PILGRIM(R)
---------------------------
FUNDS FOR SERIOUS INVESTORS
SEMI-ANNUAL REPORT
Pilgrim Variable Products Trust
June 30, 2000
U.S. EQUITY PORTFOLIOS
MagnaCap
Research Enhanced Index
Growth Opportunities
MidCap Opportunities
Growth + Value
Small Cap Opportunities
INTERNATIONAL EQUITY PORTFOLIO
International Value
INCOME PORTFOLIO
High Yield Bond
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Pilgrim
Funds
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TABLE OF CONTENTS
Chairman's Message ........................................................ 1
Portfolio Managers' Reports:
U.S. Equity Portfolios ............................................... 2
International Equity Portfolio ....................................... 14
Income Portfolio ..................................................... 16
Index Descriptions ........................................................ 18
Statements of Assets and Liabilities ...................................... 19
Statements of Operations .................................................. 20
Statements of Changes in Net Assets ....................................... 22
Financial Highlights ...................................................... 25
Notes to Financial Statements ............................................. 33
Portfolios of Investments ................................................. 39
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Pilgrim
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CHAIRMAN'S MESSAGE
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Dear Shareholder:
We are pleased to present the Semi-Annual Report for the Pilgrim Variable
Products Trust (formerly Northstar Galaxy Trust). Effective April 30, 2000, the
Trust opened three new Portfolios for investment, Pilgrim VP MagnaCap Portfolio,
Pilgrim VP Growth Opportunities Portfolio and Pilgrim VP MidCap Opportunities
Portfolio, all managed by seasoned investment professionals at Pilgrim
Investments, Inc. Additionally, Emerging Growth Portfolio changed its name to
SmallCap Opportunities Portfolio.
On May 1, 2000, ReliaStar Financial Corp., the indirect parent company of
Pilgrim Investments, Inc., Adviser to the Portfolios, entered into an agreement
under which it will be acquired by ING Groep N.V. The closing of the acquisition
is expected to occur during the third quarter of 2000 contingent upon
shareholder, Director/Trustee, and regulatory approval.
On October 29, 1999, ReliaStar Financial Corp., the indirect parent company of
Northstar Investment Management Corporation ("Northstar"), acquired Pilgrim
Capital Corporation and its subsidiaries. In conjunction with the acquisition
Northstar, the Adviser to the Trust, changed its name to Pilgrim Advisors, Inc.
On April 30, 2000, Pilgrim Advisors, Inc. merged into Pilgrim Investments, Inc.
At 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,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim Group, Inc.
July 31, 2000
1
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U.S. Equity
Portfolio
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Portfolio
MAGNACAP PORTFOLIO Managers' Report
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Portfolio Management Team: Howard N. Kornblue, Senior Vice President and Senior
Portfolio Manager; G. David Underwood, CFA, Vice President and Director of
Research; Robert M. Kloss, Equity Analyst.
Goal: The MagnaCap Portfolio seeks growth of capital, with dividend income as a
secondary consideration. As a disciplined investment philosophy portfolio,
MagnaCap invests in a very select group of companies that have been able to
sustain growth over a 10-year period. In selecting portfolio securities,
companies are generally assessed with reference to the following criteria as
ideal:
* A company must have paid or had the financial capability from its
operations to have paid a dividend in 8 out of the last 10 years.
* A company must have increased its dividend or had the financial capability
from its operations to have increased its dividend at least 100% over the
past 10 years.
* Dividend payout must be less than 65% of current earnings.
* Long-term debt should be no more than 25% of the company's total
capitalization, or a company's bonds must be rated at least A- or A-3.
* The current price should be in the lower half of the stock's price/earnings
ratio range for the past ten years, or the ratio of the price of the
company's stock at the time of purchase to its anticipated future earnings
must be an attractive value in relation to the average for its industry
peer group or that of the S&P 500 Composite Stock Price Index.
Market Overview: Stocks finished the second quarter with losses in all the major
indexes. The S&P 500 index finished the second quarter down 2.7%, while the Dow
Jones Industrial Average lost 4.0%. After reaching a record on March 10 of
5,049, the Nasdaq Composite Index fell 37% to 3,165 on May 23. Ultimately, the
technology-heavy composite finished at 3,966, down 607, or 13.3%, for the second
quarter. The index had a particularly strong June, increasing 16.6% - the fifth
best month in Nasdaq" history. Leading the way higher in the broader market in
the second quarter were drug stocks, and consumer and food stocks. Merger
agreements struck by Bestfoods and Nabisco helped bolster the whole food sector.
The vastly different picture on the technology side of the market also
encompassed telecommunications stocks, with AT&T, Ericsson and Motorola coming
in as some of the biggest decliners. The market focused on earnings. One of the
biggest drivers of the stock market has been corporate earnings
preannouncements. Surprises on the profit front have roiled whole sectors of the
stock market. On June 28 the Federal Reserve decided to hold the line on
interest rates, choosing to pause after raising them six times since last June.
The central bank's decision came amid signs the U.S. economy is slowing. As a
result, the federal funds rate remained at 6.5%, the highest level in nine
years. Over the last year, the Federal Reserve has been boosting interest rates
in an effort to slow the economy and keep inflation from escalating. They are
seeking to achieve a "soft landing" in which growth slows enough to keep
inflation under control but not so much that it threatens the country's record
9.5 year economic expansion.
Performance: For the period from May 8, 2000 (commence-ment of operations)
through June 30, 2000, the Portfolio's shares, excluding any charges, declined
0.20% versus the S&P 500 Index which declined 0.72% for the same period.
Portfolio Specifics: The Portfolio has very explicit investment criteria which
normally determine the kinds of companies that qualify for inclusion in the
portfolio. Out of a universe of approximately 4,000 publicly traded companies,
and based upon both in-house and external research, we aim to select equities
which we believe will be most likely to exhibit a high degree of performance. At
the end of June 2000, the top industry groups were integrated oil, electronic
components-semiconductors, diversified manufacturing operations, medical
products, and life/health insurance. The top stock holdings were Chevron, AFLAC,
Intel, Best Buy, and American International Group.
Market Outlook: Going forward, we will continue to employ a "bottom-up" approach
to stock selection, drawing from the pool of companies that come closest to
meeting the Portfolio's strict investment criteria given market conditions, the
circumstances of the company and the sector within which it falls. The bull
market in U.S. stocks is in its ninth year. It has been firmly based on
extraordinary changes in the economy that have given us the longest economic
expansion in U.S. history. This bull market has been one of the best in U.S.
history and we believe it is likely to continue for several reasons. First, the
economic expansion that has propelled stock prices higher has been one of the
most durable. It has been accompanied by mild inflation, job creation and
high-quality profit growth. Second, the current economic and market cycles have
benefited from several long-term structural changes. This includes a notable
reduction in the government's budget deficit. There has also been a shift to a
more sophisticated, technology driven private sector that has spurred widespread
productivity gains, which offers new opportunities for growth and jobs. Most
bull markets end when stocks are overpriced. However, it has traditionally been
extremely difficult to identify the degree of overpricing at which any
particular bull market will end. We believe stock prices can continue to rise
selectively in 2000 in concert with improvements in corporate earnings and cash
flows. Accordingly, we intend to remain almost fully invested, selecting stocks
on the basis described at the beginning of this paragraph.
2
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Portfolio
Managers' Report MAGNACAP PORTFOLIO
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Total Returns for the
Period Ended
June 30, 2000
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Since Inception
5/8/00
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MagnaCap Portfolio -0.20%
S&P 500 Index -0.72%
Based on a $10,000 initial investment, the table above illustrates the total
return of MagnaCap Portfolio against the S&P 500 Index. The Index is unmanaged
and has an inherent performance advantage over the Portfolio since it has no
cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Portfolio's
performance is shown without the imposition of any expenses or charges which
are, or may be, imposed under your annuity contract or life insurance policy.
Total returns would have been lower if such expenses or charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 18.
3
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U.S. Equity
Portfolio
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Portfolio
RESEARCH ENHANCED INDEX PORTFOLIO Managers' Report
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Portfolio Management Team: Timothy Devlin, Vice President and Portfolio Manager;
Bernard Kroll, Managing Director, and Portfolio Manager.
Goal: The Research Enhanced Index Portfolio 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 U.S. Equity market cycled erratically during the quarter
between growth stocks and value stocks based on the emerging economic data. Weak
data lead to powerful rallies in technology and other growth stocks. Data
reflecting a strong economy caused a surge in lower priced value stocks. While
value stocks outperformed dramatically at the beginning of the quarter, growth
came back strong in June to lead the quarter (Russell 1000 Growth -2.7% vs.
Russell 1000 Value -4.69%). The markets reaction to the data flow is based
entirely on the impact the economy has on interest rates. The U.S. Federal
Reserve raised rates several times in the quarter and continues to monitor the
situation. Higher rates are just beginning to slow the economy somewhat which
will start to impact corporate earnings. Any disappointment in earnings at the
company level are being penalized heavily across all sectors. We believe that
the second quarter is evidence that the market is transitioning from the strong
momentum focus it had in 1999, to a more balanced environment.
Performance: For the six month period ended June 30, 2000, the Portfolio's
shares, excluding any charges, declined 1.67% versus a decline of 0.43% for the
S&P 500 Index for the same period.
Portfolio Specifics: The Portfolio's performance was positively impacted by
stock selection during the time period. Stock selection within the hardware and
semi-conductor sectors added to the portfolio's performance. The Portfolio held
an underweight position in Qualcomm Inc. As the company announced a weakening in
chip sales, and the future of its third generation CDMA wireless sales also
looked less positive, the net effect of this holding was a positive contribution
to the portfolio's performance.
Overall, the pharmaceuticals and capital markets sectors moved ahead as
investors continued their rotation out of "new economy" stocks. As a
consequence, the software and services, telecommunications and technology
sectors fell. While the pharmaceuticals sector posted a positive return of
+3.68% for the six month period, and capital markets also contributed to the
overall performance of the Portfolio, holdings such as Oracle and Microsoft
pulled down performance within the portfolio as the latter was roiled with
detailed announcements of Judge Jackson's ruling against the company in the
lengthy anti-trust suit.
Individual security selection contributed to the Portfolio's overall performance
across the first two quarters. The Portfolio ended the period with an overweight
position in Intel, which posted a +47.79% total return for the six months ended
June 30, 2000. Merrill Lynch led the Capital Markets sector with a +38.86% gain
for the same period.
Market Outlook: We believe that the second quarter is evidence that the market
is transitioning from the strong momentum focus it had in 1999, to a more
balanced environment. We predict that the Fed will continue to closely monitor
the economy and may tighten policy again in the second half of the year. It
appears that the economy will continue to slow a little as evidenced by the
cooling of the overheated rate of late 1999 and early 2000. As always, we will
remain sector and factor neutral relative to the benchmark and continue to focus
solely on stock selection.
4
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Portfolio
Managers' Report RESEARCH ENHANCED INDEX PORTFOLIO
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Average Annual Total Returns for
the Periods Ended June 30, 2000
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Since Inception
1 Year 5 Year 5/6/94
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Research Enhanced Index Portfolio 3.56% 5.58% 6.39%
Index Return(1) 7.24% 7.62% 8.15%(2)
The Portfolio commenced operations on May 6, 1994 as the Northstar Multi-Sector
Bond Fund with the investment objective of maximizing current income consistent
with the preservation of capital. Effective April 30, 1999, the Portfolio
changed its name to the Research Enhanced Index Portfolio and changed its
investment objective and strategies to invest primarily in equity securities of
large companies that make up the S&P 500 Index. Accordingly, beginning April 30,
1999, the benchmark index for the Portfolio has been changed from the Lehman
Government/Corporate Bond Index to the S&P 500 Index.
Based on a $10,000 initial investment, the table above illustrates the total
return of the Research Enhanced Index Portfolio against the combined S&P 500
Index and the Lehman Government/Corporate Bond Index as discussed above. The
Indices are unmanaged and have an inherent performance advantage over the
Portfolio since they have no cash in their portfolios, impose no sales charges
and incur no operating expenses. An investor cannot invest directly in an index.
The Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Total returns reflect the fact that the Investment Adviser waived certain fees
or expenses without which total return results would have been lower.
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) The Index Return showing the 1 year, 5 year and since inception average
annual total returns is a calculation that reflects the Lehman
Government/Corporate Bond Index for the period May 6, 1994 to April 30,
1999 and the S&P 500 Index for the period May 1, 1999 to June 30, 2000.
(2) Since inception return from 5/1/94.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 18.
5
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U.S. Equity
Portfolio
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Portfolio
GROWTH OPPORTUNITIES PORTFOLIO Manager's Report
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Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager.
Goal: The Growth Opportunities Portfolio seeks long-term growth of capital by
investing primarily in common stock of U.S. companies that the portfolio manager
feels have above average prospects for growth.
Market Overview: The first half of 2000 was a particularly difficult time to
navigate the financial markets, as volatility reached all-time highs for all
major stock indices. Stock performance varied greatly across economic sectors,
as well as across small, mid, and large cap equities. All of the major indices
reached record highs in the first three months of the year, but they went
through a quick, sharp correction early in the second quarter. Bonds were just
as erratic as the stock market, as investors struggled to analyze the
conflicting influences of the Federal Reserve, the massive repurchase of US
treasury debt, and the highest level of oil prices in a decade. However, the
overriding theme was the Federal Reserve acting to curb the continued strong
growth of the US economy by moving short term interest rates higher.
In the first six months of the year, technology and telecommunications shares
drove the market volatility. After recording spectacular gains in January and
February, these "new economy" stocks corrected quickly as investors sought
protection from a slowing economy and an aggressive Federal Reserve. In this
environment, healthcare stocks provided an excellent defensive investment, as
the managed care and pharmaceutical sectors outperformed the market.
Biotechnology was more volatile than the rest of the healthcare sector, but
these stocks staged a significant rally over the final six weeks of the quarter.
At the same time, energy and utilities provided support to a market that has
become biased against high-growth, high-beta stocks.
Despite the record levels achieved at the outset of the year, 2000 has been a
difficult time for investors. All of the major large cap benchmarks are in
negative territory for the year, with the Dow Jones Industrials having the worst
performance, dropping 9.13% through June. After reaching another record in
March, the NASDAQ Composite fell into negative territory and has now lost 2.54%
in 2000, while the S&P 500 has fallen 0.42%. However, small and mid cap stocks
have been the best performers for the year, with the Russell 2000 Index gaining
3.04% and the S&P Midcap Index jumping 8.98%.
Performance: For the period May 3, 2000 commencement of operations, through June
30, 2000 the Portfolio's shares, excluding any charges, provided a total return
of 7.60%, versus a decline of 0.72% for the S&P 500 Index for the same period.
Portfolio Specifics: The Portfolio commenced operations on April 30, 2000. A
significant stake was built up in technology and telecommunications stocks,
which helped drive performance, with diversification provided by healthy
weightings in themes such as "Life Sciences Revolution" and "Re-Energizing
America."
Some of the individual stocks that were significant contributors to performance
during the period were Broadcom, Brocade Communications, Redback Networks, and
Sepracor.
Market Outlook: We expect that the Federal Reserve's seven rate increases will
slow the US economy, creating a more challenging backdrop for investors in the
remainder of 2000. The market has already started to broaden from the
technology- and telecommunications-driven market of late 1999 and the first
quarter of this year. However, this broadening will create a "market of stocks"
as opposed to a "stock market," where company performance will vary
significantly within specific industries. Competitive positioning and business
strategies will differentiate companies, as they deal with secular changes such
as globalization and the Internet.
Companies will not be treated equally in the slowing US economy, and the stock
market will do the same, creating significant opportunities for active portfolio
managers to outperform their benchmarks. The ability to identify companies with
consistent earnings growth will be essential to steering through the current
economic environment. By blending bottoms-up research and a top-down thematic
approach, we believe that we will be able to identify stocks that will flourish
in the changing economy. At the same time, we will continue to seek to exploit
the market volatility to our investors' advantage, using weakness to accumulate
or add to positions opportunistically.
6
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Portfolio
Manager's Report GROWTH OPPORTUNITIES PORTFOLIO
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Total Returns for
Period Ended
June 30, 2000
---------------
Since Inception
5/3/00
---------------
Growth Opportunities Portfolio 7.60%
S&P 500 Index -0.72%
Based on a $10,000 initial investment, the table above illustrates the total
return of Growth Opportunities Portfolio against the S&P 500 Index. The Index is
unmanaged and has an inherent performance advantage over the Portfolio since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Portfolio's
performance is shown without the imposition of any expenses or charges which
are, or may be, imposed under your annuity contract or life insurance policy.
Total returns would have been lower if such expenses or charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. The Portfolio invests in smaller companies which may be
more susceptible to price swings and less liquid than larger companies. The
Portfolio may invest in IPO's which may significantly impact performance.
See accompanying index descriptions on page 18.
7
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U.S. Equity
Portfolio
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Portfolio
MIDCAP OPPORTUNITIES PORTFOLIO Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager.
Goal: The MidCap Opportunities Portfolio seeks long-term capital appreciation by
investing at least 65% of its total assets in common stocks of mid-sized U.S.
companies that the portfolio manager feels have above average prospects for
growth.
Market Overview: The first half of 2000 was a particularly difficult time to
navigate the financial markets, as volatility reached all-time highs for all
major stock indices. Stock performance varied greatly across economic sectors,
as well as across small, mid, and large cap equities. All of the major indices
reached record highs in the first three months of the year, but they went
through a quick, sharp correction early in the second quarter. Bonds were just
as erratic as the stock market, as investors struggled to analyze the
conflicting influences of the Federal Reserve, the massive repurchase of US
treasury debt, and the highest level of oil prices in a decade. However, the
overriding theme was the Federal Reserve acting to curb the continued strong
growth of the US economy by moving short term interest rates higher.
In the first six months of the year, technology and telecommunications shares
drove the market volatility. After recording spectacular gains in January and
February, these "new economy" stocks corrected quickly as investors sought
protection from a slowing economy and an aggressive Federal Reserve. In this
environment, healthcare stocks provided an excellent defensive investment, as
the managed care and pharmaceutical sectors outperformed the market.
