08 1,935,938
2,000,000 # Travelcenters America, Inc., 12.750%,
due 05/01/09 1,940,000
------------
3,875,938
------------
Wireless - Cellular: 4.96%
3,300,000 Nextel Communications, Inc., 0/9.950%,
due 02/15/08 2,417,250
3,775,000 US Unwired, Inc., 1.000%, due 11/01/09 1,736,500
7,998,000 Winstar Communications, Inc., 0/14.750%,
due 04/15/10 2,279,430
------------
6,433,180
------------
Wireline - CLEC: 6.49%
3,600,000 ICG Services, Inc., 10.000%, due 02/15/08 306,000
1,500,000 Madison River Capital Finance Corp., LLC.,
13.250%, due 03/01/10 937,500
6,000,000 MGC Communications, Inc., 13.000%,
due 04/01/10 2,700,000
3,000,000 Nextlink Communications, Inc., 0/12.250%,
due 06/01/09 1,455,000
5,000,000 @@ Versatel Telecom Int'l NV, 11.875%,
due 07/15/09 3,025,000
------------
8,423,500
------------
See Accompanying Notes to Financial Statements
92
<PAGE>
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)(Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Wireline - Long Distance: 3.18%
5,500,000 @@ Call Net Enterprises, Inc., 0/12.975%,
due 08/15/08 $ 1,072,500
1,000,000 @@ Call Net Enterprises, Inc., 8.000%,
due 08/15/08 390,000
1,000,000 @@ Flag Telecom Holdings, Ltd., 11.625%,
due 03/30/10 785,000
1,600,000 Level 3 Communications, Inc., 12.875%,
due 03/15/10 752,000
7,250,000 Viatel, Inc., 0/12.500%, due 04/15/08 1,123,750
------------
4,123,250
------------
Wireline - Submarine: 1.57%
2,150,000 @@ Global Crossing Holdings, Ltd., 9.500%,
due 11/15/09 2,042,500
------------
Total Corporate Bonds
(Cost $160,400,521) 122,089,083
------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 0.20%
Health Care: 0.00%
16,926 @ Intracel Corp. $ --
------------
Wireline - CLEC: 0.20%
89,000 @@ @ Complete L Europe NV 245,640
------------
Total Common Stock
(Cost $809,227) 245,640
------------
PREFERRED STOCK: 2.37%
Wireline - CLEC: 1.69%
43,970 Adelphia Business Solutions 1,033,295
24,930 XO Communications, Inc. 1,153,012
------------
2,186,307
------------
Wireline - Submarine: 0.68%
6,000 @@ Global Crossing, Ltd. 888,000
------------
Total Preferred Stock
(Cost $7,175,466) 3,074,307
------------
WARRANTS: 0.00%
Convenience Stores: 0.00%
4,999 @ Dairy Mart Convience Stores 2,998
------------
Energy: 0.00%
1,500,000 @ Mexico (UTD Mex ST) --
------------
Internet - ISP: 0.00%
1,000 @ Unifi Communications, Inc. 10
------------
Specialty Retail: 0.00%
100 @ Electronic Retailing Systems Int'l 100
------------
Total Warrants
(Cost $0) 3,108
------------
Total Long-Term Investments
(Cost $168,385,214) 125,412,138
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.21%
Repurchase Agreement: 1.21%
$1,576,000 State Street Repurchase Agreement, 5.750%
due 01/02/01 (Collateralized by $1,455,000
U.S. Treasury Bills, 6.250% Market Value
$1,607,775, Due 08/15/23) $ 1,576,000
Total Short-Term Investments
(Cost $1,576,000) 1,576,000
------------
Total Investments in Securities
(Cost $ 169,961,214)* 97.84% $126,988,138
Other Assets and Liabilities-Net 2.16% 2,805,935
------ ------------
Net Assets 100.00% $129,794,073
====== ============
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
* Cost for federal, Income tax purposes is the same as for financial
statement purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 1,296,720
Gross Unrealized Depreciation (44,269,796)
------------
Net Unrealized Depreciation $(42,973,076)
============
See Accompanying Notes to Financial Statements
