Securities Act File No. 333-33445
Securities Act File No. 2-91302
Securities Act File No. 33-91706
Securities Act File No. 2-34552
Securities Act File No. 33-56094
Pilgrim Funds
Supplement dated August 6, 1999
to the Prospectus dated May 24, 1999
Classes: A, B, C and M
Acquisition of Pilgrim Capital Corporation by ReliaStar Financial Corp.
On July 22, 1999, Pilgrim Capital Corp. (NYSE: PFX), the parent company of
Pilgrim Investments, Inc., which is the adviser to the Funds, entered into an
agreement under which it will be acquired by ReliaStar Financial Corp. (NYSE:
RLR). ReliaStar Financial Corp. is a Minneapolis-based holding company whose
subsidiaries offer individuals and institutions life insurance and annuities,
employee benefits products and services, life and health reinsurance, retirement
plans, mutual funds, bank products and personal finance education. Based on
revenues, ReliaStar Financial Corp. is the 8th largest publicly held life
insurance holding company in the United States and at March 31, 1999, had $23.2
billion in assets under management and life insurance in force of $304.7
billion. Completion of the acquisition is contingent upon, among other things,
approval by the Directors/Trustees and the shareholders of the Pilgrim Funds and
certain regulatory approvals. The closing of the acquisition is expected to
occur during the fourth quarter of 1999.
Pilgrim Investments as an organization will survive the transaction.
Pilgrim Investments does not currently anticipate that there will be any changes
in the personnel primarily responsible for management of the Funds as a result
of the acquisition. As a result of the transaction, Pilgrim Investments may get
access to the resources and investment expertise of Northstar Investment
Management Corporation, an investment adviser that is a subsidiary of ReliaStar.
Under the provisions of the advisory contracts between the Funds and
Pilgrim Investments, those agreements will terminate automatically at the time
of the acquisition. As a result, the Board of Directors/Trustees on August 2,
1999 approved new advisory contracts between the Funds and Pilgrim Investments
which, subject to shareholder approval, will take effect immediately after the
acquisition. The contracts are substantially the same as those currently in
effect. A shareholder meeting has been scheduled in November to approve the new
agreements.
Termination of Sub-Adviser for the Pilgrim MidCap Value Fund (the "Fund")
Effective October 1, 1999, Cramer Rosenthal McGlynn, LLC ("CRM") will no
longer serve as Sub-Adviser of the Fund. CRM has served as a Sub-Adviser to
Pilgrim Investments, Inc., which is the Adviser for the Fund. Effective October
1, 1999, Pilgrim Investments will manage directly the portfolio of the Fund
pursuant to its existing Investment Management Agreement with the Fund. The fee
payable to Pilgrim Investments for serving as Adviser (at an annual rate of 1%
of the Fund's average daily net assets) will not change.
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The MidCap Value Fund will be managed by a team led by G. David Underwood,
Vice President and Senior Portfolio Manager for Pilgrim Investments. Mr.
Underwood also serves as the Portfolio Manager of Pilgrim LargeCap Leaders Fund.
The other individual on the team is Robert M. Kloss.
Effective October 1, 1999, when Pilgrim Investments takes over management
of the Fund, the Principal Investment Strategies of the Fund will be revised as
follows:
The Fund normally invests as fully as practicable (at least 80% of its
assets) in equity securities of medium-sized U.S. companies. The Fund will
normally invest at least 65% of its assets in equity securities of
companies that meet the following disciplined criteria:
Consistent Dividends - the company must have paid or had the financial
capability from its operations to pay a dividend in its last five
fiscal years.
Strong Balance Sheet - if the company has debt that is rated, that
debt is rated investment grade by a nationally recognized rating
agency. If the company does not have debt that is rated, the company's
long term debt to capitalization ratio is below 25%.
Reinvested Earnings - the company currently pays out in dividends less
than 65% of current earnings, or less than the dividend payout as a
percentage of current earnings of at least half of the medium-sized
companies in similar industries.
Attractive Price - the ratio of the stock's price to the next fiscal
year's anticipated earnings is less than the corresponding ratio for
at least half of the medium-sized companies in similar industries.
The Fund considers a company to be medium-sized if it has a market
capitalization between $1 billion and $8 billion. The equity securities
in which the Fund may invest include common stock, convertible
securities, preferred stock and warrants.
The Fund's investment objective will not be changed. It remains long term
capital appreciation. Following the assumption of portfolio management duties by
Pilgrim Investments, significant portfolio turnover may occur in connection with
a restructuring of the Fund's holdings to reflect the management style of
Pilgrim Investments. Such restructuring may result in transactional costs for
the Fund, and may result in accelerated capital gain distributions as a result
of the turnover.
Pilgrim High Yield Fund II
The proposed reorganization of Pilgrim High Yield Fund II into Pilgrim High
Yield Fund that is referenced under "Principal Investment Strategies" has
been canceled.
