[LOGO]
ANNUAL REPORT
October 31, 2000
Class Q
U.S. EQUITY FUNDS
Pilgrim Growth + Value
Pilgrim Research Enhanced Index
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Pilgrim
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TABLE OF CONTENTS
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Letter to Shareholders ................................................... 1
Portfolio Managers' Reports:
U.S. Equity Funds ...................................................... 2
Index Descriptions ....................................................... 6
Shareholder Meeting ...................................................... 7
Report of Independent Accountants ........................................ 9
Statements of Assets and Liabilities ..................................... 10
Statements of Operations ................................................. 12
Statements of Changes in Net Assets ...................................... 13
Financial Highlights ..................................................... 14
Notes to Financial Statements ............................................ 16
Portfolios of Investments ................................................ 22
Tax Information .......................................................... 27
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Pilgrim
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LETTER TO SHAREHOLDERS
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Dear Shareholder:
We are pleased to present the Annual Report for several of Pilgrim Mayflower
Trust's (the "Trust") Funds. The Funds included in this report are Research
Enhanced Index Fund and Growth + Value Fund which offered Q classes as of
October 31, 2000(1).
On September 1, 2000, ING Groep N.V. (NYSE: ING) acquired ReliaStar Financial
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,
Inc, Administrator to the Funds. In conjunction with the acquisition, the
Adviser, Distributor and Administrator changed their names to ING Pilgrim
Investments, Inc., ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.
effective September 8, 2000.
Our fund family now has many funds of varying types which provide core
investment choices for the serious investor.
At ING Pilgrim, we are dedicated to providing core investments for the serious
investor. We believe that the key to success is matching quality core
investments to the individual needs of investors. Core investments are the
foundation of every portfolio and the basis of other important investment
decisions. Pilgrim prides itself on providing a family of core investments
designed to help you reach your financial goals. Our goal is for every investor
to have a successful investment experience.SM
Sincerely,
ING Pilgrim Group, Inc.
December 28, 2000
(1) The Annual Report for other Pilgrim Fund classes has been issued
seperately.
1
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U.S. Equity
Funds
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Portfolio
PILGRIM GROWTH + VALUE FUND Manager's Report
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Portfolio Management: Louis Navellier, Chief Investment Officer and President,
Navellier Fund Management Inc.
Goal: The Fund seeks to provide long-term capital appreciation by investing in
equity securities of fast growing companies utilizing quantitative analysis.
Market Overview: The period between October 31, 1999 and October 31, 2000 can
only be characterized as one of the most volatile periods for the stock market
in the last 20 years. For the period beginning October 31, 1999 to its peak in
mid March, the Russell 2000 grew by over 41% as investor enthusiasm continued
unabated. Indeed, the first nine-plus weeks of the first quarter were very
positive for small and mid cap stocks, albeit volatile as well. The final two
and a half weeks saw a massive rotation into large company value-oriented
stocks. The rotation that began at the end of the first quarter continued
through the second quarter and third quarters of 2000 with value investing
outperforming growth investing and small company stocks outperforming large
company stocks. The month of October is traditionally a bad month for investors
and this year was no exception. Stocks were dragged down as many of the flagship
tech stocks reported disappointing earnings, inflation fears and the uncertainty
associated with the election furthered investor anxiety as well.
Performance: For the period from inception (06/05/00) through October 31, 2000,
the Fund's Class Q shares, declined 6.85% compared to the Russell 2000 Index
which was up 5.01% for the same period.
Portfolio Specifics: During the first half of the year, the Fund remained
heavily concentrated in technology stocks. Unfortunately, the technology sector
suffered the most damage during the stock market correction that began in
mid-March.
Value stocks have prospered in recent months as the bargain hunters have come
out, while growth stocks have stumbled. We recently added two new screens to our
model: Liquidation Value to Price and Capital Expenditure Growth, which are both
value-related screens. The Liquidation Value to Price screen is similar to
measuring a stock on its book value, except that it only measures a stock on its
assets that can be liquidated. The companies with high liquidation values are
perennial acquisition targets. The Capital Expenditure Growth screen measures
how much a company re-invests in capital equipment and infrastructure. The
higher a company's capital expenditures, the better the company's stock
typically performs.
Even though we maintain a growth bias, we will utilize whatever fundamental
stock selection criteria outperform the overall stock market on a trailing one
and three year basis. Today, we are utilizing five growth criteria and two value
criteria in our stock selection model.
Market Outlook: The problem with the stock market was not the third quarter
earnings, which represented record results for many companies. The big problem
is that Wall Street has literally no idea of where future earnings are headed.
Unfortunately, we are now in the midst of a "hard" economic landing. As a
result, many companies and analysts have warned Wall Street not to expect too
much in the future. The U.S. economy is slowing faster than previously
anticipated. There is no doubt that the U.S. economy needs a jump-start to get
back on track. Wall Street is now counting on the Federal Reserve Board to
rescue the stock market. Currently, there is just too much uncertainty
surrounding the U.S. economy, in fact durable goods orders recently plummeted,
signaling severe weakness. October was volatile due to tax loss selling by many
mutual funds. Unfortunately, we suspect that the large capitalization arena will
be volatile through February due to massive redemptions in many popular large
capitalization growth funds. After reviewing the third quarter earnings results,
we are anticipating a strong recovery in many of our stocks. We remain very
bullish on our favorite small-to-mid capitalization stocks. Many stocks are real
bargains at this point, in fact we believe the best buying opportunity in the
past two years is now at hand. We will continue to buy with confidence the
stocks that still have strong revenue and earnings growth. We feel that the more
impressive rally will occur in the small to mid cap stocks because the earnings
are more robust there. The volatility in the markets should start to settle down
after the election is finally decided and we expect the market to rebound nicely
once this overwhelming condition of uncertainty is eliminated.
2
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Portfolio
Manager's Report PILGRIM GROWTH + VALUE FUND
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6/5/00 10/31/00
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Pilgrim Growth + Value Fund Class Q $10,000 $9,319
Russell 2000 Index $10,000 $10,501
Average Annual Total Returns for
the periods ended October 31, 2000
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Since Inception
06/05/00
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Class Q -6.85%
Russell 2000 Index 5.01% (1)
Based on a $10,000 initial investment, the graph and table above illustrates the
total return of Pilgrim Growth + Value Fund against the Russell 2000 Index. The
Index has an inherent performance advantage over the Fund since it has no cash
in its portfolio, imposes no sales charges and incurs no operating expenses. An
investor cannot invest directly in an index.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the Index is shown from 06/01/00.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-sized companies may entail greater price variability
than investing in stocks of larger companies.
See accompanying index descriptions on page 6.
3
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U.S. Equity
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Portfolio
PILGRIM RESEARCH ENHANCED INDEX FUND Managers' Report
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Portfolio Management Team: Timothy Devlin, Vice President and Portfolio
Manager; Bernard Kroll, Managing Director and Portfolio Manager. J.P. Morgan
Investment Management Inc.
Goal: The Fund seeks to earn a total return modestly in excess of the S&P 500
Index while maintaining a return volatility similar to the S&P 500 Index.
Market Overview: The large-cap U.S. equity market has been a tale of two cities
with a continued theme of technology running through out the past twelve months.
The first half of the year was characterized by positive earnings and price
momentum as investors focused on short-term earnings, projecting them forward
indefinitely, and pricing technology stocks with no margin for disappointments.
Since April, the slowdown in the economy has materialized and threats of a
recession have been priced into the market resulting in the S&P 500 dropping to
levels not witnessed in over a year. Because the investment strategy employed by
the Fund focuses on normalized earnings and intermediate-term growth rates, it
tends not to perform as well in a market environment such as we experienced
during the latter part of the year. The Fund is well diversified and its risk
controls are robust, however, during times of extreme internal market
divergence, even modest exposures to common risk factors, such as price
momentum, can result in out of scale performance results.
