PILGRIM INVESTMENT FUNDS INC/MD, 497, 2000-01-11

PILGRIM INVESTMENT FUNDS INC/MD
497, 2000-01-11

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PILGRIM(SM)
- ---------------------------
FUNDS FOR SERIOUS INVESTORS

Prospectus
Class: Q
January 4, 2000

U.S. EQUITY FUNDS
Pilgrim MagnaCap
Pilgrim LargeCap Leaders
Pilgrim Research Enhanced Index
Pilgrim Growth Opportunities
Pilgrim LargeCap Growth
Pilgrim MidCap Value
Pilgrim MidCap Opportunities
Pilgrim MidCap Growth
This prospectus contains important Pilgrim Growth + Value
information about investing in the Pilgrim SmallCap Opportunities
Class Q shares of the Pilgrim Funds. Pilgrim SmallCap Growth
You should read it carefully before
you invest, and keep it for future INTERNATIONAL EQUITY FUNDS
reference. Please note that your Pilgrim Worldwide Growth
investment: is not a bank deposit, is Pilgrim International Value
not insured or guaranteed by the FDIC, Pilgrim International Core Growth
the Federal Reserve Board or any other Pilgrim International SmallCap Growth
government agency and is affected by Pilgrim Emerging Countries
market fluctuations. There is no
guarantee that the funds will achieve INCOME FUNDS
their objectives. As with all mutual Pilgrim Government Securities Income
funds, the Securities and Exchange Pilgrim Strategic Income
Commission (SEC) has not approved or Pilgrim High Yield
disapproved these securities nor has Pilgrim High Yield II
the SEC judged whether the information
in this prospectus is accurate or EQUITY & INCOME FUNDS
adequate. Any representation to the Pilgrim Balanced
contrary is a criminal offense. Pilgrim Convertible
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------

[GRAPHIC]
OBJECTIVE These pages contain a description of each of our Funds included
in this prospectus, including its objective, investment strategy
[GRAPHIC] and risks.
INVESTMENT
STRATEGY

You'll also find:

[GRAPHIC] How the Fund has performed. A chart that shows the Fund's
RISKS financial performance for the past ten years (or since inception,
if shorter).

[GRAPHIC] What you pay to invest. A list of the fees and expenses you pay
HOW THE -- both directly and indirectly -- when you invest in a Fund.
FUND HAS
PERFORMED

Introduction to the
Pilgrim Funds 1

U.S. EQUITY FUNDS
Pilgrim MagnaCap 2
Pilgrim LargeCap Leaders 4
Pilgrim Research Enhanced Index 6
Pilgrim Growth Opportunities 8
Pilgrim LargeCap Growth 10
Pilgrim MidCap Value 12
Pilgrim MidCap Opportunities 14
Pilgrim MidCap Growth 16
Pilgrim Growth + Value 18
Pilgrim SmallCap Opportunities 20
Pilgrim SmallCap Growth 22

INTERNATIONAL EQUITY FUNDS
Pilgrim Worldwide Growth 24
Pilgrim International Value 26
Pilgrim International Core Growth 28
Pilgrim International SmallCap Growth 30
Pilgrim Emerging Countries 32

INCOME FUNDS
Pilgrim Government Securities Income 34
Pilgrim Strategic Income 36
Pilgrim High Yield 38
Pilgrim High Yield II 40

EQUITY & INCOME FUNDS
Pilgrim Balanced 42
Pilgrim Convertible 44

What you pay to invest 46

Shareholder guide 48

Management of the Funds 52

Dividends, distributions and taxes 57

More information about risks 58

Financial highlights 61

Where to go for more information Back cover
<PAGE>
INTRODUCTION
TO THE PILGRIM FUNDS
- --------------------------------------------------------------------------------

Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with each of our Funds.
You should consult the Statement of Additional Information (SAI) for a complete
list of the risks and strategies.

[GRAPHIC]

If you have any questions about the Pilgrim Funds, please call your financial
consultant or us at 1-800-992-0180.

This prospectus is designed to help you make informed decisions about your
investments. In order to make it easy for you to find what you're looking for,
we have divided the Pilgrim Funds into four categories.

U.S. EQUITY FUNDS

Our U.S. Equity Funds focus on long-term growth by investing primarily in
domestic equities.

They may suit you if you:

* are investing for the long-term -- at least several years

* are willing to accept higher risk in exchange for long-term growth.

INTERNATIONAL EQUITY FUNDS

Pilgrim offers International Equity Funds that emphasize a growth approach
to international investing, as well as International Equity Funds that
apply the technique of "value investing". These Funds focus on long-term
growth by investing primarily in foreign equities. They may suit you if
you:

* are investing for the long-term -- at least several years

* are looking for exposure to international markets

* are willing to accept higher risk in exchange for long-term growth.

INCOME FUNDS

Pilgrim offers both aggressive and conservative Income Funds. They may suit
you if you:

* want a regular stream of income.

* want greater growth potential than a money market fund.

* are willing to accept more risk than a money market fund.

EQUITY AND INCOME FUNDS

Pilgrim's Equity and Income Funds seek income and growth of capital. They
may suit you if you:

* want both regular income and capital appreciation

* are looking for growth potential but don't feel comfortable with the
level of risk associated with the Equity Funds.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

1
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM MAGNACAP FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks growth of capital, with dividend income as a secondary
consideration.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund is managed with the philosophy that companies that can best meet the
Fund's objectives have paid increasing dividends or have had the capability to
pay rising dividends from their operations. The Fund normally invests at least
65% of its assets in equity securities of companies that meet the following
disciplined criteria:

Consistent Dividends -- A company must have paid or had the financial capability
from its operations to pay a dividend in 8 out of the last 10 years.

Substantial Dividend Increases -- 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.

Reinvested Earnings -- Dividend payout must be less than 65% of current
earnings.

Strong Balance Sheet -- Long term debt should be no more than 25% of the
company's total capitalization or a company's bonds must be rated at least A- or
A-3.

Attractive Price -- A company's current share price should be in the lower half
of the stock's price/earnings ratio range for the past ten years, or the ratio
of the share price to its anticipated future earnings must be an attractive
value in relation to the average for its industry peer group or that of the
Standard & Poor's 500 Composite Stock Price Index.

The equity securities in which the Fund may invest include common stocks,
convertible securities, and rights or warrants. Normally the Fund's investments
are primarily in larger companies that are included in the largest 500 U.S.
companies. The remainder of the Fund's assets may be invested in equity
securities that the adviser believes have growth potential because they
represent an attractive value. In selecting securities for the Fund,
preservation of capital is also an important consideration. Although the Fund
normally will be invested as fully as practicable in equity securities, assets
that are not invested in equity securities may be invested in high quality debt
securities. The Fund may invest up to 5% of its assets, measured at the time of
investment, in foreign securities.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Market Trends -- from time to time, the stock market may not favor the value
securities that meet the Fund's disciplined investment criteria. Rather, the
market could favor growth-oriented stocks or small company stocks, or may not
favor equities at all.

Debt securities -- the value of debt securities may fall when interest rates
rise. Debt securities with longer maturities tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter maturities.

Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of ecomonic uncertainty or economic downturns.

2 Pilgrim MagnaCap Fund
<PAGE>
PILGRIM MAGNACAP FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
22.46 -3.11 25.28 8.02 9.25 4.15 35.22 18.51 27.73 16.09

Best and worst quarterly performance during this period:

4th quarter 1998: up 18.93%

3rd quarter 1990: down 15.99%

The Fund's year-to-date total return as of September 30, 1999 was 2.49%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Standard & Poor's 500 Composite Stock Price Index.

Average annual total returns

S&P
500
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 9.40% 28.58%

Five years, ended
December 31, 1998 18.46% 24.05%

Ten years, ended
December 31, 1998 15.13% 19.19%

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim MagnaCap Fund 3
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM LARGECAP LEADERS FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund normally invests at least 65% of its total assets in equity securities
of large U.S. companies that the adviser believes are leaders in their
industries. The adviser considers whether these companies have a sustainable
competitive edge.

The adviser emphasizes a value approach, and seeks securities whose prices in
relation to projected earnings are believed to be reasonable in comparison to
the market. For this Fund, a company with a market capitalization (outstanding
shares multiplied by price per share) of over $5 billion is considered to be a
large company, although the Fund may also invest to a limited degree in
companies that have a market capitalization between $1 billion and $5 billion.

The equity securities in which the Fund may invest include common stock,
convertible securities, preferred stock, American Depositary Receipts, and
warrants. The Fund normally invests as fully as practicable (at least 80%) in
equity securities.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. The Fund also may invest in small and medium-sized companies,
which may be more susceptible to price swings because they have fewer financial
resources, more limited product and market diversification, and many are
dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the large
company value securities in which the Fund invests. Rather, the market could
favor growth-oriented stocks or small company stocks, or may not favor equities
at all.

Inability to Sell Securities -- securities of smaller companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.

4 Pilgrim LargeCap Leaders Fund
<PAGE>
PILGRIM LARGECAP LEADERS FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)(3)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.07 20.15 20.08

Best and worst quarterly performance during this period:

4th quarter 1998: up 24.58%

3rd quarter 1998: down 12.86%

The Fund's year-to-date total return as of September 30, 1999 was 5.45%.

Average annual total returns

S&P
500
Class A(4) Index(5)
---------- --------
One year, ended
December 31, 1998 13.16% 28.58%

Since inception(6) 18.67% 28.77%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 1999, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) Prior to November 1, 1998, the Fund's investment policies were different in
that they emphasized large company value stocks without necessarily
emphasizing industry leaders. Pilgrim Investments has been the Fund's
investment adviser since the Fund commenced operations; however, prior to
November 1, 1997, the Fund was managed by a sub-adviser.
(4) This table shows performance of the Class A shares of the Fund because
Class Q shares of the Fund were not offered as of December 31, 1998. See
the footnote to the bar chart above.
(5) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(6) The Fund commenced operations on September 1, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim LargeCap Leaders Fund 5
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
Pilgrim Advisors, Inc.
Sub-Adviser
J.P. Morgan Investment
PILGRIM RESEARCH ENHANCED INDEX FUND Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests primarily in large companies that make up the S&P 500 Index.
Based on extensive research regarding projected company earnings and dividends,
a valuation model ranks companies in each industry group according to their
relative value. Using this valuation model, the portfolio managers select stocks
for the Fund. Within each industry, the Fund modestly overweights stocks that
are ranked as undervalued or fairly valued while modestly underweighting or not
holding stocks that appear overvalued. Industry by industry, the Fund's assets
are invested so that the Fund's industry sector allocations and market cap
weightings closely parallel those of the S&P 500.

By owning a large number of stocks within the S&P 500, with an emphasis on those
that appear undervalued or fairly valued, and by tracking the industry
weightings and other characteristics of that index, the Fund seeks returns that
modestly exceed those of the S&P 500 over the long term with virtually the same
level of volatility.

Under normal market conditions, the Fund invests at least 80% of its total
assets in common stocks included in the S&P 500. It may also invest in other
common stocks not included in the S&P 500. The Fund may also invest in certain
higher-risk investments, including derivatives (generally these investments will
be limited to S&P 500 options).

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Market Trends -- from time to time, the stock market may not favor the large
company securities that are ranked as undervalued or fairly valued in which the
Fund invests. Rather, the market could favor small company stocks,
growth-oriented HERE IT ISFund invests. Rather, the market could favor small
company stocks, growth-oriented stocks, or may not favor equities at all.

Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.

6 Pilgrim Research Enhanced Index Fund
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

This Fund does not have a performance history because it was formed on December
30, 1998.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Research Enhanced Index Fund 7
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM GROWTH OPPORTUNITIES FUND Pilgrim Advisors, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

This Fund seeks long-term growth of capital.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests primarily in common stock of U.S. companies that the portfolio
manager feels have above average prospects for growth.

Under normal market conditions, the Fund invests at least 65% of its total
assets in securities purchased on the basis of the potential for capital
appreciation. These securities may be from large-cap, mid-cap, or small-cap
companies.

The portfolio manager uses a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom up approach) to guide
stock selection and portfolio structure.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks, or may not favor equities at all.

8 Pilgrim Growth Opportunities Fund
<PAGE>
PILGRIM GROWTH OPPORTUNITIES FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20.54 23.59 23.61

Best and worst quarterly performance during this period:

4th quarter 1998: up 31.33%

3rd quarter 1998: down 15.25%

The Fund's year-to-date total return as of September 30, 1999 was 38.93%.

Average annual total returns

S&P
500
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 16.49% 28.58%

Since Inception(5) 20.27% 28.56%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization U.S. companies.
(5) Class A commenced operations on June 5, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Growth Opportunities Fund 9
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM LARGECAP GROWTH FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund normally invests at least 65% of its total assets in equity securities
of large U.S. companies. The equity securities in which the Fund may invest
include common and preferred stocks, warrants, and convertible securities.

The sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial condition and competitiveness of individual companies. It uses a blend
of traditional fundamental research of individual securities and a computer
intensive ranking system that analyzes and ranks securities. The sub-adviser
seeks to uncover signs of "change at the margin" -- positive business
developments which are not yet fully reflected in a company's stock price.

In analyzing specific companies for possible investment, the sub-adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
sub-adviser usually considers whether to sell a particular security when any of
those factors materially changes.

The Fund considers a company to be large if its market capitalization
corresponds at the time of purchase to the upper 90% of the Russell 1000 Growth
Index. In the sub-adviser's opinion, the bottom 10% of the Index includes
companies with capitalizations less than $3.9 billion. Capitalization of
companies in the Index will change with market conditions.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests primarily in equity securities
of larger companies, which sometimes have more stable prices than smaller
companies.

Market Trends -- from time to time, the stock market may not favor the large
company, growth-oriented securities in which the Fund invests. Rather, the
market could favor value stocks or small company stocks, or may not favor
equities at all.

Securities Lending -- There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price.

10 Pilgrim LargeCap Growth Fund
<PAGE>
PILGRIM LARGECAP GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
60.02

Best and worst quarterly performance during this period:

4th quarter 1998: up 37.95%

3rd quarter 1998: down 8.44%

The Fund's year-to-date total return as of September 30, 1999 was 35.66%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 1000 Growth Index.

Average annual total returns

Russell
1000
Growth
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 60.02% 38.71%
Since inception(4) 45.28% 44.57%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Russell 1000 Growth Index is an unmanaged index that measures the
performance of securities of companies among the Russell 1000 Index with
higher than average price to book ratios and forcasted growth.
(4) Class Q commenced operations on July 21, 1997.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim LargeCap Growth Fund 11
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM MIDCAP VALUE FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund normally invests as fully as practicable (at least 80% of its assets)
in equity securities of medium-sized U.S. companies. The Fund will normally
invest at least 65% of its assets in equity securities of companies that meet
the following disciplined criteria, which are intended to identify companies
that are attractive values:

Consistent Dividends -- The company must have paid or had the financial
capability from its operations to pay a dividend in its last five fiscal years.