93
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 48.90%
Auto Parts & Equipment: 0.00%
1 @ Visteon Corp. $ 10
------------
Banks: 0.98%
27,900 J.P Morgan Chase & Co. 1,267,705
------------
Beverages: 2.20%
20,400 Anheuser-Busch Cos., Inc. 928,200
16,000 Coca-Cola Co. 975,000
18,900 PepsiCo, Inc. 936,731
------------
2,839,931
------------
Chemicals: 0.01%
920 @ Syngenta AG 10,063
------------
Computers: 2.25%
42,700 Compaq Computer Corp. 642,635
7,700 @ Dell Computer Corp. 134,269
14,900 @ EMC Corp.-Mass 990,850
13,200 Hewlett-Packard Co. 416,625
25,800 @ Sun Microsystems, Inc. 719,175
------------
2,903,554
------------
Cosmetics/Personal Care: 0.86%
15,755 Kimberly-Clark Corp. 1,113,721
------------
Diversified Financial
Services: 4.85%
15,000 American Express Co. 824,063
18,266 Citigroup, Inc. 932,708
19,600 Freddie Mac 1,349,950
14,500 Fannie Mae 1,257,875
6,000 J.P. Morgan & Co. 993,000
13,500 Merrill Lynch & Co., Inc. 920,531
------------
6,278,127
------------
Electric: 2.46%
19,400 @ Calpine Corp. 874,213
14,300 Duke Energy Corp. 1,219,075
32,700 Southern Co. 1,087,275
------------
3,180,563
------------
Electrical Compo & Equipment: 0.88%
14,500 @ Emerson Electric Co. 1,142,781
------------
Electronics: 0.85%
19,900 @ Solectron Corp. 674,610
15,000 @ Flextronics 427,500
------------
1,102,110
------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Food: 0.88%
18,200 @ Safeway, Inc. $ 1,137,500
------------
Forest Products & Paper: 1.23%
39,100 Int'l Paper Co. 1,595,769
------------
Home Furnishings: 0.57%
10,600 Sony Corp. 739,350
------------
Insurance: 1.44%
10,600 American Int'l Group 991,539
7,400 Marsh & McLennan Cos. 865,800
------------
1,857,339
------------
Internet: 0.41%
15,400 @ America Online, Inc. 535,920
------------
Leisure Time: 0.98%
41,000 Carnival Corp. 1,263,313
------------
Machinery-Diversified: 0.96%
27,100 Deere & Co. 1,241,519
------------
Media: 2.19%
11,346 @ Clear Channel Communications 549,572
20,000 @ Comcast Corp. 835,000
13,300 Gannett Co., Inc. 838,731
11,600 Time Warner, Inc. 605,984
------------
2,829,287
------------
Mining: 0.87%
33,700 Alcoa, Inc 1,128,950
------------
Miscellaneous
Manufacturing: 2.08%
20,500 General Electric Co. 982,719
6,300 Minnesota Mining & Manufacturing Co. 759,150
17,100 Tyco Int'l, Ltd. 949,050
------------
2,690,919
------------
Oil & Gas Producers: 3.95%
20,200 Anadarko Petroleum Corp. 1,435,816
29,000 Burlington Resources, Inc. 1,464,500
7,425 Chevron Corp. 626,948
9,162 Exxon Mobil Corp. 796,521
13,000 Royal Dutch Petroleum Co. 787,312
------------
5,111,097
------------
Oil & Gas Services: 0.67%
10,900 Schlumberger, Ltd. 871,319
------------
Pharmaceuticals: 3.10%
27,200 Abbott Laboratories $ 1,317,500
11,100 Merck & Co., Inc. 1,039,237
27,675 Pfizer, Inc. 1,273,050
8,500 Novartis 380,375
------------
4,010,162
------------
Pipelines: 2.07%
17,000 EL Paso Energy Corp. 1,217,625
17,500 Enron Corp. 1,454,687
------------
2,672,312
------------
Retail: 2.97%
16,700 Home Depot, Inc. 762,981
111 @X International Fast Food Corp. 432
10,900 McDonald's Corp. 370,600
23,300 Sears, Roebuck And Co. 809,675
14,500 Wal-Mart Stores, Inc. 770,312
27,100 Walgreen Co. 1,133,119
------------
3,847,119
------------
Savings & Loans: 1.09%
26,500 Washington Mutual, Inc. 1,406,156
------------
Semiconductors: 1.39%
30,000 Advanced Micro Devices 414,375
18,600 Intel Corp. 559,163