Biotechnology was more volatile than the rest of the healthcare sector, but
these stocks staged a significant rally over the final six weeks of the quarter.
At the same time, energy and utilities provided support to a market that has
become biased against high-growth, high-beta stocks.
Despite the record levels achieved at the outset of the year, 2000 has been a
difficult time for investors. All of the major large cap benchmarks are in
negative territory for the year, with the Dow Jones Industrials having the worst
performance, dropping 9.13% through June. After reaching another record in
March, the NASDAQ Composite fell into negative territory and has now lost 2.54%
in 2000, while the S&P 500 has fallen 0.42%. However, small and mid cap stocks
have been the best performers for the year, with the Russell 2000 Index gaining
3.04% and the S&P Midcap Index jumping 8.98%.
Performance: For the period from May 5, commence-ment of operations, through
June 30, 2000 the Portfolio's shares , exluding any charges, provided a total
return of 1.80%, versus 0.28% for the S&P Midcap 400 Index for the same period.
Portfolio Specifics: The Portfolio commenced operations on April 30, 2000. A
significant stake was built up in technology and telecommunications stocks,
which helped drive performance, with diversification provided by healthy
weightings in themes such as "Life Sciences Revolution" and "Re-Energizing
America."
Some of the individual stocks that were significant contributors to performance
during the period were Brocade Communications, Celgene, Power-One, and Siebel
Systems.
Market Outlook: We expect that the Federal Reserve's seven rate increases will
slow the US economy, creating a more challenging backdrop for investors in the
remainder of 2000. The market has already started to broaden from the
technology- and telecommunications-driven market of late 1999 and the first
quarter of this year. However, this broadening will create a "market of stocks"
as opposed to a "stock market," where company performance will vary
significantly within specific industries. Competitive positioning and business
strategies will differentiate companies, as they deal with secular changes such
as globalization and the Internet.
Companies will not be treated equally in the slowing US economy, and the stock
market will do the same, creating significant opportunities for active portfolio
managers to outperform their benchmarks. The ability to identify companies with
consistent earnings growth will be essential to steering through the current
economic environment. By blending bottoms-up research and a top-down thematic
approach, we believe that we will be able to identify stocks that will flourish
in the changing economy. At the same time, we will continue to seek to exploit
the market volatility to our investors' advantage, using weakness to accumulate
or add to positions opportunistically.
8
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Portfolio
Manager's Report MID CAP OPPORTUNITIES PORTFOLIO
--------------------------------------------------------------------------------
Total Returns for
Period Ended
June 30, 2000
---------------
Since Inception
5/5/00
---------------
MidCap Opportunities Portfolio 1.80%
S&P MidCap 400 Index 0.28%
Based on a $10,000 initial investment, the table above illustrates the total
return of Pilgrim MidCap Opportunities Portfolio against the S&P MidCap 400
Index. The Index is unmanaged and has an inherent performance advantage over the
Portfolio since it has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
The Portfolio's performance is shown without the imposition of any expenses
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
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 Portfolio.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Portfolio
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.
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 companies may entail greater price variability than investing
in stocks of larger companies. The Portfolio may invest in IPO's which may
significantly impact performance. Securities of mid-sized companies may be more
susceptible to price swings than investing in larger companies.
See accompanying index descriptions on page 18.
9
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U.S. Equity
Portfolio
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Portfolio
GROWTH + VALUE PORTFOLIO Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Louis Navellier, Chief Investment Officer and President of
Navellier Fund Management Inc.
Goal: The Growth + Value Portfolio seeks to provide long-term capital
appreciation by investing in equity securities of fast growing companies
utilizing quantitative analysis.
Market Overview: The second quarter of 2000 was marked by record volatility for
small and mid-sized company stocks, including a significant correction early in
the quarter and a very selective rally in June. During the second quarter the
Russell 2000 fell -3.78%, the S&P 500 also dropped -2.66%, while the tech heavy
NASDAQ Composite fell -13.27%.
Six consecutive rate hikes by the Federal Reserve Board over the past year and a
half took their toll in the second quarter. Interest rate fears drove investors
toward more conservative positions for much of the quarter. The second quarter
of 2000 started out where the first quarter ended, with large company stocks and
value style investing outperforming growth strategies during April and May.
Small company stocks and growth style investing outperformed value strategies in
June.
An important trend that developed saw investors actually paying attention to
company profitability. Throughout 1999 and the first two months of 2000,
unprofitable companies enjoyed a wide performance margin over profitable
companies. Stocks that lost money actually outperformed those that turned a
profit by over 35% (year-to-date) through the market peak of March 10th. Since
then, the profitable companies have outperformed the unprofitable ones by more
than 30%.
Performance: For the six month period ended June 30, 2000 the Portfolio's
shares, excluding any charges, provided a total return of 18.41% compared to the
Russell 2000 Index which rose 3.04% for the same period.
Portfolio Specifics: The Portfolio was down -6.64%, during the second quarter
compared to the Russell 2000 Index, which was down -3.78%. The Portfolio
actually recovered significantly in the final month of the quarter, posting an
11.85% return for the month of June.
The Portfolio remained concentrated in rapidly growing technology stocks.
Several oil stocks were added to the portfolio to broaden its diversification.
The top performing stocks for the second quarter of this year included SDL Inc.,
MRV Communications, Digital Lightwave, Burr Brown and Mercury Interactive. Among
the under-performing stocks were: Harmonic Inc., Avx Corp., Gemstar
International, Qlogic Corp and Sandisk Corp.
There were only minor changes to the Portfolio over the quarter as our
quantitative stock selection screens continued to find the most attractive
stocks in the small and mid cap growth arena. The number of holdings in the
Portfolio was increased to broaden diversification and thus lessen the impact of
increased market volatility. The model for the Portfolio continues to be focused
on earnings driven strategies such as earnings growth, earnings surprises and
IBES earnings revisions.
Market Outlook: Due to the recent volatility, the stock market is now obsessed
with fundamentals. Stocks without earnings are being punished severely. Not only
is the stock market demanding strong earnings growth from stocks, but because
the U.S. economy is slowing, the stock market is also seeking out those stocks
that will have consistent, predictable growth in the upcoming months. The second
quarter earnings announcements will likely be the last time that corporate
earnings grow at a 20% annual pace. By the time the third quarter earnings are
announced in October, corporate earnings growth will likely slow to around a 15%
annual pace. Fortunately, the Portfolio is concentrated in high operating margin
companies that are dominating their industry and should continue to have
predictable earnings growth. These stocks range from specialty semiconductor
chips to oil-related companies. So, despite the slowing U.S. economy, we believe
most of our stocks should not be impacted by the earnings slowdown later this
year.
10
<PAGE>
Portfolio
Manager's Report GROWTH + VALUE PORTFOLIO
--------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended June 30, 2000
-----------------------------------------
Since Inception
1 Year 5 Year 5/6/94
------ ------ ------
Growth + Value Portfolio 76.90% 32.86% 29.98%
Russell 2000 Index 14.32% 14.27% 13.93%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of Growth + Value Portfolio against the Russell 2000 Index. The Index is
unmanaged and has an inherent performance advantage over the Portfolio since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Portfolio's
performance is shown without the imposition of any expenses or charges which
are, or may be, imposed under your annuity contract or life insurance policy.
Total returns would have been lower if such expenses or charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. The Portfolio invests in smaller companies which may be
more susceptible to price swings and less liquid than larger companies.
----------
(1) Since inception performance for Index is shown from 5/1/94.
See accompanying index descriptions on page 18.
11
<PAGE>
-----------
U.S. Equity
Portfolio
-----------
SMALLCAP OPPORTUNITIES PORTFOLIO Portfolio
(FORMERLY EMERGING GROWTH PORTFOLIO) Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager
Goal: The SmallCap Opportunities Portfolio seeks capital appreciation by
investing 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.
Market Overview: The first half of 2000 was a particularly difficult time to
navigate the financial markets, as volatility reached all-time highs for all
major stock indices. Stock performance varied greatly across economic sectors,
as well as across small, mid, and large cap equities. All of the major indices
reached record highs in the first three months of the year, but they went
through a quick, sharp correction early in the second quarter. Bonds were just
as erratic as the stock market, as investors struggled to analyze the
conflicting influences of the Federal Reserve, the massive repurchase of US
treasury debt, and the highest level of oil prices in a decade. However, the
overriding theme was the Federal Reserve acting to curb the continued strong
growth of the US economy by moving short term interest rates higher.
In the first six months of the year, technology and telecommunications shares
drove the market volatility. After recording spectacular gains in January and
February, these "new economy" stocks corrected quickly as investors sought
protection from a slowing economy and an aggressive Federal Reserve. In this
environment, healthcare stocks provided an excellent defensive investment, as
the managed care and pharmaceutical sectors outperformed the market.
Biotechnology was more volatile than the rest of the healthcare sector, but
these stocks staged a significant rally over the final six weeks of the quarter.
At the same time, energy and utilities provided support to a market that has
become biased against high-growth, high-beta stocks.
Despite the record levels achieved at the outset of the year, 2000 has been a
difficult time for investors. All of the major large cap benchmarks are in
negative territory for the year, with the Dow Jones Industrials having the worst
performance, dropping 9.13% through June. After reaching another record in
March, the NASDAQ Composite fell into negative territory and has now lost 2.54%
in 2000, while the S&P 500 has fallen 0.43%. However, small and mid cap stocks
have been the best performers for the year, with the Russell 2000 Index gaining
3.04% and the S&P Midcap Index jumping 8.98%.
Performance: For the six month period ended June 30, 2000 the Portfolio's
shares, excluding any charges, provided a total return of 8.38%, compared to
3.04% for the Russell 2000 Index for the same period.
Portfolio Specifics: The Portfolio invests in high-growth, high-beta stocks,
which were highly volatile during the period, but it has undergone substantial
diversification to reflect our view that the economy would slow in response to
rising interest rates. While exposure to technology stocks remains significant,
it is clearly more selective, and the Portfolio has continued to increase
weightings in themes such as "Flourishing in the Managed Care Environment," the
"Life Sciences Revolution," and "Re-Energizing America." We also used the
volatility in the market to add to or enter into new positions in the portfolio.
Some of the individual stocks that were significant contributors to performance
in the first half of 2000 were Aurora Biosciences, Ditech Communications,
Micromuse, and Trimeris.
Market Outlook: We expect that the Federal Reserve's seven rate increases will
slow the US economy, creating a more challenging backdrop for investors in the
remainder of 2000. The market has already started to broaden from the
technology- and telecommunications-driven market of late 1999 and the first
quarter of this year. However, this broadening will create a "market of stocks"
as opposed to a "stock market," where company performance will vary
significantly within specific industries. Competitive positioning and business
strategies will differentiate companies, as they deal with secular changes such
as globalization and the Internet.
Companies will not be treated equally in the slowing US economy, and the stock
market will do the same, creating significant opportunities for active portfolio
managers to outperform their benchmarks. The ability to identify companies with
consistent earnings growth will be essential to steering through the current
economic environment. By blending bottoms-up research and a top-down thematic
approach, we believe that we will be able to identify stocks that will flourish
in the changing economy. At the same time, we will continue to seek to exploit
the market volatility to our investors' advantage, using weakness to accumulate
or add to positions opportunistically.
12
<PAGE>
Portfolio SMALLCAP OPPORTUNITIES PORTFOLIO
Manager's Report (FORMERLY EMERGING GROWTH PORTFOLIO)
--------------------------------------------------------------------------------
Average Annual Total Returns for the
Periods Ended June 30, 2000
-----------------------------------------
Since Inception
1 Year 5 Year 5/6/94
------ ------ ------
SmallCap Opportunities Portfolio 93.93% 33.93% 29.90%
Russell 2000 Index 14.32% 14.27% 13.93%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of SmallCap Opportunities Portfolio against the Russell 2000 Index. The
Index is unmanaged and has an inherent performance advantage over the Portfolio
since it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. The Portfolio invests in smaller companies which may be
more susceptible to price swings and less liquid than larger companies.
----------
(1) Since inception performance for Index is shown from 5/1/94.
See accompanying index descriptions on page 18.
13
<PAGE>
----------------
International
Equity Portfolio
----------------
Portfolio
INTERNATIONAL VALUE PORTFOLIO Managers' Report
--------------------------------------------------------------------------------
Portfolio Management Team: Managed by Multi-member Investment Committee of
Brandes Investment Partners, L.P.
Goal: The International Value Portfolio seeks to maximize long-term capital
appreciation by investing primarily in non-U.S. companies with market
capitalizations greater than $1 billion. The Fund may hold up to 25% of its
assets in companies with smaller market capitalizations.
Market Overview: Volatility characterized international stock markets during the
first six months of 2000. After a poor start in January, strong returns for
technology and telecom stocks lifted investor confidence later in the first
quarter. Still, the MSCI EAFE Index fell slightly in the first quarter, down
0.05%.
A tech-stock swoon in April and May dragged returns lower and contributed to the
EAFE Index shedding 3.90% in the second quarter. Year to date, the Index fell
3.95%. As tech stocks stumbled, investors turned their attention to undervalued,
long-overlooked sectors. As a result, value stocks posted solid gains in April
and May.
In addition to turbulent returns for technology stocks, rising interest rates,
currency weakness, and political uncertainties weighed on non-U.S. markets
during the period, creating a challenging environment.
The European Central Bank aggressively hiked short- term interest rates during
the period, including a 50- basis-point tightening in June. While investors
questioned the move at the time, reports released later in the month appeared to
confirm the validity of the Central Bank's action.
Similar to developed markets, fluctuating returns for technology stocks, rising
interest rates, currency woes, and political concerns weighed on emerging
markets during the period. While most emerging markets declined, there were
exceptions. Stocks in China generally delivered gains, propelled by strong
economic reports and passage of a key trade bill in the United States.
Performance: For the six month period ended June 30, 2000, the Portfolio's
shares excluding any charges, provided a total return of 2.56% compared to the
MSCI EAFE Index which declined 3.95% for the same period. Portfolio Specifics:
Returns benefited from investors' reevaluation of companies in undervalued
sectors such as insurance, beverages & tobacco, and energy sources. Among the
best-performing holdings during the period were Sun Life Financial (Canada --
insurance), Alcatel Alsthom (France -- electrical & electronics), and British
American Tobacco (United Kingdom -- beverages & tobacco).
Holdings in France were among the best performers while holdings in Singapore
generally delivered the weakest returns. Stock-specific declines within the
industrial components and banking industries proved the greatest detriments to
returns during the period.
As a result of our bottom-up approach and stock price fluctuations, our
allocations to Japan and Germany were decreased during the period, while our
exposure to the United Kingdom increased.
With respect to sectors, we reduced exposure to telecommunications and
electrical & electronics issues while increasing the weightings in the beverages
& tobacco, insurance, and food & household products industries. Market Outlook:
The Portfolio weathered a difficult environment and delivered gains when many
indices declined. While holdings in the telecommunications sector were among the
weakest-performing stocks during the second quarter, we continue to see a number
of favorable traits for select issues. We believe recent reluctance to investing
in emerging markets has created an exceptional opportunity for long- term
investors, given the attractive valuation levels compared to developed markets
and the long-term growth potential of the asset class.
14
<PAGE>
Portfolio
Managers' Report INTERNATIONAL VALUE PORTFOLIO
--------------------------------------------------------------------------------
Average Annual Total Returns for
the Periods Ended June 30, 2000
-------------------------------
Since Inception
1 Year 8/8/97
------ ------
International Value Portfolio 27.97% 23.04%
MSCI EAFE Index 17.44% 10.18%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of International Value Portfolio against the MSCI EAFE Index. The Index
is unmanaged and has an inherent performance advantage over the Portfolio since
it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): International investing does pose special risks,
including fluctuation and political risks not found in investments that are
solely domestic. Risks of foreign investing are generally intensified for
investments in emerging markets. The Portfolio invests in smaller companies
which may be more susceptible to price swings and less liquid than larger
companies.
----------
(1) Since inception performance for Index is shown from 8/1/97.
See accompanying index descriptions on page 18.
15
<PAGE>
---------
Income
Portfolio
---------
Portfolio
HIGH YIELD BOND PORTFOLIO Managers' Report
--------------------------------------------------------------------------------
Portfolio Management Team: Kevin Mathews, Senior Vice President & Senior
Portfolio Manager, Charles Ullerich, Vice President & Portfolio Manager
Goals: The High Yield Bond Portfolio seeks to provide high income consistent
with the preservation of capital by investing in a diversified group of high
yield securities.
Market Overview: The first half of 2000 was better than the second half of 1999,
but not by much. The negative returns of 1999 were succeeded by flat returns in
2000. High yield bond prices continued to decline in the first half of 2000 but,
when combined with coupon income, total returns on the sector came close to
zero.
Federal Open Market Committee (FOMC) policy continued the tightening bias of
1999 with further interest rate increases in the first half of 2000. After
raising the Fed Funds target rate from 5% to 5.5% in the second half of 1999,
the FOMC raised rates from 5.5% to 6.5% in the first half of 2000. The FOMC
continues to be concerned that the domestic economy is growing too quickly and
that the result might be increased inflation. Much of the price behavior in the
high yield market can be directly attributed to participants fear that the Fed
will over-tighten, pushing the economy into a recession.
Through the twelve month time period ending June 30, 2000, the ten-year Treasury
yield was basically unchanged yielding just below 6% at the beginning of the
period and just above 6% at the end of the period. High yield bonds, reflecting
the increased risk premium demanded by the market, rose in yield, falling in
price over the same time period. Spreads remained virtually unchanged from the
beginning to the end of the second half of 1999, but widened by 100 to 125 basis
points on most of the major high yield indexes in the first half of 2000. This
activity reflected the fear of recession as well as rising default rates,
declining recovery rates, and weak technical conditions resulting from mutual
fund net redemptions. Mutual fund outflows totaled in excess of $6 billion in
the first half of 2000, although trends have been more positive at the end of
the half with sales outpacing redemptions.
