PILGRIM(SM)
- ---------------------------
FUNDS FOR SERIOUS INVESTORS
Prospectus
Institutional Class Shares
(Class I)
January 4, 2000
Pilgrim Research Enhanced Index
Pilgrim Growth Opportunities
Pilgrim MidCap Opportunities
Pilgrim SmallCap Opportunities
This prospectus contains important information about investing in the Pilgrim
Funds. You should read it carefully before you invest, and keep it for future
reference. Please note that your investment: is not a bank deposit, is not
insured or guaranteed by the FDIC, the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Funds will achieve their objectives. As with all mutual funds, the
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in this prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
<PAGE>
WHAT'S INSIDE
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[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
Pilgrim Research Enhanced Index 2
Pilgrim Growth Opportunities 4
Pilgrim MidCap Opportunities 6
Pilgrim SmallCap Opportunities 8
What you pay to invest 10
Shareholder guide 11
Management of the Funds 14
Dividends, distributions and taxes 16
More information about risks 17
Financial highlights 20
Where to go for more information Back cover
<PAGE>
Adviser
Pilgrim Advisors, Inc.
Sub-Adviser
J.P. Morgan Investment
PILGRIM RESEARCH ENHANCED INDEX FUND Management
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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).
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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 portfolio managers try to remain fully invested in
companies included in the S&P 500, and generally do not change this strategy
even temporarily, which could make the Fund more susceptible to poor market
conditions.
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.
2 Pilgrim Research Enhanced Index Fund
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
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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 3
<PAGE>
Adviser
PILGRIM GROWTH OPPORTUNITIES FUND Pilgrim Advisors, Inc.
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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 believes 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 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 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.
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 Growth Opportunities Fund
<PAGE>
<PAGE>
PILGRIM GROWTH OPPORTUNITIES FUND
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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 shares from year to
year.
Year by year total returns (%)(1)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.06
Best and worst quarterly performance during this period:
4th quarter 1998: up 31.51%
3rd quarter 1998: down 15.23%
The Fund's year-to-date total return as of September 30, 1999 was 39.36%.
The table below provides some indication of the risk 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 I Index(2)
------- --------
One year, ended
December 31, 1998 24.06% 28.57%
Since Inception(3) 28.08% 34.04%
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(1) These figures are as of December 31 1998.
(2) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large- capitalization U.S. companies.
(3) The class commenced operations on March 31, 1997.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Pilgrim Growth Opportunities Fund 5
<PAGE>
Adviser
PILGRIM MIDCAP OPPORTUNITIES FUND Pilgrim Advisors, Inc.
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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 the 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 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.
6 Pilgrim MidCap Opportunities Fund
<PAGE>
PILGRIM MIDCAP OPPORTUNITIES FUND
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HOW THE
FUND HAS
PERFORMED
[GRAPHIC]
This Fund does not have a performance history because it was formed on August
20, 1998.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Pilgrim MidCap Opportunities Fund 7
<PAGE>
Adviser
PILGRIM SMALLCAP OPPORTUNITIES FUND Pilgrim Advisors, Inc.
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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 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 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.
Inability to Sell Securities -- securities of smaller 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.
8 Pilgrim SmallCap Opportunities Fund
<PAGE>
PILGRIM SMALLCAP OPPORTUNITIES FUND
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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 shares from year to
year.
Year by year total returns (%)(1)(2)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
22.85% -8.18% 57.92% 15.19% 20.81% -4.21% 11.99% 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% 11.33%
- ----------
(1) These figures are as of December 31 of each year.
(2) Because Class I 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 I shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class I and Class A shares have different
expenses.
(3) This table shows performance of the Class A shares of the Fund, because
Class I 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 9
<PAGE>
WHAT YOU PAY TO INVEST
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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 tables that follow show the
fees and expenses for each of the Pilgrim Funds.
