ING Investment Funds Inc, et al. – ‘N-30D’ for 5/31/01

On:  Wednesday, 8/1/01, at 5:54pm ET   ·   As of:  8/2/01   ·   For:  5/31/01   ·   Accession #:  950147-1-501325   ·   File #s:  811-01939, 811-04431, 811-04434, 811-07428, 811-07978, 811-08817   ·   Correction:  This Filing was Corrected by the SEC on 11/27/02. ®

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Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
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Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual Report Dated 05/31/2001                       171±   724K 

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Annual Report                                                                   

May 31, 2001                            U.S. Equity Funds                       
                Pilgrim MagnaCap
Class Q                                 Pilgrim Research Enhanced Index         
                            Pilgrim Growth Opportunities
                       Pilgrim LargeCap Growth
                            Pilgrim MidCap Opportunities
                     Pilgrim MidCap Growth
                      Pilgrim Growth + Value
                              Pilgrim SmallCap Opportunities
                       Pilgrim SmallCap Growth

                     Equity & Income Funds

                Pilgrim Balanced
                   Pilgrim Convertible

[GRAPHIC]                                                                       

                                                              [LOGO] ING PILGRIM

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Pilgrim                                                                         
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 TABLE OF CONTENTS
--------------------------------------------------------------------------------

Letter to Shareholders ................................    1
Portfolio Managers' Reports:                                
  U.S. Equity Funds ...................................    2
  Equity & Income Funds ...............................   20
Index Descriptions ....................................   24
Report of Independent Auditors ........................   25
Statements of Assets and Liabilities ..................   26
Statements of Operations ..............................   32
Statements of Changes in Net Assets ...................   37
Financial Highlights ..................................   44
Notes to Financial Statements .........................   55
Portfolios of Investments .............................   75
Shareholder Meetings ..................................   99
Tax Information .......................................  101

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Pilgrim                                                                         
Funds                                                                           
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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------

Dear Shareholders:                                                              

We are pleased to present the Class Q May 31, 2001 Annual Report for the Pilgrim
Funds.                                                                          

On September 1, 2000, ING Groep N.V. (NYSE: ING) acquired ReliaStar Financial   
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the 
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,    
Inc., Administrator to the Funds. In conjunction with the acquisition, the      
Adviser, Distributor and Administrator changed their names to ING Pilgrim       
Investments, Inc., ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.,    
respectively, effective September 8, 2000. Subsequently, in February 2001, ING  
Pilgrim Group, Inc. and ING Pilgrim Investments, Inc. became ING Pilgrim Group, 
LLC and ING Pilgrim Investments, LLC, respectively.                             

Our fund family now has many funds of varying types                             

which provide core investment choices for the serious investor. There are eleven
Funds included in this Annual Report.                                           

At ING Pilgrim, we are dedicated to providing core investments for the serious  
investor. We believe that the key to success is matching quality core           
investments to the individual needs of investors. Core investments are the      
foundation of every portfolio and the basis of other important investment       
decisions. Pilgrim prides itself on providing a family of core investments      
designed to help you reach your financial goals. Our goal is for every investor 
to have a successful investment experience.(SM)                                 

Sincerely,                                                                      

ING Pilgrim Group, LLC                                                          

July 15, 2001                                                                   

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U.S. Equity                                                                     
Funds                                                                           
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                                                                       Portfolio
PILGRIM MAGNACAP FUND                                           Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Howard N. Kornblue, Senior Vice President and Senior 
Portfolio Manager; G. David Underwood, CFA, Vice President and Portfolio        
Manager, ING Pilgrim Investments, LLC. In June 2001, Thomas Jackson, Senior Vice
President and Senior Portfolio Manager, began serving as Portfolio Manager and  
Howard N. Kornblue began serving as Auxiliary Portfolio Manager.                