In the first half of 2000, trends from the second half of 1999 continued as
higher rated issues outperformed lower rated issues. In order of performance for
2000, Double-B issues ranked first followed by Single-B and at the bottom
Triple-C and lower rated issues. These results are to be expected with the
increased level of investor sensitivity to economic conditions. Concerns about
the market did not seem to significantly slow new issuance. First half 2000
issuance totaled $27 billion, down only marginally from the $35 billion total
from the second half of 1999. This is a positive sign as there is still buyer
demand for quality issues, even in a slow and cautious market.
Performance: For the six month period ended June 30, 2000, the Portfolio's
shares, excluding any charges, declined 2.84% compared to the Lehman Brothers
High Yield Index which declined 1.21% for the same period.
Portfolio Specifics: The Portfolio held overweighted positions in the
Communications sector, including the wireless, wireline, and internet
subsectors, which helped performance for the six months. Underperforming issues
in the Shipping and Restaurant sectors adversely impacted returns for the
period. Equally important has been the avoidance of sectors that have
significantly underperformed the market including Healthcare and Retail credits.
Portfolio cash levels have risen recently as we expect the market to provide
attractive buying opportunities in the latter part of the second half of 2000.
We will take the opportunity, early in the second half of 2000, to review our
Telecommunications, Cable Television, and Direct Broadcast Satellite exposures,
possibly looking for a reduction in weighting, and to consider sectors that have
dramatically underperformed the high yield market during the last 12-18 months
as possible buy candidates.
Credit quality has played a role in performance the last twelve months. Double-B
issues have significantly outperformed the market while Triple-C's have
underperformed. The Portfolio's average credit quality weighting of Single-B has
slightly helped the portfolio, providing a return close to the market averages.
Overall, the Portfolio's management feels the credit quality of the portfolio is
good and positioned for outperformance in the second half of 2000.
Market Outlook: Our outlook is cautious as we continue to witness an FOMC that
has a bias to tighten monetary policy. The danger of recession is real as the
Fed typically creates a soft-landing, or a slowing of economic
16
<PAGE>
Portfolio
Managers' Report HIGH YIELD BOND PORTFOLIO
--------------------------------------------------------------------------------
growth and inflation without a recession, about 50% of the time once they begin
tightening. When they create a recession, the results can be problematic for
high yield bonds. We have also taken note of the increasingly tough stance taken
by banks and other lenders on not being willing to waive convenant violations.
This causes high yield credits to get into trouble faster as there is less
forbearance on the part of senior bank lenders. Finally, the high yield market
itself is less forgiving. Quality names will snap back with the market, marginal
credits will eventually recover if investors wait, but weak issuers are given no
benefit of the doubt. Weak issues can not hide behind general market trends.
Given this, it becomes obvious it is a credit pickers market. Diligence in the
credit review and monitoring process has become key to maintaining returns above
the benchmark averages.
Average Annual Total Returns for
the Periods Ended June 30, 2000
------------------------------------
Since Inception
1 Year 5 Year 5/6/94
------- ------ ---------------
High Yield Bond Portfolio -6.82% 5.11% 5.56%
Lehman Brothers High Yield
Bond Index -1.02% 6.52% 7.56%(1)
Based on a $10,000 initial investment, the table above illustrates the total
return of High Yield Bond Portfolio against the Lehman Brothers High Yield Bond
Index. The Index is unmanaged and has an inherent performance advantage over the
Portfolio since it has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
The Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
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.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
High Yields reflect the higher credit risks associated with certain lower rated
securities in the portfolio and in some cases, the lower market price for those
instruments. International investing does pose special risks, including currency
fluctuation and political risks not found in investments that are soley
domestic. Risks of foreign investing are generally intensified for investments
in emerging markets.
----------
(1) Since inception performance for Index is shown from 5/1/94.
See accompanying index descriptions on page 18.
17
<PAGE>
INDEX DESCRIPTIONS
--------------------------------------------------------------------------------
The S&P 500 Index is a widely recognized unmanaged index of 500 common stocks.
The Lehman Government/Corporate Bond Index is an unmanaged index of government
bonds and corporate bonds rated Baa3 or better.
The Russell MidCap Growth Index is an unmanged index consisting of securities
with capitalizations between $450 million and $3.8 billion with greater than
average growth orientation.
The Russell 2000 Index is an unmanaged index that measures the performance of
2,000 small companies.
The NASDAQ Composite Index is an unmanaged index that measures all domestic and
non-U.S. based common stocks listed on the NASDAQ stock market. The index is
market-value weighted.
The S&P MidCap Index is an unmanaged index that measures the performance of 800
smaller companies.
The Dow Jones Industrial Average is an unmanaged index comprised of 30 stocks
that are major factors in their industries and widely held by individuals and
institutional investors.
The MSCI EAFE Index is an unmanaged index consisting of more than 1,400
securities in the U.S., Europe, Canada, Australia, New Zealand, and the Far
East. It is a generally accepted index for major overseas markets.
The MSCI Europe Index is an unmanaged index designed to track the broader MSCI
EMU benchmark containing stocks in EMU member countries.
The MSCI Japan Index is an unmanaged index that measures the perfomance of the
Japanese stock market.
The MSCI Emerging Markets Free (EMF) Index is an unmanaged index comprised of
companies representative of the market structure of 22 emerging countries in
Europe, Latin America and the Pacific Rim Basin.
The Lehman Brothers Aggregate Bond Index is an unmanaged index of fixed income
securities.
The Lehman Brothers High Yield Bond Index is an unmanaged index comprised of
non-investment grade bonds with maturities between seven to ten years.
The Merrill Lynch Triple-C/Double-C/Single-C Index, a sub-index of the Merrill
Lynch High Yield Index, is an unmanaged index which measures the performance of
non-investment grade U.S. domestic bonds.
The Merrill Lynch Single-B Index, a sub-index of the Merrill Lynch High Yield
Index, is an unmanaged index which measures the performance of non-investment
grade U.S. domestic bonds.
Investors cannot invest directly in an index.
18
<PAGE>
-------
Pilgrim
Funds
------
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Research
Enhanced Growth MidCap
MagnaCap Index Opportunities Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at value (cost
$137,956, $26,511,145, $1,168,516,
$255,068, $96,088,607, $84,760,289,
$22,349,998 and $13,392,679, respectively) $ 137,733 $ 28,088,785 $ 1,225,777 $ 263,710
Repurchase agreements -- 116,000 342,000 --
Cash 39,362 620 296,612 78,596
Foreign cash, at value (cost $0, $0, $0, $0,
$0, $0, $60,463 and $0, respectively) -- -- -- --
Receivable for investments sold -- 21,392 105,080 --
Receivable for shares of beneficial interest
sold -- 52,044 124,477 9,070
Dividends and interest receivable -- 26,664 80 31
Receivable for futures variation margin -- 2,525 -- --
Receivable due from affiliate 2,611 4,355 3,228 3,254
--------- ------------ ----------- ---------
Total Assets 179,706 28,312,385 2,097,254 354,661
--------- ------------ ----------- ---------
LIABILITIES:
Payable for investment securities purchased 30,004 58,006 478,547 2,685
Investment advisory fee payable 37 17,408 532 145
Payable for shares of beneficial interest
reacquired -- 5 -- --
Administrative service fees payable 5 2,063 71 19
Income distribution payable -- -- -- --
Accrued expenses 5,768 24,046 7,153 7,154
--------- ------------ ----------- ---------
Total Liabilities 35,814 101,528 486,303 10,003
--------- ------------ ----------- ---------
NET ASSETS $ 143,892 $ 28,210,857 $ 1,610,951 $ 344,658
========= ============ =========== =========
NET ASSETS CONSIST OF:
Paid in capital for shares of beneficial
interest, $0.01 par value outstanding
(unlimited shares authorized) $ 143,969 $ 28,014,402 $ 1,560,307 $ 340,056
Accumulated net investment income
(loss) 186 21,480 1,741 317
Accumulated net realized gain (loss) on
investments, foreign currency and
futures contracts -- (1,395,835) (8,358) (4,357)
Net unrealized appreciation
(depreciation) of investments, foreign
currency and futures contracts (263) 1,570,810 57,261 8,642
--------- ------------ ----------- ---------
Net Assets $ 143,892 $ 28,210,857 $ 1,610,951 $ 344,658
========= ============ =========== =========
Net Asset Value Per Share ($143,892/14,412
shares, $28,210,857/5,754,126 shares,
$1,610,951/149,686 shares,
$344,658/33,856 shares,
$136,172,335/3,827,953 shares,
$122,768,031/3,873,693 shares,
$27,918,868/1,853,353 shares,
$13,406,051/3,302,026, shares,
respectively) $ 9.98 $ 4.90 $ 10.76 $ 10.18
========= ============ =========== =========
Growth+ SmallCap International High Yield
Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at value (cost
$137,956, $26,511,145, $1,168,516,
$255,068, $96,088,607, $84,760,289,
$22,349,998 and $13,392,679, respectively) $ 127,725,728 $ 112,752,610 $25,503,956 $ 11,299,574
Repurchase agreements 8,056,000 11,592,000 2,649,000 2,403,000
Cash 578 753 831 555
Foreign cash, at value (cost $0, $0, $0, $0,
$0, $0, $60,463 and $0, respectively) -- -- 116,759 --
Receivable for investments sold 5,979,885 527,476 -- 17,156
Receivable for shares of beneficial interest
sold 279,430 191,890 6,958 4,844
Dividends and interest receivable 2,610 14,188 73,357 282,928
Receivable for futures variation margin -- -- -- --
Receivable due from affiliate 14,502 10,265 11,721 3,174
------------- ------------- ----------- ------------
Total Assets 142,058,733 125,089,182 28,362,582 14,011,231
------------- ------------- ----------- ------------
LIABILITIES:
Payable for investment securities purchased 5,778,878 2,189,534 -- 250,000
Investment advisory fee payable 83,812 71,194 22,085 8,415
Payable for shares of beneficial interest
reacquired 6,394 3,504 358,843 3,027
Administrative service fees payable 10,916 9,234 1,931 863
Income distribution payable -- -- -- 320,576
Accrued expenses 6,398 47,685 60,855 22,299
------------- ------------- ----------- ------------
Total Liabilities 5,886,398 2,321,151 443,714 605,180
------------- ------------- ----------- ------------
NET ASSETS $ 136,172,335 $ 122,768,031 $27,918,868 $ 13,406,051
============= ============= =========== ============
NET ASSETS CONSIST OF:
Paid in capital for shares of beneficial
interest, $0.01 par value outstanding
(unlimited shares authorized) $ 85,107,123 $ 85,935,314 $20,653,626 $ 17,519,042
Accumulated net investment income
(loss) (278,865) (138,998) 251,292 --
Accumulated net realized gain (loss) on
investments, foreign currency and
futures contracts 19,706,956 8,979,394 3,858,538 (2,019,886)
Net unrealized appreciation
(depreciation) of investments, foreign
currency and futures contracts 31,637,121 27,992,321 3,155,412 (2,093,105)
------------- ------------- ----------- ------------
Net Assets $ 136,172,335 $ 122,768,031 $27,918,868 $ 13,406,051
============= ============= =========== ============
Net Asset Value Per Share ($143,892/14,412
shares, $28,210,857/5,754,126 shares,
$1,610,951/149,686 shares,
$344,658/33,856 shares,
$136,172,335/3,827,953 shares,
$122,768,031/3,873,693 shares,
$27,918,868/1,853,353 shares,
$13,406,051/3,302,026, shares,
respectively) $ 35.57 $ 31.69 $ 15.06 $ 4.06
============= ============= =========== ============
</TABLE>
See Accompanying Notes to Financial Statements
19
<PAGE>
-------
Pilgrim
Funds
-------
STATEMENTS OF OPERATIONS for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Research
Enhanced Growth MidCap
MagnaCap Index Opportunities Opportunities
Portfolio(1) Portfolio Portfolio(2) Portfolio(3)
------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 178,225 $ 25 $ 32
Interest 246 9,237 2,434 503
Other -- 104 -- --
--------- --------- -------- -------
Total investment income 246 187,566 2,459 535
--------- --------- -------- -------
EXPENSES:
Investment advisory fees 50 104,412 598 181
Administrative service fees 7 13,923 80 24
Accounting and custodian fees 4,275 23,669 5,700 5,700
Printing and postage 570 4,177 570 570
Professional fees 684 3,526 684 684
Trustee fees 85 682 86 86
Miscellaneous 114 1,486 114 114
--------- --------- -------- -------
5,785 151,875 7,832 7,359
Less expenses reimbursed by investment advisor 5,725 25,346 7,114 7,141
--------- --------- -------- -------
Total expenses 60 126,529 718 218
--------- --------- -------- -------
Net investment income 186 61,037 1,741 317
--------- --------- -------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments and futures
contracts -- (457,720) (8,358) (4,357)
Net change in unrealized appreciation
(depreciation) of investments and futures
contracts (263) (163,937) 57,261 8,642
--------- --------- -------- -------
Net realized and unrealized gain (loss) from
investments and futures contracts (263) (621,657) 48,903 4,285
--------- --------- -------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (77) $(560,620) $ 50,644 $ 4,602
========= ========= ======== =======
</TABLE>
----------
(1) Portfolio commenced operations on May 8, 2000.
(2) Portfolio commenced operations on May 3, 2000.
(3) Portfolio commenced operations on May 5, 2000.
See Accompanying Notes to Financial Statements
20
<PAGE>
-------
Pilgrim
Funds
-------
STATEMENTS OF OPERATIONS for the six months ended June 30, 2000 (Unaudited)
(Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SmallCap International High Yield
Growth + Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of
$0, $0, $54,785 and $0, respectively) $ 24,126 $ 80,817 $ 388,818 $ 11,661
Interest 178,088 232,479 44,021 737,997
Other -- -- -- 15,000
------------ ----------- ----------- ---------
Total investment income 202,214 313,296 432,839 764,658
------------ ----------- ----------- ---------
EXPENSES:
Investment advisory fees 450,970 376,808 126,406 55,022
Administrative service fees 60,129 50,241 12,641 7,336
Accounting and custodian fees 30,065 60,289 37,922 11,004
Printing and postage 12,026 15,072 2,528 734
Professional fees 4,910 3,144 13,537 3,399
Trustee fees 122 122 291 122
Miscellaneous 661 517 298 401
------------ ----------- ----------- ---------
558,883 506,193 193,623 78,018
Less expenses reimbursed by investment advisor 77,804 53,899 67,181 19,283
------------ ----------- ----------- ---------
Total expenses 481,079 452,294 126,442 58,735
------------ ----------- ----------- ---------
Net investment income (loss) (278,865) (138,998) 306,397 705,923
------------ ----------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments
and futures contracts 18,653,049 6,132,601 4,038,832 (304,751)
Net realized loss on foreign currency -- -- (8,522) --
Net change in unrealized depreciation
of investments and futures contracts (2,146,091) (602,645) (2,737,226) (545,761)
Net change in unrealized depreciation
of foreign currency -- -- (376,034) --
------------ ----------- ----------- ---------
Net realized and unrealized gain (loss) from
investments, foreign currency and futures
contracts 16,506,958 5,529,956 917,050 (850,512)
------------ ----------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 16,228,093 $ 5,390,958 $ 1,223,447 $(144,589)
============ =========== =========== =========
</TABLE>
See Accompanying Notes to Financial Statements
21
<PAGE>
-------
Pilgrim
Funds
-------
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth MidCap
MagnaCap Research Enhanced Opportunities Opportunities
Portfolio Index Portfolio Portfolio Portfolio
---------------- ------------------------------ ---------------- ----------------
Period Six Months Year Period Period
Ended Ended Ended Ended Ended
June 30, 2000(1) June 30, 2000 Dec. 31, June 30, 2000(2) June 30, 2000(3)
(unaudited) (unaudited) 1999 (unaudited) (unaudited)
----------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 186 $ 61,037 $ 401,082 $ 1,741 $ 317
Net realized loss on investments and
futures contracts -- (451,503) (282,732) (8,358) (4,357)
Net realized loss on foreign currency -- (6,217) -- -- --
Net change in unrealized appreciation
(depreciation) of investments and
futures contracts (263) (163,937) 1,859,215 57,261 8,642
----------- ------------ ------------ ----------- ---------
Net increase (decrease) in net assets
resulting from operations (77) (560,620) 1,977,565 50,644 4,602
----------- ------------ ------------ ----------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (39,557) (390,975) -- --
Net realized gains from investments -- -- -- -- --
----------- ------------ ------------ ----------- ---------
Total distributions -- (39,557) (390,975) -- --
----------- ------------ ------------ ----------- ---------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 244,145 4,152,000 21,898,625 1,582,128 397,362
Net asset value of shares resulting
from dividend reinvestments -- 39,557 390,975 -- --
----------- ------------ ------------ ----------- ---------
244,145 4,191,557 22,289,600 1,582,128 397,362
Cost of shares redeemed (100,176) (5,120,018) (8,573,331) (21,821) (57,306)
----------- ------------ ------------ ----------- ---------
Net increase (decrease) in net assets
resulting from capital share
transactions 143,969 (928,461) 13,716,269 1,560,307 340,056
----------- ------------ ------------ ----------- ---------
Net increase (decrease) in net assets 143,892 (1,528,638) 15,302,859 1,610,951 344,658
NET ASSETS:
Beginning of period -- 29,739,495 14,436,636 -- --
----------- ------------ ------------ ----------- ---------
End of period $ 143,892 $ 28,210,857 $ 29,739,495 $ 1,610,951 $ 344,658
=========== ============ ============ =========== =========
Undistributed net investment income $ 186 $ 21,480 $ -- $ 1,741 $ 317
=========== ============ ============ =========== =========
</TABLE>
----------
(1) Fund commenced operations on May 8, 2000.
(2) Fund commenced operations on May 3, 2000.
(3) Fund commenced operations on May 5, 2000.