Fees you pay directly Class I
- --------------------- -------
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)
Class I
Distribution Total
and service Fund
Management (12b-1) Other operating
Fund fee fees expenses expenses
- ---- ---------- ------------ -------- --------
Research Enhanced Index 0.70% -- 0.53% 1.23%
Growth Opportunities 0.75 -- 0.25 1.00
MidCap Opportunities 1.00 -- 0.52 1.52
SmallCap Opportunities 0.75 -- 0.42 1.17
- ----------
(1) These tables show the estimated operating expenses for each Fund as a ratio
of expenses to average daily net assets. These estimates are based on each
Fund's actual operating expenses for its most recent complete fiscal year.
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 I
Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
Research Enhanced Index $125 $390 $676 $1,489
Growth Opportunities 102 318 552 1,225
MidCap Opportunities 155 480 829 1,813
SmallCap Opportunities 119 372 644 1,420
10 What You Invest to Pay
<PAGE>
SHAREHOLDER
HOW TO PURCHASE SHARES GUIDE
- --------------------------------------------------------------------------------
* The minimum initial investment for Class I Shares is $1,000,000. Class I
Shares are only available to certain defined benefit plans, insurance
companies and foundations investing for their own account.
* The minimum amount of each Class I investment after your first one is
$100,000.
* We record most shares on our books electronically. We will issue a
certificate if you ask us in writing, however most of our shareholders
prefer not to have their shares in certificate form because certified
shares can't be sold or exchanged by telephone.
* We have the right to refuse a request to buy shares.
Make your investment using the table on the right.
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. The Pilgrim Funds reserve 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 $10,000.
Initial Additional
Method Investment Investment
------ ---------- ----------
By Contacting An investment Visit or consult an
Your professional with an investment
Investment authorized firm professional.
Professional can help you establish
and maintain your
account.
By Mail Visit or consult an Fill out the Account
investment Additions form
professional. Make included on the bottom
your check payable to of your account
the Pilgrim Funds and statement along with
mail it, along with a your check payable to
completed Application. the Fund and mail
Please 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
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 11
<PAGE>
SHAREHOLDER
GUIDE HOW TO REDEEM SHARES
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You may redeem shares using 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 Statement of Additional Information.
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 investment
Investment Professional professional. Investment professionals 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
Expedited Redemption other 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.
12 Shareholder Guide
<PAGE>
SHAREHOLDER
TRANSACTION POLICIES GUIDE
- --------------------------------------------------------------------------------
Net Asset Value
The net asset value (NAV) per share for each Fund and class 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 I of each Fund
is calculated by taking the value of the Fund's assets attributable to Class I,
subtracting the Fund's liabilities attributable to Class I, and dividing by the
number of shares of Class I 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. 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.
Telephone Orders
The 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.
Exchanges
You may exchange shares of a Fund for shares of the same class of any other
Pilgrim Fund.
The total value of shares being exchanged must at least equal the minimum
investment requirement 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 short-term
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. A
Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
Small Accounts
Due to the relatively high cost of handling small investments, the Funds reserve
the right upon 30 days' written notice to redeem, at NAV, the shares of any
shareholder whose account (except for IRAs) has a value of less than $10,000,
other than as a result of a decline in the NAV per share.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Shareholder Guide 13
<PAGE>
MANAGEMENT
OF THE FUNDS ADVISER
- --------------------------------------------------------------------------------
Pilgrim Advisors, Inc. (formerly Northstar Investment Management Corporation)
(Pilgrim Advisors) is a registered investment adviser that currently manages
over $4 billion in mutual funds and institutional accounts. Pilgrim Advisors is
a wholly-owned subsidiary 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' principal address is 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004.
Pilgrim Advisors has overall responsibility for management of the Funds. 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 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
- ---- ------------
Research Enhanced Index 0.70%
Growth Opportunities 0.75
MidCap Opportunities 1.00
SmallCap Opportunities 0.75
Pilgrim Advisors Directly Manages the Portfolios of the Following Funds:
Growth Opportunities Fund and MidCap
Opportunities Fund.
The following individuals share responsibility for the day-to-day management of
the Growth Opportunities Fund and MidCap Opportunities Fund:
Mary Lisanti has co-managed the MidCap Opportunities Fund since the Fund was
formed in August 1998 and has managed or co-managed the Growth Opportunities
Fund since August 1998. She joined Pilgrim Advisors in May 1998.