Strong Balance Sheet -- If the company has debt that is rated, that debt is
rated investment grade by a nationally recognized rating agency. If the company
does not have debt that is rated, the company's long-term debt to capitalization
ratio is below 25%.

Reinvested Earnings -- The company currently pays out in dividends less than 65%
of current earnings, or less than the dividend payout as a percentage of current
earnings of at least half of the medium-sized companies in similar industries.

Attractive Price -- The ratio of the stock's price to the next fiscal year's
anticipated earnings is less than the corresponding ratio for at least half of
the medium-sized companies in similar industries.

The Fund considers a company to be medium-sized if it has a market
capitalization between $1 billion and $8 billion. The equity securities in which
the Fund may invest include common stock, convertible securities, preferred
stock and warrants.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline
in value due to factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security may decline for
reasons relating to the issuer, such as changes in the financial condition of
the issuer. While equities may offer the potential for greater long-term growth
than most debt securities, they generally have higher volatility. The Fund
invests in medium-sized companies, which may be more susceptible to price swings
than larger companies, but usually tend to have less volatile price swings than
smaller companies. Securities of medium-size companies may be more susceptible
to price swings than larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the mid-cap
value securities that meet the Fund's disciplined investment criteria. Rather,
the market could favor growth-oriented stocks or large or small company stocks,
or may not favor equities at all.

Inability to Sell Securities -- securities of mid-size companies trade in lower
volume an may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.

12 Pilgrim MidCap Value Fund
<PAGE>
PILGRIM MIDCAP VALUE FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
29.56 21.87 4.89

Best and worst quarterly performance during this period:

1st quarter 1998: up 13.87%

3rd quarter 1998: down 13.94%

The Fund's year-to-date total return as of September 30, 1999 was -15.28%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Russell Midcap Index and the Russell Midcap Value Index.

Average annual total returns

Russell
Russell MidCap
MidCap Value
Class A(3) Index(4) Index(5)
---------- -------- --------
One year, ended
December 31, 1998 -1.15% 10.10% 5.08%

Since inception(6) 15.53% 18.85% 19.43%

- ----------
(1) These figures are as of December 31 of each year. Because Class Q shares
were first offered in 1999, the returns in the bar chart are based upon the
performance of Class A shares of the Fund. Class A shares are not offered
in this prospectus. Class A shares would have substantially similar annual
returns as the Class Q shares because the classes are invested in the same
portfolio of securities. Annual returns would differ only to the extent
Class Q and Class A shares have different expenses.
(2) Prior to October 1, 1999, the Fund's investment policies were different in
that they emphasized midcap value stocks without employing the current
disciplined selection criteria. Pilgrim Investments has been the Fund's
investment adviser since the Fund commenced operations; however, prior to
October 1, 1999, the Fund was managed by a sub-adviser.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The Russell Midcap Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(5) The Russell MidCap Value Index is an unmanaged index that measures the
performance of companies in the Russell Midcap Index with lower
book-to-price ratios and lower forecasted growth values.
(6) Class A commenced operations on September 1, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim MidCap Value Fund 13
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM MIDCAP OPPORTUNITIES FUND Pilgrim Advisors, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

This Fund seeks long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests primarily in the common stocks of mid-sized U.S. companies that
the portfolio managers feel have above average prospects for growth. For this
Fund, mid-sized companies are companies with market capitalizations that fall
within the range of companies in the S&P MidCap 400 Index. As of November 30,
1999, the market capitalization of companies in the S&P MidCap 400 ranged from
$195 million to $23 billion. The market capitalization range will change as the
range of the companies included in the S&P MidCap 400 changes.

The portfolio managers use a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio managers seek to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attempt to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have the potential for growth, which may give the Fund a
higher risk of price volatility than a fund that emphasizes other styles, such
as a value-oriented style. The Fund invests in medium-sized companies, which may
be more susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market diversification and
may be dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the mid-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large or small company stocks, or may not favor
equities at all.

Inability to Sell Securities -- securities of mid-size companies trade in lower
volume and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.

14 Pilgrim MidCap Opportunities Fund
<PAGE>
PILGRIM MIDCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The Pilgrim MidCap Opportunities Fund does not have a performance history
because the Fund was formed on August 20, 1998.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim MidCap Opportunities Fund 15
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM MIDCAP GROWTH FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of medium-sized U.S. companies, and at least 75% of its total
assets in common stocks.

The sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial condition and competitiveness of individual companies. It uses a blend
of traditional fundamental research of individual securities and a computer
intensive ranking system that analyzes and ranks securities. The sub-adviser
seeks to uncover what it calls "change at the margin" -- positive business
developments which are not yet fully reflected in the company's stock price.

The Fund considers a company to be medium-sized if it has a market
capitalization corresponding at the time of purchase to the middle 90% of the
Russell Midcap Growth Index. In the sub-adviser's opinion, the middle 90%
includes companies with capitalizations between $1.6 billion and $10.7 billion.
Capitalization of companies in the Index will change with market conditions.

The Fund may also lend portfolio securities on a short-term basis, up to 30% of
its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in medium-sized companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources and more limited product and market
diversification, but usually tend to have less volatile price swings than
smaller companies.

Inability to Sell Securities -- securities of mid-size companies trade in lower
volume and and may be less liquid than securities of larger, more established
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.

16 Pilgrim MidCap Growth Fund
<PAGE>
PILGRIM MIDCAP GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
38.24 16.06 16.20 14.32

Best and worst quarterly performance during this period:

4th quarter 1998: up 25.24%

3rd quarter 1998: down 17.67%

The Fund's year-to-date total return as of September 30, 1999 was 21.92%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell Midcap Growth Index.

Average annual total returns

Russell
Midcap
Growth
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 14.32% 17.86%

Since inception(4) 18.75% 21.46%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Russell MidCap Growth Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index.
(4) Class Q shares commenced operations on June 30, 1994.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim MidCap Growth Fund 17
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
Pilgrim Advisors, Inc.
Sub-Adviser
PILGRIM GROWTH + VALUE FUND Navellier Fund Management, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

This Fund seeks capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests primarily in a diversified portfolio of equity securities,
including common and preferred stock, warrants and convertible securities. The
Fund invests in common stock of companies the portfolio manager identifies as
either growth or value companies through quantitative analysis.

Growth companies have above average earnings or sales growth and higher price to
earnings ratios. Value companies are temporarily undervalued or out of favor,
and tend to have lower price to book ratios relative to price and higher returns
on equity. The percentage of Fund assets allocated to the two different kinds of
companies varies depending on the portfolio manager's assessment of economic
conditions and investment opportunities.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund's performance will be affected
if the portfolio manager makes an inaccurate assessment of economic conditions
and investment opportunities, and chooses growth companies that do not grow as
quickly as hoped, or value companies that continue to be undervalued by the
market. Although the sub-adviser invests in value companies to decrease
volatility, these investments may also lower the Fund's performance. The Fund's
investments in smaller and mid-sized companies may be more susceptible to price
swings than investments in larger companies because they have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the mix of
growth and value securities in which the Fund invests. Rather, the market could
favor growth stocks to the exclusion of value stocks, or favor value stocks to
the exclusion of growth stocks, or may not favor equities at all.

Inability to Sell Securities -- securities of smaller and mid-sized companies
usually trade in lower volume and may be less liquid than securities of larger,
more established companies. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund.

Changes in Interest Rates -- the value of the Fund's convertible securities may
fall when interest rates rise. Convertibles with longer durations tend to be
more sensitive to changes in interest rates, usually making them more volatile
than debt securities with shorter durations.

Credit Risk -- the Fund could lose money if the issuer of a convertible security
is unable to meet its financial obligations or goes bankrupt.

18 Pilgrim Growth + Value Fund
<PAGE>
PILGRIM GROWTH + VALUE FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.10 17.72

Best and worst quarterly performance during this period:

4th quarter 1998: up 29.15%

3rd quarter 1998: down 16.34%

The Fund's year-to-date total return as of September 30, 1999 was 31.08%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.

Average annual total returns

Russell
2000
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 10.93% -2.54%

Since inception(5) 12.09% 9.99%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of smaller U.S. companies.
(5) The Fund commenced operations on November 18, 1996.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Growth + Value Fund 19
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
PILGRIM SMALLCAP OPPORTUNITIES FUND Pilgrim Advisors, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

This Fund seeks capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests at least 65% of its total assets in the common stock of
smaller, lesser-known U.S. companies that the portfolio manager believes have
above average prospects for growth. For this Fund, smaller companies are those
with market capitalizations that fall within the range of companies in the
Russell 2000 Index, which is an index that measures the performance of small
companies. The market capitalization range will change as the range of the
companies included in the Russell 2000 changes. The median market capitalization
of companies held by the Fund as of September 30, 1999 was $1.1 billion.

The portfolio manager uses a "top-down" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in structuring
the portfolio and a sell discipline. The portfolio manager seeks to invest in
companies expected to benefit most from major social, economic and technological
trends that are likely to shape the future of business and commerce over the
next three to five years, and attemps to provide a framework for identifying the
industries and companies expected to benefit most. This top-down approach is
combined with rigorous fundamental research (a bottom-up approach) to guide
stock selection and portfolio structure.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
portfolio manager feels have above average prospects for growth, which may give
the Fund a higher risk of price volatility than a fund that emphasizes other
styles, such as a value-oriented style. The Fund invests in smaller companies,
which may be more susceptible to price swings than larger companies because they
have fewer financial resources, more limited product and market diversification
and many are dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the small
sized growth securities in which the Fund invests. Rather, the market could
favor value-oriented stocks or large company stocks, or may not favor equities
at all.

20 Pilgrim SmallCap Opportunities Fund
<PAGE>
PILGRIM SMALLCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.16 14.94 7.59

Best and worst quarterly performance during this period:

4th quarter 1998: up 28.84%

3rd quarter 1998: down 24.07%

The Fund's year-to-date total return as of September 30, 1999 was 46.88%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Index.

Average annual total returns

Russell
2000
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 1.42% -2.54%

Since inception(5) 12.93% 14.83%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The Russell 2000 Index is an unmanaged index that measures the performance
of securities of small companies.
(5) Class A commenced operations on June 5, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim SmallCap Opportunities Fund 21
<PAGE>
- -----------
U.S. Equity
Funds
- -----------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM SMALLCAP GROWTH FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
equity securities of small U.S. companies, and at least 75% of its total assets
in common stocks.

The Fund's sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial condition and competitiveness of individual companies. It uses a blend
of traditional fundamental research of individual securities and a computer
intensive ranking system that analyzes and ranks securities. The sub-adviser
seeks to uncover what it calls "change at the margin" -- positive business
developments which are not yet fully reflected in the company's stock price.

The Fund considers a company to be small if it has a market capitalization
corresponding at the time of purchase to the middle 90% of the Russell 2000
Growth Index. In the sub-adviser's opinion, the middle 90% included companies
with capitalizations between $255 million and $1.4 billion. Capitalization of
companies in the Index will change with market conditions.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in small-cap companies, which
may be more susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market diversification and
many are dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the small-cap
growth securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or large company stocks, or may not favor equities at all.

22 Pilgrim SmallCap Growth Fund
<PAGE>
PILGRIM SMALLCAP GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
19.44 11.56 4.26

Best and worst quarterly performance during this period:

4th quarter 1998: up 27.03%

3rd quarter 1998: down 23.41%

The Fund's year-to-date total return as of September 30, 1999 was 26.48%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Russell 2000 Growth Index.

Average annual total returns

Russell
2000
Growth
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 4.26% 1.23%

Since inception(4) 11.85% 8.62%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Russell 2000 Growth Index is an unmanaged index that measures the
performance of securities of smaller U.S. companies with
greater-than-average growth orientation.
(4) Class Q commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim SmallCap Growth Fund 23
<PAGE>
- -------------
International
Equity Funds
- -------------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
Capital Management
PILGRIM WORLDWIDE GROWTH FUND
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
securities of issuers located in at least three different countries, one of
which may be the U.S.

The Fund normally invests at least 75% of its total assets in common and
preferred stocks, warrants and convertible securities. The Fund may invest in
companies located in countries with emerging securities markets when the
sub-adviser believes they present attractive investment opportunities.

The Fund's sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The sub-adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price. It gathers financial data on 20,000 companies in over 50
countries.

In analyzing specific companies for possible investment, the sub-adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective reasearch and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
sub-adviser usually considers whether to sell a particular security when any of
those factors materially changes.

In allocating the Fund's assets, the sub-adviser attempts to identify securities
of countries that are expected to provide the best opportunities for meeting the
Fund's investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund may also invest in small and
medium-sized companies, which may be more susceptible to greater price swings
than larger companies because they may have fewer financial resources, more
limited product and market diversification and may be dependent on a few key
managers.

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging markets
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.

Inability to Sell Securities -- securities of foreign companies may trade in
lower volume and may be less liquid than securities of U.S. companies. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.

24 Pilgrim Worldwide Growth Fund
<PAGE>
PILGRIM WORLDWIDE GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.32 17.64 37.92

Best and worst quarterly performance during this period:

4th quarter 1998: up 28.33%

3rd quarter 1998: down 13.33%

The Fund's year-to-date total return as of September 30, 1999 was 27.18%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the MSCI World Index.

Average annual total returns

MSCI
World
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 37.92% 22.78%

Since inception(4) 21.71% 16.80%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Morgan Stanley Capital International World (MSCI World) Index is an
unmanaged index that measures the performance of over 1,400 securities
listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and
the Far East.
(4) Class Q commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Worldwide Growth Fund 25
<PAGE>
- -------------
International
Equity Funds
- -------------

Adviser
Pilgrim Advisors, Inc.
Sub-Adviser
Brandes Investment
PILGRIM INTERNATIONAL VALUE FUND Partners L.P.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

This Fund seeks long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests primarily in foreign companies with market capitalizations
greater than $1 billion, but it may hold up to 25% of its assets in companies
with smaller market capitalizations.

The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicates are priced below their long-term value.

The Fund holds common stocks, preferred stocks, American, European and Global
depositary receipts, as well as convertible securities.