Performance: For the period from inception (04/03/00) through October 31, 2000,
the Fund's Class Q shares, declined 6.76% compared to the S&P 500 Index which
declined 4.01% for the same period.
Portfolio Specifics: On a stock selection basis, Philip Morris, the food and
tobacco company, contributed dramatically to the funds performance as it
benefited from the announced purchase of Nabisco, the Kraft division IPO and
tobacco settlement issues. September and October saw us challenged by the
market's flight from technology to less risky sectors as tech bellwether Sun
Microsystems, which had reaffirmed strong revenue growth and improved gross
profit margins, dropped dramatically. Overweights in pharmaceutical stocks Alza
Corp. and Forest Labs added to performance. While underweight positions in
Oracle and Network Appliance, two names that topped the list with great returns,
consequently detracted from performance.
Market Outlook: We remain confident in our investment process and risk controls,
and expect that the historically wide spread between the most and least
attractive names in our universe suggests opportunities ahead. Most of the
performance of the last few years has been driven by the momentum technology
boom. The valuations on these stocks is much higher than that of the rest of the
market. We expect the market to broaden. We believe that a slowing of global
growth will cause investors to look beyond these over priced stocks to companies
that trade at much lower multiples. The beginnings of this trend have
materialized and we expect it to continue going forward.
4
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Portfolio
Managers' Report PILGRIM RESEARCH ENHANCED INDEX FUND
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4/3/00 10/31/00
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Pilgrim Research Enhanced Index Fund Class Q $10,000 $9,371
S&P 500 Index $10,000 $9,599
Average Annual Total Returns for
the Periods Ended October 31, 2000
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Since Inception
04/03/00
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Class Q -6.76%
S&P 500 Index -4.01%(1)
Based on a $10,000 initial investment, the graph and table above illustrates the
total return of Pilgrim Research Enhanced Index Fund against the S&P 500 Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. Total returns would have been
lower had there been no waiver to the Fund.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Since inception performance for the Index is shown from 04/01/00.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 6.
5
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INDEX DESCRIPTIONS
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The S&P 500 Index is a widely recognized unmanaged index of 500 common stocks.
The Russell 2000 Index is an unmanaged index that measures the performance of
2000 small companies.
An investor cannot invest directly in an index.
6
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SHAREHOLDER MEETING (Unaudited)
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A special meeting of shareholders of the Pilgrim Funds was held in Phoenix,
Arizona on August 18, 2000. A brief description of each matter voted upon as
well as the results are outlined below:
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Shares
Shares voted against Shares
voted for or withheld abstained Total
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<S> <C> <C> <C> <C>
1. The election as Trustee of four of the six funds comprising Pilgrim
Mayflower Trust, of each of the following persons, until his or her
successor is elected, and has been qualified:
Al Burton 136,240,055 2,091,873 -- 138,331,928
Paul S. Doherty 136,334,240 1.997,688 -- 138,331,928
Robert B. Goode, Jr. 136,309,230 2,022,698 -- 138,331,928
Alan L. Gosule 136,363,867 1,968,061 -- 138,331,928
Walter H. May 136,367,133 1,964,795 -- 138,331,928
Jock Patton 136,355,214 1,976,714 -- 138,331,928
David W.C. Putnam 136,353,547 1,978,381 -- 138,331,928
John R. Smith 136,245,075 2,086,853 -- 138,331,928
Robert W. Stallings 136,376,932 1,954,996 -- 138,331,928
John G. Turner 136,356,131 1,975,797 -- 138,331,928
David W. Wallace 136,261,113 2,070,815 -- 138,331,928
2. To approve new Investment Advisory Agreements between the Funds and Pilgrim
Investments, Inc. to reflect the acquisition of ReliaStar Financial Corp.
by ING Groep, NV:
Pilgrim Growth + Value Fund 27,941,306 316,269 601,320 28,858,895
Pilgrim Research Enhanced Index Fund 19,273,892 190,446 435,304 19,899,642
3. To approve new Sub-Advisory Agreement among Navellier Fund Management, Inc.
and ING Pilgrim Investments, Inc. to reflect the acquisition of ReliaStar
Financial Corp. by ING Groep, NV:
Pilgrim Growth + Value Fund 27,950,499 319,020 589,376 28,858,895
4. To approve new Sub-Advisory Agreement among J.P. Morgan Investment
Management, Inc. and ING Pilgrim Investments, Inc. to reflect the
acquisition of ReliaStar Financial Corp. by ING Groep, NV:
Pilgrim Reseach Enhanced Index Fund 19,382,743 102,733 414,166 19,899,642
5. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for each Fund for the fiscal year ending October 31, 2000.
Pilgrim Growth + Value Fund 28,385,767 135,762 337,366 28,858,895
Pilgrim Research Enhanced Index Fund 19,513,375 56,841 329,426 19,899,642
</TABLE>
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8
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Pilgrim
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Shareholders and Trustees of Pilgrim Mayflower Trust:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Pilgrim Growth + Value Fund and
Pilgrim Research Enhanced Index Fund, two of the six funds comprising Pilgrim
Mayflower Trust, (collectively, the "Trust") at October 31, 2000, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended, except for the
Pilgrim Research Enhanced Index Fund for which the periods were for the year
ended October 31, 2000 and for the period December 30, 1998 (commencement of
operations) to October 31, 1999, and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLp
Denver, Colorado
December 28, 2000
9
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U.S. Equity
Funds
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STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2000
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<TABLE>
<CAPTION>
Pilgrim Pilgrim Research
Growth + Enhanced
Value Fund Index Fund
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<S> <C> <C>
ASSETS:
Investments in securities, at market value
(cost $833,047,299 and $224,415,278, respectively) $ 979,057,962 $ 234,686,037
Repurchase agreements 52,565,000 562,000
Cash 133 161
Receivable for investments sold 9,548,712 2,192,746
Receivable for shares of beneficial interest sold 8,486,492 1,945,360
Dividends and interest receivable 23,558 217,551
Receivable for futures variation margin -- 7,250
Prepaid expenses 77,166 1,302
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Total Assets 1,049,759,023 239,612,407
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LIABILITIES:
Payable for investments purchased -- 2,213,738
Investment advisory fee payable 858,048 137,243
Payable for shares of beneficial interest reacquired 1,111,349 2,020,410
Distribution fees payable 715,501 159,320
Administrative service fees payable 85,805 19,479
Transfer agent fees payable 257,374 78,538
Accrued expenses 17,306 190,644
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Total Liabilities 3,045,383 4,819,372
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NET ASSETS $1,046,713,640 $ 234,793,035
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NET ASSETS CONSIST OF:
Paid in capital for shares of beneficial interest,
$0.01 par value outstanding (unlimited shares authorized) $ 814,721,611 $ 226,456,696
Accumulated net realized gain (loss) on investments,
foreign currency and futures contracts 85,981,366 (1,859,574)
Net unrealized appreciation of investments, foreign
currency and futures contracts 146,010,663 10,195,913
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Net Assets $1,046,713,640 $ 234,793,035
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</TABLE>
See Accompanying Notes to Financial Statements
10
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U.S. Equity
Funds
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STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2000
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Pilgrim
Pilgrim Research
Growth + Enhanced
Value Fund Index Fund
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Class A:
Net assets $257,601,361 $ 23,570,632
Shares outstanding 10,343,128 2,109,934
Net asset value and redemption value per share
(net assets/shares outstanding) $ 24.91 $ 11.17
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $ 26.43 $ 11.85
Class B
Net assets $507,282,073 $ 94,027,522
Shares outstanding 20,988,563 8,514,231
Net asset value and offering price per share(1)
(net assets/shares outstanding) $ 24.17 $ 11.04
Class C:
Net assets $280,483,714 $ 88,449,172
Shares outstanding 11,609,122 8,005,582
Net asset value and offering price per share(1)
(net assets/shares outstanding) $ 24.16 $ 11.05
Class I:
Net assets N/A $ 28,472,760
Shares outstanding N/A 2,531,789
Net asset value, offering price and redemption
price per share (net assets/shares outstanding) N/A $ 11.25
Class Q:
Net assets $ 1,346,492 $ 272,949
Shares outstanding 54,071 24,444
Net asset value, offering price and redemption
price per share (net assets/shares outstanding) $ 24.90 $ 11.17
(1) Redemption price per share varies with length of time Class B and C shares
are held.