16,600 LSI Logic Corp. 283,694
11,400 Texas Instruments, Inc. 540,075
------------
1,797,307
------------
Software: 0.94%
14,600 First Data Corp. 769,238
10,300 @ Microsoft Corp. 446,763
------------
1,216,001
------------
Telecommunications: 4.09%
20,100 BellSouth Corp. 822,844
15,900 Cisco Systems, Inc. 608,175
31,525 @ Global Crossing, Ltd. 451,202
16,600 Nokia OYJ 722,100
17,772 SBC Communications, Inc. 848,613
31,448 @ Verizon Communications, Inc. 1,576,331
26,500 @ WorldCom, Inc. 257,344
------------
5,286,609
------------
See Accompanying Notes to Financial Statements
94
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Tobacco: 1.03%
30,400 Philip Morris Cos., Inc. $ 1,337,600
------------
Transportation: 0.65%
20,900 @ FedEx Corp. 835,164
------------
Total Common Stock
(Cost $57,265,085) 63,249,279
------------
CORPORATE BONDS: 16.45%
Airlines: 1.03%
9,729 Continental Airlines, Inc.,6.545% due 2/2/19 944,476
3,900 Atlas Air, Inc., 9.375% due 11/15/06 384,150
------------
1,328,626
------------
Banks: 1.44%
8,000 Wachovia Corp.,6.605% due 10/1/25 804,666
10,950 @@ Banco Santander-Chile 6.500% due 11/1/05 1,063,772
------------
1,868,438
------------
Building Materials: 0.54%
7,500 Dayton Superior Corp.,13.000% due 6/15/09 697,500
------------
Commercial Services: 0.38%
1,000 United Rentals, Inc., 9.000% due 4/01/09 75,500
500 United Rentals, Inc., 8.800% due 8/15/08 37,750
8,400 Neff Corp., 10.250% due 6/1/2008 373,800
------------
487,050
------------
Computers: 0.14%
5,000 Globix Corp., 12.500% due 2/1/10 187,500
------------
Diversified Financial Services: 3.87%
8,000 Household Finance Corp., 8.000% due 5/9/05 $ 840,420
10,000 Ford Credit Co., 7.875% due 6/15/10 1,028,670
5,000 Madison River Finance Corp., 13.250%
due 3/1/10 312,500
1,600 @@ Amvescap PLC, 6.375% due 5/15/03 157,730
1,000 #@@ Cerro Negro Finance, Ltd.,7.330% due 12/01/09 91,995
26,000 FleetBoston Financial Corp., 7.190% due 10/2/12 2,566,049
------------
4,997,364
------------
Electric: 0.56%
1,000 AES Corp., 9.375% due 9/15/10 102,750
3,000 AES Corp., 9.500% due 6/1/09 312,000
3,200 Calpine Corp., 8.625% due 8/15/10 310,414
------------
725,164
------------
Electronics: 0.17%
1,000 Celestica Int'l, Inc., 10.500% due 12/31/06 104,500
1,150 Flextronics Int'l, Ltd., 8.750% due 10/15/07 109,825
------------
214,325
------------
Entertainment: 0.32%
1,250 # Anchor Gaming, 9.875% due 10/15/08 129,063
3,500 Ascent Entertainment Group, 1.000%
due 12/15/04 284,813
------------
413,876
------------
Environmental Control: 0.37%
5,000 Allied Waste North America, 10.000% due 8/1/09 473,750
------------
Forrest Products & Paper: 0.26%
8,000 Doman Inds., Ltd., 8.750% due 3/15/04 $ 340,000
------------
Healthcare-Services: 0.11%
1,500 HCA - The Healthcare Company, 7.250%
due 5/20/08 143,314
------------
Holding Cos.- Diverse: 0.38%
1,000 # Kansas City Southern Railway, 9.500%
due 10/1/08 103,000
4,300 Penhall Int'l, Inc., 12.000% due 8/1/06 387,000
------------
490,000
------------
Home Builders: 0.15%
1,250 Lennar Corp., 9.950% due 5/1/10 128,125
750 Lennar Corp., 7.625% due 3/1/09 69,486
------------
197,611
------------
Internet: 0.04%
2,000 Rhythms Netconnections, Inc., 14.000%
due 2/15/10 47,000
------------
Iron/Steel: 0.23%
1,000 AK Steel Corp., 7.875% due 2/15/09 89,250
1,650 AK Steel Corp., 9.125% due 12/15/06 157,987
500 Armco, Inc., 9.000% due 9/15/07 46,250
------------