Goal: The Pilgrim MagnaCap Fund (the "Fund") seeks growth of capital, with      
dividend income as a secondary consideration. As a disciplined investment       
philosophy fund, 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 pay or had the financial capability from its operations
to pay 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: We have just completed one of the most extraordinary years in  
stock market history. Last year's massacre of technology and Internet stocks    
marked the end of one of the US's biggest financial manias of the last 100      
years. Yet it was a massacre that left much of the market relatively unscathed. 
The Nasdaq Composite Index plunged 39.3% to 2,470.5, the worst year since it was
created in 1971, giving back almost all of 1999's record 86% gain. Its peak to  
trough 54% plunge represented a loss of $3.3 trillion, equivalent to one-third  
of the houses in America disappearing. The Dow Jones Industrial Average fell    
only 6.2% to 10,786.9 for the year. That broke a nine-year winning streak and   
represented its worst calendar year since 1981. The Standard & Poor's 500 stock 
index ("S&P 500") lost 10.1% to 1,320.3 last year, its worst since 1977. The Dow
and the S&P 500 have given up less than a sixth of what they made when they     
tripled between 1995 and 1999, and excess in the market has been liquidated     
without destroying the entire market. The top performing stocks included        
utilities and health care stocks, including hospital companies, drug            
distributors, medical device makers and drug companies. Among utility stocks,   
the strongest were the natural gas producers, which benefited from soaring      
natural gas prices and worries about winter shortages. The big losers were      
almost all technology related, and included the names of beleaguered Internet   
related companies whose businesses did not hold up. Stocks ended the first      
quarter of 2001 with one of the worst periods ever for equity returns, further  
pressuring markets already under siege. The quarter started constructively with 
the equity markets trending upward in January, only to weaken markedly in       
February and be followed by a widespread rout in March. The late-quarter        
sell-off hit every major equity index and investment style. Investors continued 
to dump technology and telecommunications stocks, but pummeled the rest of the  
market indiscriminately. Most unusual, the sell down took place even as the     
Federal Reserve lowered interest rates. The S&P 500 lost 11.9%. Punished the    
most, the technology-dominated NASDAQ lost 25.5%.                               

Performance: For the eleven months ended May 31, 2001, the Fund's Class Q shares
provided a total return of -2.60%, compared to the S&P 500 Index, which returned
-12.70% for the same period.                                                    

Portfolio Specifics: We believe that the Fund's past success can be attributed  
to the 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 the 40 to 60 equities which we believe will 
be most likely to exhibit a high degree of performance. Among the individual    
stocks that were significant contributors to performance were Microsoft, Best   
Buy, Tricon Global Restaurants, and Compaq Computer.                            

Market Outlook: Going forward, we will continue to draw from the pool of        
companies that come closest to meeting the Fund's strict investment criteria    
given market conditions, the circumstances of the company and the sector within 
which it falls. There is a question if last year's Nasdaq decline is the        
vanguard of a broad based bear market. The answer depends mostly on whether the 
economy's downshift in recent months is a pause in the longest expansion in a   
century or the first stage of a recession. The Federal Reserve's raising of     
interest rates through last May eventually sank stocks and braked the speeding  
economy. As the Federal Reserve now reverses course and lowers rates, the       
economy and stock prices should move forward. Fed easing usually outweighs      
earnings deceleration in driving stock prices. During the past thirty years, the
equity market has risen on both a six-month and one year horizon from the       
initiation of a Fed easing process, with two key exceptions. Those exceptions   
were the mid-1970s and early 1980s, when the U.S. economy fell into deep slumps 
that were still underway a year after the Fed began to ease. Even including     
those two periods, the S&P 500 was up an average of 12% one year after the Fed  
began easing its policy. Excluding them, the S&P 500 was up an average of 22%.  
Unless one believes the U.S. economy is about to crumble, Fed easing would mark 
a buying opportunity for equities. We believe stock prices can continue to rise 
selectively in 2001 in concert with improvements in corporate earnings and cash 
flows. Accordingly, we intend to remain almost fully invested, selecting stocks 
on the basis described above.                                                   

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Portfolio                                                                       
Managers' Report                                           PILGRIM MAGNACAP FUND
--------------------------------------------------------------------------------