See Accompanying Notes to Financial Statements
22
<PAGE>
-------
Pilgrim
Funds
-------
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth + Value SmallCap Opportunities
Portfolio Portfolio
--------------------------------- --------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, 2000 Dec. 31, June 30, 2000 Dec. 31,
(unaudited) 1999 (unaudited) 1999
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment loss $ (278,865) $ (240,906) $ (138,998) $ (229,285)
Net realized gain on investments and futures
contracts 18,653,049 16,690,730 6,132,601 11,492,646
Net change in unrealized appreciation
(depreciation) of investments and futures
contracts (2,146,091) 23,531,739 (602,645) 25,300,570
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 16,228,093 39,981,563 5,390,958 36,563,931
------------- ------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- -- -- --
Net realized gains from investments -- (15,458,703) -- (9,516,224)
------------- ------------- ------------- -------------
Total distributions -- (15,458,703) -- (9,516,224)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 61,864,613 31,600,589 82,835,895 32,611,788
Net asset value of shares resulting from dividend
reinvestments -- 15,453,430 -- 9,516,224
------------- ------------- ------------- -------------
61,864,613 47,054,019 82,835,895 42,128,012
Cost of shares redeemed (31,831,842) (23,258,493) (36,990,489) (21,696,806)
------------- ------------- ------------- -------------
Net increase in net assets resulting from
capital share transactions 30,032,771 23,795,526 45,845,406 20,431,206
------------- ------------- ------------- -------------
Net increase in net assets 46,260,864 48,318,386 51,236,364 47,478,913
NET ASSETS:
Beginning of period 89,911,471 41,593,085 71,531,667 24,052,754
------------- ------------- ------------- -------------
End of period $ 136,172,335 $ 89,911,471 122,768,031 $ 71,531,667
============= ============= ============= =============
Accumulated net investment income (loss) $ (278,865) -- $ (138,998) --
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
23
<PAGE>
-------
Pilgrim
Funds
-------
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Value Portfolio High Yield Bond Portfolio
--------------------------------- ---------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, 2000 Dec. 31, June 30, 2000 Dec. 31,
(unaudited) 1999 (unaudited) 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 306,397 $ 303,959 $ 705,923 $ 1,821,208
Net realized gain (loss) on investments 4,038,832 1,964,021 (304,751) (1,702,623)
Net realized gain (loss) on foreign
currency (8,522) 50,118 -- (7,605)
Net change in unrealized appreciation
(depreciation) of investments (2,737,226) 5,728,854 (545,761) (713,261)
Net change in unrealized appreciation
(depreciation) of foreign currency (376,034) 2,001 -- --
------------- ------------- ------------ -------------
Net increase (decrease) in net assets
resulting from operations 1,223,447 8,048,953 (144,589) (602,281)
------------- ------------- ------------ -------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income (147,920) (315,993) (705,923) (1,821,208)
Net realized gains from investments -- (2,221,649) -- --
------------- ------------- ------------ -------------
Total distributions (147,920) (2,537,642) (705,923) (1,821,208)
------------- ------------- ------------ -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 56,616,545 73,659,755 6,204,011 10,216,238
Net asset value of shares resulting from
dividend reinvestments 147,920 2,537,642 406,979 1,799,111
------------- ------------- ------------ -------------
56,764,465 76,197,397 6,610,990 12,015,349
Cost of shares redeemed (53,972,024) (71,422,272) (8,796,803) (14,469,647)
------------- ------------- ------------ -------------
Net increase (decrease) in net assets
resulting from capital share transactions 2,792,441 4,775,125 (2,185,813) (2,454,298)
------------- ------------- ------------ -------------
Net increase (decrease) in net assets 3,867,968 10,286,436 (3,036,325) (4,877,787)
NET ASSETS:
Beginning of period 24,050,900 13,764,464 16,442,376 21,320,163
------------- ------------- ------------ -------------
End of period $ 27,918,868 $ 24,050,900 $ 13,406,051 $ 16,442,376
============= ============= ============ =============
Undistributed net investment income $ 251,292 $ 92,815 $ -- $ --
============= ============= ============ =============
</TABLE>
See Accompanying Notes to Financial Statements
24
<PAGE>
Financial
Highlights MAGNACAP PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
Period Ended
June 30, 2000(1)
(unaudited)
-----------
Operating performance:
Net asset value, beginning of the period $ 10.00
Net investment income $ 0.01
Net realized and unrealized gain (loss)
on investments $ (0.03)
Total from investment operations $ (0.02)
Dividends from net investment income $ --
Dividends from net realized gain on
investments sold $ --
Total distributions $ --
Net asset value, end of the period $ 9.98
Total return(2) % (0.20)
Ratios and supplemental data:
Net assets, end of the period (000s) $ 144
Ratio of expenses to average net assets
after reimbursement(3) % 0.90
Ratio of expenses to average net assets
prior to expense reimbursement(3) % 89.01
Ratio of net investment income (loss) to
average net assets(3) % 2.83
Portfolio turnover % --
----------
(1) The Portfolio commenced operations on May 8, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
25
<PAGE>
Financial
RESEARCH ENHANCED INDEX PORTFOLIO (UNAUDITED) Highlights
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 ------------------------------------------------
(unaudited) 1999(2) 1998 1997 1996 1995
----------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 4.99 4.83 5.14 5.25 5.14 4.85
Net investment income $ 0.01 0.11 0.36 0.40 0.41 0.42
Net realized and unrealized gain (loss)
on investments $ (0.09) 0.16 (0.31) (0.08) 0.21 0.29
Total from investment operations $ (0.08) 0.27 0.05 0.32 0.62 0.71
Dividends from net investment income $ (0.01) (0.11) (0.36) (0.40) (0.41) (0.42)
Dividends from net realized gain on
investments sold $ -- -- -- (0.03) (0.10) --
Total distributions $ (0.01) (0.11) (0.36) (0.43) (0.51) (0.42)
Net asset value, end of the period $ 4.90 4.99 4.83 5.14 5.25 5.14
Total return(1) % (1.67) 5.79 1.02 6.15 12.53 14.97
Ratios and supplemental data:
Net assets, end of the period (000s) $ 28,211 29,739 14,437 10,548 6,277 3,766
Ratio of expenses to average net assets
after reimbursement(3)(4) % 0.90 0.89 0.80 0.80 0.80 0.80
Ratio of expenses to average net assets
prior to expense reimbursement(4) % 1.11 1.26 1.29 1.36 1.68 2.06
Ratio of net investment income to
average net assets(4) % 0.44 1.89 7.53 8.31 8.38 8.52
Portfolio turnover % 22 123 93 162 121 83
</TABLE>
----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) Portfolio commenced operations as Northstar Multi-Sector Bond Fund.
Effective April 30, 1999 the Portfolio changed its name to Northstar
Research Enhanced Index Portfolio and changed its investment objective.
(3) As of April 30, 1999, the expense limit increased from 0.80% to 0.90%.
(4) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
26
<PAGE>
Financial
Highlights GROWTH OPPORTUNITIES PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
Period
Ended
June 30, 2000(1)
(unaudited)
-----------
Operating performance:
Net asset value, beginning of the period $ 10.00
Net investment income $ 0.01
Net realized and unrealized gain (loss)
on investments $ 0.75
Total from investment operations $ 0.76
Dividends from net investment income $ --
Dividends from net realized gain on
investments sold $ --
Total distributions $ --
Net asset value, end of the period $ 10.76
Total return(2) % 7.60
Ratios and supplemental data:
Net assets, end of the period (000s) $ 1,611
Ratio of expenses to average net assets
after reimbursement(3) % 0.90
Ratio of expenses to average net assets
prior to expense reimbursement(3) % 9.72
Ratio of net investment income (loss) to
average net assets(3) % 2.16
Portfolio turnover % 18
----------
(1) The Portfolio commenced operations on May 3, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
27
<PAGE>
Financial
MIDCAP OPPORTUNITIES PORTFOLIO (UNAUDITED) Highlights
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
Period Ended
June 30, 2000(1)
(unaudited)
-----------
Operating performance:
Net asset value, beginning of the period $ 10.00
Net investment income $ 0.01
Net realized and unrealized gain (loss)
on investments $ 0.17
Total from investment operations $ 0.18
Dividends from net investment income $ --
Dividends from net realized gain on
investments sold $ --
Total distributions $ --
Net asset value, end of the period $ 10.18
Total return(2) % 1.80
Ratios and supplemental data:
Net assets, end of the period (000s) $ 345
Ratio of expenses to average net assets
after reimbursement(3) % 0.90
Ratio of expenses to average net assets
prior to expense reimbursement(3) % 30.42
Ratio of net investment income (loss) to
average net assets(3) % 1.32
Portfolio turnover % 29
----------
(1) The Fund commenced operations on May 5, 2000.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
28
<PAGE>
Financial
Highlights GROWTH + VALUE PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 ------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 30.04 18.76 15.85 14.08 11.56 10.04
Net investment income (loss) $ (0.07) (0.08) (0.03) 0.09 0.08 0.20
Net realized and unrealized gain on
investments $ 5.60 17.74 3.09 1.95 2.57 2.27
Total from investment operations $ 5.53 17.66 3.06 2.04 2.65 2.47
Dividends from net investment income $ -- -- (0.01) (0.10) (0.09) (0.19)
Dividends from net realized gain on
investments sold $ -- (6.38) (0.14) (0.17) (0.04) (0.76)
Total distributions $ -- (6.38) (0.15) (0.27) (0.13) (0.95)
Net asset value, end of the period $ 35.57 30.04 18.76 15.85 14.08 11.56
Total return(1) % 18.41 94.98 19.32 14.66 22.99 24.78
Ratios and supplemental data:
Net assets, end of the period (000s) $ 136,172 89,911 41,593 32,156 15,564 3,813
Ratio of expenses to average net assets
after reimbursement(2) % 0.80 0.80 0.80 0.80 0.80 0.80
Ratio of expenses to average net assets
prior to expense reimbursement(2) % 0.93 0.97 1.02 1.09 1.70 2.04
Ratio of net investment income (loss) to
average net assets(2) % (0.46) (0.44) (0.17) 0.70 0.65 1.77
Portfolio turnover % 93 179 216 178 161 123
</TABLE>
----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
29
<PAGE>
Financial
SMALLCAP OPPORTUNITIES PORTFOLIO (UNAUDITED) Highlights
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 ------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 29.24 14.12 13.00 11.72 11.39 9.92
Net investment income (loss) $ (0.04) (0.09) 0.39 0.44 0.40 0.37
Net realized and unrealized gain on
investments $ 2.49 19.83 1.76 1.36 1.15 1.73
Total from investment operations $ 2.45 19.74 2.15 1.80 1.55 2.10
Dividends from net investment income $ -- -- (0.39) (0.44) (0.41) (0.37)
Dividends from net realized gain on
investments sold $ -- (4.62) (0.64) (0.08) (0.81) (0.26)
Total distributions $ -- (4.62) (1.03) (0.52) (1.22) (0.63)
Net asset value, end of the period $ 31.69 29.24 14.12 13.00 11.72 11.39
Total return(1) % 8.38 141.03 17.30 15.81 13.80 21.39
Ratios and supplemental data:
Net assets, end of the period (000s) $ 122,768 71,532 24,053 21,531 12,579 7,410
Ratio of expenses to average net assets
after reimbursement(3) % 0.90 0.90 0.82 0.80 0.80 0.80
Ratio of expenses to average net assets
prior to expense reimbursement(3) % 1.01 1.09 1.14 1.11 1.40 1.74
Ratio of net investment income (loss) to
average net assets(3) % (0.28) (0.64) 3.00 3.72 3.67 3.63
Portfolio turnover % 80 236 161 55 129 74
</TABLE>
----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) As of November 9, 1998, the expense limit increased from 0.80% to 0.90%.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
30
<PAGE>
Financial
Highlights INTERNATIONAL VALUE PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 --------------------------------
(unaudited) 1999 1998 1997(1)
----------- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 14.77 11.08 10.10 10.00
Net investment income $ 0.16 0.22 0.21 0.03
Net realized and unrealized gain on
investments $ 0.21 5.23 1.49 0.10
Total from investment operations $ 0.37 5.45 1.70 0.13
Dividends from net investment income $ (0.08) (0.24) (0.22) (0.03)
Dividends from net realized gain on
investments sold $ -- (1.52) (0.50) --
Total distributions $ (0.08) (1.76) (0.72) (0.03)
Net asset value, end of the period $ 15.06 14.77 11.08 10.10
Total return(2) % 2.56 50.18 16.93 1.30
Ratios and supplemental data:
Net assets, end of the period (000s) $ 27,919 24,051 13,764 5,937
Ratio of expenses to average net assets
after reimbursement(3)(4) % 1.00 1.00 0.84 0.80
Ratio of expenses to average net assets
prior to expense reimbursement(4) % 1.52 1.52 1.68 2.61
Ratio of net investment income (loss) to
average net assets(4) % 2.42 1.69 1.90 0.97
Portfolio turnover % 53 84 30 5
</TABLE>
----------
(1) The Fund commenced operation on August 8, 1997.
(2) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(3) As of November 9, 1998, the expenses limit increased from 0.80% to 1.00%
(4) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
31
<PAGE>
Financial
HIGH YIELD BOND PORTFOLIO (UNAUDITED) Highlights
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 -----------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of the period $ 4.30 4.87 5.30 5.27 5.04 4.69
Net investment income $ 0.12 0.44 0.42 0.40 0.45 0.50
Net realized and unrealized gain (loss)
on investments $ (0.24) (0.57) (0.42) 0.07 0.32 0.34
Total from investment operations $ (0.12) (0.13) 0.00 0.47 0.77 0.84
Dividends from net investment income $ (0.12) (0.44) (0.42) (0.40) (0.45) (0.49)
Dividends from net realized gain on
investments sold $ -- -- (0.01) (0.04) (0.09) --
Total distributions $ (0.12) (0.44) (0.43) (0.44) (0.54) (0.49)
Net asset value, end of the period $ 4.06 4.30 4.87 5.30 5.27 5.04
Total return(1) % (2.84) (2.98) (0.12) 9.00 15.75 18.55
Ratios and supplemental data:
Net assets, end of the period (000s) $ 13,406 16,442 21,320 12,606 6,619 4,773
Ratio of expenses to average net assets
after reimbursement(2) % 0.80 0.80 0.80 0.79 0.80 0.80
Ratio of expenses to average net assets
prior to expense reimbursement(2) % 1.07 1.11 1.23 1.35 1.73 2.11
Ratio of net investment income to
average net assets(2) % 9.63 9.19 8.92 8.44 8.72 10.61
Portfolio turnover % 60 85 135 152 159 157
</TABLE>
----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization. The Pilgrim Variable Products Trust (formerly Northstar Galaxy
Trust) is a business trust organized under the laws of the Commonwealth of
Massachusetts on December 17, 1993 and registered under the Investment Company
Act of 1940 as a diversified open-end management investment company. The names
of the eight investment series which comprise the Trust (the "Funds") and their
respective investment objectives are set forth below.
MagnaCap Portfolio ("MagnaCap Portfolio") is a diversified portfolio whose
investment objective is growth of capital through investments in common stock of
companies that have paid increasing dividends or have had the capability to pay
rising dividends from their operations.
Research Enhanced Index Portfolio ("Research Enhanced Index Portfolio") is a
diversified portfolio whose investment objective is capital appreciation by
investing primarily in large companies that make up the S&P 500 Index.
Growth Opportunities Portfolio ("Growth Opportunities Portfolio") is a
diversified portfolio which seeks long-term growth of capital through
investments in common stock of U.S. companies that the portfolio manager feels
have above average prospects for growth.
MidCap Opportunities Portfolio ("MidCap Opportunities Portfolio") is a
diversified portfolio which seeks long-term capital appreciation through
investments in common stock of mid-sized U.S. companies that the portfolio
managers feel have above average prospects for growth.
Growth + Value Portfolio ("Growth + Value Portfolio") is a diversified portfolio
with an investment objective of long-term growth of capital through investments
in common stocks and convertible securities that the Adviser believes provide
above average potential for capital appreciation.
SmallCap Opportunities Portfolio ("SmallCap Opportunities Portfolio") (formerly
Emerging Growth Portfolio) is a diversified portfolio with the investment
objective of long-term capital appreciation by investing primarily in small to
mid-sized companies that the Adviser feels have above average prospects for
growth.
International Value Portfolio ("International Value Portfolio") is a diversified
portfolio with the investment objective of long-term capital appreciation by
investing primarily in foreign companies with a market valuation greater than $1
billion, but may hold up to 25% of its assets in companies with smaller market
capitalization. Portfolio managers apply the technique of "value investing".
High Yield Bond Portfolio ("High Yield Bond Portfolio") is a diversified
portfolio whose investment objective is to seek high income consistent with the
preservation of capital by investing primarily in a diversified group of high
yield-high risk fixed income securities, convertible securities, securities
issued by U.S. companies in foreign currencies, and securities issued by foreign
governments and companies.
On October 29, 1999, ReliaStar Financial Corp., the indirect parent Company of
Northstar Investment Management Corporation ("Northstar"), acquired Pilgrim
Capital Corporation and its subsidiaries. In conjunction with the acquisition
Northstar, the Adviser to the Trust, changed its name to Pilgrim Advisors, Inc.
Pilgrim Advisors, Inc. merged into Pilgrim Investments, Inc. on April 30, 2000.
Security Valuation. Equity securities are valued daily at closing sales prices
reported on recognized securities exchanges or lacking any sales, at the last
available bid price. Prices of long-term debt securities are valued on the basis
of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid and asked prices for
such securities, or if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. 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
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
the Trustees of the Trust. At June 30, 2000, the High Yield Bond Portfolio
contained one security for which market quotations were not readily available
and which were fair valued pursuant to the Fund's procedures. The security had a
total value of $1,547 representing 0.01% of the Portfolio's net assets. The
books and records of the Funds are maintained in U.S. dollars. Securities quoted
in foreign currencies are translated into U.S. dollars based on the prevailing
exchange rates on that day. The Adviser uses independent pricing services to
price the Portfolios' securities.
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 the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
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 amortized to par at maturity; dividend income is recorded on the
ex-dividend dates.