293,487
------------
Lodging: 0.10%
750 Prime Hospitality Corp., 9.750% due 4/1/07 75,750
500 Station Casinos, Inc., 9.875% due 7/1/10 51,562
------------
127,312
------------
See Accompanying Notes to Financial Statements
95
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Machinery-Construction & Mining: 0.05%
700 Terex Corp., 8.875% due 4/1/08 $ 60,637
------------
Media: 1.15%
2,100 Adelphia Communications, 10.875% due 10/1/10 203,700
5,000 Charter Communications Holdings Corp., 8.625%
due 4/1/09 456,250
Echostar DBS Corp., 9.25% due 2/1/06 413,312
14,500 UPC, 13.750% due 2/1/10 420,500
------------
1,493,762
------------
Oil & Gas Producers: 1.08%
10,000 Occidental Petroleum Corp., 7.650% due 2/15/06 1,044,413
2,000 United Refining Co., 10.750% due 6/15/07 124,000
2,287 #@@ Hurricane Hydrocarbons,11.750% due 12/31/01 226,964
------------
1,395,377
------------
Packaging & Containers: 0.31%
6,650 Owens-Illinois, Inc., 7.850% due 5/15/04 402,325
------------
Pharmaceuticals: 1.39%
17,000 American Home Products Corp., 7.900%
due 2/15/05 1,802,673
------------
Retail: 0.22%
7,080 Hollywood Entertainment Corp., 10.625%
due 8/15/04 286,740
------------
Telecommunications: 2.11%
6,000 @@ Call-Net Enterprises, Inc.,8.000% due 8/15/08 $ 234,000
10,000 Call-Net Enterprises, Inc., 1.000% due 8/15/08 195,000
7,500 # Colo.com, Inc., 13.875% due 3/15/10 337,500
500 Fairchild Semiconductor Int'l, Inc., 10.125%
due 3/15/07 46,750
3,400 @@ Global Crossing Holding, Ltd., 9.500%
due 11/15/09 323,000
8,000 MGC Communications, Inc., 13.000% due 4/1/10 360,000
8,400 Motorola, Inc., 6.500% due 9/1/25 854,821
2,000 Star Choice Communications, 13.000%
due 12/15/05 211,250
3,750 US Unwired, Inc., 1.000% due 11/1/09 172,500
------------
2,734,821
------------
Transportation: 0.05%
750 Gulfmark Offshore, Inc., 8.750% due 6/1/08 70,313
------------
Total Corporate Bonds
(Cost: $ 25,601,997) 21,278,965
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 17.47%
Federal Home Loan Mortgage
Association: 1.48%
4,507 7.000%, due 06/01/29 451,724
4,981 6.000%, due 04/01/14 492,470
9,978 5.500%, due 01/01/14 971,902
------------
1,916,096
------------
Federal National Mortgage
Association: 11.35
8,158 8.000%, due 08/01/30 $ 835,982
16,688 6.500%, due 06/01/14 1,668,244
27,550 7.000%, due 03/01/15 2,788,131
31,049 6.350%, due 01/01/04 3,123,373
30,000 7.125%, due 06/15/10 3,254,223
8,000 6.625%, due 11/15/30 843,998
20,000 7.250%, due 1/15/10 2,174,620
------------
14,688,571
------------
Government National Mortgage
Association: 4.64%
11,851 7.500%, due 11/15/29 1,205,785
12,776 8.000%, due 7/15/30 1,310,111
35,152 6.500%, due 6/15/29 3,480,096
------------
5,995,992
------------
Total U.S. Government Agency Obligations
(Cost $ 20,915,038) 22,600,659
------------
See Accompanying Notes to Financial Statements
96
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS: 9.06%
U.S. Treasury Bonds: 7.05%
35,250 6.125%, due 8/15/29 $ 3,834,001
45,000 7.25%, due 5/15/16 5,293,125
------------
9,127,126
------------
U.S. Treasury Notes: 2.01%
19,000 6.5%, due 2/15/10 2,080,054
5,000 5.85%, due 11/15/04 513,194
------------
2,593,248
------------
Total U.S. Treasury Obligations
(Cost $10,938,666) 11,720,374
------------
COLLATERALIZED MORTGAGE OBLIGATIONS: 1.80%
Commercial MBS: 1.25%
4,672 # Criimi Mae CMBS Corp., 5.697% due 10/20/01 460,783
11,184 GMAC Commercial Mortgage Securities, Inc.