                                          11/19/99       5/31/99       5/31/01
                                          --------       -------       -------
Pilgrim MagnaCap Fund Class Q               $10,000       $ 9,975       $ 9,489 
S&P 500 Index                               $10,000       $10,290       $ 9,204 

Average Annual Total Returns for              
the Periods Ended May 31, 2001              
--------------------------------              
 Since Inception
1 Year         11/19/99               
------         --------               
Class Q              -4.88%          -3.37%                                     
S&P 500 Index       -10.55%          -5.38%(1)                                  

Based upon a $10,000 intitial investment, the graph and table above illustrate  
the total return of Pilgrim MagnaCap Fund against the S&P 500 Index. The Index  
has an inherent performance advantage over the Fund since it has no cash in its 
portfolio, imposes no sales charges and incurs no operating expenses. An        
investor cannot invest directly in an index. The Fund's performance is shown    
both with and without the imposition of the sales charges.                      

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 managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the index is shown from 12/01/99.           

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities.                                                        

 See accompanying index descriptions on page 24.

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                                                                       Portfolio
PILGIRM RESEARCH ENHANCED INDEX FUND                            Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: J.P. Morgan Investment Management, Inc. led by       
Timothy Devlin, Vice President.                                                 

Goal: The Research Enhanced Index Fund (the "Fund" or "REI") seeks capital      
appreciation by investing primarily in large companies that make up the S&P 500 
Index. The Fund seeks returns that modestly exceed those of the S&P 500 Index   
over the long term with virtually the same level of volatility.                 

Market Overview: The seven months ending May 31, 2001 in the equity markets were
characterized by glimpses of optimism shrouded by a cloud of negativity.        
November and December of 2000 saw a huge sell-off in the equity markets led by a
27% fall in the Nasdaq and an 8% drop in the S&P 500. This sell-off was driven  
by a number of factors. Technology stocks plummeted as a result of numerous     
earnings down grades and disappointments. Telecoms declined rapidly as wireless 
companies addressed their spectrum and capex financing needs and long distance  
voice providers continued to cut prices. On a larger scale, the increased fear  
of a recession and a prolonged Presidential election also added to the          
uncertainty in the market for the quarter.                                      

The first quarter of 2001 saw a continuation of this drastic decline for equity 
markets as the S&P 500 and the Nasdaq declined 11.9% and 25.5%, respectively.   
The year began positively as the markets were buoyed by a surprise Fed rate cut 
of 50 basis points on January 3 and a subsequent 50 basis point cut announced at
the January 31 Federal Open Market Committee (FOMC) meeting. Investors sensed   
the market had reached a bottom, rotated out of defensive names and returned to 
scoop up bargains in Telecoms and Technology. News during the months of February
and March, however, did more than negate January's optimism. Signs of slowing   
economic growth, concerns of an inventory correction, announcements of cuts in  
capital spending, and deteriorating sales, profits and cash flow renewed fears  
of a hard landing. This environment drove the Nasdaq down to a two- year low in 
early March. Declines across all markets then continued as investors were       
disappointed by the Fed's 50 basis point interest rate cut at the March 20th    
FOMC meeting. At the end of the quarter, the S&P 500 and the Nasdaq had returned
to levels not seen since the second half of 1998.                               

The markets, however, came roaring back in April. Spurred on by another surprise
50 basis point rate cut and bargain hunting following the massive sell-offs in  
February and March, the S&P 500 closed up 7.7% and the Nasdaq up 15.0% in April.
The markets then leveled off in May. The month did see a brief rally sparked by 
the Fed's 50 basis point cut in the middle of the month, but most indices       
returned to pre-easing price levels by month end.                               

Performance: For the seven months ended May 31, 2000, the Fund's Class Q Shares 
provided a total return of -11.82% compared to a return of -11.48% for the S&P  
500 Index.                                                                      

Portfolio Specifics: As the Fund is sector and style neutral relative to the S&P
500, REI's performance over the period was attributable purely to stock         
selection within sectors. The Fund's stock selection was robust overall as stock
picking added value in 12 out of 18 sectors. Security selection added most value
in Industrial Cyclicals, Consumer Stable and Finance. On the other hand, stock  
picking in Software & Services, Telecoms and Network Technology proved          
troublesome as companies in these sectors gave analysts almost no guidance with 
regards to earnings.                                                            

More specifically, positions within the Fund that significantly added to        
performance included overweights in Philip Morris and Comcast and an underweight
in Applied Micro Circuits. Positions that detracted from performance included   
overweights in Sun Microsystems and Level 3 Communications.                     