Ms. Lisanti has over 20 years of experience in small and mid-cap investments.
Before joining Pilgrim Advisors, 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 Institutional Investor Emerging Growth 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 MidCap Opportunities Fund since the Fund
was formed in August 1998 and has co-managed the Growth Opportunities Fund since
January 2000. He joined Pilgrim Advisors in May 1998.
Mr. Bernstein has over 10 years of experience in small and mid-cap investments.
Before joining Pilgrim Advisors, 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.
14 Management of the Funds
<PAGE>
MANAGEMENT
SUB-ADVISER OF THE FUNDS
- --------------------------------------------------------------------------------
For the following Fund, Pilgrim Advisors has engaged a Sub-Adviser to provide
the day-to-day management of the Fund's portfolio. The Sub-Adviser is among the
most respected institutional investment advisers in the world, and has been
selected primarily on the basis of its 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 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.
Timothy Devlin 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.
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 retail investors.
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.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Management of the Funds 15
<PAGE>
DIVIDENDS,
DISTRIBUTIONS
AND TAXES DIVIDENDS/TAXES
- --------------------------------------------------------------------------------
Dividends
The Funds distribute most or all of their net earnings and net capital gains to
shareholders annually in the form of dividends.
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 I Shares of a Fund invested in another Pilgrim Fund which offers
the Class.
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.
16 Dividends, Distributions and Taxes
<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
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. The Fund
could lose money if it cannot sell a security at the time and price that would
be most beneficial to the Fund.
U.S. Government Securities. Some U.S. Government agency securities may be
subject to varying degrees of credit risk particularly those 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 as limited in the Statement of
Additional Information, 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 as limited in the Statement of Additional
Information. 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.
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 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.
Portfolio Turnover. Each Fund is generally expected to engage in frequent and
active trading of portfolio securities to achieve its investment objective. A
high portfolio turnover rate involves greater expenses to a Fund, including
brokerage commissions and other transaction costs, and is likely to generate
more taxable short-term gains for shareholders, which may have an adverse effect
on the performance of the Fund.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
More Information About Risks 17
<PAGE>
MORE INFORMATION
ABOUT RISKS
- --------------------------------------------------------------------------------
OTHER 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 to 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.
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.
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.
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
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar 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 and
dollar rolls, 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 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.
Percentage and Rating Limitations. Unless otherwise stated, the percentage
limitations in this prospectus apply at the time of investment.
18 More Information About Risks
<PAGE>
MORE INFORMATION
ABOUT RISKS
- --------------------------------------------------------------------------------
Year 2000 Compliance
Like other financial organizations, the Funds could be adversely affected if the
computer systems used by the Adviser 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 has taken steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to computer systems that it uses 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' 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.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
More Information About Risks 19
<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.
20
<PAGE>
Financial
Highlights PILGRIM RESEARCH ENHANCED INDEX FUND
- --------------------------------------------------------------------------------
The following chart shows the Fund's financial performance for Class I shares.
These figures have been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, are included in the annual report,
which is available upon request.
Class I(1)
Year ended
October 31, 1999
----------------
Operating performance:
Net asset value at the beginning of the period $ 10.00
Net investment income 0.06
Net realized and unrealized gain on investments 1.11
Total from investment operations 1.17
Net asset value at the end of the period 11.17
Total investment return(2) 11.70%
Ratios and supplemental data:
Net assets at the end of the period ($000s) $27,927
Ratio of net expenses to average net assets(3) 0.98%
Ratio of net expense reimbursement to average net assets(3) 0.25%
Ratio of net investment income to average net assets(3) 0.62%
Portfolio turnover rate 26%
- ----------
(1) Class I commenced operations on December 30, 1998.
(2) Assumes dividends have been reinvested.
(3) Annualized.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Pilgrim Research Enhanced Index Fund 21
<PAGE>
Financial
PILGRIM GROWTH OPPORTUNITIES FUND Highlights
- --------------------------------------------------------------------------------
The following chart shows the Fund's financial performance for Class I shares.