See Accompanying Notes to Financial Statements
11
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U.S. Equity
Funds
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STATEMENTS OF OPERATIONS for the year ended October 31, 2000
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<TABLE>
<CAPTION>
Pilgrim Pilgrim Research
Growth + Enhanced
Value Fund Index Fund
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<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of
$0 and $24,290, respectively) $ 221,045 $ 3,189,778
Interest 2,463,831 215,827
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Total investment income 2,684,876 3,405,605
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EXPENSES:
Investment advisory fees 7,639,602 1,741,851
Distribution fees:
Class A 510,815 84,544
Class B 3,956,212 1,023,994
Class C 1,978,306 891,570
Class Q 591 260
Transfer agent fees and expenses 763,960 236,223
Administrative fees 836,071 272,002
Accounting and custodian fees 229,188 211,510
Shareholder reporting 82,396 24,884
Registration fees 78,985 104,627
Professional fees 53,616 36,875
Trustee fees 17,980 10,980
Miscellaneous 16,501 7,572
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Total expenses 16,164,223 4,646,892
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Net investment loss (13,479,347) (1,241,287)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments 96,147,664 (1,264,718)
Net change in unrealized appreciation of investments and futures 50,016,590 4,751,252
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Net realized and unrealized gain on investments and futures 146,164,254 3,486,534
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NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 132,684,907 $ 2,245,247
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</TABLE>
See Accompanying Notes to Financial Statements
12
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STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
Pilgrim Growth + Value Fund Pilgrim Research Enhanced Index Fund
------------------------------- -------------------------------------
Year Ended Year Ended Year Ended For the period
October 31, Otober 31, October 31, December 30, 1998(1)
2000 1999 2000 to October 31, 1999
--------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment loss $ (13,479,347) $ (5,045,729) $ (1,241,287) $ (160,475)
Net realized gain (loss) on
investments and futures 96,147,664 83,963,594 (1,264,718) 2,844,931
Net change in unrealized appreciation
of investments and futures 50,016,590 83,444,021 4,751,252 5,444,661
--------------- --------------- --------------- ---------------
Net increase in net assets resulting
from operations 132,684,907 162,361,886 2,245,247 8,129,117
--------------- --------------- --------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investments (52,769,105) -- (3,268,200) --
--------------- --------------- --------------- ---------------
Total distributions (52,769,105) -- (3,268,200) --
--------------- --------------- --------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 795,463,400 215,319,842 70,474,849 231,460,935
Net asset value of shares resulting
from dividend reinvestment 32,130,552 -- 1,900,825 --
--------------- --------------- --------------- ---------------
827,593,952 215,319,842 72,375,674 231,460,935
Cost of shares redeemed (253,638,470) (161,711,440) (66,766,343) (9,383,395)
--------------- --------------- --------------- ---------------
Net increase in net assets resulting
from capital share transactions 573,955,482 53,608,402 5,609,331 222,077,540
--------------- --------------- --------------- ---------------
Net increase in net assets 653,871,284 215,970,288 4,586,378 230,206,657
NET ASSETS:
Beginning of period 392,842,356 176,872,068 230,206,657 --
--------------- --------------- --------------- ---------------
End of period $ 1,046,713,640 $ 392,842,356 $ 234,793,035 $ 230,206,657
=============== =============== =============== ===============
</TABLE>
(1) Commencement of operations.
See Accompanying Notes to Financial Statements
13
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Financial
PILGRIM GROWTH + VALUE FUND Highlights
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Selected data for a share of beneficial interest outstanding throughout each
period.
Class Q
------------------------
Period ended October 31,
2000(1)
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Operating performance:
Net asset value, beginning of the period $ 26.73
Income from investment operations:
Net investment loss $ (0.05)
Net realized and unrealized loss on
investments $ (1.78)
Total from investment operations $ (1.83)
Net asset value, end of the period $ 24.90
Total return(2) % (6.85)
Ratios and supplemental data:
Net assets, end of the period (000's) $ 1,346
Ratios to average net assets:
Expenses(3) % 1.53
Net investment loss(3) % (1.19)
Portfolio turnover % 163
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(1) Class Q commenced operations on June 5, 2000.
(2) Assumes dividends have been reinvested.
(3) Annualized.
See Accompanying Notes to Financial Statements
14
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Financial
Highlights
PILGRIM RESEARCH ENHANCED INDEX FUND
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Selected data for a share of beneficial interest outstanding throughout each
period.
Class Q
------------------------
Period ended October 31,
2000(1)
-------
Operating performance:
Net asset value, beginning of the period $ 11.98
Income from investment operations:
Net investment loss $ --
Net realized and unrealized loss on
investments $ (0.81)
Total from investment operations $ (0.81)
Net asset value, end of the period $ 11.17
Total return(2) % (6.76)
Ratios and supplemental data:
Net assets, end of the period (000's) $ 273
Ratios to average net assets:
Expenses(3) % 1.32
Net investment loss(3) % (0.05)
Portfolio turnover % 57
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(1) Class Q commenced offering of shares on April 3, 2000.
(2) Assumes dividends have been reinvested.
(3) Annualized
See Accompanying Notes to Financial Statements
15
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NOTES TO FINANCIAL STATEMENTS as of October 31, 2000
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NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization. The Pilgrim Mayflower Trust (the "Trust") comprising Pilgrim
Growth + Value Fund, Pilgrim Research Enhanced Index Fund, Pilgrim International
Value Fund, Pilgrim Emerging Markets Value Fund, Pilgrim High Total Return Fund
and Pilgrim High Total Return Fund II (collectively, the "Funds") was organized
under the laws of the Commonwealth of Massachusetts and registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company. Pilgrim Growth + Value Fund and Pilgrim Research Enhanced Index Fund
are included in this report.
Pilgrim Growth + Value Fund is a diversified portfolio with the investment
objective of capital appreciation by investing in equity securities. The Fund
seeks to achieve its objective through investments in companies the portfolio
manager identifies as either growth or value through quantitative analysis.
Pilgrim Research Enhanced Index Fund is a diversified portfolio with the
investment objective of capital appreciation. The Fund seeks to achieve its
objective 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 data characteristics of the S&P 500.
Each Fund offers at least three of the following classes of shares: Class A,
Class B, Class C, Class I and Class Q. This report only covers the funds that
offer Class Q. The separate classes of shares differ principally in the
applicable sales charges (if any), distribution fees and shareholder servicing
fees. Shareholders of each class also bear certain expenses that pertain to that
particular class. All shareholders bear the common expenses of the Fund and earn
income from the portfolio pro rata based on the average daily net assets of each
class, without distinction between share classes. Dividends are determined
separately for each class based on income and expenses allocable to each class.
Distribution from realized gains are allocated to each class pro rata based on
the net assets of each class on the date of distribution. No class has
preferential dividend rights. Differences in per share dividend rates result
from differences in separate class expenses, including distribution and
shareholder servicing fees. Class B shares, along with their reinvested dividend
shares, automatically convert to Class A shares approximately eight years after
purchase.
On October 29, 1999, ReliaStar Financial Corp., the indirect parent company of
Northstar Investment Management Corporation ("Northstar") the investment
adviser to the Funds, acquired Pilgrim Capital Corporation and its
subsidiaries. In conjunction with the acquisition, Northstar changed its name
to Pilgrim Advisors, Inc. On April 30, 2000 Pilgrim Advisors, Inc. merged into
Pilgrim Investments, Inc.