Under normal circumstances, the Fund invests at least 65% of its total assets in
securities of companies located in at least three countries other than the U.S.
The Fund may invest up to the greater of:

* 20% of its assets in any one country or industry, or,

* 150% of the weighting of the country or industry in the MSCI EAFE Index, as
long as the Fund meets any industry concentration or diversification
requirements under the Investment Company Act.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund's investments may be
affected by the following additional risks:

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political, social and economic conditions, a lack of adequate or
accurate company information, differences in the way securities markets operate,
less secure foreign banks or securities depositories than those in the U.S., and
foreign controls on investment. To the extent that the Fund invests in emerging
market countries, the risks may be greater, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. The Fund invests primarily in equity
securities of larger companies, which sometimes have more stable prices than
smaller companies. However, the Fund may also invest in small and medium-sized
companies, which may be more susceptible to price swings than larger companies
because they have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the
value-oriented stocks that the Fund invests in. Rather, the market could favor
growth-oriented stocks, or may not favor equities at all.

Inability to Sell Securities -- securities of smaller companies and some foreign
companies may trade in lower volume and may be less liquid than securities of
larger, more established companies or U.S. companies. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.

26 Pilgrim International Value Fund
<PAGE>
PILGRIM INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total return (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
15.23 17.86 13.46

Best and worst quarterly performance during this period:

4th quarter 1998: up 18.81%

3rd quarter 1998: down 14.73%

The Fund's year-to-date total return as of September 30, 1999 was 21.67%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the MSCI EAFE Index.

Average annual total returns

MSCI
EAFE
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 6.90% 20.00%

Since inception(5) 13.63% 11.24%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 2000, the returns in the bar
chart are based upon the performance of Class A shares of the Fund. Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The Morgan Stanley Capital International Europe Australasia Far East (MSCI
EAFE) Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australia and the Far
East.
(5) Class A commenced operations on March 6, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim International Value Fund 27
<PAGE>
- -------------
International
Equity Funds
- -------------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM INTERNATIONAL CORE GROWTH FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
securities of issuers located in countries outside the U.S. The Fund may invest
up to 35% of its total assets in U.S. issuers.

The Fund invests primarily in large capitalized companies ("large cap stocks")
located worldwide. In the opinion of the sub-adviser large cap stocks are those
whose stock market capitalizations are predominantly in the top 75% of publicly
traded companies as measured by stock market capitalizations in over 50
countries. The market capitalization ranges of the various countries' large cap
stocks may vary greatly due to fluctuating currency values, differences in the
size of the respective economies, and movements in the local stock markets.

Under normal conditions, the Fund invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. The Fund may
invest in companies located in countries with emerging securities markets when
the sub-adviser believes they present attractive investment opportunities.

The Fund's sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The sub-adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price. It gathers financial data on 20,000 companies in over 50
countries.

In allocating the Fund's assets, the sub-adviser attempts to identify securities
of countries that are expected to provide the best opportunities for meeting the
Fund's investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in large companies, which
sometimes have more stable prices than smaller companies.

Market Trends -- from time to time, the stock market may not favor the growth
securities in which the Fund invests. Rather, the market could favor
value-oriented stocks or smaller company stocks, or may not favor equities at
all.

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.

28 Pilgrim International Core Growth Fund
<PAGE>
PILGRIM INTERNATIONAL CORE GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.22

Best and worst quarterly performance during this period:

1st quarter 1998: up 17.31%

3rd quarter 1998: down 14.85%

The Fund's year-to-date total return as of September 30, 1999 was 16.00%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the MSCI EAFE Index.

Average annual total returns

MSCI
EAFE
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 21.22% 20.00%

Since inception(4) 21.92% 12.66%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Morgan Stanley Capital International Europe Australasia Far East (MSCI
EAFE) Index is an unmanaged index that measures the performance of
securities listed on exchanges in markets in Europe, Australasia and the
Far East.
(4) Class Q commenced operations on February 28, 1997.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim International Core Growth Fund 29
<PAGE>
- -------------
International
Equity Funds
- -------------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
securities of small companies located outside the U.S. The Fund may invest up to
35% of its total assets in U.S. issuers. The Fund invests primarily in
smaller-capitalized companies ("small cap stocks") located worldwide. In the
opinion of the Fund's sub-adviser, small cap stocks are those whose stock market
capitalizations are predominantly in the bottom 25% of publicly traded companies
as measured by stock market capitalizations in over 50 countries. The market
capitalization ranges of the various countries' small cap stocks may vary
greatly due to fluctuating currency values, differences in the size of the
respective economies, and movements in the local stock markets.

The Fund normally invests at least 75% of its total assets in common and
preferred stock, warrants and convertible securities. The Fund may invest in
companies located in countries with emerging securities markets when the
sub-adviser believes they present attractive investment opportunities.

The Fund's sub-adviser emphasizes a growth approach by searching for successful,
growing companies that are managing change advantageously and poised to exceed
growth expectations. It focuses on a "bottom-up" analysis that evaluates the
financial conditions and competitiveness of individual companies worldwide. It
uses a blend of traditional fundamental research of individual securities,
calling on the expertise of many external analysts in different countries
throughout the world, and a computer intensive ranking system that analyzes and
ranks securities. The sub-adviser seeks to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected in a
company's stock price.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund invests in small companies, which may
be more susceptible to greater price swings than larger companies because they
may have fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. To the extent the Fund invests in emerging market
countries, the risks may be greater, partly because emerging market countries
may be less politically and economically stable than other countries. It may
also be more difficult to buy and sell securities in emerging market countries.

Inability to Sell Securities -- securities of smaller and foreign companies
trade in lower volume and may be less liquid than securities of larger U.S.
companies. The Fund could lose money if it cannot sell a security at the time
and price that would be most beneficial to the Fund.

30 Pilgrim International SmallCap Growth Fund
<PAGE>
PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
17.98 13.93 35.96

Best and worst quarterly performance during this period:

1st quarter 1998: up 25.12%

3rd quarter 1998: down 15.26%

The Fund's year-to-date total return as of September 30, 1999 was 44.74%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Salomon EPAC EM Index.

Average annual total returns

Salomon
EPAC
EM
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 35.96% 14.14%

Since inception(4) 20.24% 3.43%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Salomon EPAC Extended Market (Salomon EPAC EM) Index is an unmanaged
index that measures the performance of securities of smaller capitalization
companies in 22 countries excluding the U.S. and Canada.
(4) Class Q commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim International SmallCap Growth Fund 31
<PAGE>
- -------------
International
Equity Funds
- -------------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM EMERGING COUNTRIES FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum long-term capital appreciation.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund invests at least 65% of its total assets in equity securities of
issuers located in at least three countries with emerging securities markets --
that is, countries with securities markets which are, in the opinion of the
sub-adviser, emerging as investment markets but have yet to reach a level of
maturity associated with developed foreign stock markets.

The sub-adviser currently selects portfolio securities from an investment
universe of approximately 6,000 foreign issuers in over 35 emerging markets.

Under normal market conditions, the Fund invests at least 75% of its total
assets in common and preferred stock, warrants and convertible securities. The
Fund may invest at least 35% ot its assets in U.S. companies.

The Fund's sub-adviser emphasizes a growth approach, and seeks issuers in the
early stages of development believed to be undergoing a basic change in
operations.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may go up or down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer, such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility. This Fund invests in companies that the
sub-adviser believes have the potential for rapid growth, which may give the
Fund a higher risk of price volatility than a fund that emphasizes other styles,
such as a value-oriented style. The Fund may invest in small and medium-sized
companies, which may be more susceptible to greater price swings than larger
companies because they may have fewer financial resources, more limited product
and market diversification and many are dependent on a few key managers.

Market Trends -- from time to time, the stock market may not favor the growth
securities in company stocks, or may not favor equities at all.

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate company
information, differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the U.S., and foreign
controls on investment. Investments in emerging markets countries are generally
riskier than other kinds of foreign investments, partly because emerging market
countries may be less politically and economically stable than other countries.
It may also be more difficult to buy and sell securities in emerging market
countries.

Inability to Sell Securities -- securities of emerging market companies trade in
lower volume and may be less liquid than securities of companies in larger, more
established markets. The Fund could lose money if it cannot sell a security at
the time and price that would be most beneficial to the Fund.

32 Pilgrim Emerging Countries Fund
<PAGE>
PILGRIM EMERGING COUNTRIES FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
27.75 10.00 -21.46

Best and worst quarterly performance during this period:

2nd quarter 1997: up 15.06%

3rd quarter 1998: down 25.99%

The Fund's year-to-date total return as of September 30, 1999 was 29.38%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the MSCI EMF Index.

Average annual total returns

MSCI
Emerging
Markets
Free
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 -21.46% -27.52%

Since inception(4) 1.42% -12.63%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The Morgan Stanley Capital International Emerging Markets Free (MSCI EMF)
Index is an unmanaged index that measures the performance of securities
listed on exchanges in developing nations throughout the world.
(4) Class Q commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Emerging Countries Fund 33
<PAGE>
- ------
Income
Funds
- ------

Adviser
PILGRIM GOVERNMENT SECURITIES INCOME FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks high current income, consistent with liquidity and preservation
of capital.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund normally invests at least 70% of its total assets in securities issued
or guaranteed by the U.S. Government and the following agencies or
instrumentalities of the U.S. Government: the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corporation (FHLMC). Such securities include direct
obligations of the U.S. Treasury and mortgage-backed securities. The Fund may
fall below the 70% threshold due to changes in the value of the Fund's holdings
or the sale of securities to meet redemptions, in which case the Fund will
purchase only U.S. Government securities until the 70% level is restored. The
remainder of the Fund's assets may be invested in securities issued by other
agencies and instrumentalities of the U.S. Government and in instruments
collateralized by securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The foregoing policies are fundamental and may
not be changed without shareholder approval.

The Fund may invest in securities of any maturity; however, the Fund is expected
to have a duration within a range of 20% above or below that of the Lehman
Intermediate Treasury Index. As of September 30, 1999, the dollar-weighted
average duration of the Lehman Intermediate Treasury Index was 3.05 years. The
adviser determines the composition of the Fund's portfolio on the basis of its
judgment of existing market conditions, such as the general direction of
interest rates, trends in creditworthiness, expected inflation, supply and
demand of fixed income securities, and other factors. The Fund may enter into
reverse repurchase agreements, dollar roll transactions or pairing off
transactions. The Fund does not invest in highly leveraged derivatives, such as
swaps, interest-only or principal-only stripped mortgage-backed securities, or
interest rate futures contracts.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. This Fund may be particularly sensitive to interest rates
because it primarily invests in U.S. government securities. Debt securities with
longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than debt securities with shorter durations.

Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund is subject
to less credit risk than the other income funds because it principally invests
in debt securities issued or guaranteed by the U.S. Government, its agencies and
government sponsored enterprises.

Prepayment Risk -- the Fund may invest in mortgage related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.

34 Pilgrim Government Securities Income Fund
<PAGE>
PILGRIM GOVERNMENT SECURITIES INCOME FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
12.92 8.03 11.90 7.46(6) 4.71 -3.61 14.51 2.56 7.85 5.61

Best and worst quarterly performance during this period:

2nd quarter 1989: up 7.76%

1st quarter 1994: down 2.66%

The Fund's year-to-date total return as of September 30, 1999 was -0.88%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of two broad measures of market
performance -- the Lehman Brothers/Mortgage Government Index and the Lehman
Brothers Intermediate Treasury Index.

Average annual total returns

Lehman Lehman
Gov't/ Intermediate
Mortgage Treasury
Class A(3) Index(4) Index(5)
---------- -------- --------
One year, ended
December 31, 1998 0.63% 6.98% 8.62%

Five years, ended
December 31, 1998 4.20% 5.98% 6.45%

Ten years, ended
December 31, 1998(6) 6.56% 7.38% 8.34%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 1999, the returns in the bar
chart are based upon the performance of Class A shares of the Fund Class A
shares are not offered in this prospectus. Class A shares would have
substantially similar annual returns as the Class Q shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class Q and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class Q shares of the Fund were not offered as of December 31, 1998. See
footnote (2) to the bar chart above.
(4) The Lehman Brothers Government/Mortgage Index is an unmanaged index that
measures the performance of U.S. Government agencies and instrumentalities,
as well as mortgage pass-through instruments issued by FNMA, FHLMC and
GNMA.
(5) The Lehman Brothers Intermediate Treasury Index is an unmanaged index that
measures the performance of U.S. Treasuries with maturities of under 10
years. Information on the Lehman Intermediate Treasury Index is presented
because effective May 24, 1999, the Fund seeks an average portfolio
duration within +/-20% of the duration of that Index. Previously, the
Fund's average portfolio maturity was generally longer.
(6) The Fund earned income and realized capital gains as a result of entering
into reverse repurchase agreements during the six-month period from July to
December 1992 that caused the Fund to exceed its 10% investment restriction
on borrowing. Therefore, the Fund's performance was higher than it would
have been had the Fund adhered to its borrowing restriction.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Government Securities Income Fund 35
<PAGE>
- ------
Income
Funds
- ------

Adviser
PILGRIM STRATEGIC INCOME FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum total return.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 60% of its total assets in
debt securities issued by U.S. and foreign corporations, U.S. and foreign
governments, and their agencies and instrumentalities that are rated in one of
the top four categories by a nationally recognized statistical rating agency, or
of comparable quality if unrated. These securities include bonds, notes,
mortgage-backed and asset-backed securities with rates that are fixed, variable
or floating. The Fund may invest up to 40% of its total assets in high yield
debt securities, commonly known as "junk bonds." There is no minimum credit
rating for high yield debt securities in which the Fund may invest.

The "total return" sought by the Fund consists of income earned on the Fund's
investments, plus capital appreciation, if any, which generally arises from
decreases in interest rates or improving credit fundamentals for a particular
sector or security.

The Fund may invest in debt securities of any maturity; however, the average
portfolio duration of the Fund will generally range from two to eight years. The
Fund may invest up to 30% of its total assets in securities payable in foreign
currencies. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may also use options, futures contracts and interest rate and currency swaps as
hedging techniques. The Fund does not invest in interest-only or principal-only
stripped mortgage-backed securities.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long terms to
maturity. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.

Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This is especially
true during periods of economic uncertainty or economic downturns. This Fund may
be subject to more credit risk than the other income funds, because it may
invest in high yield debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments.

Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. A security in the lowest rating catergories, that is
unrated, or whose credit rating has been lowered may be particularly difficult
to sell. Foreign securities and mortgage-related and asset-backed debt
securities may be less liquid than other debt securities. The Fund could lose
money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.

Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivatives instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.

36 Pilgrim Strategic Income Fund
<PAGE>
PILGRIM STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Institutional Class
shares from year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.77 8.96 8.18

Best and worst quarterly performance during this period:

2nd quarter 1997: up 3.68%

1st quarter 1996: down 3.16%

The Fund's year-to-date total return as of September 30, 1999 was -1.76%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman Aggregate Bond Index.