The figures have been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
Class I
-------------------------------
Six
months
ended Year ended December 31,
June 30, -----------------------
1999 1998 1997(1)
---- ---- -------
(unaudited)
<S> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 26.28 $ 21.36 $ 17.90
Net investment income (loss) (0.09) (0.05) 0.01
Net realized and unrealized gain on
investments 7.89 5.18 4.30
Total from investment operations 7.80 5.13 4.31
Dividends from net realized gain on
investments sold -- (0.21) (0.85)
Total distributions 0.00 (0.21) (0.85)
Net asset value at the end of the period 34.08 26.28 21.36
Total investment return(2) 29.60% 24.06% 24.29%
Ratios and supplemental data:
Net assets at the end of the period ($000s) $107,971 $83,233 $113,529
Ratio of expenses to average net assets(3) 1.00% 1.00% 1.02%
Ratio of net investment income (loss) to
average net assets(3) (0.64)% (0.13)% 0.08%
Portfolio turnover rate 170% 98% 32%
</TABLE>
- ----------
(1) Class I commenced operations on March 31, 1997.
(2) Assumes dividends have been reinvested.
(3) Annualized
22 Pilgrim Growth Opportunities Fund
<PAGE>
Financial
Highlights PILGRIM MIDCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
The following chart shows the Fund's financial performance by Class I shares.
These figures have been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, are included in the annual report,
which is available upon request.
Class I
------------------------
Six months
ended Year ended
June 30, 1999 December 31,
(unaudited) 1998(1)
----------- -------
Operating performance
Net asset value at the beginning of the period $ 12.99 $ 10.00
Net investment loss (0.09) (0.02)
Net realized and unrealized gain on
investments 4.37 3.01
Total from investment operations 4.28 2.99
Net asset value at the end of the period 17.27 12.99
Total investment return(2): 32.95% 29.90%
Ratios and supplemental data
Net assets at the end of the period ($000s) $44,472 $33,441
Ratio of net expenses to average net assets(3) 1.50% 1.50%
Ratio of expense reimbursement to average net
assets(3): 0.02% 0.51%
Ratio of net investment loss to average net
assets(3): (1.17)% (0.70)%
Portfolio turnover rate 124% 61%
- ----------
(1) Class I commenced operations on August 20, 1998.
(2) Assumes dividends have been reinvested.
(3) Annualized.
[GRAPHIC]
If you have any questions, please call 1-800-992-0180.
Pilgrim MidCap Opportunities Fund 23
<PAGE>
Financial
PILGRIM SMALLCAP OPPORTUNITIES FUND Highlights
- --------------------------------------------------------------------------------
The following chart shows the Fund's financial performance by Class I shares.
The figures have been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the annual report, which
is available upon request.
April 1,
1999
to
June 30,
1999
(unaudited)(4)
--------------
Operating performance:
Net asset value at the beginning of the period $ 31.78
Net investment loss (0.05)
Net realized and unrealized gain on
investments 4.62
Total from investment operations 4.57
Net asset value at the end of the period 36.35
Total investment return(1) 14.38%
Ratios and supplemental data:
Net assets at the end of the period ($000s) --(2)
Ratio of expenses to average net assets(3) 0.49%
Ratio of expense reimbursement to average
net assets(3) --
Ratio of net investment loss to average
net assets(3) (0.38)%
Portfolio turnover rate 136%
- ----------
(1) Assumes dividends have been reinvested.
(2) Less than $1,000.
(3) Annualized.
(4) Class I commenced operations on April 1, 1999.
24 Pilgrim SmallCap Opportunities Fund
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the Pilgrim Funds in our:
ANNUAL AND SEMI-ANNUAL REPORTS
Include 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 (SAI)
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).
You may request a free copy of any of these documents by calling or writing the
Funds' Shareholder Servicing Agent at:
The Pilgrim Funds
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004
1-800-992-0180
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
Prospectus
IPROS0100-010400 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.