On September 1, 2000, ING Groep N.V. (NYSE: ING) acquired ReliaStar Financial
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,
Inc, Administrator to the Funds. In conjunction with the acquisition the
Adviser, Distributor and Administrator changed their names to ING Pilgrim
Investments, Inc., ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.
effective September 8, 2000.
Security Valuation. Equity securities are valued daily at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at the
last available bid price. Short-term debt instruments with remaining maturities
of less than 60 days are valued at amortized cost, unless the Trustees determine
that amortized cost does not reflect the fair value of such obligations.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under direction of the Trustees of the
Funds.
Security Transactions, Investment Income, Expenses. Security transactions are
recorded on the trade date. Realized gains or losses on sales of investments are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis except when collection is not expected; discounts are accreted,
and premiums are amortized to par at maturity; dividend income is recorded on
the ex-dividend dates. Income, expenses (except class specific expenses), and
realized/unrealized gains/losses, are allocated proportionately to each Fund or
class of shares based upon the relative daily net asset value.
Distributions to Shareholders. Dividends from net investment income are
declared and paid annually by
16
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of October 31, 2000 (Continued)
--------------------------------------------------------------------------------
the Growth + Value Fund and Research Enhanced Index Fund. Distributions of net
realized capital gains, if any, are declared annually; however, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed.
The Funds may periodically make reclassifications among certain of their capital
accounts as a result of the timing and characterization of certain income and
capital gains distributions determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of net operating
losses and foreign currency transactions. As of October 31, 2000, the following
amounts have been reclassified between undistributed net investment income
(loss), accumulated net realized gain (loss) in investments and paid in capital:
Undistributed Accumulated Net
Net Investment Realized Gain (Loss) Paid in
income (Loss) on Investments Capital
------------- -------------- -------
Growth + Value Fund $13,479,347 $(10,032,180) $(3,447,167)
Researched Enhanced
Index Fund 1,241,287 (11,112) (1,230,175)
These reclassifications did not affect net investment income (loss), net
realized gain (loss) on investments or net assets for the year ended October 31,
2000.
Foreign Currency. The Funds isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Net realized gain (loss) on foreign currency transactions represents the foreign
exchange: (1) gains and losses from the sale of holdings of foreign currencies,
(2) gains and losses between trade date and settlement date on investment
securities transactions and forward exchange contracts, and (3) gains and losses
from the difference between amounts of interest and dividends recorded and the
amounts actually received. Net change in unrealized appreciation (depreciation)
of investments and foreign currency arise from changes in the value of assets
and liabilities including investment in securities at fiscal year end, resulting
from changes in the exchange rates.
Forward Foreign Currency Contracts. The Funds may enter into forward foreign
currency contracts primarily to hedge against foreign currency exchange rate
risks on their non-U.S. dollar denominated investment securities. When entering
into a currency forward contract, the Funds agree to receive or deliver a fixed
quantity of foreign currency for an agreed-upon price on an agreed future date.
These contracts are valued daily and the funds' net equity therein, representing
unrealized gain or loss on the contracts as measured by the difference between
the forward foreign exchange rates at the dates of entry into the contracts and
the forward rates at the reporting date, is included in the statement of assets
and liabilities. Realized and unrealized gains and losses are included in the
statement of operations. These instruments involve market and/or credit risk in
excess of the amount recognized in the statement of assets and liabilities.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movement in currency and securities values and interest
rates.
Options. The Funds may write (sell) and purchase put and call options. The
premium collected or paid by a Fund for the sale or purchase of a call or put
option is recorded as an investment and subsequently "marked to market" to
reflect the current market value of the option. If an option which a Fund has
sold or purchased expires on the stipulated expiration date, the Fund realizes a
gain or loss in the amount of the premium received or paid for the option.
For written options, the Fund's obligation may be discharged in three ways: (1)
the option expires on the stipulated expiration date; (2) the option holder
exercises the right to call (buy) or put (sell) the securitiy; or (3) the Fund
enters into a closing transaction. If the option is held until expiration, the
Fund recognizes a gain equal to the amount of premium received. If the written
call option is exercised by the counterparty, the premium is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If the written put option is
exercised by the counterparty, the premium reduces the cost basis of the
securities purchased by the Fund. If the Fund enters into a closing transaction,
a gain or loss is recognized equal to the difference between the premium
received by the Fund from the counterparty and the
17
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of October 31, 2000 (Continued)
--------------------------------------------------------------------------------
amount paid by the Fund on effecting a closing purchase transaction, including
brokerage commissions. As the writer of options, the Fund bears the market risk
of an unfavorable change in the price of the security underlying the written
option.
Futures Contracts. The Funds may invest in futures contracts solely for the
purpose of hedging its existing portfolio securities, or securities that the
Funds intend to purchase, against fluctuations in fair value caused by changes
in prevailing market or interest rates.
Initial margin deposits made upon entering into futures contracts are recognized
as assets due from the broker (the Funds' agent in acquiring the futures
position). During the period the futures contract is open, changes in the value
of the contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the daily market value of the contract.
Variation margin payments are received or made by the Funds each day, depending
upon the daily fluctuations in the fair value of the underlying instrument. The
Funds recognize a gain or loss equal to the daily variation margin. When the
contract is closed, the Funds record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Funds' basis in the contract.
Should market conditions move unexpectedly, the Funds may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involve the risk of imperfect correlation in
movements in the price of futures contracts, interest rates, and the underlying
hedged assets.
Repurchase Agreements. The Funds' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
Federal Income Taxes. The Funds intend to comply with the special provisions of
the Internal Revenue Code available to investment companies and to distribute
all of the taxable net income to their respective shareholders. Therefore, no
federal income tax provision or excise tax provision is required.
Management's Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Organization Costs. Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are being amortized over a
period of five years from the date the funds commenced operations.
NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
ING Pilgrim Investments, Inc. (the "Advisor"), serves as each Fund's investment
adviser.
ING Pilgrim Group, Inc. (the "Administrator") serves as administator to each
Fund. The Funds pay the Administrator a fee calculated at an annual rate of
0.10% of each Fund's average daily net assets, and an annual shareholder account
servicing fee of $5.00, payable semi-annually, for each account of beneficial
owners of shares. For the year ended October 31, 2000, the Administrator earned
$1,108,073 in administrative and account servicing fees.
ING Pilgrim Securities, Inc. (the "Distributor") is the distributor of each
Fund's shares. Under separate Plans of Distribution pertaining to Class A, Class
B, Class C, and Class Q, the Funds pay the Distributor monthly service fees at
an annual rate of 0.25% of the average daily net assets in the case of Class A,
Class B, Class C, and Class Q shares, and monthly distribution fees at the
annual rate
18
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of October 31, 2000 (Continued)
--------------------------------------------------------------------------------
of 0.05% of the average daily net assets of Class A shares and 0.75% of the
average daily net assets of Class B and Class C shares for all Funds. Class I
shares do not pay distribution or service fees. For the year ended October 31,
2000 the Distributor earned $8,446,292 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid by
shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B
and Class C shares. For the year ended October 31, 2000, the Distributor earned
the following amounts in sales charges from Mayflower Trust:
Class A Class B Class C
Shares Shares Shares
------ ------ ------
Initial sales charges $890,373 N/A N/A
Contingent deferred
sales charges 104,791 N/A $150,713
The Growth + Value Fund, pays the Advisor an investment advisory fee calculated
at an annual rate of 1.00% of average daily net assets. The Research Enhanced
Index Fund pays the Advisor an investment advisory fee calculated at an annual
rate of 0.70% of average daily net assets. For the year ended October 31, 2000,
the Advisor earned $9,381,453 in investment advisory fees. Navellier Fund
Management, Inc. ("Navellier"), a registered investment advisor, serves as
subadvisor to the Growth + Value Fund pursuant to a Subadivsory Agreement dated
July 31, 1996 and amended and restated on July 1, 1998, between the Advisor and
Navellier. For its services, Navellier receives from the Advisor, a fee equal to
0.50% of the average daily net assets of the Fund. For the year ended October
31, 2000, Navellier received $3,541,560 in subadvisory fees from the Advisor.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), a registered investment
advisor, serves as subadvisor to the Research Enhanced Index Fund pursuant to a
Subadvisory Agreement dated December 21, 1998, between the Advisor and J.P.