Average annual total returns

Lehman
Aggregate
Institutional Bond
Class(3) Index(4)
-------- --------
One year, ended
December 31, 1998 8.18% 8.67%

Since inception(5) 8.23% 8.20%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 1998, the returns in the bar
chart are based upon the performance of Institutional Class shares of the
Fund, which are no longer offered, for prior periods, restated to reflect
Class Q operating expenses. Class Q shares, after adjustment for class
expenses, would have had substantially similar returns because
Institutional Class shares were invested in the same portfolio of
securities. Also, prior to May 24, 1999, a different adviser managed the
Fund.
(3) This table shows performance of the Institutional Class shares of the Fund,
which is no longer offered, because Class Q of the Fund did not have a full
year's performance as of December 31, 1998. See footnote (2) to the bar
chart above.
(4) The Lehman Aggregate Bond Index is an unmanaged index that measures the
performance of fixed income securities that are similar, but not identical,
to those in the Fund's portfolio.
(5) The Fund commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Strategic Income Fund 37
<PAGE>
- ------
Income
Funds
- ------

Adviser
PILGRIM HIGH YIELD FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks a high level of current income, with capital appreciation as a
secondary objective.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund normally invests at least 65% of its assets in high yield debt
securities, including preferred stock and convertible securities, that do not in
the opinion of the adviser involve undue risk relative to their expected return.
High yield securities, which are commonly known as "junk bonds," are securities
that are rated below investment grade, i.e., rated lower than Baa by Moody's
Investors Service, Inc. or BBB by Standard and Poor's, or of comparable quality
if not rated. Generally, the Fund will invest in securities rated lower than B
by Moody's or S&P only when the adviser believes the financial condition of the
issuer or other available protections reduce the risk to the Fund or that there
is greater value in the securities than is reflected in their prevailing market
price. There is no minimum credit rating for high yield securities in which the
Fund may invest. The Fund may invest in debt securities of any maturity. In
selecting securities for the Fund, preservation of capital is a consideration.

The remainder of the Fund's assets may be invested in common stocks, investment
grade preferred stocks, investment grade debt obligations of all types, U.S.
Government securities, warrants, money market instruments (including repurchase
agreements on U.S. Government securities), mortgage-related securities and
participation interests and assignments in floating rate loans and notes. The
Fund may also invest up to 10% of its assets in foreign debt securities of any
rating. The Fund may invest in financial futures and related options to attempt
to hedge risk, although the Fund has not invested in such instruments since
Pilgrim Investments, Inc. became the adviser in 1995 through the date of this
prospectus. In selecting equity securities, the adviser uses a "bottom-up"
analysis that focuses on individual companies and assesses the company's
valuation, financial condition, management, competitiveness, and other factors.

Differences between the Fund and High Yield Fund II -- While both Funds invest
primarily in high yield securities, the High Yield Fund normally emphasizes
bonds with stronger credit ratings in the high yield bond universe. Thus, of the
two Funds, High Yield Fund II normally presents the potential for higher income,
but with potentially higher credit risk and volatility.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than other income funds because it invests in high
yield (or "junk bond") debt securities, which are considered predominantly
speculative with respect to the issuer's continuing ability to meet interest and
principal payments. This is especially true during periods of economic
uncertainty or economic downturns. The Fund is also subject to credit risk
through its investment in floating rate loans.

Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.

Risks of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, and the risk of loss due to changes in
interest rates. The use of certain derivatives may also have a leveraging
effect, which may increase the volatility of the Fund. The use of derivatives
may reduce returns for the Fund.

Price Volatility -- Equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.

38 Pilgrim High Yield Fund
<PAGE>
PILGRIM HIGH YIELD FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class A shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.87 -9.49 29.44 16.19 18.52 -1.55 17.71 15.76 14.98 -2.96

Best and worst quarterly performance during this period:

1st quarter 1991: up 14.83%

3rd quarter 1998: down 7.91%

The Fund's year-to-date total return as of September 30, 1999 was -0.07%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lehman High Yield Bond Index.

Average annual total returns

Lehman
High
Yield
Bond
Class A(3) Index(4)
---------- --------
One year, ended
December 31, 1998 -7.60% 1.87%

Five years, ended
December 31, 1998 7.36% 8.57%

Ten years, ended
December 31, 1998 8.88% 10.55%

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim High Yield Fund 39
<PAGE>
- ------
Income
Funds
- ------

Adviser
PILGRIM HIGH YIELD FUND II Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks a high level of current income and capital growth.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
high yield, lower rated debt securities, which are commonly referred to as "junk
bonds," and convertible securities rated below investment grade (i.e., lower
than the four highest rating catergories) by a nationally recognized statistical
rating agency, or of comparable quality if unrated. There is no limit on either
the portfolio maturity or the acceptable rating of securities bought by the
Fund. Securities may bear rates that are fixed, variable or floating. The Fund
may invest up to 35% of its total assets in equity securities of U.S. and
foreign companies, including securities of companies in emerging markets. In
selecting equity securities, the adviser uses a "bottom-up" analysis that
focuses on individual companies and assesses the company's valuation, financial
condition, management, competitiveness, and other factors.

The Fund is not restricted to investments in companies of any particular size,
but currently intends to invest principally in companies with market
capitalization above $100 million at the time of purchase. The Fund may also use
options, futures contracts and interest rate and currency swaps as hedging
techniques or to help seek the Fund's investment objective.

Differences between the Fund and High Yield Fund -- While both Funds invest
primarily in high yield securities, the High Yield Fund normally emphasizes
bonds with stronger credit ratings in the high yield bond universe. Thus, of the
two Funds, High Yield Fund II normally presents the potential for higher income,
but with potentially higher credit risk and volatility.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Changes in Interest Rates -- the value of the Fund's investments may fall when
interest rates rise. The Fund may be sensitive to changes in interest rates
because it may invest in debt securities with intermediate and long term
maturities. Debt securities with longer durations tend to be more sensitive to
changes in interest rates, usually making them more volatile than debt
securities with shorter durations.

Prepayment Risk -- the Fund may invest in mortgage-related securities, which can
be paid off early if the owners of the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will be
forced to reinvest this money at lower yields.

Inability to Sell Securities -- high yield securities may be less liquid than
higher quality investments. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund. A
security in the lowest rating categories, that is unrated, or whose credit
rating has been lowered may be particularly difficult to sell. Valuing less
liquid securities involves greater exercise of judgment and may be more
subjective than valuing securities using market quotes.

Risks of Foreign Investing -- foreign investments may be riskier than U.S.
investments for many reasons, including changes in currency exchange rates,
unstable political and economic conditions, a lack of adequate information,
differences in the way securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign controls on
investment. Investments in emerging market countries are generally riskier than
other kinds of foreign investments, partly because emerging market countries may
be less politically and economically stable than other countries. It may also be
more difficult to buy and sell securities in emerging market countries.

Risk of Using Derivatives -- derivatives are subject to the risk of changes in
the market price of the security, credit risk with respect to the counterparty
to the derivative instrument, and the risk of loss due to changes in interest
rates. The use of certain derivatives may also have a leveraging effect, which
may increase the volatility of the Fund. The use of derivatives may reduce
returns for the Fund.

Price Volatility -- equity securities face market, issuer and other risks, and
their values may go up and down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to factors affecting
securities markets generally or particular industries. Issuer risk is the risk
that the value of a security may decline for reasons relating to the issuer.

40 Pilgrim High Yield Fund II
<PAGE>
PILGRIM HIGH YIELD FUND II
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Institutional Class
shares from year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
21.07 5.03

Best and worst quarterly performance during this period:

3rd quarter 1997: up 8.31%

3rd quarter 1998: down 7.02%

The Fund's year-to-date total return as of September 30, 1999 was 2.60%.

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the First Boston High Yield Index.

Average annual total returns

First
Boston
Institutional High
Class(3) Index(4)
-------- --------
One year, ended
December 31, 1998 5.03% 0.58%

Since inception(5) 15.37% 8.43%

- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class Q shares were first offered in 1998, the returns in the bar
chart are based upon the performance of Institutional Class shares of the
Fund, which are no longer offered, for prior periods, restated to reflect
Class Q operating expenses. Class Q shares, after adjustment for class
expenses, would have had substantially similar returns because
Institutional Class shares were invested in the same portfolio of
securities. Prior to May 24, 1999, the Fund was managed by a different
adviser.
(3) This table shows performance of the Institutional Class shares of the Fund,
which is no longer offered, because Class Q of the Fund did not have a full
year's performance as of December 31, 1998. See footnote (2) to the bar
chart above.
(4) The First Boston High Yield Index is an unmanaged index that measures the
performance of fixed income securities similar, but not identical, to those
in the Fund's portfolio.
(5) The Fund commenced operations on July 31, 1996.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim High Yield Fund II 41
<PAGE>
- ------------
Equity and
Income Funds
- ------------

Adviser
PILGRIM BALANCED FUND Pilgrim Investments, Inc.
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks a balance of long-term capital appreciation and current income.

INVESTMENT
STRATEGY
[GRAPHIC]

The Fund's adviser actively manages a blended portfolio of equity and debt
securities with an emphasis on overall total return. The Fund normally maintains
40% to 60% of its assets in debt securities of any maturity issued by
corporations or other business entities and the U.S. Government and its agencies
and instrumentalities, and government sponsored enterprises, and normally seeks
a target allocation of 50%, although this may vary with market conditions.

The remainder of the Fund's assets are normally invested in equity securities of
large companies that the adviser believes are leaders in their industries. The
adviser considers whether these companies have a sustainable competitive edge.
The adviser emphasizes a value approach in equity selection and seeks securities
whose prices in relation to projected earnings are believed to be reasonable in
comparison to the market. For this Fund, a company with a market capitalization
of over $5 billion is considered to be a large company, although the Fund may
also invest to a limited degree in companies that have a market capitalization
between $1 billion and $5 billion.

A portion of the Fund's net assets (up to 35%) may be invested in high yield
debt securities (commonly known as "junk bonds") rated below investment grade
(i.e., lower than the four highest rating categories) by a nationally recognized
statistical rating agency, or of comparable quality if unrated. There is no
minimum credit quality for the high yield debt securities in which the Fund may
invest. The Fund may invest up to 10% of its assets in other investment
companies that invest in secured floating rate loans, including up to 5% of its
assets in Pilgrim Prime Rate Trust, a closed-end investment company. The Fund
may invest up to 20% of its total assets in foreign securities. The Fund may use
options on securities, securities indices, interest rates and foreign currencies
as a hedging technique or in furtherance of this investment objective. The Fund
may invest up to 35% of its net assets in zero coupon securities.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

The Fund also may invest in smaller companies, which may be more susceptible to
price swings than larger companies.

Changes in Interest Rates -- the value of debt and equity securities can change
in response to changes in interest rates. The value of the debt securities held
by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in debt securities with
intermediate and long terms to maturity. Debt securities with longer maturities
tend to be more sensitive to changes in interest rates, usually making them more
volatile than debt securities with shorter maturities. Zero coupon securities
are particularly sensitive to changes in interest rates.

Credit Risk -- the Fund could lose money if the issuer of a debt security is
unable to meet its financial obligations or goes bankrupt. This Fund may be
subject to more credit risk than the other income funds, because it may invest
in high yield debt securities, which are considered predominantly speculative
with respect to the issuer's continuing ability to meet interest and principal
payments. This is especially true during periods of economic uncertainty or
economic downturns.

Inability to Sell Securities -- high yield securities and securities of smaller
companies may be less liquid than other investments. The Fund could lose money
if it cannot sell a security at the time and price that would be most beneficial
to the Fund.

42 Pilgrim Balanced Fund
<PAGE>
PILGRIM BALANCED FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
16.88 21.46 23.52

Best and worst quarterly performance during this period:

4th quarter 1998: up 14.48%

1st quarter 1997: down 5.00%

The Fund's year-to-date total return as of September 30, 1999 was 2.73%

The table below provides some indication of the risks of investing in the Fund
by comparing the Fund's performance to that of a broad measure of market
performance -- the Lipper Balanced Fund Index -- and a composite index
consisting of 60% S&P 500 Index and 40% Lehman Brothers Government/Corporate
Bond Index.

Average annual total returns

Lipper
Balanced Fund Composite
Class Q Index(4) Index
------- -------- -----
One year, ended
December 31, 1998 23.52% 15.09% 20.93%

Since inception(3) 18.17% 16.68% 20.65%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, a different adviser managed the Fund.
(3) Class Q commenced operations on August 31, 1995.
(4) The Lipper Balanced Fund Index is an unmanaged index that measures the
performance of balanced funds (funds that seek current income balanced with
capital appreciation).

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Balanced Fund 43
<PAGE>
- ------------
Equity and
Income Funds
- ------------

Adviser
Pilgrim Investments, Inc.
Sub-Adviser
Nicholas-Applegate
PILGRIM CONVERTIBLE FUND Capital Management
- --------------------------------------------------------------------------------

OBJECTIVE
[GRAPHIC]

The Fund seeks maximum total return, consisting of capital appreciation and
current income.

INVESTMENT
STRATEGY
[GRAPHIC]

Under normal conditions, the Fund invests at least 65% of its total assets in
convertible securities. Convertible securities are generally preferred stock or
other securities, including debt securities, that are convertible into common
stock. The Fund emphasizes companies with market capitalizations above $500
million. Through investments in convertible securities, the Fund seeks to
capture the upside potential of the underlying equities with less downside
exposure.

The Fund normally invests a minimum of 25% of its total assets in common and
preferred stocks, and 25% in other income producing convertible and debt
securities. The Fund may also invest up to 35% of its net assets in high yield
or convertible debt securities (commonly known as "junk bonds") rated below
investment grade by a nationally recognized statistical rating agency, or of
comparable quality if unrated. There is no minimum credit rating for high yield
securities in which the Fund may invest.

The Fund may also invest in securities issued by the U.S. government and its
agencies and instrumentalities.

In evaluating convertibles the Fund's sub-adviser evaluates each security's
investment characteristics as a fixed income instrument as well as its potential
for capital appreciation.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

- --------------------------------------------------------------------------------

RISKS
[GRAPHIC]

You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:

Price Volatility -- the value of the Fund changes as the prices of its
investments go up or down. Convertible securities have investment
characteristics of both equity and debt securities. Equity securities face
market, issuer and other risks, and their values may go up or down, sometimes
rapidly and unpredictably. Market risk is the risk that securities may decline
in value due to factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security may decline for
reasons relating to the issuer, such as changes in the financial condition of
the issuer. While equities may offer the potential for greater long-term growth
than most debt securities, they generally have higher volatility. The Fund may
invest in small and medium-sized companies, which may be more susceptible to
greater price swings than larger companies because they may have fewer financial
resources, more limited product and market diversification and many are
dependent on a few key managers.