Market Outlook: U.S. economic data continues to be somewhat mixed. The          
Purchasing Managers Index suggests that the drag from the inventory cycle has   
peaked. Additionally, housing and autos have held up well reinforcing hopes that
the GPD growth rate has bottomed. However, the economy faces major structural   
headwinds impeding demand growth, so a strong snapback to 3% or 4% GDP growth   
seems very unlikely; particularly in the short run. Households must rebuild     
savings now that the equity bubble has burst; and the capital spending boom of  
the 1990s has given way to a bust. On an inflation front, the data during the   
next couple of months should be market-friendly because demand growth has       
cooled, commodity prices are falling, the dollar is firm and incipient excess   
capacity suggests corporate pricing will remain low. Corporate profit growth,   
however, should remain below sales growth until after the unemployment rate has 
risen and excess capacity has been worked off. All in all, the Fund's sector    
neutral, stock picking strategy emphasizing company fundamentals should be able 
to add value across all market environments.                                    

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Portfolio                                                                       
Managers' Report                            PILGIRM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------

                                                   4/4/00     5/31/00    5/31/01
                                                   -------    -------    -------
Pilgrim Research Enhanced Index Fund Class Q       $10,000    $ 9,421    $ 8,263
S&P 500 Index                                      $10,000    $ 9,500    $ 8,497

Average Annual Total Returns for
the Periods Ended May 31, 2001
--------------------------------
               Since Inception
1 Year          04/04/00  
------          --------  
Class Q                    -12.29%          -15.16%                             
S&P 500 Index              -10.55%          -13.03%(1)                          

Based on a $10,000 initial investment, the graph and table above illustrates the
total return of Pilgrim Research Enhanced Index Fund against the S&P 500 Index. 
The Index has an inherent performance advantage over the Fund since it has no   
cash in its portfolio, imposes no sales charges and incurs no operating         
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund. Total returns would have been  
lower had there been no waiver to the Fund.                                     

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the Index is shown from 04/01/00.           

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities.                                                        

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
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                                                                       Portfolio
PILGRIM GROWTH OPPORTUNITIES FUND                               Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager; Jeff Bernstein, Senior Vice President and Portfolio Manager, ING       
Pilgrim Investments, LLC.                                                       

Goal: The Fund seeks long-term growth of capital by investing primarily in the  
common stock of U.S. companies that the Portfolio Manager feels have above      
average prospects for growth.                                                   

Market Overview: The year 2001 began with surprise rate cut by the Federal      
Reserve, and the Fed's influence on the economy and the stock market continued  
to be the story of the year. At this time last year, GDP was growing close to   
6%, but the effect of 175 basis points in interest rate hikes dramatically      
slowed growth in the second half of 2000. By the fourth quarter of 2000, US GDP 
had slowed to a 1.0% growth rate, and the United States faced the prospect of   
its first recession since 1990-91. Since the start of the year 2001, the Fed has
cut interest rates by 250 basis points, as the lagging economic indicators and  
corporate earnings pointed to a further deterioration in the economy.           