Morgan. For its services, J.P. Morgan receives from the Advisor, a fee equal to
0.20% of the average daily net assets of the Fund. For the year ended October
31, 2000, J.P. Morgan received $495,110 in subadvisory fees from the Advisor.
The Advisor voluntarily undertook to limit the expenses of the Research Enhanced
Index Fund to 1.30% (Class A), 2.00% (Class B and C), and 1.00% (Class I) of
each respective class's average net assets from inception through October 31,
1999.
NOTE 3. FUTURES CONTRACTS
On October 31, 2000, the Research Enhanced Index Fund had $65,000 principal
amount of U.S. Treasury obligations pledged as collateral to cover margin
requirements for open futures contracts.
Open futures contracts at October 31, 2000, were as follows:
Number
of Commit- Unrealized
Contract Contracts Month ment Depreciation
-------- --------- ----- ---- ------------
S&P 500 1 December Buy $ (74,846)
19
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of October 31, 2000 (Continued)
--------------------------------------------------------------------------------
NOTE 4 -- PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended October 31, 2000, were as
follows:
Growth + Value Research Enhanced
Fund Index Fund
-------------- ------------
Aggregate purchases $1,626,046,443 $150,423,322
Aggregate sales $1,167,454,793 $139,880,419
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended October 31, 2000,
were as follows:
<TABLE>
<CAPTION>
Growth + Value Fund
--------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class Q
--------------------------- --------------------------- -------------------------- ---------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 11,866,737 $ 303,851,859 11,175,519 $ 278,695,932 8,365,370 $ 211,475,739 54,841 $ 1,439,870
Shares issued as
reinvestment
of dividends 380,695 8,366,591 806,730 17,285,755 302,389 6,478,206 -- --
Shares redeemed (6,015,701) (151,084,341) (2,742,651) (67,678,591) (1,424,913) (34,857,895) (770) (17,643)
----------- ------------- ----------- ------------- ---------- ------------- ------- -----------
Net increase 6,231,731 $ 161,134,109 9,239,598 $ 228,303,096 7,242,846 $ 183,096,050 54,071 $ 1,422,227
=========== ============= =========== ============= ========== ============= ======= ===========
Research Enhanced Index Fund
--------------------------------------------------------
Class A Class B
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold 905,210 $ 10,303,882 2,050,650 $ 23,253,462
Shares issued as
reinvestment
of dividends 14,197 165,396 52,910 612,733
Shares redeemed (1,242,238) (14,134,442) (2,542,262) (28,592,017)
---------- ------------ ---------- ------------
Net increase
(decrease) (322,831) $ (3,665,164) (438,702) $ (4,725,822)
========== ============ ========== ============
Research Enhanced Index Fund
----------------------------------------------------------------------
Class C Class I Class Q
-------------------------- ----------------- --------------------
Shares Amount Shares Amount Shares Amount
---------- ------------ ------ -------- ------- ---------
Shares sold 3,232,804 $ 36,538,030 -- $ -- 33,521 $ 379,475
Shares issued as
reinvestment
of dividends 64,089 751,195 31,779 371,501 -- --
Shares redeemed (2,138,973) (23,939,384) -- -- (9,077) (100,500)
---------- ------------ ------ -------- ------- ---------
Net increase
(decrease) 1,157,920 $ 13,349,841 31,779 $371,501 24,444 $ 278,975
========== ============ ====== ======== ======= =========
</TABLE>
Transactions in capital shares of each Fund for the year ended October 31, 1999,
were as follows:
<TABLE>
<CAPTION>
Growth + Value Fund
---------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 8,330,313 $ 119,944,285 3,968,213 $ 62,085,069 2,142,358 $ 33,290,488
Shares redeemed (7,420,035) (104,892,760) (2,518,709) (36,547,165) (1,416,685) (20,271,515)
---------- ------------- ---------- ------------ ---------- ------------
Net increase 910,278 $ 15,051,525 1,449,504 $ 25,537,904 725,673 $ 13,018,973
========== ============= ========== ============ ========== ============
Research Enhanced Index Fund
-----------------------------------------------------------------------------------------------------------
Class A Class B Class C Class I
------------------------- -------------------------- ------------------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------- ---------- ------------ --------- -----------
Shares sold 2,723,102 $ 29,720,302 9,270,282 $ 100,006,579 7,106,428 $ 76,733,954 2,500,010 $25,000,100
Shares redeemed (290,337) (3,146,624) (317,349) (3,429,082) (258,766) (2,807,689) -- --
---------- ------------ ---------- ------------- ---------- ------------ --------- -----------
Net increase 2,432,765 $ 26,573,678 8,952,933 $ 96,577,497 6,847,662 $ 73,926,265 2,500,010 $25,000,100
========== ============ ========== ============= ========== ============ ========= ===========
</TABLE>
20
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of October 31, 2000 (Continued)
--------------------------------------------------------------------------------
NOTE 6. SECURITY LOANS
Each Fund may lend its securities to brokers, dealers and other financial
institutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high grade
securities. As with other extensions of credit, each Fund may bear risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Funds receive compensation for lending their
securities in the form of fees or all or a portion of the income from
investments of the collateral. The Funds also continue to earn income on the
securities loaned. At October 31, 2000, the Funds did not have any securities on
loan.
NOTE 7. LETTER OF CREDIT
The Pilgrim Funds, Pilgrim Equity Trust, Pilgrim Variable Products Trust
(formerly Northstar Galaxy Trust) and Pilgrim Mayflower Trust (collectively, the
"Funds") have entered into an unsecured committed revolving line of credit
agreement (the "Credit Agreement") with State Street Bank and Trust Company for
an aggregate amount of $50,000,000. The proceeds may be used only to (1)
temporarily finance the purchase and sale of securities; (2) finance the
redemption of shares of an investor in the Funds; and (3) enable the Funds to
meet other emergency expenses as defined in the Credit Agreement. The Funds pay
a commitment fee equal to 0.08% per annum on the daily unused portion of the
committed line amount payable quarterly in arrears. There were no borrowings
during the year ended October 31, 2000.