Changes in Interest Rates -- the value of the convertible and debt securities
held by the Fund may fall when interest rates rise. The Fund may be sensitive to
changes in interest rates because it may invest in securities with intermediate
and long terms to maturity. Securities with longer durations tend to be more
sensitive to changes in interest rates, usually making them more volatile than
securities with shorter durations. Zero coupon securities are particularly
sensitive to Changes in Interest Rates.

Credit Risk -- the Fund could lose money if the issuer of a security is unable
to meet its financial obligations or goes bankrupt. This is especially true
during periods of economic uncertainty or economic downturns. This Fund may be
subject to more credit risk than many bond funds, because the convertible
securities and debt securities in which it invests may be lower-rated
securities.

Inability to Sell Securities -- convertible securities and lower rated debt and
convertible securities may be less liquid than other investments. The Fund could
lose money if it cannot sell a security at the time and price that would be most
beneficial to the Fund.

44 Pilgrim Convertible Fund
<PAGE>
PILGRIM CONVERTIBLE FUND
- --------------------------------------------------------------------------------

HOW THE
FUND HAS
PERFORMED
[GRAPHIC]

The bar chart below provides some indication of the risks of investing in the
Fund by showing changes in the performance of the Fund's Class Q shares from
year to year.

Year by year total returns (%)(1)(2)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20.74 23.04 21.40

Best and worst quarterly performance during this period:

4th quarter 1998: up 19.88%

3rd quarter 1998: down 9.03%

The Fund's year-to-date total return as of September 30, 1999 was 11.71%.

Average annual total returns

First
Boston
Convertible
Class Q Index(3)
------- --------
One year, ended
December 31, 1998 21.40% 6.55%

Since inception(4) 20.57% 11.82%

- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the
adviser, rather than sub-adviser, to the Fund.
(3) The First Boston Convertible Index is an unmanaged index that measures the
performance of a universe of convertible securities that are similar, but
not identical, to those in the Fund's portfolio.
(4) Class Q commenced operations on August 31, 1995.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Convertible Fund 45
<PAGE>
WHAT YOU PAY TO INVEST
- --------------------------------------------------------------------------------

There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the fund. The table below shows the fees
and expenses for Class Q shares of the Pilgrim Funds.

Fees you pay directly

Class Q
-------
Maximum sales charge on your investment
(as a % of offering price) none

Maximum deferred sales charge
(as a % of purchase or sales price,
whichever is less) none

Operating expenses paid each year by the Funds(1)
(as a % of average net assets)

<TABLE>
<CAPTION>
Distribution Total
and service fund Fee waiver
Management (12b-1) Other operating by Net
Fund fee fees expenses(3)(4) expenses adviser(2) expenses
- ---- --- ---- -------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
MagnaCap % 0.71 0.25 0.34 1.30 -- 1.30
LargeCap Leaders % 1.00 0.25 0.73 1.98 -0.23 1.75
Research Enhanced Index % 0.70 0.25 0.56 1.51 -- 1.51
Growth Opportunities % 0.75 0.25 0.32 1.32 -- 1.32
LargeCap Growth % 0.75 0.25 0.25 1.25 -- 1.25
MidCap Value % 1.00 0.25 0.54 1.79 -0.04 1.75
MidCap Opportunities % 1.00 0.25 1.12 2.37 -- 2.37
MidCap Growth % 0.75 0.25 0.25 1.25 -- 1.25
Growth + Value % 1.00 0.25 0.39 1.64 -- 1.64
SmallCap Opportunities % 0.75 0.25 0.42 1.42 -- 1.42
SmallCap Growth % 1.00 0.25 0.24 1.49 -- 1.49
Worldwide Growth % 1.00 0.25 0.30 1.55 -- 1.55
International Value % 1.00 0.25 0.38 1.63 -- 1.63
International Core Growth % 1.00 0.25 0.38 1.63 -- 1.63
International SmallCap Growth % 1.00 0.25 0.42 1.67 -- 1.67
Emerging Countries % 1.25 0.25 0.93 2.43 -0.53 1.90
Government Securities Income % 0.50 0.25 0.65 1.40 -- 1.40
Strategic Income % 0.45 0.25 0.67 1.37 -0.52 0.85
High Yield % 0.60 0.25 0.27 1.12 -0.02 1.10
High Yield II % 0.60 0.25 0.32 1.17 -0.17 1.00
Balanced % 0.75 0.25 0.51 1.51 -0.26 1.25
Convertible % 0.75 0.25 0.23 1.23 -- 1.23
</TABLE>

- ----------
(1) This table shows the estimated operating expenses for Class Q shares of
each Fund as a ratio of expenses to average daily net assets. These
estimated expenses are based on each Fund's actual operating expenses for
its most recent complete fiscal year and fee waivers to which the Advisers
have agreed.
(2) Pilgrim Investments has entered into expense limitation agreements with
each Fund except MagnaCap Fund, Research Enhanced Index Fund, Growth
Opportunities Fund, MidCap Opportunities Fund, Growth + Value Fund,
SmallCap Opportunities Fund, International Value Fund and Government
Securities Income Fund, under which it will limit expenses of the Fund,
excluding interest, taxes, brokerage and extraordinary expenses, subject to
possible reimbursement to Pilgrim Investments within three years. The
expense limit for each such Fund is shown as "Net Expenses." For each Fund
except Government Securities Income Fund, the expense limit will continue
through at least October 31, 2001. Nicholas-Applegate Capital Management
bears 50% of the cost of maintaining the expense limit for funds for which
it serves as sub-adviser. Pilgrim Investments has separately agreed to
reimburse Government Securities Income Fund to the extent that total Fund
operating expenses, excluding interest, taxes, brokerage commissions,
extraordinary expenses, and distribution fees in excess of 0.25%, exceed
1.50% of the Fund's average daily net assets on the first $40 million in
net assets and 1% of average daily net assets in excess of $40 million. The
expense limit for Government Securities Income Fund will terminate only
with termination of the advisory contract with Pilgrim Investments.
(3) Because Class Q shares are new for MagnaCap Fund, LargeCap Leaders Fund,
Research Enhanced Index Fund, Growth Opportunities Fund, MidCap Value Fund,
MidCap Opportunities Fund, Growth + Value Fund, SmallCap Opportunities
Fund, International Value Fund, Government Securities Income Fund, and High
Yield Fund, the expenses for each Fund are estimated based on Class A
expenses of the Fund.
(4) Except for MagnaCap Fund, LargeCap Leaders Fund, Research Enhanced Index
Fund, Growth Opportunities Fund, MidCap Value Fund, MidCap Opportunities
Fund, Growth + Value Fund, SmallCap Opportunities Fund, International Value
Fund, Government Securities Income Fund, and High Yield Fund, other
expenses have been restated to reflect the elimination of certain
administrative fees effective May 24, 1999.

46 What You Pay to Invest
<PAGE>
WHAT YOU PAY TO INVEST
- --------------------------------------------------------------------------------

Examples

The examples that follow are intended to help you compare the cost of investing
in the Pilgrim Funds with the cost of investing in other mutual funds. Each
example assumes that you invested $10,000, reinvested all your dividends, the
Fund earned an average annual return of 5%, and annual operating expenses
remained at the current level. Keep in mind that this is only an estimate --
actual expenses and performance may vary.

Class Q

Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
MagnaCap $ 132 412 713 1,568
LargeCap Leaders $ 178 576 1,024 2,268
Research Enhanced Index $ 154 477 824 1,802
Growth Opportunities $ 134 418 723 1,590
LargeCap Growth $ 127 397 686 1,511
MidCap Value $ 178 555 962 2,098
MidCap Opportunities $ 240 739 1,265 2,706
MidCap Growth $ 127 397 686 1,511
Growth + Value $ 167 517 892 1,944
SmallCap Opportunities $ 145 449 776 1,702
SmallCap Growth $ 152 471 813 1,779
Worldwide Growth $ 158 490 845 1,845
International Value $ 166 514 887 1,933
International Core Growth $ 166 514 887 1,933
International SmallCap Growth $ 170 526 907 1,976
Emerging Countries $ 193 653 1,197 2,683
Government Securities Income $ 143 443 766 1,680
Strategic Income $ 87 328 648 1,553
High Yield $ 112 352 613 1,359
High Yield II $ 102 337 610 1,389
Balanced $ 127 425 773 1,756
Convertible $ 125 390 676 1,489

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

What You Pay to Invest 47
<PAGE>
SHAREHOLDER
GUIDE HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Purchase of Shares

Class Q Shares are offered at net asset value without a sales charge to
qualified retirement plans, financial and other institutions and "wrap
accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment is $10,000. The Distributor may waive these minimums from
time to time. Certain Funds also offer Class A, B, C, M, T and I shares, which
have different sales charges and other expenses that may affect their
performance. You can obtain more information about these other share classes by
calling (800) 992-0180.

The Funds and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. Pilgrim reserves the right to waive minimum investment
amounts. The Funds reserve the right to liquidate sufficient shares to recover
annual transfer agent fees or to close your account and redeem your shares
should you fail to maintain your account value at a minimum of $250,000.

If you are a participant in a qualified retirement plan, you should make
purchases through your plan administrator or sponsor, who is responsible for
transmitting orders.

All other purchasers may purchase shares by the methods outlined in the table on
the right.

Distribution and Shareholder Service Fees

To pay for the cost of servicing your shareholder account, each Fund has adopted
a Rule 12b-1 plan for Class Q shares which requires fees to be paid out of the
assets of the class. Each Fund pays a service fee at an annual rate of 0.25% of
the average daily net assets of the Class Q shares of the Fund.

Retirement Plans

You may invest in each Fund through various retirement plans, including IRAs,
Simplified Employee Plan (SEP) IRAs, Roth IRAs 403(b) plans, 457 plans, and all
qualified retirement plans. For further information about any of the plans,
agreements, applications and annual fees, contact the Distributor, your
financial consultant or plan sponsor. To determine which retirement plan is
appropriate for you, consult your tax adviser. For further information, contact
the Shareholder Servicing Agent at (800) 992-0180.

Initial Additional
Method Investment Investment
------ ---------- ----------
By Contacting A financial consultant Visit or consult a
Your Financial with an authorized firm financial consultant.
Consultant can help you establish
and maintain your
account.

By Mail Visit or speak with a Fill out the Account
financial consultant. Additions form
Make your check included on the bottom
payable to the Pilgrim of your account
Funds and mail it, statement along with
along with a completed your check payable to
Application. Please the Fund and mail
indicate your them to the address on
investment professional the account statement.
on the New Account Remember to write
Application your account number
on the check.

By Wire Call the Pilgrim Wire the funds in the
Operations Department same manner described
at (800) 336-3436 to under "Initial
obtain an account Investment."
number and indicate
your investment
professional on the
account.

Instruct your bank to
wire funds to the Fund
in the care of:

Investors Fiduciary
Trust Co.
ABA #101003621
Kansas City, MO
credit to:__________
(the Fund)
A/C #751-8315; for
further credit
to:_________________
Shareholder
A/C #_______________
(A/C # you received
over the telephone)
Shareholder Name:
____________________
(Your Name Here)

After wiring funds you
must complete the
Account Application
and send it to:

Pilgrim Funds
P.O. Box 219368
Kansas City, MO
64121-6368

48 Shareholder Guide
<PAGE>
SHAREHOLDER
HOW TO REDEEM SHARES GUIDE
- --------------------------------------------------------------------------------

If you are a participant in a qualified retirement plan, you should make
redemptions through your plan administrator or sponsor, who is responsible for
transmitting orders.

All other shareholders may redeem shares by the methods outlined in the table on
the right.

Under unusual circumstances, a Fund may suspend the right of redemption as
allowed by federal securities laws.

Systematic Withdrawal Plan

You may elect to make periodic withdrawals from your account on a regular basis.

* Your account must have a current value of at least $250,000.

* Minimum withdrawal amount is $1,000.

* You may choose from monthly, quarterly, semi-annual or annual payments.

For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the SAI.

Payments

Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.

Each Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, a Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, a Fund could elect to make payment in securities
for redemptions in excess of $250,000 or 1% of its net assets during any 90-day
period for any one shareholder. An investor may incur brokerage costs in
converting such securities to cash.

Method Procedures
------ ----------
By Contacting Your You may redeem by contacting your financial consultant
Financial Consultant who may charge for their services in connection with your
redemption request, but neither the Fund nor the
Distributor imposes any such charge.

By Mail Send a written request specifying the Fund name and share
class, your account number, the name(s) in which the
account is registered, and the dollar value or number of
shares you wish to redeem to:

Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368

If certificated shares have been issued, the certificate
must accompany the written request. Corporate investors
and other associations must have an appropriate
certification on file authorizing redemptions. A
suggested form of such certification is provided on the
Account Application. A signature guarantee may be
required.

By Telephone -- You may redeem shares by telephone on all accounts other
Expedited Redemption than retirement accounts, unless you check the box on
the Account Application which signifies that you do not
wish to use telephone redemptions. To redeem by
telephone, call the Shareholder Servicing Agent at (800)
992-0180.

Receiving Proceeds By Check:

You may have redemption proceeds (up to a maximum of
$100,000) mailed to an address which has been on record
with Pilgrim Funds for at least 30 days.

Receiving Proceeds By Wire:

You may have redemption proceeds (subject to a minimum of
$5,000) wired to your pre-designated bank account. You
will not be able to receive redemption proceeds by wire
unless you check the box on the Account Application which
signifies that you wish to receive redemption proceeds by
wire and attach a voided check. Under normal
circumstances, proceeds will be transmitted to your bank
on the business day following receipt of your
instructions, provided redemptions may be made. In the
event that share certificates have been issued, you may
not request a wire redemption by telephone.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Shareholder Guide 49
<PAGE>
SHAREHOLDER
GUIDE TRANSACTION POLICIES
- --------------------------------------------------------------------------------

Net Asset Value

The net asset value (NAV) per share for Class Q shares of each Fund is
determined each business day as of the close of regular trading on the New York
Stock Exchange (usually at 4:00 p.m. Eastern Time). The NAV per share of Class Q
shares of each Fund is calculated by taking the value of the Fund's assets
attributable to Class Q shares, subtracting the Fund's liabilities attributable
to Class Q shares, and dividing by the number of Class Q shares that are
outstanding. Because foreign securities may trade on days when the Funds do not
price shares, the net asset value of a Fund that invests in foreign securities
may change on days when shareholders will not be able to purchase or redeem the
Fund's shares.