The deterioration in the growth of earnings was most apparent in the fastest    
growing sectors of the economy, namely technology and telecommunications.       
Healthcare stocks also struggled as investors sought the relative safety of     
value stocks, in consumer-related stocks, energy, and basic materials. The      
technology-heavy NASDAQ Composite was the hardest hit benchmark with a decline  
of 14.57% during the first five months of the year. While smaller cap stocks    
showed some strength with the Russell 2000 Index gaining 3.29%, the performance 
of other benchmarks was mixed. The Dow Jones Industrials gained 1.16% in 2001   
and the S&P Midcap Index rose 1.38%, while the S&P 500 dipped 4.37%. While there
was some evidence of a recovery in stocks, the signs of a classic bear market   
were apparent, as the S&P 500 dropped 26% from peak to trough, while the NASDAQ 
suffered a decline of 68%.                                                      

Performance: For the five months ended May 31, 2001, the Fund's Class Q shares  
provided a total return of -26.61%, compared to the S&P 500 Index, which        
returned -4.37% over the same period.                                           

Portfolio Specifics: The Fund struggled in a market environment that favored    
value stocks over growth-oriented strategies. While the Fund started the year   
with weightings in "defensive" sectors such as energy, healthcare, and consumer 
stocks, we found the opportunity to invest in higher growth companies at        
attractive valuations. Thus, we increased our weightings in selected technology 
industries and companies.                                                       

For the year-to-date period, the Fund has seen the biggest impact from the      
"America's Changing Leisure Time" and "Life on the Net" investment themes, while
the strongest contributors among the individual stocks were Lam Research, Brooks
Automation, Peregrine Systems, and Jones Apparel.                               

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     
Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who we believe can deliver          
above-average earnings growth in 2002 and beyond, and we are particularly       
focused on those companies who are improving their business models through this 
downturn and have opportunities for significant improvement in profitability    
ahead of them.                                                                  

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Portfolio                                                                       
Managers' Report                               PILGRIM GROWTH OPPORTUNITIES FUND
--------------------------------------------------------------------------------

                                                        6/1/00       5/31/01
                                                       -------       -------
Pilgrim Growth Opportunities Fund Class Q                $10,000       $ 6,051  
S&P 500 Index                                            $10,000       $ 8,945  

Average Annual Total Returns          
for the Period Ended          
May 31, 2001          
----------------------------          
Since Inception           
06/01/00          
--------          
Class Q                         -39.49%                                         
S&P 500 Index                   -10.55%                                         

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim Growth Opportunities Fund against the S&P 500 Index. The
Index has an inherent performance advantage over the Fund since it has no cash  
in its portfolio, imposes no sales charges and incurs no operating expenses. An 
investor cannot invest directly in an index. The Fund's performance is shown    
both with and without the imposition of sales charges.                          

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund. Total returns would have been  
lower had there been no waiver to the Fund.                                     

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund 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 volatility than investing  
in stocks of larger companies.                                                  

 See accompanying index descriptions on page 24.

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                                                                       Portfolio
PILGRIM LARGECAP GROWTH FUND                                    Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager; Jeff Bernstein, Senior Vice President and Portfolio Manager, ING       
Pilgrim Investments, LLC.                                                       

Goal: The LargeCap Growth Fund (the "Fund") seeks long-term capital appreciation
by investing primarily in stocks from a universe of U.S. companies with market  
capitalizations corresponding to the upper 90% of the S&P 500 Index.            

Market Overview: The past year has seen a dramatic change in the outlook and the
performance of the US economy, which led to an extremely volatile stock market  
over that time. At this time last year, GDP was growing close to 6%, but the    
effect of 175 basis points in interest rate hikes dramatically slowed growth in 
the second half of 2000. By the fourth quarter of 2000, US GDP had slowed to a  
1.0% growth rate, and the United States faced the prospect of its first         
recession since 1990-91. Since the start of the year 2001, the Fed has cut      
interest rates by 250 basis points, as the lagging economic indicators and      
corporate earnings pointed to a further deterioration in the economy.           