NOTE 8. SUBSEQUENT EVENTS
Subsequent to October 31, 2000, the following funds declared distributions from
capital gains of:
Per Share Payable Record
Type Amount Date Date
---- ------ ---- ----
Growth + Value All Classes LTCG $ 2.2155 11/20/00 11/15/00
21
<PAGE>
Pilgrim
Growth +
Value Fund
PORTFOLIO OF INVESTMENTS as of October 31, 2000
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS: 93.54%
Biotechnology: 4.37%
314,700 @ CuraGen Corp. $20,337,487
187,900 @ Protein Design Labs, Inc. 25,381,180
-----------
45,718,667
-----------
Commercial Services: 2.55%
193,500 @ Aurora Biosciences Corp. 11,791,406
236,900 @ Plexus Corp. 14,939,506
-----------
26,730,912
-----------
Computers: 5.70%
489,800 @ Mentor Graphics Corp. 11,479,688
1,063,000 @ Silicon Storage Technology, Inc. 24,183,250
468,800 @ Sungard Data Systems, Inc. 23,967,400
-----------
59,630,338
-----------
Electrical Components and
Equipment: 4.52%
181,500 C&D Technologies, Inc. 10,731,188
516,600 @ Power-One, Inc. 36,646,312
-----------
47,377,500
-----------
Electronics: 4.45%
277,300 @ Nanometrics, Inc. 6,377,900
192,900 PerkinElmer, Inc. 23,051,550
90,800 Technitrol, Inc. 10,067,450
231,900 @ Varian, Inc. 7,145,419
-----------
46,642,319
-----------
Entertainment: 2.60%
373,800 @ Macrovision Corp 27,240,675
-----------
Healthcare - Products: 3.59%
446,800 @ Oakley, Inc. 9,382,800
249,600 @ Techne Corp. 28,142,400
-----------
37,525,200
-----------
Healthcare-Services: 5.15%
108,200 @ Laboratory Corp. of America Holdings 14,593,475
167,200 @ Quest Diagnostics, Inc. 16,093,000
198,400 @ Wellpoint Health Networks Inc 23,200,400
-----------
53,886,875
-----------
Internet: 5.26%
202,700 @ Art Technology Group, Inc. 12,719,425
248,900 @ i2 Technologies, Inc. 42,313,000
-----------
55,032,425
-----------
Manufacturing: 1.25%
383,700 @ Applied Films Corp. 13,045,800
-----------
Oil and Gas Producers: 1.22%
415,900 @ Triton Energy Ltd. 12,788,925
-----------
Oil and Gas Services: 2.60%
518,600 @ BJ Services Co. 27,194,088
-----------
Pharmaceuticals: 8.05%
383,600 @ Celgene Corp. 24,694,250
500,400 @ IVAX Corp. 21,767,400
405,800 @ Vertex Pharmaceuticals, Inc. 37,783,784
-----------
84,245,434
-----------
Retail: 4.04%
578,700 @ CDW Computer Centers, Inc. 37,289,981
149,700 @ Christopher & Banks Corp. 4,958,813
-----------
42,248,794
-----------
Semiconductors: 8.82%
702,600 @ Applied Micro Circuits Corp. 53,661,075
610,600 @ International Rectifier Corp. 27,248,025
408,600 @ OAK Technology, Inc. 11,466,338
-----------
92,375,438
-----------
Software: 11.61%
678,400 Adobe Systems, Inc 51,600,800
429,800 @ Mercury Interactive Corp. 47,707,800
357,300 @ Nvidia Corp. 22,202,845
-----------
121,511,445
-----------
Telecommunications: 17.76%
421,500 @ Digital Lightwave, Inc. 21,364,781
254,900 @ Emulex Corp. 37,438,437
405,700 @ Natural Microsystems Corp. 18,332,569
246,600 Newport Corp. 28,162,490
567,000 @ Powerwave Technologies, Inc. 27,286,875
427,600 Scientific-Atlanta, Inc. 29,263,875
250,800 @ Tollgrade Communications, Inc. 24,014,100
-----------
185,863,127
-----------
Total Common Stocks
(Cost $833,047,299) 979,057,962
Principal
Amount Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 5.02%
Repurchase Agreement: 5.02%
$52,565,000 State Street Bank & Trust Repurchase Agreement,
6.450% due 11/01/00 (Collateralized by
$2,350,000 U.S. Treasury Bonds, 8.750% Due
11/15/08 Value $2,620,250, $22,870,000
U.S. Treasury Bonds, 8.750%, Due 11/15/08,
Value $25,500,050, $25,190,000 U.S.
Treasury Notes, 6.125%, Due 08/31/02, Value
$25,504,875) $ 52,565,000
--------------
Total Short-Term Investments
(Cost $52,565,000) 52,565,000
--------------
Total Investments in Securities
(Cost $ 885,612,299)* 98.56% 1,031,622,962
Other Assets and
Liabilities-Net 1.44% 15,090,678
------ --------------
Net Assets 100.00% $1,046,713,640
====== ==============
@ Non-income producing security
* Cost for federal income tax purposes is $ 840,239,457.
Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 180,740,824
Gross Unrealized Depreciation (41,922,319)
-------------
Net Unrealized Appreciation $ 138,818,505
=============
See Accompanying Notes to Financial Statements
22
<PAGE>
Pilgrim
Research Enhanced
Index Fund
PORTFOLIO OF INVESTMENTS as of October 31, 2000
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS: 99.92%
Aerospace/Defense: 0.58%
8,400 Boeing Co. $ 569,625
7,900 Goodrich (B.F.) Co. 323,406
2,000 Lockheed Martin Corp. 71,700
5,600 United Technologies Corp. 390,950
----------
1,355,681
----------
Airlines: 0.37%
8,100 @ AMR Corp. 265,275
2,100 Continental Airlines, Inc. 110,250
600 Delta Air Lines, Inc. 28,350
3,600 @ Northwest Airlines Corp. 102,600
12,900 Southwest Airlines 367,650
----------
874,125
----------
Apparel: 0.25%
6,800 @ Jones Apparel Group, Inc. 189,125
10,200 Nike, Inc. 407,362
----------
596,487
----------
Auto Manufacturers: 1.41%
65,900 Ford Motor Co. 1,721,636
22,900 General Motors Corp. 1,422,662
3,700 Paccar, Inc. 155,631
----------
3,299,929
----------
Auto Parts & Equipment: 0.27%
6,700 Dana Corp. 148,656
23,900 Delphi Automotive Systems 374,931
6,400 Visteon Corp. 113,200
----------
636,787
----------
Banks: 3.04%
9,500 Amsouth Bancorporation 132,406
21,800 Bank of America Corp. 1,047,762
35,000 Bank One Corp. 1,277,500
4,200 Banknorth Group, Inc. 76,125
600 Chase Manhattan Corp. 27,300
100 Comerica, Inc. 6,031
2,900 Compass Bancshares, Inc. 52,744
4,400 First Tennessee National Corp. 101,200
27,000 First Union Corp. 818,438
12,700 Fleet Boston Financial Corp. 482,600
4,500 Hibernia Corp. 53,719
16,500 KeyCorp 407,344
1,000 Marshall & Ilsley Corp. 45,312
6,000 National Commerce Bancorp 127,500
10,700 PNC Financial Services Group 715,562
6,400 Regions Financial Corp. 150,800
5,600 SouthTrust Corp. 181,300
5,000 Summit Bancorp 187,500
2,500 TCF Financial Corp. 101,094
43,600 U.S. Bancorp 1,054,575
1,800 Wells Fargo & Co. 83,362
----------
7,130,174
----------
Beverages: 1.23%
100 Anheuser-Busch Companies, Inc. 4,575
32,900 Coca-Cola Co. 1,986,338
18,700 PepsiCo, Inc. 905,781
----------
2,896,694
----------
Biotechnology: 0.47%
14,300 @ Amgen, Inc. 828,506
1,000 @ Genzyme Corp.--
General Division 71,000
2,200 @ Human Genome Sciences, Inc. 194,460
----------
1,093,966
----------
Chemicals: 1.10%
13,700 Air Products &
Chemicals, Inc. 511,181
27,800 Dow Chemical Co. 851,375
10,500 PPG Industries, Inc. 468,563
9,800 Praxair, Inc. 365,050
13,000 Rohm & Haas Co. 390,812
----------
2,586,981
----------
Commercial Services: 0.20%
39,000 Cendant Corp. $ 468,000