Distribution to Shareholders. Dividends from net investment income are declared
and paid annually by the MagnaCap Portfolio, Growth Opportunities Portfolio,
MidCap Opportunities Portfolio, Growth + Value Portfolio, International Value
Portfolio and the SmallCap Opportunities Porfolio; and declared daily and paid
quarterly by the Research Enhanced Index Portfolio and the High Yield Bond
Portfolio. 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 Portfolios 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.
Foreign Currency. The Portfolios 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 foreign currency arise from changes in the value of assets and liabilities
including investments in securities at fiscal year end, resulting from changes
in the exchange rate.
Foreign Currency Forward Contracts. The Portfolios may enter into foreign
currency forward 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 Portfolios 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 Portfolios' 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 Portfolios may write (sell) and purchase put and call options. The
premium collected or paid by a Portfolio for the sale or purchase of a call or
put option is recorded as an investment and subsequently "marked
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
to market" to reflect the current market value of the option. If an option which
a Portfolio has sold or purchased expires on the stipulated expiration date, the
Portfolio realizes a gain or loss in the amount of the premium received or paid
for the option.
For written options, the Portfolio'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 security, or (3) the
Portfolio enters into a closing transaction. If the option is held until
expiration, the Portfolio 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 Portfolio 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 Portfolio. If the Portfolio enters
into a closing transaction, a gain or loss is recognized equal to the difference
between the premium received by the Portfolio from the counterparty and the
amount paid by the Portfolio on effecting a closing purchase transaction,
including brokerage commissions. As the writer of options, the Portfolio bears
the market risk of an unfavorable change in the price of the security underlying
the written option.
Futures contracts. The Portfolios may invest in futures contracts solely for the
purpose of hedging their existing portfolio securities, or securities that the
Portfolios 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 Portfolios' 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 Portfolios each day,
depending upon the daily fluctuations in the fair value of the underlying
instrument. The Portfolios recognize a gain or loss equal to the daily variation
margin. When the contract is closed, the Portfolios record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolios' basis in the contract.
Should market conditions move unexpectedly, the Portfolios may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates, and the underlying
hedged assets.
Repurchase Agreements. The Portfolios' 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 on the obligation to repurchase, the Portfolios 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 Portfolios may be delayed or
limited.
Federal Income Taxes. The Trust intends 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 respective shareholders. Therefore, no Federal
income tax provision or excise tax provision is required.
NOTE 2 -- INVESTMENT ADVISER AND ADMINISTRATOR
Pilgrim Investments, Inc. (the "Adviser") serves as each Portfolio's investment
adviser. The Adviser receives an investment advisory fee calculated at an annual
rate of 0.75% of average daily net assets from the MagnaCap Portfolio, Research
Enhanced Index Portfolio, Growth Opportunities Portfolio, MidCap Opportunities
Portfolio, Growth+Value Portfolio, SmallCap Opportunities Portfolio, and High
Yield Bond Portfolio. The Adviser receives an investment advisory fee calculated
at an annual rate of 1.00% of average daily net assets from the
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
International Value Portfolio. For the six months ended June 30, 2000, the
Adviser earned $1,114,447 in investment advisory fees. Pilgrim Group, Inc. (the
"Administrator") serves as each Portfolio's administrator. Each Portfolio pays
the Administrator a fee calculated at an annual rate of 0.10% of average daily
net assets. For the six months ended June 30, 2000, the Administrator earned
$144,381 in administrative fees.
The Adviser has voluntarily undertaken to limit the expenses of the Research
Enhanced Index Portfolio, Growth + Value Portfolio and High Yield Bond Portfolio
to 0.80% of the average daily net assets and to limit the expenses of the
MagnaCap Portfolio, Growth Opportunities Portfolio, MidCap Opportunities
Portfolio and SmallCap Opportunities to 0.90% and International Value Portfolio
to 1.00% of the average daily net assets. Effective April 30, 1999, the expense
limit for Research Enhanced Index Portfolio increased from 0.80% to 0.90%. For
the six months ended June 30, 2000, the Adviser has reimbursed the MagnaCap
Portfolio $5,725, Research Enhanced Portfolio $25,346, the Growth Opportunities
Portfolio $7,114, the MidCap Opportunities Portfolio $7,141, the Growth + Value
Portfolio $77,804, the SmallCap Opportunities Portfolio $53,899, International
Value Portfolio $67,181 and the High Yield Bond Portfolio $19,283.
Navellier Fund Management, Inc. ("Navellier"), a registered investment adviser,
serves as subadviser to the Growth + Value Portfolio pursuant to a Subadvisory
Agreement dated November 1, 1998, between the Adviser and Navellier. For its
services, Navellier receives, from the Adviser, an annual fee equal to 0.35% of
the average daily net assets. For the six months ended June 30, 2000, Navellier
received $1,695,964 in subadvisory fees from the Adviser.
Brandes Investment Partners, L.P. ("Brandes"), a registered investment adviser,
serves as a subadviser to the International Value Portfolio pursuant to a
Subadvisory Agreement dated July 24, 1997. For its services, Brandes receives,
from the Adviser, an annual fee equal to 0.50% of the average daily net asset
value of the Portfolio. Brandes has waived their advisory fee until the
Portfolio reaches $50 million in assets.
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), a registered investment
adviser, serves as subadviser
to the Research Enchanced Index Portfolio pursuant to a Subadvisory Agreement
dated April 30, 1999, between the Adviser and J.P. Morgan. For its services,
J.P. Morgan receives, from the Adviser, an annual fee equal to
0.20% of the average daily net assets. For the six months ended June 30, 2000,
J.P. Morgan received $251,818 in subadvisory fees from the Adviser.
NOTE 3 -- PURCHASES AND SALE OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the six months ended June 30, 2000 were
as follows:
Research Growth MidCap
MagnaCap Enhanced Index Opportunities Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Aggregate purchases $1,859,560 $6,181,312 $1,498,573 $286,966
Aggregate sales -- 6,403,635 226,023 24,422
SmallCap International High Yield
Growth + Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Aggregate purchases $140,888,294 $116,020,186 $14,693,042 $5,382,156
Aggregate sales 106,588,209 76,909,708 14,324,761 6,145,676
U.S. Government Securities not included above were as follows:
Research Growth MidCap
MagnaCap Enhanced Index Opportunities Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Aggregate purchases $ -- $ 49,648 $ -- $ --
Aggregate sales -- 100,006 -- --
SmallCap International High Yield
Growth + Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Aggregate purchases $ -- $ -- $ -- $ --
Aggregate sales -- -- -- --
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Portfolio for the six months ended June
30, 2000 were as follows:
Research Growth MidCap
MagnaCap Enhanced Index Opportunities Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Shares sold 24,440 852,034 151,842 39,567
Shares issued as
reinvestments of
dividends -- 7,756 -- --
Shares redeemed (10,028) (1,064,248) (2,156) (5,711)
------- ---------- ------- ------
Net increase
(decrease) 14,412 (204,458) 149,686 33,856
======= ========== ======= ======
SmallCap International High Yield
Growth + Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Shares sold 1,702,153 2,562,149 4,110,502 1,465,459
Shares issued as
reinvestments of
dividends -- -- 10,634 98,542
Shares redeemed (867,359) (1,135,082) (3,895,793) (2,084,310)
--------- ---------- ---------- ----------
Net increase
(decrease) 834,794 1,427,067 225,343 (520,309)
========= ========== ========== ==========
Transactions in capital shares of each Portfolio for the year ended December 31,
1999 were as follows:
<TABLE>
<CAPTION>
Research SmallCap International High Yield
Enhanced Index Growth + Value Opportunities Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares sold 4,702,239 1,238,595 1,483,157 5,601,652 2,153,188
Shares issued as
reinvestments of
dividends 83,063 527,241 337,694 179,821 391,809
Shares redeemed (1,818,177) (989,359) (1,077,481) (5,395,608) (3,096,755)
---------- --------- ---------- ---------- ----------
Net increase 2,967,125 776,477 743,370 385,865 (551,758)
========== ========= ========== ========== ==========
</TABLE>
NOTE 5 -- CREDIT RISK AND DEFAULTED SECURITIES
Although the Portfolios have a diversified portfolio, the High Yield Bond
Portfolio had 100% of its portfolio invested in lower rated and comparable
quality unrated high yield securities. Investments in higher yielding securities
are accompanied by a greater degree of credit risk and such lower rated
securities tend to be more sensitive to economic conditions than higher rated
securities. The risk of loss due to default by the issuer may be significantly
greater for the holders of high yielding securities, because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
At June 30, 2000, the High Yield Bond Portfolio held SA Telecommunications,
Inc., a security in default. For financial reporting purposes, it is each
Portfolio's accounting practice to discontinue accrual of income and provide an
estimate for probable losses due to unpaid interest income on defaulted
securities for the current reporting period.
NOTE 6 -- FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At December 31, 1999 the Research Enhanced Index Portfolio had capital loss
carryforwards of $331,465 and $527,558 expiring December 31, 2006 and 2007,
respectively. High Yield Bond Portfolio had capital loss carryforwards of $6,416
and $1,520,897 expiring December 31, 2006 and 2007, respectively. During 1999,
no prior year capital loss carryforward amount was utilized.
NOTE 7 -- SECURITY LOANS
The Portfolio 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, the Portfolio may bear risk of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Portfolios receive compensation for
lending its securities in the form of fees or all or a portion of the income
from investments of the collateral.
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
The Portfolios also continue to earn income on the securities loaned. At June
30, 2000, the Portfolios did not have any securities on loan.
NOTE 8 -- LETTER OF CREDIT
The Pilgrim Funds, Pilgrim Equity Trust, Pilgrim Variable Products 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.
During the six months ended June 30, 2000, the Funds did not have any loans
outstanding.
NOTE 9 -- FUTURES CONTRACTS
On June 30, 2000, the Research Enhanced Index Portfolio had $75,000 principal
amount of U.S. Treasury obligations pledged as collateral to cover margin
requirements for open futures contracts.
Open futures contracts at June 30, 2000, were as follows:
Number of Unrealized
Contract Contracts Month Commitment Depreciation
-------- --------- ----- ---------- ------------
September 00 S&P 500 Futures 1 June Buy 6,831
NOTE 10 -- SUBSEQUENT EVENTS
On May 1, 2000, ReliaStar Financial Corp. (NYSE:RLR), the indirect parent
company of Pilgrim Investments, Inc., Adviser to the Funds entered into an
agreement under which it will be acquired by ING Groep N.V. (NYSE:ING). ING is a
global financial institution active in the field of insurance, banking, and
asset management in more than 60 countries, with almost 90,000 employees.
Completion of the acquisition is contingent upon, among other things, approval
by the Directors/Trustees of the Pilgrim Funds and certain shareholder and
regulatory approvals. The closing of the acquisition is expected to occur during
the third quarter of 2000.
38
<PAGE>
Pilgrim VP
MagnaCap
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 95.72%
Beverages: 5.68%
50 Anheuser-Busch Cos., Inc. $ 3,734
100 PepsiCo, Inc. 4,444
--------
8,178
--------
Chemicals: 1.52%
50 Du Pont (E.I.) de Nemours & Co. 2,187
--------
Computers: 5.76%
50 @ Computer Sciences Corp. 3,734
50 @ Sun Microsystems, Inc. 4,547
--------
8,281
--------
Diversified Financial Services: 5.23%
40 Alliance Capital Management Holdings 1,898
50 Citigroup, Inc. 3,012
50 Fannie Mae 2,609
--------
7,519
--------
Electric: 1.96%
50 Duke Energy Corp. 2,819
--------
Electronics: 2.91%
100 @ Solectron Corp. 4,188
--------
Food: 3.04%
100 Heinz (H.J.) Co. 4,375
--------
Healthcare-Products: 5.98%
50 Baxter Int'l, Inc. 3,516
50 Johnson & Johnson 5,093
--------
8,609
--------
Insurance: 12.50%
150 Aflac, Inc. 6,891
50 American Int'l Group 5,875
50 Marsh & McLennan Cos. 5,221
--------
17,987
--------
Leisure Time: 0.68%
50 Carnival Corp. 975
--------
Media: 2.70%
100 Disney (Walt) Co. 3,881
--------
Miscellaneous Manufacturing: 6.98%
100 General Electric Co. $ 5,300
100 @@ Tyco Int'l, Ltd. 4,737
--------
10,037
--------
Oil & Gas Producers: 8.45%
100 Chevron Corp. 8,481
150 Conoco, Inc. 3,683
--------
12,166
--------
Oil & Gas Service: 1.55%
30 Schlumberger, Ltd. 2,239
--------
Retail: 8.70%
100 @ Best Buy Co., Inc. 6,325
100 McDonald's Corp. 3,294
50 Target Corp. 2,900
--------
12,519
--------
Savings & Loans: 2.01%
100 Washington Mutual, Inc. 2,888
--------
Semiconductors: 8.19%
50 Altera Corp. 5,097
50 Intel Corp. 6,684
--------
11,781
--------
Software: 3.72%
100 Automatic Data Processing 5,356
--------
Telecommunications: 7.24%
50 Bell Atlantic Corp. 2,541
50 SBC Communications, Inc. 2,163
50 @ Tellabs, Inc. 3,423
50 @ Worldcom, Inc. 2,294
--------
10,420
--------
Tobacco: 0.92%
50 Philip Morris Cos., Inc. 1,328
--------
Total Common Stocks (Cost $137,956) 137,733
--------
Total Investments in Securities
(Cost $ 137,956)* 95.72% $ 137,733
Other Assets and Liabilities-Net 4.28% 6,159
------ ---------
Net Assets 100.00% $ 143,892
====== =========
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized
Appreciation $ 2,222
Gross Unrealized Depreciation (2,445)
--------
Net Unrealized Depreciation $ (223)
========
See Accompanying Notes to Financial Statements
39
<PAGE>
Pilgrim VP
Research
Enhanced Index
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 99.30%
Aerospace/Defense: 0.34%
1,500 Boeing Co. $ 62,719
700 Goodrich (B.F.) Co. 23,843
400 Lockheed Martin Corp. 9,926
----------
96,488
----------
Airlines: 0.22%
700 AMR Corp. 18,505
600 Delta Air Lines, Inc. 30,338
100 @ Northwest Airlines Corp. 3,044
600 Southwest Airlines 11,363
----------
63,250
----------
Apparel: 0.06%
600 @ Jones Apparel Group, Inc. 14,100
100 Nike, Inc. 3,981
----------
18,081
----------
Auto Manufacturers: 1.50%
5,800 Ford Motor Co. 249,400
2,700 General Motors Corp. 156,769
400 Paccar, Inc. 15,875
----------
422,044
----------
Auto Parts & Equipment: 0.29%
800 Dana Corp. 16,950
2,900 Delphi Automotive Systems 42,231
800 Goodyear Tire & Rubber Co. 16,000
655 Visteon Corp. 7,938
----------
83,119
----------
Banks: 2.44%
800 Bank of America Corp. $ 34,400
3,800 Bank One Corp. 100,938
470 Banknorth Group, Inc. 7,196
500 Comerica, Inc. 22,438
400 Compass Bancshares, Inc. 6,825
500 First Tennessee National Corp. 8,281
4,100 First Union Corp. 101,732
3,200 Firstar Corp. 67,400
2,600 Fleet Boston Financial Corp. 88,400
700 Hibernia Corp. 7,613
1,900 Keycorp 33,487
400 Marshall & Ilsley Corp. 16,600
300 Mercantile Bankshares Corp. 8,944
200 National Commerce Bancorp 3,213
580 North Fork Bancorp 8,772
1,200 PNC Financial Services Group 56,250