In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations,
short-term debt securities, and for situations where market quotations are
deemed unreliable. Short-term debt securities having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Directors or Trustees, although the
actual calculations will be made by persons acting under the supervision of the
Board. Valuing securities at fair value involves greater reliance on judgment
than securities that have readily available market quotations.

Price of Shares

When you buy shares, you pay the NAV. When you sell shares, you receive the NAV.
Exchange orders are effected at NAV.

Execution of Requests

Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.

You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued
unless you request them in writing.

Exchanges

You may exchange Class Q shares for Class Q shares of any other Pilgrim Fund
that offers Class Q shares. The total value of shares being exchanged must at
least equal the minimum investment requirement for Class Q shares of the Fund
into which they are being exchanged. Exchanges of shares are sales and may
result in a gain or loss for federal and state income tax purposes. There is no
specific limit on exchange frequency; however, the Funds are intended for long
term investment and not as a trading vehicle. The adviser may prohibit excessive
exchanges (more than four per year). The adviser also may, on 60 days' prior
notice, restrict the frequency of, otherwise modify, or impose charges of up to
$5.00 upon exchanges.

You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege.

Systematic Exchange Privilege

You may elect to have a specified dollar amount of Class Q shares systematically
exchanged, monthly, quarterly, semi-annually or annually (on or about the 10th
of the applicable month), from your account to an identically registered account
in Class Q shares of any other open-end Pilgrim Fund. This exchange privilege
may be modified at any time or terminated upon 60 days' written notice to
shareholders.

Telephone Orders

The Pilgrim funds and their transfer agent will not be responsible for the
authenticity of phone instructions or losses, if any, resulting from
unauthorized shareholder transactions if they reasonably believe that such
instructions were genuine. The Funds and their transfer agent have established
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include recording telephone instructions for exchanges
and expedited redemptions, requiring the caller to give certain specific
identifying information, and providing written confirmation to shareholders of
record not later than five days following any such telephone transactions. If
the Funds and their transfer agent do not employ these procedures, they may be
liable for any losses due to unauthorized or fraudulent telephone instructions.

50 Shareholder Guide
<PAGE>
SHAREHOLDER
TRANSACTION POLICIES GUIDE
- --------------------------------------------------------------------------------

Small Accounts (Non-Retirement Only)

If you draw down a non-retirement account so that its total value is less than
the Fund minimum, you may be asked to purchase more shares within 60 days. If
you do not take action, the Fund may close out your account and mail you the
proceeds. Your account will not be closed if its drop in value is due to Fund
performance.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Shareholder Guide 51
<PAGE>
MANAGEMENT OF THE FUNDS
ADVISERS
- --------------------------------------------------------------------------------

Pilgrim Advisors, Inc., formerly Northstar Investment Management Corporation
("Pilgrim Advisors") or Pilgrim Investments, Inc. ("Pilgrim Investments") serves
as the investment adviser to each of the Funds. Both are indirect wholly-owned
subsidiaries of ReliaStar Financial Corp. ("ReliaStar") (NYSE: RLR). Through its
subsidiaries, ReliaStar offers individuals and institutions life insurance and
annuities, employee benefits products and services, life and health reinsurance,
retirement plans, mutual funds, bank products, and personal finance education.

Pilgrim Advisors or Pilgrim Investments, as the case may be, has overall
responsibility for the management of the Funds for which it serves as adviser.
The adviser provides or oversees all investment advisory and portfolio
management services for each Fund, and assists in managing and supervising all
aspects of the general day-to-day business activities and operations of the
Funds, including custodial, transfer agency, dividend disbursing, accounting,
auditing, compliance and related services.

Pilgrim Advisors is a registered investment adviser that currently manages over
$4 billion in mutual funds and institutional accounts.

Organized in December 1994, Pilgrim Investments is registered as an investment
adviser. As of September 30, 1999, Pilgrim Investments managed over $7.7 billion
in assets. Pilgrim Investments acquired certain assets of previous advisers to
certain of the Funds in separate transactions that closed on April 7, 1995 and
May 21, 1999. On October 29, 1999, ReliaStar acquired Pilgrim Investments.
Pilgrim Advisors and Pilgrim Investments share certain resources and investment
personnel.

Pilgrim Advisors' and Pilgrim Investments' principal address is 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004.

Pilgrim Advisors or Pilgrim Investments, as the case may be, receives a monthly
fee for its services based on the average daily net assets of each of the Funds
it manages.

The following table shows the aggregate annual advisory fee paid by each Fund
for the most recent fiscal year as a percentage of that Fund's average daily net
assets:

Fund Advisory Fee
- ---- ------------
MagnaCap 0.71%
LargeCap Leaders 1.00
Research Enhanced Index 0.70
Growth Opportunities 0.75
LargeCap Growth 0.75
MidCap Value 1.00
MidCap Opportunities 1.00
MidCap Growth 0.75
Growth + Value 1.00
SmallCap Opportunities 0.75
SmallCap Growth 1.00
Worldwide Growth 1.00
International Value 1.00
International Core Growth 1.00
International SmallCap Growth 1.00
Emerging Countries 1.25
Government Securities Income 0.50
Strategic Income 0.45
High Yield 0.60
High Yield II 0.60
Balanced 0.75
Convertible 0.75

Pilgrim Advisors Directly Manages the Portfolios of the Following Funds:

Growth Opportunities Fund
MidCap Opportunities Fund

The following individuals share responsibility for the day-to-day management of
the Growth Opportunities Fund and the MidCap Opportunities Fund:

Mary Lisanti has co-managed the Pilgrim MidCap Opportunities Fund since the fund
was formed in August 1998 and has managed or co-managed the Pilgrim Growth
Opportunities Fund since August 1998. She joined Pilgrim Advisors in May 1998.

52 Management of the Funds
<PAGE>
MANAGEMENT
ADVISERS OF THE FUNDS
- --------------------------------------------------------------------------------

Ms. Lisanti has over 20 years of experience in small and mid-cap investments.
Before joining Pilgrim, Ms. Lisanti was a Portfolio Manager at Strong Capital
Management where she managed the Strong Small Cap Fund and co-managed the Strong
Mid Cap Fund. From 1993 to 1996, Ms. Lisanti was a Managing Director and Head of
Small and Mid-Capitalization Equity Strategies at Bankers Trust Corp. where she
managed the BT Small Cap Fund and the BT Capital Appreciation Fund. Prior to
Bankers Trust, Ms. Lisanti was a Portfolio Manager with the Evergreen Funds. She
began her career as an Analyst specializing in emerging growth stocks with
Donaldson, Lufkin & Jenrette and Shearson Lehman Hutton, and was ranked the
number one Emerging Growth Institutional Investor Stock Analyst in 1989. She is
a Chartered Financial Analyst, and a Member of the New York Society of Security
Analysts and the Financial Analyst Federation.

Jeffrey Bernstein has co-managed the Pilgrim MidCap Opportunities Fund since the
fund was formed in August 1998 and has co-managed the Pilgrim Growth
Opportunities Fund since January 2000. He joined Pilgrim in May 1998.

Mr. Bernstein has over 10 years of experience in small and mid-cap investments.
Before joining Pilgrim, Mr. Bernstein was a Portfolio Manager at Strong Capital
Management where he co-managed the Strong MidCap Fund. From November 1995 to
February 1997, Mr. Bernstein was a Portfolio Manager with Berkeley Capital. From
September 1993 to November 1995, Mr. Bernstein was an Assistant Portfolio
Manager at Bankers Trust Corp. Prior to Bankers Trust, Mr. Bernstein was an
Analyst for Cowen & Co.

SmallCap Opportunities Fund

Mary Lisanti, whose background is described above, has served as manager of the
SmallCap Opportunities Fund since July 1998.

Pilgrim Investments Directly Manages the Portfolios of the Following Funds:

MagnaCap Fund

This Fund is managed by a team led by Howard N. Kornblue, Senior Vice President
and Senior Portfolio Manager for Pilgrim Investments. Mr. Kornblue has served
as a Portfolio Manager of MagnaCap Fund since 1989. The other individuals on
the team are G. David Underwood and Robert M. Kloss.

Mr. Underwood has over 21 years of investment management experience. At Pilgrim
Investments, an affiliate of Pilgrim, he serves as a Vice President and Senior
Portfolio Manager. Prior to joining Pilgrim Investments in December 1996, Mr.
Underwood was a Director of Funds Management for First Interstate Capital
Management.

LargeCap Leaders and MidCap Value Fund

The LargeCap Leaders and MidCap Value Funds are managed by a team led by G.
David Underwood, Vice President and Senior Portfolio Manager for Pilgrim
Investments. Mr. Underwood is the Lead Portfolio Manager of LargeCap Leaders
Fund. Prior to joining Pilgrim Investments in December, 1996, Mr. Underwood
served as Director of Funds Management for First Interstate Capital Management.
Mr. Underwood's prior experience includes a 10 year association with Integra
Trust Company of Pittsburgh where he served as Director of Research and Senior
Portfolio Manager. The other individual on the team is Robert M. Kloss.

Strategic Income Fund

The following individuals share responsibility for the day-to-day management of
the Strategic Income Fund:

Robert K. Kinsey, Vice President of Pilgrim Investments, has served as a
Portfolio Manager of Strategic Income Fund since May 24, 1999. Mr. Kinsey
manages Strategic Income Fund's assets that are invested in assets other than
high yield debt securities. Prior to joining Pilgrim Investments, Mr. Kinsey
was a Vice President and Fixed Income Portfolio Manager for Federated Investors
from January 1995 to March 1999. From July 1992 to January 1995, Mr. Kinsey was
a Principal and Portfolio Manager for Harris Investment Management.

Kevin G. Mathews, Senior Vice President and Senior Portfolio Manager of Pilgrim
Investments, has served as a Senior Portfolio Manager of Strategic Income Fund
since May 24, 1999. Mr. Mathews manages Strategic Income Fund's assets that are
invested in high yield debt securities. Mr. Mathews has served as Portfolio
Manager of High Yield Fund since June 1995, and also served as Portfolio Manager
of Government Securities Income Fund from June 1995 through September 1996.
Prior to joining Pilgrim Investments, Mr. Mathews was a Vice President and
Senior Portfolio Manager with Van Kampen American Capital.

Charles Ullerich, Vice President and Portfolio Manager of Pilgrim Investments,
has served as a Co-Portfolio Manager of Strategic Income Fund since December
1999. Prior to joining Pilgrim Investments, Mr. Ullerich was Vice President of
Treasury Services for First Liberty Bank of Macon, GA since 1991, where he was
Portfolio Manager for a mortgage and treasury securities portfolio.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Management of the Funds 53
<PAGE>
MANAGEMENT OF THE FUNDS
ADVISERS
- --------------------------------------------------------------------------------

Government Securities Income Fund

Robert K. Kinsey, whose background is described above, has primary
responsibility for the day-to-day management of Government Securities Income
Fund, and has served as Senior Portfolio Manager of Government Securities Income
Fund since May 24, 1999.

High Yield Fund and High Yield Fund II

Kevin G. Mathews, whose background is described above, has served as Senior
Portfolio Manager of High Yield Fund and High Yield Fund II since June 1995 and
May 1999, respectively.

Charles Ullerich, whose background is described above, has served as a
co-manager of High Yield Fund and High Yield Fund II since December 1999.

Balanced Fund

The following individuals share responsibility for the day-to-day management of
the Balanced Fund:

G. David Underwood, whose background is described above, has served as Senior
Portfolio Manager of the equity portion of the Balanced Fund's assets since May
24, 1999.

Kevin G. Mathews, whose background is described above, has served as Senior
Portfolio Manager of the fixed income portion of Balanced Fund's assets since
May 24, 1999.

Robert K. Kinsey, whose background is described above, has served as a Portfolio
Manager of the fixed income portion of Balanced Fund's assets since May 24,
1999.

Charles Ullerich, whose background is described above, has served as a
co-manager of the fixed income portion of Balanced Fund's assets since December
1999.

54 Management of the Funds
<PAGE>
MANAGEMENT
SUB-ADVISERS OF THE FUNDS
- --------------------------------------------------------------------------------

For the following Funds, Pilgrim Advisors or Pilgrim Investments has engaged a
Sub-Adviser to provide the day-to-day management of the Fund's portfolio. The
Sub-Advisers have, at least in part, been selected on the basis of their
successful application of a consistent, well-defined, long-term investment
approach over a period of several market cycles.

Research Enhanced Index Fund

J.P. Morgan Investment Management Inc.

A registered investment adviser, J.P. Morgan Investment Management Inc. (J.P.
Morgan) serves as Sub-Adviser to the Pilgrim Research Enhanced Index Fund. The
firm was formed in 1984. The firm evolved from the Trust and Investment Division
of Morgan Guaranty Trust Company which acquired its first tax-exempt client in
1913 and its first pension account in 1940. J.P. Morgan currently manages
approximately $326 billion for institutions and pension funds. The company is a
wholly owned subsidiary of J.P. Morgan & Co. J.P. Morgan's principal address is
522 Fifth Avenue, New York, New York 10036.

James Wiess has co-managed the Pilgrim Research Enhanced Index Fund since the
fund was formed in December 1998. At J.P. Morgan, he serves as a Portfolio
Manager and Member of the Structured Equity Group with the responsibility of
portfolio rebalancing and research and development of structured equities
strategies.

Mr. Wiess has over 16 years of investment management experience. Before joining
J.P. Morgan in 1992, Mr. Wiess was a Stock Index Arbitrager for seven years at
Oppenheimer & Co. and a Consultant for Data Resources. He is a Chartered
Financial Analyst.

Timothy Devlin has co-managed the Pilgrim Research Balanced Index Fund since the
fund was formed in December 1998. At J.P. Morgan, he serves as a Portfolio
Manager and Member of the Structured Equity Group.

Mr. Devlin has over 12 years of investment management experience. Before
joining J.P. Morgan in 1996, Mr. Devlin was a Portfolio Manager for nine years
at Mitchell Hutchins Asset Management, Inc. where he managed
quantitatively-driven portfolios for institutional and small investments.

Growth + Value Fund

Navellier Fund Management, Inc.

A registered investment adviser, Navellier Fund Management Inc. (Navellier)
serves as Sub-Adviser to the Pilgrim Growth + Value Fund. Navellier and its
affiliate, Navellier & Associates, Inc., manage over $2 billion for
institutions, pension funds and high net worth individuals. Navellier is wholly
owned by Louis Navellier. Navellier's principal address is 1 East Liberty, Third
Floor, Reno, Nevada 89501.

Louis Navellier has managed the Pilgrim Growth + Value Fund since the fund was
formed in November 1996. Mr. Navellier has over 19 years of investment
management experience and is the sole owner of Navellier & Associates, Inc. Mr.
Navellier's investment newsletter, MPT Review, has been published for over 19
years and is widely renowned throughout the investment community.