6.974%, due 5/15/08 1,151,380
------------
1,612,163
------------
Home Equity ABS: 0.55%
7,000 Emergent Home Equity Loan Trust, 7.08%
due 12/15/28 712,870
------------
Total Collateralized Mortgage Obligations
(Cost $2,243,293) 2,325,033
------------
Total Fixed Income
(Cost $59,698,994) 57,925,031
------------
PREFERRED STOCK: 0.16%
Media: 0.05%
660 Paxson Communications Corp. 63,585
------------
Telecommunications: 0.11%
3,030 XO Communications, Inc. 140,137
------------
Total Preferred Stock 203,722
(Cost $298,394)
Market
Shares Value
- --------------------------------------------------------------------------------
MUTUAL FUNDS: 2.48%
Investment Cost: 2.48%
428,000 Pilgrim Prime Rate Trust $ 3,210,000
------------
Total Mutual Funds
(Cost $3,810,826) 3,210,000
------------
WARRANTS: 0.02%
750 # Dayton Superior Corp. 15,000
------------
Miscellaneous Manufacturing: 0.01%
500 # Packaged Ice, Inc. 10,500
------------
Telecommunications: 0.00%
500 # Iridium World Communications 5
1,000 # Unifi Communications, Inc. 10
------------
15
------------
Total Warrants
(Cost $64,468) 25,515
------------
Total Long-term Investments
(Cost $121,137,767) 124,613,545
------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 3.17%
Repurchase Agreement: 3.17%
$4,090,000 State Street Bank & Trust Repurchase
Agreement, 5.750% due 01/02/01 (Collateralized
by $3,970,000 U.S. Treasury Notes, 7.875% Due
5/15/06, Market Value $4,173,462) $ 4,090,000
------------
Total Short-Term Investments
(Cost $4,090,000) 4,090,000
------------
Total Investments in Securities
(Cost $ 125,227,767)* 99.51% $128,703,545
Other Assets and Liabilities-Net 0.49% 628,589
------ ------------
Net Assets 100.00% $129,332,134
====== ============
@ Non-income producing security
# Securities with purchases, pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to the rule except to qualified
institutional buyers.
+ Step-up basis bonds. Interest rates shown reflect current
++ Related Party
& Payment in-kind security
@@ Foreign Issuer
X Market Value determined by Pilgrim Valuation Committee appointed by the
Funds Board of Directors.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 15,027,778
Gross Unrealized Depreciation (11,552,000)
------------
Net Unrealized Appreciation $ 3,475,778
============
See Accompanying Notes to Financial Statements
97
<PAGE>
Pilgrim
Convertible
Fund PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 24.17%
Diversified Financial Services: 3.00%
134,781 @ Calpine Capital Trust II $ 12,602,024
------------
Electric: 1.03%
95,991 @ Coastal Corp. 4,319,595
------------
HealthCare Products: 2.65%
207,668 @ AES Trust VII 11,136,197
------------
Insurance: 2.02%
77,410 @ Metlife Capital Trust I 8,476,395
------------
Media: 0.67%
171,769 United Global Com, Inc. 2,812,717
------------
Oil & Gas Producers: 0.90%
50,000 Transocean Sedco Forex, Inc. 2,300,000
31,800 Crown Castle Int'l Corp. 1,474,725
------------
3,774,725
------------
Oil & Gas Services: 0.99%
28,411 @ Global Crossing, Ltd. 4,133,801
------------
Packaging & Containers: 0.75%
96,845 Sealed Air Corp. 3,129,352
------------
Savings & Loans: 3.78%
268,700 Sovereign Bancorp, Inc. 15,853,300
------------
Telecommunications: 7.81%
1 WinStar Communications, Inc. 8
122,005 Weatherford Int'l, Inc. 6,176,503
8,139 McLeodUSA, Inc. 3,147,254
227,100 MediaOne Group, Inc. 22,199,025
51,931 WinStar Communications, Inc. 1,246,344
------------
32,769,134
------------
Transportation: 0.57%
40,500 United Parcel Service, Inc. 2,381,906
------------
Total Common Stock
(Cost $96,134,735) 101,389,146
------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 72.44%
Biotechnology: 2.58%