700 Regions Financial Corp. 13,913
700 SouthTrust Corp. 15,838
700 Summit Bancorp 17,238
400 TCF Financial Corp. 10,275
2,500 U.S. Bancorp 48,125
400 Union Planters Corp. 11,175
----------
689,053
----------
Beverages: 0.92%
4,500 Coca-Cola Co. 258,469
----------
Biotechnology: 0.14%
100 @ Amgen, Inc. 7,025
200 @ Genzyme Corp.-General Division 11,887
100 @ Human Genome Sciences, Inc. 13,338
100 @ Incyte Genomics, Inc. 8,219
----------
40,469
----------
Chemicals: 1.07%
1,700 Air Products & Chemicals, Inc. 52,381
3,300 Dow Chemical Co. 99,619
1,200 PPG Industries, Inc. 53,175
1,100 Praxair, Inc. 41,181
1,600 Rohm & Haas Co. 55,200
----------
301,556
----------
Commercial Services: 0.21%
4,200 Cendant Corp. 58,800
----------
Computers: 13.02%
1,000 @ Apple Computer, Inc. 52,375
18,000 @ Cisco Systems, Inc. 1,144,125
5,000 Compaq Computer Corp. 127,813
7,700 @ Dell Computer Corp. 379,706
1,500 Electronic Data Systems 61,875
3,000 EMC Corp. 230,812
2,600 Hewlett-Packard Co. 324,675
2,800 International Business Machines 306,775
400 @ Lexmark Int'l, Inc. 26,900
4,500 @ Oracle Corp. 378,281
2,600 @ Seagate Technology, Inc. 143,000
5,100 @ Sun Microsystems, Inc. 463,781
300 @ Veritas Software Corp. 33,905
----------
3,674,023
----------
Cosmetics/Personal Care: 1.78%
300 Estee Lauder Cos., Inc. 14,831
4,600 Gillette Co. 160,712
1,200 Kimberly-Clark Corp. 68,850
4,500 Procter & Gamble Co. 257,625
----------
502,018
----------
Distribution/Wholesale: 0.02%
200 Grainger (W.W.), Inc. 6,163
----------
See Accompanying Notes to Financial Statements
40
<PAGE>
Pilgrim VP
Research
Enhanced Index
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Diversified Financial Services: 6.43%
420 American Express Co. $ 21,893
2,400 Associates First Capital Corp. 53,550
725 Bear Stearns Cos., Inc. 30,178
800 Capital One Financial Corp. 35,700
900 CIT Group, Inc. 14,625
9,100 Citigroup, Inc. 548,275
2,870 Fannie Mae 116,235
800 Franklin Resources, Inc. 24,300
3,600 Freddie Mac 187,875
1,600 Goldman Sachs Group, Inc. 151,800
700 Household Int'l, Inc. 29,094
500 Lehman Brothers Holdings, Inc. 47,281
1,900 Merrill Lynch & Co. 218,500
3,000 Morgan Stanley Dean Witter & Co. 249,750
900 Paine Webber Group, Inc. 40,950
500 Providian Financial Corp. 45,000
----------
1,815,006
----------
Electric: 1.70%
100 Allegheny Energy, Inc. 2,738
300 Ameren Corp. 10,125
900 Cinergy Corp. 22,894
800 CMS Energy Corp. 17,700
800 Consolidated Edison, Inc. 23,700
1,900 CP&L Energy, Inc. 60,681
1,000 Dominion Resources, Inc. 42,875
1,000 DTE Energy Co. 30,563
1,300 Edison Int'l 26,650
1,200 Entergy Corp. 32,625
700 FPL Group, Inc. 34,650
700 GPU, Inc. 18,943
700 NiSource, Inc. 13,037
1,700 PG&E Corp. 41,862
600 Pinnacle West Capital Corp. 20,325
900 PPL Corp. 19,744
1,500 TXU Corp. 44,250
800 Wisconsin Energy Corp. 15,851
----------
479,213
----------
Electrical Components & Equipment: 0.26%
1,200 Emerson Electric Co. 72,450
----------
Electronics: 0.36%
991 @ Agilent Technologies, Inc. 73,086
400 Johnson Controls, Inc. 20,525
100 PE Corp.-PE Biosystems Group 6,588
----------
100,199
----------
Food: 1.88%
1,200 Bestfoods 83,100
1,300 General Mills, Inc. 49,725
1,500 Heinz (H.J.) Co. 65,625
300 Hershey Foods Corp. 14,550
1,700 Kellogg Co. 50,575
4,000 @ Kroger Co. 88,250
100 Nabisco Holdings Corp. 5,250
600 Quaker Oats Co. 45,075
1,200 Ralston Purina Group 23,925
2,400 @@ Unilever NV 103,200
----------
529,275
----------
Forest Products & Paper: 0.36%
100 Bowater, Inc. 4,412
1,000 Fort James Corp. 23,125
500 Georgia-Pacific 13,125
1,600 International Paper Co. 47,700
300 Temple-Inland, Inc. 12,600
----------
100,962
----------
Healthcare-Products: 1.35%
200 Baxter Int'l, Inc. 14,062
1,200 Becton, Dickinson & Co. 34,425
1,700 @ Boston Scientific Corp. 37,294
100 @ Guidant Corp. 4,950
1,700 Johnson & Johnson 173,187
2,000 Medtronic, Inc. 99,625
400 ST Jude Medical, Inc. 18,350
----------
381,893
----------
Healthcare-Services: 0.58%
1,800 HCA - The Healthcare Co. 54,675
2,000 @ Tenet Healthcare Corp. 54,000
400 UnitedHealth Group, Inc. 34,300
300 @ Wellpoint Health Networks, Inc. 21,732
----------
164,707
----------
Household Products/Wares: 0.16%
1,000 Clorox Co. 44,812
----------
Insurance: 3.22%
1,000 Aetna, Inc. 64,187
4,700 Allstate Corp. 104,575
400 AMBAC Financial Group, Inc. 21,924
100 American General Corp. 6,100
2,200 American Int'l Group 258,500
900 AON Corp. 27,956
1,800 AXA Financial, Inc. 61,200
900 Cigna Corp. 84,150
100 Financial Security Assurance Holdings 7,588
1,400 Hartford Financial Services 78,313
1,800 @ John Hancock Financial Services 42,638
1,000 Lincoln National Corp. 36,125
600 MBIA, Inc. 28,912
3,200 @ Metlife, Inc 67,400
800 Torchmark Corp. 19,750
----------
909,318
----------
Internet: 1.16%
800 @ Ameritrade Holding Corp. 9,300
400 @ DoubleClick, Inc. 15,250
1,800 @ E*TRADE Group, Inc. 29,700
4,564 Schwab (Charles) Corp. 153,466
2,600 @ TD Waterhouse Group 45,013
600 @ Yahoo, Inc. 74,325
----------
327,054
----------
Iron/Steel: 0.08%
450 Allegheny Technologies, Inc. 8,100
400 Nucor Corp. 13,275
----------
21,375
----------
See Accompanying Notes to Financial Statements
41
<PAGE>
Pilgrim VP
Research
Enhanced Index
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Lodging: 0.25%
1,100 Marriott Int'l, Inc. $ 39,669
900 Starwood Hotels & Resorts Worldwide 29,306
----------
68,975
----------
Machinery-Construction & Mining: 0.20%
1,700 Caterpillar, Inc. 57,587
----------
Machinery Diversified: 0.22%
800 Ingersoll-Rand Co. 32,200
900 Rockwell Int'l Corp. 28,350
----------
60,550
----------
Media: 4.35%
4,700 @ AT&T - Liberty Media Group 148,637
3,700 @ Comcast Corp. 149,850
1,000 Disney (Walt) Co. 38,812
900 @ Fox Entertainment Group, Inc. 27,338
1,500 Gannett Co., Inc. 89,719
400 Knight Ridder, Inc. 21,275
4,000 @ MediaOne Group, Inc. 265,256
500 New York Times Co. 19,750
2,300 @@ Seagram Co., Ltd. 133,400
3,400 Time Warner, Inc. 258,400
1,100 @ Viacom, Inc. 75,006
----------
1,227,443
----------
Mining: 0.55%
600 @@ Alcan Aluminium, Ltd. 18,600
4,672 Alcoa, Inc. 135,488
----------
154,088
----------
Miscellaneous Manufacturing: 6.83%
500 Cooper Industries, Inc. 16,281
2,100 Eastman Kodak Co. 124,950
400 Eaton Corp. 26,800
24,700 General Electric Co. 1,309,100
4,100 Honeywell Int'l, Inc. 138,119
600 ITT Industries, Inc. 18,225
6,200 @@ Tyco Int'l, Ltd. 293,725
----------
1,927,200
----------
Oil & Gas Producers: 5.57%
400 Anadarko Petroleum Corp. 19,725
300 Apache Corp. 17,644
2,300 Chevron Corp. 195,069
1,200 Conoco Inc. 29,475
500 Conoco Inc. 11,000
200 Devon Energy Corp. 11,237
9,588 Exxon Mobil Corp. 752,658
560 @ Global Marine Inc. 15,785
400 Phillips Petroleum Co. 20,275
6,400 @@ Royal Dutch Petroleum Co. 394,000
1,500 Texaco, Inc. 79,875
200 Tosco Corp. 5,662
800 Union Pacific Resources Group 17,600
----------
1,570,005
----------
Oil & Gas Services: 0.14%
1,000 Baker Hughes, Inc. 32,000
100 @ Cooper Cameron Corp. 6,600
----------
38,600
----------
Packaging & Containers: 0.05%
990 @ Smurfit-Stone Container Corp. 12,746
---------
Pharmaceuticals: 9.29%
5,300 Abbott Laboratories 236,181
300 @ Alza Corp. 17,738
4,600 American Home Products Corp. 270,250
6,700 Bristol-Myers Squibb Co. 390,275
3,800 Eli Lilly & Co. 379,525
200 Forest Laboratories - Class A 20,200
5,000 Merck & Co., Inc. 383,125
11,050 Pfizer Inc. 530,400
3,600 Pharmacia Corp. 186,075
3,800 Schering-Plough Corp. 191,900
300 @ Watson Pharmaceutical, Inc. 16,125
----------
2,621,794
----------
Pipelines: 0.45%
300 Columbia Energy Group 19,687
400 Dynegy, Inc. 27,325
600 EL Paso Energy Corp. 30,562
1,200 Williams Cos., Inc. 50,025
----------
127,599
----------
Retail: 5.26%
900 Circuit City Stores 29,869
1,000 @ Federated Department Stores, Inc. 33,750
4,200 Gap, Inc. 131,250
4,000 Home Depot, Inc. 199,750
1,800 Limited, Inc. 38,925
1,500 Lowe's Cos. 61,594
1,600 May Department Stores Co. 38,400
900 McDonald's Corp. 29,644
500 Nordstrom, Inc. 12,062
1,000 Penney (J.C.) Co. 18,437
1,300 Sears, Roebuck, and Co. 42,412
2,100 Target Corp. 121,800
1,900 TJX Cos., Inc. 35,625
12,000 Wal-Mart Stores, Inc. 691,500
----------
1,485,018
----------
Savings & Loans: 0.44%
800 Charter One Financial, Inc. 18,400
700 Dime Bancorp, Inc. 11,025
500 Golden West Financial Corp. 20,406
500 Greenpoint Financial Corp. 9,375
2,270 Washington Mutual, Inc. 65,547
----------
124,753
----------
Semiconductors: 7.00%
500 Advanced Micro Devices 38,625
600 @ Altera Corp. 61,163
2,600 @ Applied Materials, Inc. 235,625
8,700 Intel Corp. 1,163,081
200 @ Lattice Semiconductor Corp. 13,825
700 Micron Technology, Inc. 61,644
600 @ National Semiconductor Corp. 34,050
5,200 Texas Instruments, Inc. 357,175
100 @ Xilinx, Inc. 8,256
----------
1,973,444
----------
See Accompanying Notes to Financial Statements
42
<PAGE>
Pilgrim VP
Research
Enhanced Index
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Software: 6.54%
400 Adobe Systems, Inc. $ 52,000
6,800 @ America Online, Inc. 358,700
400 Automatic Data Processing 21,425
900 @ BMC Software, Inc. 32,835
600 @ Citrix Systems, Inc. 11,361
1,800 Computer Associates Int'l 92,138
13,700 @ Microsoft Corp. 1,096,000
400 @ Network Associates, Inc. 8,150
600 @ Siebel Systems, Inc. 98,137
200 @ Symantec Corp. 10,788
600 @ Tibco Software, Inc. 64,341
----------
1,845,875
----------
Telecommunications: 11.02%
300 @ Allegiance Telecom, Inc. 19,200
500 Alltel Corp. 30,969
6,000 @ AT&T Corp. 145,500
2,500 Bell Atlantic Corp. 127,031
1,200 Bellsouth Corp. 51,150
300 Corning, Inc. 80,963
3,400 @ Global Crossing, Ltd. 89,462
@@
3,500 GTE Corp. 217,875
6,800 Lucent Technologies, Inc. 402,900
6,900 Motorola, Inc. 200,531
8,900 @@ Nortel Networks Corp. 607,425
600 @ Qualcomm, Inc. 36,000
10,000 SBC Communications, Inc. 432,500
1,100 @ Sprint Corp. (PCS Group) 65,450
1,300 @ Tellabs, Inc. 88,969
1,000 US West, Inc. 85,750
9,300 @ Worldcom, Inc. 426,638
----------
3,108,313
----------
Tobacco: 0.94%
10,000 Philip Morris Cos., Inc. 265,625
----------
Toys/Games/Hobbies: 0.15%
900 Hasbro, Inc. 13,556
2,200 Mattel, Inc. 29,013
----------
42,569
----------
Transportation: 0.50%
1,500 Burlington Northern
Santa Fe Co. $ 34,407
1,100 CSX Corp. 23,306
600 @ FedEx Corp. 22,800
1,900 Norfolk Southern
Corp. 28,263
900 Union Pacific Corp. 33,469
----------
142,245
----------
Total Common Stocks
(Cost $26,436,552) 28,014,226
----------
US. GOVERNMENT SECURITIES: 0.27%
$ 75,000 U.S. Treasury Note, 5.625%, due 02/28/01 $ 74,559
----------
(Cost $74,593) 74,559
----------
Principal
Amount
------
Repurchase Agreements: 0.41%
$ 116,000 State Street Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $80,000 U.S.
Treasury Notes, 11.250% Due 02/15/15 Market
Value $121,400) $ 116,000
-----------
Total Short-Term Investments (Cost $116,000) 116,000
-----------
Total Investments in Securities
(Cost $ 26,627,145)* 99.98% $28,204,785
Other Assets and Liabilities-Net 0.02% 6,072
------ -----------
Net Assets 100.00% $28,210,857
====== ===========
----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $26,678,086. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 4,450,887
Gross Unrealized Depreciation (2,822,306)
-----------
Net Unrealized Appreciation $ 1,628,581
===========
See Accompanying Notes to Financial Statements
43
<PAGE>
Pilgrim VP
Growth
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 76.09%
Banks: 1.50%
300 Bank of New York Co., Inc. $ 13,950
300 Fleet Boston Financial Corp. 10,200
----------
24,150
----------
Beverages: 0.36%
100 Coca-Cola Co. 5,754
----------
Biotechnology: 4.08%
44 Amgen, Inc. 3,091
173 @ Biogen, Inc. 11,159
50 @ Human Genome Sciences, Inc. 6,669
250 @ Immunex Corp. 12,359
150 @ Incyte Genomics, Inc. 12,328
100 @ Millennium Pharmaceuticals 11,188
54 @ Protein Design Labs, Inc. 8,907
----------
65,701
----------
Computers: 9.42%
75 @ Brocade Communications System 13,761
175 @ Cisco Systems, Inc. 11,123
96 EMC Corp. 7,386
100 @ Foundry Networks, Inc. 11,050
125 @ Juniper Networks, Inc. 18,195
125 @ Oracle Corp. 10,358
125 @ Redback Networks 22,250
100 @ Sandisk Corp. 6,119
100 @ Sapient Corp. 10,694
68 @ Silicon Storage Technology, Inc. 6,063
100 @ StorageNetworks, Inc. 9,025
50 @ Stratos Lightwave, Inc. 1,394
79 @ Turnstone Systems, Inc. 13,088
100 @ Veritas Software Corp. 11,301
----------
151,807
----------
Cosmetics/Personal Care: 0.83%
300 Avon Products 13,350
----------
Diversified Financial Services: 3.27%
175 Citigroup, Inc. 10,544
100 Lehman Brothers Holdings, Inc. 9,623
56 Merrill Lynch & Co. 6,440
150 Morgan Stanley Dean Witter & Co. 12,487
300 Paine Webber Group, Inc. 13,650
----------
52,744
----------
Electric: 1.81%
200 Duke Energy Corp. 11,275
200 PECO Energy Co. 8,558
300 Reliant Energy, Inc. 9,349
----------
29,182
----------
Electronics: 2.80%
100 Adobe Systems, Inc. 13,000
150 @ Agilent Technologies, Inc. 11,063
100 @ Sanmina Corp. 8,617
100 @ Waters Corp. 12,481
----------
45,161
----------
Food: 0.51%
189 @ Safeway, Inc. 8,194
----------
Healthcare-Products: 1.56%
140 Baxter Int'l, Inc. 9,844
150 Johnson & Johnson 15,281
----------
25,125
----------
Healthcare-Services: 1.51%
200 HCA - The Healthcare Co. 6,421
148 UnitedHealth Group, Inc. 12,946
68 @ Wellpoint Health Networks 4,926
----------
24,293
----------
Internet: 0.82%
117 @ Infospace, Inc 6,464
200 Schwab (Charles) Corp. 6,725
----------
13,189
----------
Media: 1.35%
100 @ Comcast Corp. 4,050
250 Disney (Walt) Co. 9,703
116 @ Viacom, Inc. 7,910
----------
21,663
----------
Oil & Gas Producers: 2.74%
200 Apache Corp. 11,762
350 Ensco Int'l, Inc. 12,592
400 EOG Resources, Inc. 13,400
65 Exxon Mobil Corp. 5,103
25 Phillips Petroleum Co. 1,267
----------
44,124
----------
Oil & Gas Services: 1.88%
400 Baker Hughes, Inc. 12,800
150 BJ Services Co. 9,375
200 @ Weatherford Int'l, Inc. 8,146
----------
30,321
----------
Pharmaceuticals: 7.91%
100 @ Alkermes, Inc. 4,712
200 @ Alza Corp. 11,825
150 Cardinal Health, Inc. 11,100
150 @ COR Therapeutics, Inc. 12,797
107 Eli Lilly & Co. 10,687
149 @ Medimmune, Inc. 11,026
165 Merck & Co., Inc. 12,643
300 Pfizer, Inc. 14,400
400 Schering-Plough Corp. 20,200
150 @ Sepracor, Inc. 18,094
----------
127,484
----------
Pipelines: 2.33%
200 Dynegy, Inc. 14,221
250 EL Paso Energy Corp. 12,734
50 Enron Corp. 3,433
150 Equitable Resources, Inc. 7,178
----------
37,566
----------
Retail: 2.58%
100 @ AnnTaylor Stores Corp. 3,312
400 Intimate Brands, Inc. 8,066
200 @ Kohls Corp. 11,125
400 Limited Inc. 8,716
150 Nordstrom, Inc. 3,700
352 TJX Companies, Inc. 6,702
----------
41,621
----------
See Accompanying Notes to Financial Statements
44
<PAGE>
Pilgrim VP
Growth
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Semiconductors: 13.44%
116 @ Altera Corp. $ 11,825
150 @ Analog Devices, Inc. 11,400
80 @ Applied Materials, Inc. 7,250
75 @ Broadcom Corp. 16,420
200 @ Cypress Semiconductor Corp. 8,450
125 @ Globespan, Inc. 15,260
100 @ Infineon Technologies AG ADR 8,060
@@
150 Intel Corp. 20,053
175 @ Intersil Holding Corp. 9,461
200 @ Kla-Tencor Corp. 11,712
250 @ Lam Research Corp. 9,375
95 @ LSI Logic Corp. 5,142
100 @ Marvell Technology Group, Ltd. 5,700
175 Micron Technology, Inc. 15,411
123 @ National Semiconductor Corp. 6,980
200 @ Novellus Systems, Inc. 11,313
44 @ PMC - Sierra, Inc. 7,818
100 @ Teradyne, Inc. 7,350
105 Texas Instruments, Inc. 7,512
55 @ Triquint Semiconductor, Inc. 5,263
200 @ Vitesse Semiconductor Corp. 14,713
----------
216,468
----------
Software: 3.49%
100 @ Alteon Websystems, Inc. 10,006
200 @ Macromedia, Inc. 19,337
83 @ Siebel Systems Inc. 13,576
75 @ VeriSign, Inc. 13,238
----------
56,157
----------
Telecommunications: 11.90%
100 @ ADC Telecommunications, Inc. 8,387
400 @ Andrew Corp. 13,425
165 @ Avanex Corp. 15,757
100 @ Ciena Corp. 16,669
126 @ Digital Lightwave, Inc. 12,663
200 @ Exfo Electro Optical Engineering 8,775
125 @ JDS Uniphase Corp. 14,984
100 @ Natural Microsystems Corp. 11,085
200 Nortel Networks Corp. 13,650
125 @ Qwest Communications Int'l 6,211
100 Scientific-Atlanta, Inc. 7,450
70 @ SDL, Inc. 19,963
200 Sprint Corp. (FON Group) 10,200
100 @ Sycamore Networks, Inc. 11,038
100 US West, Inc. 8,575
281 @ Worldcom, Inc. 12,891
----------
191,723
----------
Total Common Stocks
(Cost $1,168,516) 1,225,777
----------
Principal
Amount
------
SHORT-TERM INVESTMENTS: 21.23%
Repurchase Agreements: 21.23%
$ 342,000 State Street Repurchase Agreement, 6.20% due
07/03/00 (Collateralized by $351,000 U.S.