International Value Fund

Brandes Investment Partners, L.P.

A registered investment adviser, Brandes Investment Partners, L.P. (Brandes)
serves as Sub-Adviser to the Pilgrim International Value Fund. The company was
formed in May 1996 as the successor to its general partner, Brandes Investment
Partners, Inc. which has been providing investment advisory services (through
various predecessor entities) since 1974. Brandes currently manages over $33
billion in international portfolios. Brandes' principal address is 12750 High
Bluff Drive, San Diego, California 92130.

Charles Brandes has co-managed the Pilgrim International Value Fund since the
funds were formed in March 1995 and January 1998, respectively. Mr. Brandes has
over 31 years of investment management experience. He founded the general
partner of Brandes Investment Partners, L.P. in 1974 and owns a controlling
interest in it. At Brandes Investment Partners, L.P., he serves as a Managing
Partner. He is a Chartered Financial Analyst and a Memeber of the Association
for Investment Management and Research.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Management of the Funds 55
<PAGE>
MANAGEMENT
OF THE FUNDS SUB-ADVISERS
- --------------------------------------------------------------------------------

Jeff Busby has co-managed the Pilgrim International Value Fund since the fund
was formed in March 1995. Mr. Busby has over 13 years of investment management
experience. At Brandes Investment Partners, L.P., he serves as a Managing
Partner. He is also responsible for overseeing all trading activities for the
firm. He is a Chartered Financial Analyst, and a Member of the Association for
Investment Management and Research and the Financial Analyst Society.

LargeCap Growth Fund, MidCap Growth Fund, SmallCap Growth Fund, International
Core Growth Fund, Worldwide Growth Fund, International SmallCap Growth Fund,
Emerging Countries Fund and Convertible Fund

Nicholas-Applegate Capital Management (NACM).

NACM serves as sub-adviser to the Funds listed above. Founded in 1984, NACM
manages over $35 billion of discretionary assets for numerous clients, including
employee benefit plans of corporations, public retirement systems and unions,
university endowments, foundations, and other institutional investors and
individuals. Each of the Funds listed above is managed by a team of portfolio
managers and analysts employed by NACM. NACM's principal business address is 600
West Broadway, San Diego, California, 92101.

56 Management of the Funds
<PAGE>
DIVIDENDS,
DISTRIBUTIONS
DIVIDENDS/TAXES AND TAXES
- --------------------------------------------------------------------------------

Dividends

The Funds generally distribute most or all of their net earnings in the form of
dividends. Each Fund pays dividends, if any, as follows:

Annually(1) Semi-Annually(1) Quarterly(2) Monthly(3)
- ----------- ---------------- ------------ ----------
LargeCap Leaders MagnaCap Balanced Strategic
Research Enhanced Convertible Income
Index Government
Growth Securities
Opportunities Income
LargeCap Growth High Yield
MidCap Value High Yield II
MidCap
Opportunites
MidCap Growth
Growth + Value
SmallCap
Opportunities
SmallCap Growth
Worldwide
Growth
International
Value
International
Core Growth
International
SmallCap Growth
Emerging
Countries

- ----------
(1) Distributions normally expected to consist primarily of capital gains.
(2) Distributions normally expected to consist, on an annual basis, of a
variable combination of capital gains and ordinary income.
(3) Distributions normally expected to consist primarily of ordinary income.

Each Fund distributes capital gains, if any, annually.

Dividend Reinvestment

Unless you instruct a Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class Q shares of a Fund invested in another Pilgrim Fund which offers
the Class Q shares.

Taxes

The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.

Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive. A particular distribution generally will be taxable as either ordinary
income or long-term capital gains. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a Fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.

Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.

You will receive an annual statement summarizing your dividend and capital gains
distributions.

If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.

There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.

As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Dividends, Distributions and Taxes 57
<PAGE>
MORE INFORMATION ABOUT RISKS
- --------------------------------------------------------------------------------

All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. A Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds may invest
and certain of the investment practices that the Funds may use. For more
information about these and other types of securities and investment techniques
that may be used by the Funds, see the Statement of Additional Information.

Many of the investment techniques and strategies discussed in this prospectus
and in the Statement of Additional Information are discretionary, which means
that the adviser or sub-adviser can decide whether to use them or not. The
adviser or sub-adviser of a Fund may also use investment techniques or make
investments in securities that are not a part of the Fund's principal investment
strategy.

PRINCIPAL RISKS

Investments in Foreign Securities. There are certain risks in owning foreign
securities, including those resulting from: fluctuations in currency exchange
rates; devaluation of currencies; political or economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions; reduced availability of public information concerning
issuers; accounting, auditing and financial reporting standards or other
regulatory practices and requirements that are not uniform when compared to
those applicable to domestic companies; settlement and clearance procedures in
some countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of the Funds, including the withholding of
dividends.

Each Fund that invests in foreign securities may enter into foreign currency
transactions either on a spot or cash basis at prevailing rates or through
forward foreign currency exchange contracts to have the necessary currencies to
settle transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure of securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Fund.

Emerging Markets Investments. Because of less developed markets and economies
and, in some countries, less mature governments and governmental institutions,
the risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in emerging
market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete financial systems; environmental problems; less well developed legal
systems; and less reliable custodial services and settlement practices.

Inability to Sell Securities -- some securities usually trade in lower volume
and may be less liquid than securities of large established companies. These
less liquid securities could include securities of small and mid-size U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in emerging markets. A
Fund could lose money if it cannot sell a security at the time and price that
would be most beneficial to the Fund.

High Yield Securities. Investments in high yield securities generally provide
greater income and increased opportunity for capital appreciation than
investments in higher quality debt securities, but they also typically entail
greater potential price volatility and principal and income risk. High yield
securities are not considered investment grade, and are regarded as
predominantly speculative with respect to the issuing company's continuing
ability to meet principal and interest payments. The prices of high yield
securities have been found to be less sensitive to interest rate changes than
higher-rated investments, but more sensitive to adverse economic downturns or
individual corporate developments. High yield securities structured as
zero-coupon or pay-in-kind securities tend to be more volatile. The secondary
market in which high yield securities are traded is generally less liquid than
the market for higher grade bonds. At times of less liquidity, it may be more
difficult to value high yield securities.

Corporate Debt Securities. Corporate debt securities are subject to the risk of
the issuer's inability to meet principal and interest payments on the obligation
and may also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit-worthiness of the issuer and
general market liquidity. When interest rates decline, the value of the Funds'
debt securities can be expected to rise, and when interest rates rise, the value
of those securities can be expected to decline. Debt securities with longer
maturities tend to be more sensitive to interest rate movements than those with
shorter maturities.

One measure of risk for fixed income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility." According to this measure, the longer the

58 More Information About Risks
<PAGE>
MORE INFORMATION ABOUT RISKS
- --------------------------------------------------------------------------------

maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.

U.S. Government Securities. Some U.S. Government agency securities may be
subject to varying degrees of credit risk, particularly those that are not
backed by the full faith and credit of the United States Government. All U.S.
Government securities may be subject to price declines in the securities due to
changing interest rates.

Convertible Securities. The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. A Fund may be required to redeem or convert a convertible
security before the holder would otherwise choose.

Other Investment Companies. Each Fund (except the MagnaCap, High Yield and
Government Securities Income Funds) may invest up to 10% of its assets in other
investment companies. When a Fund invests in other investment companies, you
indirectly pay a proportionate share of the expenses of that other investment
company (including management fees, administration fees, and custodial fees) in
addition to the expenses of the Fund.

Restricted and Illiquid Securities. Each Fund may invest in restricted and
illiquid securities (except MagnaCap Fund may not invest in restricted
securities). If a security is illiquid, the Fund might be unable to sell the
security at a time when the adviser might wish to sell, and the security could
have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities, which could vary from the amount the Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid. However, some
restricted securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.

Mortgage-Related Securities. Although mortgage loans underlying a
mortgage-backed security may have maturities of up to 30 years, the actual
average life of a mortgage-backed security typically will be substantially less
because the mortgages will be subject to normal principal amortization, and may
be prepaid prior to maturity. Like other fixed income securities, when interest
rates rise, the value of a mortgage-backed security generally will decline;
however, when interest rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as much as other fixed
income securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have the effect
of shortening or extending the effective maturity of the security beyond what
was anticipated at the time of the purchase. Unanticipated rates of prepayment
on underlying mortgages can be expected to increase the volatility of such
securities. In addition, the value of these securities may fluctuate in response
to the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by a Fund. Additionally, although mortgages
and mortgage-related securities are generally supported by some form of
government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.

Interests in Loans. Certain Funds may invest in participation interests or
assignments in secured variable or floating rate loans, which include
participation interests in lease financings. Loans are subject to the credit
risk of nonpayment of principal or interest. Substantial increases in interest
rates may cause an increase in loan defaults. Although the loans will generally
be fully collateralized at the time of acquisition, the collateral may decline
in value, be relatively illiquid, or lose all or substantially all of its value
subsequent to the Fund's investment. Many loans are relatively illiquid, and may
be difficult to value.

Derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Some derivatives are sophisticated instruments
that typically involve a small investment of cash relative to the magnitude of
risks assumed. These may include swap agreements, options, forwards and futures.
Derivative securities are subject to market risk, which could be significant for
those that have a leveraging effect. Many of the Funds do not invest in these
types of derivatives, and some do, so please check the description of the Fund's
policies. Derivatives are also subject to credit risks related to the
counterparty's ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. A risk of using
derivatives is that the adviser might imperfectly judge the market's direction.
For instance, if a derivative is used as a hedge to offset investment risk in
another security, the hedge might not correlate to the market's movements and
may have unexpected or undesired results, such as a loss or a reduction in
gains.

Temporary Defensive Strategies. When the adviser or sub-adviser to a Fund
anticipates unusual market or other conditions, the Fund

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

More Information About Risks 59
<PAGE>
MORE INFORMATION ABOUT RISKS
- --------------------------------------------------------------------------------

may temporarily depart from its principal investment strategies as a defensive
measure. To the extent that a Fund invests defensively, it likely will not
achieve capital appreciation.

OTHER RISKS

Repurchase Agreements. Each Fund may enter into repurchase agreements, which
involve the purchase by a Fund of a security that the seller has agreed to buy
back. If the seller defaults and the collateral value declines, the Fund might
incur a loss. If the seller declares bankruptcy, the Fund may not be able to
sell the collateral at the desired time.

Lending Portfolio Securities. In order to generate additional income, each Fund
may lend portfolio securities in an amount up to 33 1/3% of total Fund assets to
broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
default or fail financially.

Borrowing. Each Fund may borrow for certain types of temporary or emergency
purposes subject to certain limits. Borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities or the net asset value
of a Fund, and money borrowed will be subject to interest costs. Interest costs
on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.

Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement
involves the sale of a security, with an agreement to repurchase the same
securities at an agreed upon price and date. Whether such a transaction produces
a gain for a Fund depends upon the costs of the agreements and the income and
gains of the securities purchased with the proceeds received from the sale of
the security. If the income and gains on the securities purchased fail to exceed
the costs, net asset value will decline faster than otherwise would be the case.
Reverse repurchase agreements, as leveraging techniques, may increase a Fund's
yield; however, such transactions also increase a Fund's risk to capital and may
result in a shareholder's loss of principal.

Short Sales. Each Fund (except MagnaCap Fund, LargeCap Leaders Fund, Government
Securities Income Fund, and High Yield Fund) may make short sales. A "short
sale" is the sale by a Fund of a security which has been borrowed from a third
party on the expectation that the market price will drop. If the price of the
security rises, the Fund may have to cover its short position at a higher price
than the short sale price, resulting in a loss.

Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits
to purchase a security at a future date, and then the Fund "pairs-off" the
purchase with a sale of the same security prior to or on the original settlement
date. Whether a pairing-off transaction on a debt security produces a gain
depends on the movement of interest rates. If interest rates increase, then the
money received upon the sale of the same security will be less than the
anticipated amount needed at the time the commitment to purchase the security at
the future date was entered and the Fund will experience a loss.

Percentage and Rating Limitations. Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.

Year 2000 Compliance. Like other financial organizations, the Funds could be
adversely affected if the computer systems used by the Advisers and the Funds'
other service providers do not properly process and calculate date-related
information after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Year 2000 Problem could have a negative impact on handling
securities trades, payment of interest and dividends, pricing, and account
services. Pilgrim Advisors, Pilgrim Investments and Pilgrim Group, Inc. have
taken steps that they believe are reasonably designed to address the Year 2000
Problem with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps have been taken by the Funds' other major
service providers. It is not anticipated that the Funds will directly bear any
material costs associated with Pilgrim Advisors', Pilgrim Investments', Pilgrim
Group's and the Funds' other service providers efforts to become Year 2000
compliant. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact to the Funds nor can there be any
assurance that the Year 2000 Problem will not have an adverse effect on the
companies whose securities are held by the Funds or on global markets or
economies, generally. Foreign issuers may be more susceptible to risks
associated with the Year 2000 Problem than domestic issuers.

60 More Information About Risks
<PAGE>
Financial
Highlights
- --------------------------------------------------------------------------------

The financial highlights tables on the following pages are intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). A report of each
Fund's independent auditor, along with the Fund's financial statements, are
included in the Fund's annual report, which is available upon request.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

61
<PAGE>
Financial
PILGRIM LARGECAP GROWTH FUND Highlights
- --------------------------------------------------------------------------------

For the three months ended June 30, 1999, the information in the table below has
been audited by KPMG LLP, independent auditors. For all periods ending prior to
June 30, 1999, the financial information was audited by another independent
auditor.

<TABLE>
<CAPTION>
Three months Year July 21,
ended ended 1997(1) to
June 30, March 31, March 31,
1999(2) 1999 1998
------- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 25.24 15.66 12.50
Income from investment operations:
Net investment income (loss) $ (0.03) (0.02) (0.01)
Net realized and unrealized gains on
investments $ 3.22 9.87 3.26
Total from investment operations $ 3.19 9.85 3.25
Less distributions from:
Net investment income $ -- -- 0.01
Net realized gains on investments $ -- 0.27 0.08
Net asset value, end of period $ 28.43 25.24 15.66
Total Return(3): % 12.64 63.76 62.47

Ratios/Supplemental Data:
Net assets, end of period ($000's) $ 6,044 4,908 799
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.23 1.26 1.25
Gross expenses prior to expense
reimbursement(4) % 1.25 1.91 10.45
Net investment income (loss) after expense
reimbursement(4) % (0.36) (0.28) (0.62)
Portfolio turnover % 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.
(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.