6,511,000 Millennium Pharmaceuticals, 5.500%,
due 01/15/07 $ 10,828,639
------------
Computers: 7.77%
12,574,000 #@@ ASM Lithography Holding NV, 4.250%,
due 11/30/04 11,945,300
18,126,000 Hewlett-Packard Co., 0.010%, due 10/14/17 9,703,074
450,000 Veritas Software Corp., 5.250%, due 11/01/04 4,126,500
2,729,000 Veritas Software Corp., 1.856%, due 08/13/06 6,805,444
------------
32,580,318
------------
Distribution/Wholesale: 1.13%
5,000,000 Costco Wholesale Corp., 0.000%, due 08/19/17 4,759,375
------------
Electronics: 10.51%
4,034,000 OAK Industries, Inc., 4.875%, due 03/01/08 14,340,870
5,000,000 # Sanmina Corp., 0.000%, due 09/12/20 1,900,000
2,771,000 Sanmina Corp., 4.250%, due 05/01/04 5,077,857
5,000,000 Solectron Corp., 0.000%, due 01/27/19 2,946,875
35,128,000 Solectron Corp., 0.010%, due 05/08/20 19,803,410
------------
44,069,012
------------
Healthcare-Services: 4.49%
6,946,000 Universal Health Services, 0.426%,
due 06/23/20 4,862,200
16,000,000 @ Wellpoint Health Networks, 0.000%,
due 07/02/19 13,960,000
------------
18,822,200
------------
Media: 7.21%
20,594,000 Clear Channel Communications, 1.500%,
due 12/01/02 $ 18,560,343
12,997,000 AT&T - Liberty Media Corp., 4.000%,
due 11/15/29 8,756,729
4,379,000 News America Holdings, 0.010%, due 03/11/13 2,922,983
------------
30,240,055
------------
Oil & Gas Producers: 10.27%
7,556,000 @ Anadarko Petroleum Corp., 0.000%, due 03/07/20 6,691,820
2,518,000 PennzEnergy Co., 4.900%, due 08/15/08 2,410,985
4,287,000 Diamond Offshore Drilling, 3.750%,
due 02/15/07 4,715,700
13,235,000 Kerr-McGee Corp., 5.250%, due 02/15/10 16,692,644
21,703,000 @ Transocean Sedco Forex, Inc., 0.000%,
due 05/24/20 12,560,611
------------
43,071,760
------------
Pharmaceuticals: 8.64%
2,883,000 Alpharma, Inc., 3.000%, due 06/01/06 4,191,161
6,200,000 Alza Corp., 0.000%, due 07/28/20 4,324,500
10,269,000 Alza Corp., 0.000%, due 07/14/14 11,398,590
2,500,000 COR Therapeutics, Inc., 5.000%, due 03/01/07 2,995,325
5,426,000 Elan Finance Corp. Ltd., 0.000%, due 12/14/18 3,981,328
6,148,000 # Roche Holdings, Inc., 0.010%, due 01/19/15 5,494,775
3,500,000 # Teva Pharmaceutical Finance LLC, 1.500%,
due 10/15/05 3,867,500
------------
36,253,179
------------
See Accompanying Notes to Financial Statements
98
<PAGE>
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of December 31, 2000 (Unaudited)(Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Semiconductors: 7.34%
12,500,000 Advanced Micro Devices, 6.000%, due 05/15/05 $ 11,632,875
8,466,000 Cypress Semiconductor Corp., 4.000%,
due 02/01/05 6,561,150
8,058,000 @@ STMicroelectronics N.V., 0.010%, due 09/22/09 9,931,485
4,000,000 #@@ STMicroelectronics N.V., 0.000%, due 11/16/10 2,665,000
------------
30,790,510
------------
Software: 0.68%
4,500,000 Nvidia Corp., 4.750%, due 10/15/07 2,851,875
------------
Telecommunications: 11.83%
13,000,000 Corning, Inc., 0.000%, due 11/08/15 9,238,190
3,712,000 Echostar Communications Corp., 4.875%,
due 01/01/07 2,860,578
8,471,000 Juniper Networks, Inc., 4.750%, due 03/15/07 8,624,579
7,000,000 Level 3 Communications, Inc., 6.000%,
due 09/15/09 4,961,250
20,241,000 Nextel Communications, Inc., 5.250%,
due 01/15/10 14,750,629
4,055,000 American Tower Corp., 5.000%, due 02/15/10 3,748,361
8,000,000 Oni Systems Corp., 5.000%, due 10/15/05 5,430,000
------------
49,613,587
------------
Total Corporate Bonds
(Cost $ 339,361,037) 303,880,510
------------
Total Long-Term Investments
(Cost $ 435,495,772) 405,269,656
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 2.86%
Repurchase Agreement: 2.86%
$11,999,000 State Street Bank & Trust Repurchase
Agreement, 5.75% due 01/02/01
(Collateralized by $12,000,000 U.S.