----------
Computers: 7.37%
700 @ Apple Computer, Inc. 13,694
48,200 Compaq Computer Corp. 1,465,762
56,200 @ Dell Computer Corp. 1,657,900
39,400 EMC Corp. 3,509,062
31,600 Hewlett-Packard Co. 1,467,425
28,100 International Business Machines 2,767,850
1,800 NCR Corp. 77,625
18,700 @ Seagate Technology, Inc. 1,306,663
39,847 @ Sun Microsystems, Inc. 4,418,036
4,500 @ Veritas Software Corp. 634,570
----------
17,318,587
----------
Cosmetics/Personal Care: 1.87%
3,700 Estee Lauder Cos., Inc. 171,819
40,200 Gillette Co. 1,401,975
9,700 Kimberly-Clark Corp. 640,200
30,500 Procter & Gamble Co. 2,178,844
----------
4,392,838
----------
Distribution/Wholesale
Total: 0.06%
4,400 W.W. Grainger, Inc. 140,525
----------
See Accompanying Notes to Financial Statements
23
<PAGE>
Pilgrim
Research Enhanced
Index Fund
PORTFOLIO OF INVESTMENTS as of October 31, 2000
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Diversified Financial
Services: 8.09%
10,400 American Express Co. $ 624,000
21,500 Associates First Capital Corp. 798,188
2,000 Bear Stearns Cos., Inc. 121,250
9,000 Capital One Financial Corp. 568,125
9,600 CIT Group, Inc. 167,400
100,700 Citigroup, Inc. 5,299,338
5,900 Countrywide Credit Ind., Inc. 220,881
2,500 Edwards (A.G.), Inc. 126,875
26,400 Fannie Mae 2,032,800
7,200 Franklin Resources, Inc. 308,448
23,100 Freddie Mac 1,386,000
10,600 Goldman Sachs Group, Inc. 1,058,013
13,800 Household Int'l, Inc. 694,312
1,600 Legg Mason, Inc. 83,100
7,400 Lehman Brothers Holdings, Inc. 477,300
7,600 MBNA Corp. 285,475
26,200 Merrill Lynch & Co. 1,834,000
26,000 Morgan Stanley Dean Witter & Co. 2,088,125
600 Price (T Rowe) Associates 28,087
7,800 Providian Financial Corp. 811,200
----------
19,012,917
----------
Electric: 2.34%
5,000 Ameren Corp. 198,750
11,600 American Electric Power 481,400
7,800 Cinergy Corp. 238,875
7,100 CMS Energy Corp. 191,700
7,300 Consolidated Edison, Inc. 256,869
15,900 CP&L Energy, Inc. 640,969
8,400 DTE Energy Co. 303,450
9,100 Edison Int'l 217,262
13,000 Entergy Corp. 498,062
6,300 FPL Group, Inc. 415,800
5,900 GPU, Inc. 195,069
4,900 NiSource, Inc. 122,194
14,000 PG&E Corp. 377,125
4,600 Pinnacle West Capital Corp. 199,812
5,800 Public Service Enterprise Group 240,700
13,500 TXU Corp. 500,344
6,400 Wisconsin Energy Corp. 120,400
11,400 XCEL Energy, Inc. 291,413
----------
5,490,194
----------
Electrical Components & Equipment: 0.08%
2,600 Emerson Electric Co. 190,938
----------
Electronics: 0.19%
3,400 @ Johnson Controls, Inc. 202,725
5,200 Parker Hannifin Corp. 215,150
200 PE Corp.-PE Biosystems Group 23,400
----------
441,275
----------
Environment Control: 0.02%
2,300 Waste Management, Inc. 46,000
----------
Food: 2.27%
11,900 Albertson's, Inc. 281,881
2,400 Campbell Soup Co. 70,200
11,100 General Mills, Inc. 463,425
15,200 Heinz (H.J.) Co. 637,450
17,800 Kellogg Co. 451,675
37,000 @ Kroger Co. 834,813
5,300 Quaker Oats Co. 432,281
16,100 Safeway, Inc. 880,469
25,100 @@ Unilever NV 1,275,394
----------
5,327,588
----------
Forest Products & Paper: 0.36%
6,500 Georgia-Pacific 174,688
15,400 International Paper Co. 564,025
2,200 Temple-Inland, Inc. 98,450
----------
837,163
----------
Healthcare-Products: 1.86%
4,600 Bard (C.R.), Inc. 192,625
4,700 Baxter Int'l, Inc. 386,281
13,400 Becton, Dickinson & Co. 448,900
18,600 @ Boston Scientific Corp. 296,437
8,200 @ Guidant Corp. 434,087
16,100 Johnson & Johnson 1,483,213
14,600 Medtronic, Inc. 792,963
5,900 ST Jude Medical, Inc. 324,500
----------
4,359,006
----------
Healthcare-Services: 0.66%
24,300 HCA -- The Healthcare Co. 970,481
14,500 @ Tenet Healthcare Corp. 570,032
----------
1,540,513
----------
Household Products/Wares: 0.16%
8,500 Clorox Co. 379,313
----------
Insurance: 4.01%
2,400 Aetna, Inc. 138,750
6,700 Aflac, Inc. 489,519
27,000 Allstate Corp. 1,086,750
3,800 AMBAC Financial Group, Inc. 303,287
5,500 American General Corp. 442,750
29,300 American Int'l Group 2,871,400
9,500 AON Corp. 393,656
7,400 Cigna Corp. 902,430
10,800 Hartford Financial Services 803,925
13,000 @ John Hancock Financial Services 411,125
6,400 Lincoln National Corp. 309,600
5,300 MBIA, Inc. 385,244
24,000 @ Metlife, Inc 663,000
6,700 Torchmark Corp. 223,194
----------
9,424,630
----------
Internet: 1.65%
44,600 @ America Online, Inc. 2,249,178
11,600 @ Charles Schwab Corp. 407,450
12,400 @ E*TRADE Group, Inc. 180,575
3,600 Network Associates, Inc. 69,300
18,800 @ TD Waterhouse Group 311,375
4,900 Tibco Software, Inc. 308,700
6,100 @ Yahoo, Inc. 357,613
----------
3,884,191
----------
Iron/Steel: 0.03%
3,900 Allegheny Technologies, Inc. 78,975
----------
Lodging: 0.30%
6,400 Hilton Hotels Corp. 60,800
10,000 Marriott Int'l, Inc. 405,000
7,900 Starwood Hotels & Resorts Worldwide 234,038
----------
699,838
----------
Machinery-Construction & Mining: 0.26%
17,100 Caterpillar, Inc. 599,569
----------
Machinery Diversified: 0.16%
2,200 Dover Corp. 93,363
7,100 Ingersoll-Rand Co. 268,025
500 Rockwell Int'l Corp. 19,656
----------
381,044
----------
See Accompanying Notes to Financial Statements
24
<PAGE>
Pilgrim
Research Enhanced
Index Fund
PORTFOLIO OF INVESTMENTS as of October 31, 2000
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Media: 3.44%
36,800 @ AT&T-Liberty Media Group $ 662,400
34,200 @ Comcast Corp. 1,393,650
20,200 Disney (Walt) Co. 723,413
4,000 @ Fox Entertainment Group, Inc. 86,000
10,200 Gannett Co., Inc. 591,600
8,600 Gemstar-TV Guide
International, Inc. 589,637
4,300 Knight Ridder, Inc. 216,075
3,800 New York Times Co. 139,650
32,200 Time Warner, Inc. 2,444,302
21,500 @ Viacom, Inc. 1,222,813
----------
8,069,540
----------
Mining: 0.44%
36,000 Alcoa, Inc. 1,032,750
----------
1,032,750
----------
Miscellaneous Manufacturing: 7.03%
3,800 Cooper Industries, Inc. 145,350
4,300 Eastman Kodak Co. 192,962
3,900 Eaton Corp. 265,444
201,900 General Electric Co. 11,066,644
17,700 Honeywell Int'l, Inc. 952,481
11,500 Illinois Tool Works 638,969
9,800 ITT Industries, Inc. 319,112
51,400 @@ Tyco Int'l, Ltd. 2,913,738
----------
16,494,700
----------
Oil & Gas Producers: 5.82%
5,800 Anadarko Petroleum Corp. 371,490
2,400 Apache Corp. 132,750
18,900 Chevron Corp. 1,552,162
11,400 Conoco Inc. 309,938
2,100 Devon Energy Corp. 105,840
800 Diamond Offshore Drilling 27,650
1,700 Ensco International, Inc. 56,525
73,200 Exxon Mobil Corp. 6,528,525
10,300 @ Global Marine Inc. 272,950
53,000 @@ Royal Dutch
Petroleum Co. 3,146,875
19,800 Texaco, Inc. 1,169,438
----------
13,674,143
----------
Oil & Gas Services: 0.47%
9,700 Baker Hughes, Inc. 333,437