Treasury Notes, 4.875%, Due 03/31/01)
Market Value $351,000, $ 342,000
----------
Total Short-Term Investments (Cost $342,000) 342,000
----------
Total Investments in Securities
(Cost $1,510,516)* 97.32% $1,567,777
Other Assets and Liabilities-Net 2.68% 43,174
------ ----------
Net Assets 100.00% $1,610,951
====== ==========
----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 79,943
Gross Unrealized Depreciation (22,682)
---------
Net Unrealized Appreciation $ 57,261
=========
See Accompanying Notes to Financial Statements
45
<PAGE>
Pilgrim VP
MidCap
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 76.51%
Biotechnology: 7.83%
100 @ Idec Pharmaceuticals Corp. $11,731
93 @ Incyte Genomics, Inc. 7,643
25 @ Millennium Pharmaceuticals 2,797
25 @ PE Corp.-Celera Genomics 2,338
15 @ Protein Design Labs, Inc. 2,474
-------
26,983
-------
Commercial Services: 1.02%
123 @ Robert Half Int'l, Inc. 3,506
-------
Computers: 6.40%
51 @ Brocade Communications System 9,358
20 @ Juniper Networks, Inc. 2,911
22 @ Redback Networks 3,916
37 @ Sandisk Corp. 2,264
25 @ Silicon Storage Technology, Inc. 2,208
50 @ Stratos Lightwave, Inc. 1,394
-------
22,051
-------
Diversified Financial Service: 1.93%
149 Capital One Financial Corp. 6,649
-------
Electric: 3.44%
150 @ Calpine Corp. 9,862
56 Montana Power Co. 1,978
-------
11,840
-------
Electrical Components &
Equipment: 1.56%
47 @ Power-One, Inc. 5,355
-------
Electronics: 2.49%
96 @ Amphenol Corp. 6,354
34 PE Corp. - PE Biosystems Group 2,240
-------
8,594
-------
Food: 2.30%
214 Keebler Foods Co. $ 7,945
-------
Healthcare Services: 1.54%
174 @ Community Health Systems, Inc. 2,816
190 @ Health Management Associates, Inc. 2,482
-------
5,298
-------
Insurance: 0.70%
86 ACE, Ltd. 2,408
-------
Media: 0.66%
22 @ Univision Communications, Inc. 2,277
-------
Oil & Gas Producers: 3.56%
42 Apache Corp. 2,470
127 @ Global Marine, Inc. 3,580
57 @ Nabors Industries, Inc. 2,369
100 @ Precision Drilling Corp. 3,862
-------
12,281
-------
Oil & Gas Services: 5.03%
239 Baker Hughes, Inc. 7,648
36 @ BJ Services Co. 2,250
113 @ Cooper Cameron Corp. 7,458
-------
17,356
-------
Pharmaceuticals: 8.60%
100 @ Celgene Corp. 5,888
124 @ Cephalon, Inc. 7,424
36 @ COR Therapeutics, Inc. 3,071
28 @ Forest Laboratories 2,828
31 @ King Pharmaceuticals, Inc. 1,360
64 @ Sepracor, Inc. 7,720
13 @ Vertex Pharmaceuticals, Inc. 1,370
-------
29,661
-------
Pipelines: 2.42%
50 Dynegy, Inc. 3,416
47 EL Paso Energy Corp. 2,394
73 Kinder Morgan, Inc. 2,523
-------
8,333
-------
Retail: 4.01%
130 Talbots, Inc. 7,142
356 TJX Cos., Inc. 6,675
-------
13,817
-------
Semiconductors: 7.64%
85 @ Analog Devices, Inc. 6,460
39 @ Credence Systems Corp. 2,152
142 @ Cypress Semiconductor Corp. 6,000
44 @ Integrated Device Technology, Inc. 2,635
186 @ Lam Research Corp. 6,975
22 @ Triquint Semiconductor, Inc. 2,105
-------
26,327
-------
Software: 7.10%
15 @ Alteon Websystems, Inc. 1,501
38 @ Clarent Corp. 2,717
36 @ Macromedia, Inc. 3,481
28 @ Micromuse, Inc. 4,633
53 @ Siebel Systems, Inc. 8,669
57 @ Vitria Technology, Inc. 3,484
-------
24,485
-------
See Accompanying Notes to Financial Statements
46
<PAGE>
Pilgrim VP
MidCap
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Telecommunications: 8.28%
200 @ Andrew Corp $ 6,712
79 @ Comverse Technology, Inc. 7,347
27 @ Digital Lightwave, Inc. 2,713
90 @ Ditech Communications Corp. 8,511
29 @ Natural Microsystems Corp. 3,261
-------
28,544
-------
Total Common Stocks (Cost $255,068) 263,710
-------
Total Investments in Securities
(Cost $255,068)* 76.51% $263,710
Other Assets and Liabilities-Net 23.49% 80,948
----- --------
Net Assets 100.0% $344,658
===== ========
----------
@ Non-income producing security
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $18,337
Gross Unrealized Depreciation (9,695)
-------
Net Unrealized Appreciation $ 8,642
=======
See Accompanying Notes to Financial Statements
47
<PAGE>
Pilgrim VP
Growth + Value
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 93.80%
Aerospace/Defense: 1.26%
38,300 @ Titan Corp. $ 1,713,924
-----------
Biotechnology: 2.20%
78,600 @ CuraGen Corp. 2,991,713
-----------
Commercial Services: 2.95%
45,700 @ Diamond Technology Partners, Inc. 4,021,600
-----------
Computers: 8.12%
35,000 @ Emulex Corp. 2,299,063
135,500 @ Mentor Graphics Corp. 2,693,062
39,000 @ Sandisk Corp. 2,386,313
41,700 @ Silicon Storage Technology, Inc. 3,682,631
-----------
11,061,069
-----------
Electrical Components & Equipment: 4.38%
25,700 C&D Technologies, Inc. 1,452,050
26,800 @ Littelfuse, Inc. 1,313,200
28,100 @ Power-One, Inc. 3,201,644
-----------
5,966,894
-----------
Electronics: 9.23%
48,700 @ DSP Group, Inc. 2,727,200
101,100 @ Kemet Corp. 2,533,819
33,300 Newport Corp. 3,575,588
98,450 @ Vishay Intertechnology, Inc. 3,734,947
-----------
12,571,554
-----------
Entertainment: 1.36%
29,000 @ Macrovision Corp. 1,853,734
-----------
Healthcare-Products: 4.70%
34,200 @ Arthrocare Corp. 1,821,150
37,100 @ Cytyc Corp. 1,980,212
20,000 @ Techne Corp. 2,600,000
-----------
6,401,362
-----------
Machinery-Diversified: 1.34%
35,300 @ Cognex Corp. 1,826,775
-----------
Oil & Gas Producers: 1.53%
35,400 Apache Corp. 2,081,963
-----------
Oil & Gas Services: 3.31%
72,000 @ BJ Services Co. 4,500,000
-----------
Pharmaceuticals: 2.56%
47,100 @ Medimmune, Inc. 3,485,400
-----------
Retail: 3.41%
74,300 @ CDW Computer Centers, Inc. 4,643,750
-----------
Semiconductors: 16.30%
55,000 @ Alpha Industries 2,423,438
46,900 @ Applied Micro Circuits Corp. 4,631,375
44,300 @ Kopin Corp. 3,067,775
39,900 @ LTX Corp. 1,394,006
51,700 @ Mattson Technology, Inc. 1,680,250
54,999 @ Three-Five Systems, Inc. 3,244,941
60,100 @ Triquint Semiconductor, Inc. 5,750,819
-----------
22,192,604
-----------
Software: 11.97%
46,300 Adobe Systems, Inc. 6,019,000
73,200 @ BroadVision, Inc. 3,719,475
23,200 @ I2 Technologies, Inc. 2,418,962
42,800 @ Mercury Interactive Corp. 4,140,900
-----------
16,298,337
-----------
Telecommunications: 19.18%
25,600 @ Adtran, Inc. 1,532,800
63,700 @ Advanced Fibre Communication 2,886,406
49,300 @ Aspect Communications Corp. 1,938,106
32,700 @ Digital Lightwave, Inc. 3,286,350
33,300 @ MRV Communications, Inc. 2,239,425
34,300 @ Powertel, Inc. 2,433,156
93,000 @ Powerwave Technologies, Inc. 4,092,000
53,300 Scientific-Atlanta, Inc. 3,970,850
13,100 @ SDL, Inc. 3,735,956
-----------
26,115,049
-----------
Total Common Stocks (Cost $ 96,088,607) 127,725,728
-----------
Principal
Amount
------
SHORT-TERM INVESTMENTS: 5.91%
Repurchase Agreement: 5.91%
$8,056,000 State Street Repurchase Agreement, 6.2% due
07/03/00 (Collateralized by $7,645,000 U.S.
Treasury Notes, 7.500% due 02/15/05, Market
Value $8,218,375) $ 8,056,000
------------
Total Short-Term Investments (Cost $8,056,000) 8,056,000
------------
Total Investments (Cost $104,144,607)* 99.71% $135,781,728
Other Assets and Liabilities-Net 0.29% 390,607
------ ------------
Total Net Assets 100.00% $136,172,335
====== ============
----------
@ Non-income producing security
* Cost for federal income tax purposes is $104,273,018. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 36,949,664
Gross Unrealized Depreciation (5,184,132)
------------
Net Unrealized Appreciation $ 31,765,532
============
See Accompanying Notes to Financial Statements
48
<PAGE>
Pilgrim VP
SmallCap
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 91.84%
Apparel: 0.27%
16,500 @ Russell Corp. $ 330,000
---------
Auto Parts & Equipment: 0.26%
22,300 Delphi Automotive Systems 324,744
---------
Biotechnology: 6.17%
10,800 @ Aclara BioSciences, Inc. 550,125
20,700 @ Charles River Laboratories Int'l 459,281
18,700 @ Diacrin, Inc. 147,263
8,000 @ Genome Therapeutics Corp. 243,500
13,800 @ Incyte Genomics, Inc. 1,134,188
4,700 @ Inhale Therapeutic Systems Inc. 476,903
9,300 @ Invitrogen Corp. 699,389
9,300 @ Maxygen 527,920
4,500 @ Orchid BioSciences, Inc. 170,859
7,700 @ Protein Design Labs, Inc. 1,270,139
8,300 @ Sequenom, Inc. 376,613
53,100 @ Texas Biotech Corp. 1,008,900
11,200 @ Visible Genetics, Inc. 505,400
---------
7,570,480
---------
Commercial Services: 3.94%
9,000 @ Albany Molecular Research, Inc. 489,937
16,400 @ Aurora Biosciences Corp. 1,118,275
12,900 @ First Health Group Corp. 423,281
25,300 @ Heidrick & Struggles, Inc. 1,597,063
38,000 @ Korn/Ferry Int'l 1,204,125
---------
4,832,681
---------
Computers: 2.94%
4,600 @ Foundry Networks, Inc. 508,300
4,800 @ Juniper Networks, Inc. 698,700
27,600 @ Manhattan Associates, Inc. 690,000
500 @ Nuance Communications, Inc. 41,656
5,100 @ Oni Systems Corp. 597,736
7,200 @ Silicon Storage Technology, Inc. 635,850
1,400 @ StorageNetworks, Inc. 126,350
6,500 @ Stratos Lightwave, Inc. 181,188
800 @ Turnstone Systems, Inc. 132,537
---------
3,612,317
---------
Diversified Financial Service: 1.76%
19,200 @ CompuCredit Corp. 576,000
7,100 Dain Rauscher Corp. 468,600
24,400 Paine Webber Group, Inc. 1,110,200
---------
2,154,800
---------
Electric: 2.28%
28,300 Cinergy Corp. 719,881
30,400 Kansas City Power & Light 684,000
27,200 NiSource, Inc. 506,600
20,400 @ NRG Energy, Inc. 372,300
6,000 @ Sanmina Corp. 513,000
---------
2,795,781
---------
Electrical Components & Equipment: 1.55%
14,600 @ Advanced Energy Industries 860,487
1,400 @ Capstone Turbine Corp. 63,088
8,550 @ Power-One, Inc. 974,166
---------
1,897,741
---------
Electronics: 1.71%
18,200 @ Packard Biosciences 309,400
19,350 Symbol Technologies, Inc. 1,044,900
6,000 @ Waters Corp. 748,875
---------
2,103,175
---------
Environmental Control: 0.02%
1,300 @ Waste Connections, Inc. 25,675
---------
Food: 0.80%
21,800 @ Safeway, Inc. 983,725
---------
Healthcare-Products: 1.47%
18,200 @ Cytyc Corp. 971,425
32,200 @ Edwards Lifesciences Corp. 615,825
19,300 @ Kensey Nash Corp. 214,713
---------
1,801,963
---------
Healthcare-Services: 6.32%
45,900 @ Community Health Systems, Inc. 743,006
15,300 @ Coventry Health Care, Inc. 203,920
14,600 @ Laboratory Corp. of America Holdings 1,126,025
69,400 @ LifePoint Hospitals, Inc. 1,544,150
24,100 @ Oxford Health Plans 573,881
15,900 @ Quest Diagnostics, Inc. 1,137,844
55,100 @ Triad Hospitals, Inc. 1,332,731
21,400 @ Trigon Healthcare, Inc. 1,103,438
---------
7,764,995
---------
Internet: 0.03%
1,100 @ Digital Insight Corp. 37,400
---------
Machinery-Diversified: 0.35%
28,800 Stewart & Stevenson Services 433,800
---------
Media: 0.76%
13,700 @ Viacom, Inc. 934,169
---------
Oil & Gas Producers: 5.99%
51,200 Cross Timbers Oil Co. 1,132,800
39,200 EOG Resources, Inc. 1,313,200
4,600 @ Global Marine, Inc. 129,663
20,400 @ HS Resources, Inc. 612,000
66,700 @ Key Energy Group 641,987
8,300 @ Louis Dreyfus Natural Gas 259,894
5,600 Murphy Oil Corp. 332,850
25,300 @ Newfield Exploration Co. 989,863
12,600 Phillips Petroleum Co. 638,662
32,400 @ Pride Int'l, Inc. 801,900
19,600 @ Spinnaker Exploration Co. 502,250
---------
7,355,069
---------
Oil & Gas Services: 2.53%
15,500 @ BJ Services Co. 968,750
20,700 @ Dril-Quip 967,725
13,700 Halliburton Co. 646,469
15,700 @ Universal Compression Holdings 525,950
---------
3,108,894
---------
See Accompanying Notes to Financial Statements
49
<PAGE>
Pilgrim VP
SmallCap
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Pharmaceuticals: 10.18%
15,700 @ Alkermes, Inc. $ 739,863
10,600 Alpharma, Inc. 659,850
19,400 @ Anesta Corp. 482,575
20,000 @ Celgene Corp. 1,177,500
14,400 @ COR Therapeutics, Inc. 1,228,500
14,200 @ Cubist Pharmaceuticals, Inc. 699,350
17,300 @ Ilex Oncology, Inc. 609,825
47,200 @ Intrabiotics Pharmaceuticals, Inc. 1,259,650
12,400 @ Sepracor, Inc. 1,495,750
17,000 @ Syncor Int'l Corp. 1,224,000
18,600 @ Trimeris, Inc. 1,300,837
9,100 @ United Therapeutics Corp. 986,213
6,000 @ Vertex Pharmaceuticals, Inc. 632,250
----------
12,496,163
----------
Pipelines: 2.67%
31,100 EL Paso Energy Corp. 1,584,156
7,300 Equitable Resources, Inc. 352,225
38,900 Kinder Morgan, Inc. 1,344,481
----------
3,280,862
----------
Retail: 5.42%
8,500 @ AnnTaylor Stores Corp. 281,563
4,300 @ Brinker Int'l, Inc. 125,775
14,500 @ Factory 2-U Stores, Inc. 548,281
23,600 @ Michaels Stores, Inc. 1,081,175
68,300 @ MSC Industrial Direct Co. 1,430,031
29,800 @ Pacific Sunwear of California 558,750
16,500 Talbots, Inc. 906,469
9,800 Tiffany & Co. 661,500
22,200 TJX Cos., Inc. 416,250
25,200 @ Too, Inc. 641,025
----------
6,650,819
----------
Semiconductors: 14.56%
15,400 @ Analog Devices, Inc. 1,170,400
4,300 @ Applied Micro Circuits Corp. 424,625
14,000 @ Asyst Technologies, Inc. 479,500
21,400 @ Atmel Corp. 789,125
20,900 @ ATMI, Inc. 971,850
11,000 @ Bookham Technology Plc 651,750
3,800 @ Broadcom Corp. 831,962
7,400 @ Conexant Systems, Inc. 359,825
17,500 @ Cypress Semiconductor Corp. 739,375
14,700 @ Exar Corp. 1,281,656
10,400 @ Integrated Device Technology, Inc. 622,700
12,300 @ Intersil Holding Corp. 664,969
10,700 @ Lam Research Corp. 401,250
11,800 @ Micrel, Inc. 512,563
18,800 @ Novellus Systems, Inc. 1,063,375
9,400 @ PRI Automation, Inc. 614,672
21,800 @ Quicklogic Corp. 485,050
13,100 @ Rudolph Technologies, Inc. 507,625
2,400 @ Silicon Image, Inc. 119,700
34,900 @ Therma-Wave, Inc. 778,706
8,000 @ Three-Five Systems, Inc. 472,000
14,500 @ Transwitch Corp. 1,119,219
4,900 @ Triquint Semiconductor, Inc. 468,869
18,700 @ Varian Semiconductor Equipment 1,174,594
11,900 @ Virata Corp. 709,537
5,600 @ Xilinx, Inc. 462,350
----------
17,877,247
----------
Software: 9.82%
7,400 @ AppNet, Inc. 266,400
6,100 @ Art Technology Group, Inc. 615,719
10,800 @ BEA Systems, Inc. 533,925
29,500 @ Caminus Corp 722,750
6,000 @ Clarent Corp. 429,000
15,800 @ Extensity, Inc. 541,150
21,000 @ Manugistics Group, Inc. 981,750
6,600 @ Micromuse, Inc. 1,092,197
8,900 @ Net Perceptions, Inc. 141,287
12,900 @ Network Associates, Inc. 262,837
10,500 @ Numerical Technologies, Inc. 510,563
30,000 @ Open Market, Inc. 414,375