Treasury Notes, 8.00% Due 11/15/21,
Market Value $12,243,693) $ 11,999,000
------------
Total Short-Term Investments
(Cost $11,999,000) 11,999,000
------------
Total Investments in Securities
(Cost $ 447,494,772)* 99.47% $417,268,656
Other Assets and Liabilities-Net 0.53% 2,222,875
------ ------------
Net Assets 100.00% $419,491,531
====== ============
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 36,657,071
Gross Unrealized Depreciation (66,883,187)
------------
Net Unrealized Depreciation $(30,226,116)
============
See Accompanying Notes to Financial Statements
99
<PAGE>
SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
A special meeting of shareholders of the Pilgrim Funds (listed below) was held
in Phoenix, Arizona on August 18,2000.
A brief description of each matter voted upon as well as the results are
outlined below:
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
--------- ----------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
1. To approve new Investment Management Agreements between the Funds and Pilgrim Investments, Inc. ("Pilgrim"), to
reflect the acquisition of Pilgrim by ING Groep N.V. ("ING"), with no change in the advisory fees payable to
Pilgrim;
Pilgrim Balanced Fund 5,852,446 244,621 -- -- 6,097,067
Pilgrim Bank and Thrift Fund 17,395,838 722,384 -- -- 18,118,222
Pilgrim Convertible Fund 14,114,046 320,397 -- -- 14,434,443
Pilgrim Government Securities Income Fund 7,930,229 550,166 -- -- 8,480,395
Pilgrim High Yield Fund 48,691,093 1,967,797 -- -- 50,658,890
Pilgrim High Yield Fund II 15,876,094 456,032 -- -- 16,332,126
Pilgrim LargeCap Growth Fund 13,427,843 254,416 -- -- 13,682,259
Pilgrim LargeCap Leaders Fund 1,934,352 45,755 -- -- 1,980,107
Pilgrim MagnaCap Fund 16,148,978 792,273 -- -- 16,941,251
Pilgrim MidCap Growth Fund 16,788,788 344,196 -- -- 17,132,984
Pilgrim MidCap Value Fund 1,626,116 37,455 -- -- 1,663,571
Pilgrim Money Market Fund 58,049,711 255,420 -- -- 58,305,131
Pilgrim SmallCap Growth Fund 23,486,117 435,892 -- -- 23,922,009
Pilgrim Strategic Income Fund 701,286 16,777 -- -- 718,063
2. For shareholders of Pilgrim Convertible Fund and Pilgrim LargeCap Growth Fund to approve a new Sub-Advisory
Agreement between Pilgrim and Nicholas-Applegate Capital Management ("NACM") to reflect the acquisition of Pilgrim
by ING, with no change in the sub-advisory fees payable to NACM.
Pilgrim Convertible Fund 14,115,264 319,179 -- -- 14,434,443
Pilgrim LargeCap Growth Fund 13,429,517 252,742 -- -- 13,682,259
</TABLE>
See Accompanying Notes to Financial Statements
100
<PAGE>
INVESTMENT MANAGER
ING Pilgrim Investments, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Pilgrim Group, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
CUSTODIAN
State Street Bank & Trust
801 Pennsylvania Avenue
Kansas City, Missouri 64105
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling ING Pilgrim Securities, Inc.
Distributor at 1-800-334-3444. Please read the prospectus carefully before you
invest or send money.
QSEMI123100-030101
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----