7,600 @ Cooper Cameron Corp. 414,200
9,900 Halliburton Co. 366,919
----------
1,114,556
----------
Packaging & Containers: 0.06%
9,600 @ Smurfit-Stone Container Corp. 129,600
----------
Pharmaceuticals: 9.17%
25,200 Abbott Laboratories 1,330,875
2,500 @ Alza Corp. 202,344
27,700 American Home Products Corp. 1,758,950
34,300 Bristol-Myers Squibb Co. 2,090,156
29,300 Eli Lilly & Co. 2,618,687
2,000 Forest Laboratories -- Class A 265,000
50,200 Merck & Co., Inc. 4,514,863
114,000 Pfizer Inc. 4,923,375
31,100 Pharmacia Corp. 1,710,500
41,400 Schering-Plough Corp. 2,139,863
----------
21,554,613
----------
Pipelines: 0.44%
1,400 Columbia Energy Group 100,713
5,300 Dynegy, Inc. 245,456
2,800 EL Paso Energy Corp. 175,525
700 Enron Corp. 57,444
10,600 Williams Cos., Inc. 443,212
----------
1,022,350
----------
Retail: 4.64%
10,700 @ Best Buy Co., Inc. 537,006
4,000 Costco Wholesale Corp. 146,500
9,600 @ Federated Department Stores, Inc. 312,600
38,200 Gap, Inc. 986,037
48,600 Home Depot, Inc. 2,089,800
2,600 Kohl's Corp. 140,887
15,600 Limited, Inc. 393,900
12,100 Lowe's Cos. 552,819
16,300 May Department Stores Co. 427,875
17,000 McDonald's Corp. 527,000
100 Sears, Roebuck, and Co. 2,973
39,600 Target Corp. 1,093,950
16,200 TJX Cos., Inc. 441,450
71,500 Wal-Mart Stores, Inc. 3,244,313
----------
10,897,110
----------
Savings & Loans: 0.62%
6,200 Dime Bancorp, Inc. 151,513
4,000 Golden West Financial Corp. 224,250
3,700 Greenpoint Financial Corp. 110,075
21,900 Washington Mutual, Inc. 963,600
----------
1,449,438
----------
Semiconductors: 4.83%
2,300 @ Advanced Micro Devices 52,038
12,000 @ Altera Corp. 491,250
8,300 Analog Devices, Inc. 539,500
18,600 @ Applied Materials, Inc. 988,125
1,700 Broadcom Corp. 378,038
3,500 Cypress Semiconductor Corp. 131,031
112,000 Intel Corp. 5,040,000
2,800 @ Lattice Semiconductor Corp. 81,725
6,100 Linear Technology Corp. 393,831
17,000 Micron Technology, Inc. 590,750
11,100 @ National Semiconductor Corp. 288,600
700 PMC -- Sierra, Inc. 118,650
34,500 Texas Instruments, Inc. 1,692,656
7,700 @ Xilinx, Inc. 557,769
----------
11,343,963
----------
Software: 6.01%
7,000 Adobe Systems, Inc. 532,437
11,700 Automatic Data Processing 764,156
7,700 @ BEA Systems, Inc. 552,475
2,600 @ Citrix Systems, Inc. 57,525
115,400 @ Microsoft Corp. 7,948,175
1,200 Novell, Inc. 10,800
102,300 Oracle Corp. 3,375,900
7,800 Parametric Technology Corp. 96,037
6,600 @ Siebel Systems, Inc. 692,587
1,800 @ Symantec Corp. 70,312
----------
14,100,404
----------
See Accompanying Notes to Financial Statements
25
<PAGE>
Pilgrim
Research Enhanced
Index Fund
PORTFOLIO OF INVESTMENTS as of October 31, 2000
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Telecommunications: 14.38%
200 @ Allegiance Telecom,
Inc. $ 6,287
53,200 @ AT&T Corp. 1,233,575
7,175 @ Avaya, Inc. 96,414
12,700 Bellsouth Corp. 613,569
143,800 Cisco Systems, Inc. 7,747,225
20,100 Corning, Inc. 1,537,650
23,500 @@@ Global Crossing, Ltd. 555,188
26,500 JDS Uniphase Corp. 2,156,437
10,900 Level 3 Communications, Inc. 519,794
64,900 Lucent Technologies, Inc. 1,512,981
33,200 Motorola, Inc. 827,925
4,100 Network Appliance, Inc. 487,900
19,300 Nextel Communications, Inc. 741,844
71,700 @@ Nortel Networks Corp. 3,262,350
9,900 @ Qualcomm, Inc. 644,583
48,700 Qwest Communications Int'l 2,368,037
62,200 SBC Communications, Inc. 3,588,162
4,500 Sprint Corp. (FON Group) 114,750
21,000 @ Sprint Corp. (PCS Group) 800,625
12,400 @ Tellabs, Inc. 619,225
51,300 Verizon Communications 2,965,781
58,000 @ Worldcom, Inc. 1,377,500
-----------
33,777,802
-----------
Tobacco: 1.19%
76,200 Philip Morris Cos., Inc. 2,790,825
-----------
Toys/Games/Hobbies: 0.13%
7,400 Hasbro, Inc. 79,550
17,500 Mattel, Inc. 226,406
-----------
305,956
-----------
Transportation: 0.59%
15,500 Burlington Northern Santa Fe Co. 411,719
1,600 C.H. Robinson Worldwide, Inc. 87,500
4,300 @ FedEx Corp. 201,498
16,200 Norfolk Southern Corp. 228,825
9,600 Union Pacific Corp. 450,000
-----------
1,379,542
-----------
Total Common Stocks
(Cost $ 224,350,431) 234,621,220
-----------
Principal
Amount Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.27%
U.S. Government Securities: 0.03%
(1)$65,000 U.S. Treasury Note,
5.625%, due 02/28/01
(cost $64,847) $ 64,817
------------
Repurchase Agreement: 0.24%
562,000 State Street Bank & Trust
Repurchase Agreement,
6.450% due 11/01/00.
(Collateralized by
$535,000 U.S. Treasury
Notes, 6.375%, Due
08/15/27 Value $574,456) 562,000
------------
Total Short-Term Investments
(cost $626,847) 626,817
------------
Total Investments in Securities
(Cost $224,977,278)* 100.19% 235,248,037
Other Assets and
Liabilities-Net -0.19% (455,002)
------- ------------
Net Assets 100.00% $234,793,035
======= ============
----------
@ Non-income producing security
@@ Foreign Issuer
(1) This security has been segregated as collateral for futures contracts.
* Cost for federal income tax purposes is $225,005,811. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 31,212,105
Gross Unrealized Depreciation (21,596,696)
------------
Net Unrealized Appreciation $ 9,615,409
============
See Accompanying Notes to Financial Statements
26
<PAGE>
-------
Pilgrim
Funds
-------
TAX INFORMATION (Unaudited)
--------------------------------------------------------------------------------
Dividends paid during the fiscal year ended October 31, 2000 were as follows:
Fund Name Type Per Share Amount
--------- ---- ----------------
Growth + Value Fund
All Classes STCG $ 1.7419
All Classes LTCG $ 0.7190
--------
$ 2.4609
========
Research Enhanced Index Fund
All Classes STCG $ 0.1364
All Classes LTCG $ 0.0122
--------
$ 0.1486
========
----------
STCG -- Short-term capital gain
LTCG -- Long-term capital gain
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their Investments in the Funds. In January 2001,
shareholders, excluding corporate shareholders, will receive an IRS Form 1099
DIV regarding the federal tax status of the dividends and distributions received
by them in calendar 2000.
27
<PAGE>
INVESTMENT MANAGER
ING Pilgrim Investments, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Pilgrim Group, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
CUSTODIAN
State Street Bank & Trust
One Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1670 Broadway, Suite1000
Denver, Colorado 80202
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling ING Pilgrim Securities, Inc.
Distributor at 1-800-334-3444. Please read the prospectus carefully before you
invest or send money.
MAYANQ103100-122900