Equity investors clearly favored value stocks over growth in this environment,  
and the technology- and telecommunications-fueled rally of 1999 and early 2000  
ended as market leadership shifted to utilities, energy, basic materials, and,  
following the rate cuts, financials. The hardest hit benchmark was the NASDAQ   
Composite, which plummeted 46.79% over the past 11 months, despite a rally of   
nearly 15% in April and May. While other sectors of the economy saw a decline in
their earnings growth, none was as dramatic as the decline in NASDAQ earnings.  
The S&P 500 Index dropped 12.70%, while among small cap stocks, the Russell 2000
Index slid 2.79%. However, the Dow Jones Industrials gained 4.44% over the past 
11 months, while the S&P Midcap Index gained 9.32% as the change to the earnings
outlook was not nearly as severe as in other sectors. >From peak to trough, the 
S&P 500 declined 26% and the NASDAQ Composite dropped 68%--classic bear market  
declines on the part of the S&P 500 and the largest decline in the NASDAQ since 
that index was developed.                                                       

Performance: For the eleven months ended May 31, 2001, the Fund's Class Q shares
provided a total return of -42.50%, compared to the Russell 1000 Growth Index,  
which returned -34.66% over the same period.                                    

Portfolio Specifics: The market was clearly unkind towards funds that invest in 
growth stocks over this period. The Fund became increasingly "defensive" in the 
second half of calendar 2000, and we exited the year with significant weightings
in energy, healthcare, and consumer stocks, as they showed the best opportunity 
for earnings growth. However, as 2001 has progressed, we have found the         
opportunity to invest in growth companies at attractive valuations, and our     
positions in technology and telecommunications shares have increased.           

Over the past fiscal year, the sectors that have had the biggest positive impact
on performance were utilities, healthcare, and financials, while the best       
performing individual stocks in the Fund were eBay, Baxter International, and   
Transocean Sedco Forex.                                                         

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     

Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who can deliver above-average       
earnings growth in 2002 and beyond, and we are particularly focused on those    
companies who are improving their business models through this downturn and have
significant improvement in profitability ahead of them.                         

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Portfolio                                                                       
Managers' Report                                    PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------

                                                                [Download Table]

                                      7/21/97  5/31/98  5/31/99  5/31/00  5/31/01
                                      -------  -------  -------  -------  -------
                                                                                 
Pilgrim LargeCap Growth Fund Class Q  $10,000  $12,688  $21,841  $32,876  $20,801
Russell 1000 Growth Index             $10,000  $11,375  $14,357  $17,946  $12,614

                      Average Annual Total Returns
                      for the Periods Ended May 31, 2001
                      ----------------------------------
                                   Since Inception
                  1 Year           7/21/97
                  ------           -------
Class Q                              -36.73%           20.89%                   
Russell 1000 Growth Index            -29.71%            6.25%(1)                

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth    
Index. The Index has an inherent performance advantage over the Fund since it   
has no cash in its portfolio, imposes no sales charges and incurs no operating  
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund, subject to possible later      
reimbursement during a three-year period. Total returns would have been lower   
had there been no deferral to the Fund.                                         

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the Index is shown from 8/1/97.             

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities.                                                        

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
Funds                                                                           
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                                                                       Portfolio
PILGRIM MIDCAP OPPORTUNITIES FUND                               Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager; Jeff Bernstein, Senior Vice President and Portfolio Manager, ING       
Pilgrim Investments, LLC.                                                       

Goal: The Fund seeks long-term capital appreciation by investing primarily in   
the common stock of mid-sized U.S. companies that the Portfolio Manager feels   
have above average prospects for growth.                                        

Market Overview: The year 2001 began with surprise rate cut by the Federal      
Reserve, and the Fed's influence on the economy and the stock market continued  
to be the story of the year. At this time last year, GDP was growing close to   
6%, but the effect of 175 basis points in interest rate hikes dramatically      
slowed growth in the second half of 2000. By the fourth quarter of 2000, US GDP 
had slowed to a 1.0% growth rate, and the United States faced the prospect of   
its first recession since 1990-91. Since the start of the year 2001, the Fed has
cut interest rates by 250 basis points, as the lagging economic indicators and  
corporate earnings pointed to a further deterioration in the economy.           