62 Pilgrim LargeCap Growth Fund
<PAGE>
Financial
Highlights PILGRIM MIDCAP GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months June 30,
ended Year ended March 31, 1994(2) to
June 30, -------------------------------- March 31,
1999(1) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 25.14 23.30 18.01 17.99 13.66 12.50
Income from investment operations:
Net investment income (loss) $ (0.06) (0.12) (0.21) (0.04) (0.07) (0.02)
Net realized and unrealized gains on
investments $ 1.86 3.56 7.48 0.32 4.86 1.18
Total from investment operations $ 1.80 3.44 7.27 0.28 4.79 1.16
Less distributions from:
Net realized gains on investments $ -- 1.60 1.98 0.26 0.46 --
Net asset value, end of period $ 26.94 25.14 23.30 18.01 17.99 13.66
Total Return(3): % 7.16 15.77 42.00 1.39 35.37 9.28
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 19,383 14,350 12,204 13,115 4,274 2,121
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.24 1.23 1.22 1.25 1.23 1.24
Gross expenses prior to expense
reimbursement(4) % 1.25 1.31 1.95 1.84 2.84 3.52
Net investment income (loss) after expense
reimbursement(4) % (0.95) (0.71) (0.97) (0.69) (0.57) (0.33)
Portfolio turnover % 55 154 200 153 114 98
</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.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim MidCap Growth Fund 63
<PAGE>
Financial
PILGRIM SMALLCAP GROWTH FUND Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(2) to
June 30, ----------------------- March 31,
1999(1) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.56 19.27 13.19 14.16 12.50
Income from investment operations:
Net investment income (loss) $ (0.06) (0.15) 0.03 (0.07) (0.03)
Net realized and unrealized gains (loss) on
investments $ 2.69 0.22 6.16 (0.77) 1.69
Total from investment operations $ 2.63 0.07 6.19 (0.84) 1.66
Less distributions from:
Net realized gains on investments $ -- 0.78 0.11 0.13 --
Net asset value, end of period $ 21.19 18.56 19.27 13.19 14.16
Total Return(3): % 14.17 0.96 47.01 (6.03) 13.28

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,013 9,107 12,508 1,013 314
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.45 1.53 1.52 1.51 1.49
Gross expenses prior to expense
reimbursement(4) % 1.49 1.63 2.39 10.79 37.86
Net investment income (loss) after expense
reimbursement(4) % (1.21) (0.97) (1.52) (1.02) (1.05)
Portfolio turnover % 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.
(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.

64 Pilgrim SmallCap Growth Fund
<PAGE>
Financial
Highlights PILGRIM WORLDWIDE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(2) to
June 30, --------------------- March 31,
1999(1) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 24.59 19.63 15.00 13.27 12.50
Income from investment operations:
Net investment income (loss) $ 0.01 0.22 (0.11) 0.01 (0.04)
Net realized and unrealized gains (loss) on
investments $ 2.52 6.15 5.29 1.72 0.81
Total from investment operations $ 2.53 6.37 5.18 1.73 0.77
Less distributions from:
Net investment income $ -- 0.15 -- -- --
Net realized gains on investments $ -- 1.26 0.55 -- --
Net asset value, end of period $ 27.12 24.59 19.63 15.00 13.27
Total Return(3): % 10.29 33.97 35.11 12.87 6.32

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 14,870 7,320 645 642 1
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.55 1.59 1.61 1.61 1.60
Gross expenses prior to expense
reimbursement(4) % 1.55 1.76 3.75 34.99 3,232.53
Net investment income (loss) after expense
reimbursement(4) % 0.17 0.17 (0.47) (0.91) (0.50)
Portfolio turnover % 57 247 202 182 132
</TABLE>

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Worldwide Growth Fund 65
<PAGE>
Financial
Highlights
PILGRIM INTERNATIONAL CORE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months February 28,
ended Year ended March 31, 1997(1) to
June 30, -------------------- March 31,
1999(2) 1999 1998 1997
------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.36 17.43 12.75 12.50
Income from investment operations:
Net investment income (loss) $ 0.04 0.09 (0.04) --
Net realized and unrealized gains on
investments $ 1.23 0.97 4.72 0.25
Total from investment operations $ 1.27 1.06 4.68 0.25
Less distributions from:
Net investment income $ -- 0.13 -- --
Net asset value, end of period $ 19.63 18.36 17.43 12.75
Total Return(3): % 6.92 6.11 36.63 2.00

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 9,390 11,268 1,719 1
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.54 1.63 1.66 0.00
Gross expenses prior to expense
reimbursement(4) % 1.63 1.87 3.18 2,667.07
Net investment income (loss) after expense
reimbursement(4) % 0.73 (0.27) (0.47) 0.00
Portfolio turnover % 67 214 274 76
</TABLE>

- ----------
(1) The Fund commenced operations on February 28, 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.
(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.

66 Pilgrim International Core Growth Fund
<PAGE>
Financial
Highlights PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(1) to
June 30, ---------------------- March 31,
1999(2) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 22.23 19.18 14.01 13.52 12.50
Income from investment operations:
Net investment income (loss) $ (0.03) (0.02) 0.05 (0.06) 0.01
Net realized and unrealized gains on
investments $ 2.96 3.36 5.12 2.01 1.01
Total from investment operations $ 2.93 3.34 5.17 1.95 1.02
Less distributions from:
Net investment income $ -- 0.09 -- -- --
Net realized gains on investments $ -- 0.20 -- 1.46 --
Net asset value, end of period $ 25.16 22.23 19.18 14.01 13.52
Total Return(3): % 13.18 17.61 36.90 15.03 8.16

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 42,881 32,819 8,810 42 19
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 1.65 1.65 1.66 1.66 1.65
Gross expenses prior to expense
reimbursement(4) % 1.67 1.80 6.15 151.33 531.72
Net investment income (loss) after expense
reimbursement(4) % (0.50) (0.50) (0.43) (0.64) 0.33
Portfolio turnover % 44 146 198 206 141
</TABLE>

- ----------
(1) Commencement of offering shares.
(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.
(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.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim International SmallCap Growth Fund 67
<PAGE>
Financial
PILGRIM EMERGING COUNTRIES FUND Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(1) to
June 30, ----------------------- March 31,
1999(2) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 13.79 17.76 16.47 13.18 12.50
Income from investment operations:
Net investment income (loss) $ (0.04) (0.01) 0.07 (0.04) 0.01
Net realized and unrealized gains (loss) on
investments $ 3.45 (3.78) 1.33 3.37 0.67
Total from investment operations $ 3.41 (3.79) 1.40 3.33 0.68
Less distributions from:
Net investment income $ -- 0.18 -- -- --
Net realized gains on investments $ -- -- 0.11 0.04 --
Net asset value, end of $ 17.20 13.79 17.76 16.47 13.18
Total Return(3): % 24.73 (21.42) 8.60 25.29 5.44

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 79,130 53,125 46,711 8,660 350
Ratio to average net assets:
Net expenses after expense reimbursement(4) % 1.90 1.94 1.91 1.91 1.90
Gross expenses prior to expense
reimbursement(4) % 2.43 2.23 2.43 4.20 44.24
Net investment income (loss) after expense
reimbursement(4) % (1.07) (0.01) 1.06 (0.87) 0.47
Portfolio turnover % 67 213 243 176 118
</TABLE>

68 Pilgrim Emerging Countries Fund
<PAGE>
Financial
Highlights PILGRIM STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months July 27,
ended 1998(1) to
June 30, March 31,
1999(2) 1999
------- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.26 12.43
Income from investment operations:
Net investment income $ 0.25 0.48
Net realized and unrealized gains (loss) on
investments $ (0.38) (0.04)
Total from investment operations $ (0.13) 0.44
Less distributions from:
Net investment income $ 0.14 0.50
Net realized gains on investments $ -- 0.11
Net asset value, end of period $ 11.99 12.26
Total Return(3): % 1.16 5.78

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 171 314
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 0.71 0.69
Gross expenses prior to expense
reimbursement(4) % 1.37 1.74
Net investment income (loss) after expense
reimbursement(4) % 6.07 6.03
Portfolio turnover % 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.
(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.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Strategic Income Fund 69
<PAGE>
Financial
PILGRIM HIGH YIELD FUND Highlights
- --------------------------------------------------------------------------------

For the period ending June 30, 1999, the information in the table below has been
audited by KPMG LLP, independent auditors.

From June 17
thru
June 30,
1999(1)
-------
Per Share Operating Performance:
Net asset value, beginning of period $ 5.91
Income (loss) from investment operations:
Net investment income $ 0.02
Net realized and unrealized gain (loss) on
investments $ --
Total from investment operation $ 0.02
Less distributions from:
Net investment income $ --
Realized capital gains $ --
Net asset value, end of period $ 5.93
Total Return(2): % 0.34

Ratios/Supplemental Data:
Net assets, end of period (000's) $ --
Ratios to average net assets:
Gross expenses prior to expense
reimbursement(3) % --
Net expenses after expense reimbursement(3) % --
Net investment income (loss) after expense
reimbursement(3) % --
Portfolio turnover rate % 184

- ----------
(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.

70 Pilgrim High Yield Fund
<PAGE>
Financial
Highlights PILGRIM HIGH YIELD FUND II
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months Year March 27,
ended ended 1998(1) to
June 30, March 31, March 31,
1999(2) 1999 1998
------- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.68 12.72 12.70
Income from investment operations:
Net investment income (loss) $ 0.30 1.16 0.01
Net realized and unrealized gains (loss) on
securities and foreign currency $ (0.11) (1.01) 0.01
Total from investment operations $ 0.19 0.15 0.02
Less distributions from:
Net investment income $ 0.28 1.19 --
Net asset value, end of period $ 11.59 11.68 12.72
Total Return(3): % 1.63 1.40 0.16

Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,229 6,502 567
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 0.90 0.87 0.97
Gross expenses prior to expense
reimbursement(4) % 1.17 1.28 0.97
Net investment income (loss) after expense
reimbursement(4) % 9.88 10.01 7.53
Portfolio turnover % 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.
(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.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim High Yield Fund II 71
<PAGE>
Financial
PILGRIM BALANCED FUND Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(1) to
June 30, ---------------------- March 31,
1999(2) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.85 18.48 13.42 12.69 12.50
Income from investment operations:
Net investment income $ 0.11 0.44 0.30 0.24 0.15
Net realized and unrealized gains on
investments $ 0.16 2.50 5.07 0.73 0.19
Total from investment operations $ 0.27 2.94 5.37 0.97 0.34
Less distributions from:
Net investment income $ 0.08 0.50 0.31 0.24 0.15
Net realized gains on investments $ -- 2.07 -- -- --
Net asset value, end of period $ 19.04 18.85 18.48 13.42 12.69
Total Return(3): % 1.44 17.49 40.21 7.60 2.77

Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 190 176 166 73 1
Ratio to average net assets:
Net expenses after expense reimbursement(4) % 1.25 1.25 1.26 1.26 1.25
Gross expenses prior to expense
reimbursement(4) % 1.51 1.63 11.28 126.75 3,094.48
Net investment income (loss) after expense
reimbursement(4) % 2.30 2.41 4.09 2.15 2.16
Portfolio turnover % 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.
(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.

72 Pilgrim Balanced Fund
<PAGE>
Financial
Highlights PILGRIM CONVERTIBLE FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Three months August 31,
ended Year ended March 31, 1995(2) to
June 30, -------------------- March 31,
1999(1) 1999 1998 1997 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 21.22 18.47 15.19 13.72 12.50
Income from investment operations:
Net investment income (loss) $ 0.09 0.43 0.48 0.42 0.17
Net realized and unrealized gains (loss) on
investments $ 1.31 3.09 4.19 1.50 1.22
Total from investment operations $ 1.40 3.52 4.67 1.92 1.39
Less distributions from:
Net investment income $ 0.11 0.46 0.48 0.42 0.17
Net realized gains on investments $ -- 0.31 0.91 0.03 --
Net asset value, end of period $ 22.51 21.22 18.47 15.19 13.72
Total Return(3): % 6.62 19.66 31.54 14.13 11.13

Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 17,537 8,741 7,080 4,599 1,085
Ratio to average net assets:
Net expenses after expense reimbursement(4) % 1.23 1.23 1.22 1.25 1.25
Gross expenses prior to expense
reimbursement(4) % 1.23 1.35 2.35 2.90 9.21
Net investment income (loss) after expense
reimbursement(4) % 2.04 2.37 5.99 3.29 3.59
Portfolio turnover % 28 138 160 167 145
</TABLE>

- ----------
(1) Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment
Manager of the Fund.
(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.

[GRAPHIC]
If you have any questions, please call 1-800-992-0180.

Pilgrim Convertible Fund 73
<PAGE>
WHERE TO GO FOR MORE INFORMATION

You'll find more information about the Pilgrim Funds in our:

ANNUAL/SEMIANNUAL REPORTS

Includes a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditor's
reports (in annual report only).

STATEMENT OF ADDITIONAL INFORMATION

The SAI contains more detailed information about the Pilgrim Funds. The SAI is
legally part of this prospectus (it is incorporated by reference). A copy has
been filed with the Securities and Exchange Commission (SEC).

Please write or call for a free copy of the current Annual/semiannual reports,
the SAI or other fund information, or to make shareholder inquiries:

The Pilgrim Funds
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004

1-800-992-0180

Or visit our website at www.pilgrimfunds.com

This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102

or at the e-mail address: [email protected]

Or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov.

When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers are as follows:

Pilgrim Growth Opportunities Fund 811-4431
Pilgrim Equity Trust 811-8817
Pilgrim Mayflower Trust 811-7978
Pilgrim SmallCap Opportunities Fund 811-4434
Pilgrim Advisory Funds, Inc. 811-9040
Pilgrim Government Securities Income Fund, Inc. 811-4031
Pilgrim Investment Funds, Inc. 811-1939
Pilgrim Mutual Funds 811-7428

Prospectus
QPROS0100-010400 January 4, 2000
<PAGE>
GRAPHICS DESCRIPTION APPENDIX

There are four icon sized graphics used throughout the prospectuses as follows:

1. In the sections describing the Objective of the Funds, the graphic icon is
that of a dart in the bullseye of a target.

2. In the sections describing the Investment Strategy of the Funds, the
graphic icon is that of a compass pointing due north.

3. In the sections describing the Risks of the Funds, the graphic icon is that
of an old fashioned scale tilting heavy on the left side.

4. In the sections describing the Performance history of the Funds, the
graphic icon is that of a stack of US currency bills.

5. On the bottom footer of every odd numbered page (right hand page), the
graphic icon is that of a telephone by the 800 number of the fund to call
for information.