22,000 @ OTG Software, Inc. 628,375
15,900 @ PC-Tel, Inc. 604,200
400 @ RADVision Limited 11,175
5,300 @ Rational Software Corp. 492,569
28,700 @ Serena Software, Inc. 1,303,159
5,800 @ Siebel Systems, Inc. 948,663
6,300 @ Universal Access, Inc. 154,350
1,720 @ VeriSign, Inc. 303,580
3,400 @ Webmethods, Inc. 534,437
22,600 @ Websense, Inc 567,825
----------
12,060,286
----------
See Accompanying Notes to Financial Statements
50
<PAGE>
Pilgrim VP
SmallCap
Opportunities
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited) (Continued)
--------------------------------------------------------------------------------
Shares Value
------ -----
Telecommunications: 10.04%
32,900 @ Andrew Corp. $ 1,104,206
17,000 @ Digital Lightwave, Inc. 1,708,500
9,600 @ Ditech Communications Corp. 907,800
40,900 @ Glenayre Technologies, Inc. 432,006
33,600 @ I3 Mobile, Inc 617,400
14,400 @ Mck Communications, Inc. 333,000
14,000 @ Natural Microsystems Corp. 1,574,125
15,600 @ Nextel Communications, Inc. 954,525
14,200 Nortel Networks Corp. 969,150
8,200 SBC Communications, Inc. 354,650
6,600 @ SDL, Inc. 1,882,237
4,800 @ Sycamore Networks, Inc. 529,800
5,800 @ TeleCorp PCS, Inc 233,813
10,200 @ Tritel, Inc. 302,813
7,200 @ Triton PCS Holdings, Inc. 415,800
-----------
12,319,825
-----------
Total Common Stocks (Cost $ 84,760,289) 112,752,610
-----------
Principal
Amount
------
SHORT-TERM INVESTMENTS: 9.44%
Repurchase Agreement: 9.44%
$11,592,000 State Street Bank & Trust Repurchase Agreement,
6.200% due 07/03/00 (Collateralized by
$11,065,000 U.S. Treasury Notes, 7.875%
Due 11/15/04, Market Value $11,825,719) $ 11,592,000
------------
Total Short-Term Investments
(Cost $11,592,000) 11,592,000
------------
Total Investments in Securities
(Cost $96,352,289)* 101.28% $124,344,610
Other Assets and Liabilities-Net -1.28% (1,576,579)
------ ------------
Net Assets 100.00% $122,768,031
====== =============
----------
@ Non income producing security
* Cost for federal income tax purposes is $52,799,517. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 31,615,721
Gross Unrealized Depreciation (3,590,988)
-------------
Net Unrealized Appreciation $ 28,024,733
=============
See Accompanying Notes to Financial Statements
51
<PAGE>
Pilgrim VP
International
Value
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS: 91.35%
BRAZIL: 7.58%
37,700 Banco Bradesco SA ADR $ 328,366
204 Brasil Telecom Participacoes SA ADR 14,905
63,800 Centrais Eletricas Brasileiras ADR 648,980
1,090 Centrais Geradoras do Sul do Brasil ADR 6,616
15,600 Petroleo Brasileiro SA ADR 471,299
102 Tele Celular Sul Participacoes ADR 4,616
340 Tele Centro Oeste Celular Partipacoes SA ADR 4,080
20 Tele Leste Celular Participacoes SA ADR 885
51 Tele Nordeste Celular Participacoes SA ADR 3,532
20 Tele Norte Celular Participacoes SA ADR 1,015
25,839 Tele Norte Leste Participacoes SA ADR 610,446
51 Telemig Celular Participacoes SA ADR 3,647
408 Telesp Celular Participacoes SA ADR 18,309
----------
2,116,696
----------
CANADA: 0.75%
12,400 @ Sun Life Financial Services 209,250
----------
CHINA: 0.90%
1,202,000 @ PetroChina Co., Ltd. 249,790
----------
FRANCE: 8.35%
8,500 Alcatel SA 557,497
3,500 Eridania Beghin-Say 342,833
19,500 Michelin (C.G.D.E.) 625,706
5,244 Total Fina Elf SA 804,036
----------
2,330,072
----------
GERMANY: 5.26%
7,600 BASF AG 305,465
19,600 Bayerische Motoren Werke AG 592,239
5,200 Deutsche Telekom 296,874
870 Muenchener Rueckversicher 273,264
----------
1,467,842
----------
HONG KONG: 1.88%
32,799 First Pacific Co. 11,150
69,283 Jardine Matheson Holdings, Ltd. 303,459
36,000 Swire Pacific, Ltd. 211,044
----------
525,653
----------
IRELAND: 2.28%
15,446 Allied Irish Banks PLC 138,320
79,400 Bank of Ireland 496,890
----------
635,210
----------
ITALY: 2.60%
64,700 ENI SpA 373,703
25,700 Telecom Italia SpA 353,316
----------
727,019
----------
JAPAN: 11.80%
7,000 Daiichi Pharmaceutical Co., Ltd. 177,466
46,000 Daiwa House Industry Co., Ltd. 335,554
25,000 Hitachi, Ltd. 360,492
54,000 Komatsu, Ltd. 379,662
12,000 Matsushita Electric Industrial 311,013
147,000 Mitsubishi Heavy Industries, Ltd. 651,147
122,000 Nippon Mitsubishi Oil Corp. 558,805
45,100 Tokio Marine & Fire Insurance 520,262
----------
3,294,401
----------
MEXICO: 2.46%
12,000 Telefonos de Mexico SA ADR 685,500
----------
NETHERLANDS: 3.08%
12,738 ING Groep NV 860,997
----------
NEW ZEALAND: 1.80%
143,700 Telecom Corp. of New Zealand 502,202
----------
PORTUGAL: 1.89%
47,026 Portugal Telecom 527,974
----------
SINGAPORE: 0.90%
19,615 DBS Group Holdings, Ltd. 252,144
----------
SOUTH AFRICA: 2.81%
32,300 De Beers Consolidated Mines, Ltd. 785,483
----------
SPAIN: 1.76%
27,333 Banco Bilbao Vizcaya Argentaria 408,384
441 Telefonica SA ADR 28,257
3,000 Union Electrica Fenosa SA 54,275
----------
490,916
----------
SWITZERLAND: 2.45%
200 Nestle SA 400,294
820 @ Swisscom AG 284,007
----------
684,301
----------
UNITED KINGDOM: 31 95.%
66,700 Allied Zurich PLC 788,721
103,000 BAE Systems PLC 642,100
88,000 British American Tobacco PLC 587,204
26,000 British Telecom PLC 335,969
124,191 Diageo PLC 1,114,326
52,000 @ HSBC Holdings PLC 595,343
28,400 Imperial Chemical Industries PLC 225,389
284,500 Marks & Spencer PLC 999,782
127,500 National Power PLC 812,195
62,300 Reckitt Benckiser PLC 697,569
64,954 Royal & Sun Alliance Insurance 421,629
100,900 @ South African Breweries PLC 737,023
159,000 Unilever PLC 962,331
----------
8,919,581
----------
VENEZUELA: 0.85%
8,770 Compania Anonima Nacional Telefonos ADR 238,433
----------
Total Common Stocks (Cost $22,349,999) 25,503,463
----------
See Accompanying Notes to Financial Statements
52
<PAGE>
Pilgrim VP
International
Value
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) (Unaudited)
--------------------------------------------------------------------------------
Principal
Amount
------
Repurchase Agreements: 9.49%
$2,649,000 State Street Repurchase Agreement, 6.200%
due 07/03/00 (Collateralized by
$2,195,000 U.S. Treasury Notes,
8.125% Due 05/21/21 Market Value
$2,702,594) $ 2,649,000
-----------
Total Short-Term Investments
(Cost $2,649,000) 2,649,000
-----------
Total Investments in Securities
(Cost $24,998,999)* 100.84% $28,152,463
Other Assets and Liabilities-Net -0.84% (233,595)
------ -----------
Net Assets 100.00% $27,918,868
====== ===========
----------
@ Non-income producing security
ADR American Depository Receipt
Cost for federal income tax purposes is $25,377,144.
Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 4,391,795
Gross Unrealized Depreciation (859,692)
-----------
Net Unrealized Appreciation $ 3,532,103
===========
See Accompanying Notes to Financial Statements
53
<PAGE>
Pilgrim VP
International
Value
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) (Unaudited)
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Aerospace/Defense 2.30%
Agriculture 1.23%
Auto Manufacturers 2.12%
Auto Parts & Equipment 2.24%
Banks 11.03%
Beverages 6.64%
Chemicals 1.91%
Electric 5.45%
Electrical Components & Equipment 1.29%
Food 4.88%
Holding Companies-Diversified 1.89%
Home Builders 1.20%
Home Furnishings 1.11%
Household Products/Wares 2.50%
Insurance 7.93%
Machinery-Construction & Mining 1.36%
Mining 2.81%
Miscellaneous Manufacturing 2.33%
Oil & Gas Producers 8.80%
Pharmaceuticals 0.63%
Retail 3.58%
Telecommunications 16.01%
Tobacco 2.11%
Short-Term Investments 9.49%
Other Assets and Liabilities, Net -0.84%
------
NET ASSETS 100.00%
======
See Accompanying Notes to Financial Statements
54
<PAGE>
Pilgrim VP
High Yield
Bond
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Principal
Amount Value
------ -----
CORPORATE BONDS: 79.79%
Automotive: 0.05%
$ 500,000 Safelite Glass Corp., 9.875%, due 12/15/06 $ 6,875
----------
Broadcasting: 2.08%
100,000 Capstar Broadcasting Partners, 9.250%,
due 07/01/07 102,500
200,000 Sinclair Broadcasting Group, Inc., 8.750%,
due 12/15/07 177,000
----------
279,500
----------
Business Services: 3.13%
500,000 Allied Waste North America, Inc., 10.000%,
due 08/01/09 420,000
----------
Cable & DBS: 23.79%
500,000 Adelphia Communications Corp., 7.875%,
due 05/01/09 423,750
500,000 Charter Communication Holdings, LLC, 8.625%,
due 04/01/09 441,875
500,000 @ Diva Systems Corp., 0/12.625%, due 03/01/08 240,000
750,000 Echostar DBS Corp., 9.250%, due 02/01/06 733,125
600,000 @ NTL, Inc., 0/9.750%, due 04/01/08 376,500
500,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 515,625
500,000 @@ United Pan Europe NV, 13.750%, due 02/01/10 237,500
250,000 # XM Satellite Radio Inc., 14.000%, 03/15/10 221,250
----------
3,189,625
----------
Communications-Internet: 5.42%
250,000 # Colo.com, 13.875%, due 03/15/10 270,000
250,000 # Exodus Communications, 11.625%, due 07/15/10 250,000
250,000 Globix Corp., 12.500%, due 02/01/10 206,250
----------
726,250
----------
Communications-Wireless: 3.87%
$ 750,000 @ Crown Castle Int'l Corp., 0/11.250%%,
due 08/01/11 472,500
80,000 # @ Ubiquitel Operating Co., 0/14.000%,
due 04/15/10 46,700
----------
519,200
----------
Communications-Wireline: 18.29%
500,000 @@@ Call Net Enterprises, Inc., 0/14.000%,
due 08/15/08 195,000
250,000 @@ Global Crossing Holding, Ltd., 9.500%,
due 11/15/09 242,500
500,000 @ ICG Holdings, Inc., 0/12.500%, due 05/01/06 416,250
750,000 Nextel Communications, 9.375%, due 11/15/09 720,000
500,000 Nextlink Communications, 10.750%, due 11/15/08 495,000
125,000 # SA Telecommunications, Inc., 10.000%,
due 08/15/06 0
500,000 Viatel, Inc., 11.500%, due 03/15/09 382,500
----------
2,451,250
----------
Containers, Packaging, Glass: 1.01%
362,000 Indesco Int'l, Inc., 9.750%, due 04/15/08 135,750
----------
Equipment Rental: 1.82%
250,000 Penhall Int'l, 12.000%, due 08/01/06 243,750
----------
Finance, Insurance, Banking: 1.76%
250,000 MFN Financial Corp., 10.000%, due 03/23/01 236,250
----------
Food, Beverage, Tobacco: 6.99%
450,000 @@ Fage Dairy Industries SA, 9.000%, due 02/01/07 362,250
500,000 North Atlantic Trading, Inc., 11.000%,
due 06/15/04 453,750
150,000 Standard Commercial Corp., 8.875%, due 08/01/05 120,750
----------
936,750
----------
Gaming & Lottery: 1.87%
250,000 Park Place Entertainment, 9.375%, due 02/15/07 251,250
----------
Homebuilding, Building Materials: 1.84%
250,000 # Dayton Superior Corp., 13.000%, due 06/15/09 246,250
----------
Paper & Forest Products: 1.46%
250,000 @@ Domain Industries, Ltd., 8.750%, due 03/15/04 195,000
----------
Restaurants: 2.24%
500,000 Romacorp, Inc., 12.000%, due 07/01/06 300,000
----------
Retail: 1.04%
200,000 Toms Foods, Inc., 10.500%, due 11/01/04 140,000
----------
Shipping: 2.43%
400,000 @@ Equimar Shipholdings, Ltd., 9.875%, due 07/01/07 78,720
300,000 Ultralpetrol Bahamas, Ltd., 10.500%,
due 04/01/08 247,500
----------
326,220
----------
Steel: 0.70%
100,000 WCI Steel, Inc., 10.000%, due 12/01/04 93,500
----------
Total Corporate Bonds (Cost $12,725,401) 10,697,420
----------
See Accompanying Notes to Financial Statements
55
<PAGE>
Pilgrim VP
High Yield
Bond
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) (Unaudited)
--------------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCK: 0.07%
Health Care: 0.01%
6,192 @ Intracel Corp. $ 1,547
-------
Manufacturing: 0.06%
150 Jordan Telecommunications 7,800
-------
Total Common Stock (Cost $131,683) 9,347
-------
PREFERRED STOCK: 3.99%
Broadcasting: 1.14%
1,520 Paxson Communications Corp. 152,380
-------
Communications-Wireline: 2.85%
4,232 Adelphia Business Solutions 381,935
-------
Total Preferred Stock (Cost $520,262) 534,315
-------
Number of
Warrants Value
-------- -----
WARRANTS: 0.44%
Cabel & DBS: 0.16%
1,500 Diva Systems Corp $ 21,375
--------
Communications-Internet: 0.00%
100 Unifi Communications, Inc. --
--------
Communications-Wireless: 0.00%
3,000 Geotek Communications, Inc. 30
--------
Communications-Wireline: 0.20%
150 Adelphia Business Solutions 26,288
--------
Food, Beverage, Tobacco: 0.08%
295 # Packaged Ice, Inc. $ 10,399
--------
Retail: 0.00%
666 Dairy Mart Convenience Stores 400
--------
Steel: 0.00%
500 Sheffield Steel Corp. --
--------
Total Warrants (Cost $15,333) 58,492
--------
See Accompanying Notes to Financial Statements
56
<PAGE>
Pilgrim VP
High Yield
Bond
Portfolio
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) (Unaudited)
--------------------------------------------------------------------------------
Principal
Amount
------
SHORT-TERM INVESTMENTS: 17.92%
Repurchase Agreement: 17.92%
$2,403,000 State Street Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $4,605,000 U.S.
Treasury Notes, 6.375% Due 09/30/2001
Market Value $4,735,552) $ 2,403,000
Total Short-Term Investments (Cost $2,403,000) 2,403,000
-----------
Total Investments in Securities
(Cost $15,795,679)* 102.21% $13,702,574
Other Assets and Liabilities-Net -2.21% (296,523)
------ -----------
Net Assets 100.00% $13,406,051
====== ===========
----------
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
* Cost for federal income tax purposes is $15,798,048. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 116,050
Gross Unrealized Depreciation (2,209,155)
-----------
Net Unrealized Depreciation $(2,093,105)
===========
See Accompanying Notes to Financial Statements
57
<PAGE>
Investment Manager
Pilgrim Investments, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Administrator
Pilgrim Group, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Transfer Agent
State Street Bank Transfer Agent Services
1 Heritage Place
North Quincy, MA 02171
Custodian
State Street Bank and Trust
1 Heritage Place
North Quincy, MA 02171
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Prospectus containing more complete information regarding the Portfolio,
including charges and expenses, may be obtained by calling Pilgrim Variable
Products Trust at 1-800-992-0180. Please read the prospectus carefully before
you invest or send money.
VPTRUSTSEMI063000