The deterioration in the growth of earnings was most apparent in the fastest    
growing sectors of the economy, namely technology and telecommunications.       
Healthcare stocks also struggled as investors sought the relative safety of     
value stocks, in consumer-related stocks, energy, and basic materials. The      
technology-heavy NASDAQ Composite was the hardest hit benchmark with a decline  
of 14.57% during the first five months of the year. While smaller cap stocks    
showed some strength with the Russell 2000 Index gaining 3.29%, the performance 
of other benchmarks was mixed. The Dow Jones Industrials gained 1.16% in 2001   
and the S&P Midcap Index rose 1.38%, while the S&P 500 dipped 4.37%. While there
was some evidence of a recovery in stocks, the signs of a classic bear market   
were apparent, as the S&P 500 dropped 26% from peak to trough, while the NASDAQ 
suffered a decline of 68%.                                                      

Performance: For the five months ended May 31, 2001, the Fund's Class Q shares  
provided a total return of -23.64%, compared to the S&P Midcap 400 Index, which 
returned 1.38% over the same period.                                            

Portfolio Specifics: The Fund struggled in a market environment that favored    
value stocks over growth-oriented strategies. While the Fund started the year   
with weightings in "defensive" sectors such as energy, healthcare, and consumer 
stocks, we found the opportunity to invest in higher growth companies at        
attractive valuations. Thus, we increased our weightings in selected technology 
industries and companies.                                                       

For the year to date period, the Fund has seen the biggest impact from the      
"Greying of America," "Life on the Net," and "New Age of Media" themes, while   
the strongest contributors among the individual stocks were Cendant Corporation,
Conseco Inc., Intersil Corporation, and TyCom Limited.                          

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     

Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who we believe can deliver          
above-average earnings growth in 2002 and beyond, and we are particularly       
focused on those companies who are improving their business models through this 
downturn and have opportunities for significant improvement in profitability    
ahead of them.                                                                  

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Portfolio                                                                       
Managers' Report                               PILGRIM MIDCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------

                                             4/4/00       5/31/00      5/31/01
                                             -------      -------      -------
Pilgrim MidCap Opportunities Fund Class Q     $10,000      $ 9,366      $ 7,188 
S&P MidCap 400 Index                          $10,000      $ 9,530      $10,571 

              Average Annual Total Returns for
              the Periods Ended May 31, 2001
              --------------------------------
                             Since Inception
            1 Year          04/04/00
            ------          --------
Class Q                          -23.26%           -24.77%                      
S&P MidCap 400 Index              10.92%             4.88%(1)                   

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim MidCap Opportunities Fund against the S&P MidCap 400    
Index. The Index has an inherent performance advantage over the Fund since it   
has no cash in its portfolio, imposes no sales charges and incurs no operating  
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund. Total returns would have been  
lower had there been no waiver to the Fund.                                     

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the index is shown from 4/1/00.             

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities. In exchange for higher growth potential, investing in  
stocks of smaller companies may entail greater price volatility than investing  
in stocks of larger companies.                                                  

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

                                                                       Portfolio
PILGRIM MIDCAP GROWTH FUND                                      Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager; Jeff Bernstein, Senior Vice President and Portfolio Manager, ING       
Pilgrim Investments, LLC.                                                       

Goal: The MidCap Growth Fund (the "Fund") seeks maximum long-term capital       
appreciation by investing at least 65% of its total assets in equity securities 
of medium-sized U.S. companies, and at least 75% of its total assets in common  
stock that the portfolio managers feel have above average prospects for growth. 

Market Overview: The past year has seen a dramatic change in the outlook and the
performance of the US economy, which led to an extremely volatile stock market  
over that time. At this time last year, GDP was growing close to 6%, but the    
effect of 175 basis points in interest rate hikes dramatically slowed growth in 
the second half of 2000. By the fourth quarter of 2000, US GDP had slowed to a  
1.0% growth rate, and the United States faced the prospect of its first         
recession since 1990-91. Since the start of the year 2001, the Fed has cut      
interest rates by 250 basis points, as the lagging economic indicators and      
corporate earnings pointed to a further deterioration in the economy.           

Equity investors clearly favored value stocks over growth in this environment,  
and the technology- and telecommunications-fueled rally of 1999 and early 2000  
ended as market leadership shifted to utilities, energy, basic materials, and,  
following the rate cuts, financials. The hardest hit benchmark was the NASDAQ   
Composite, which plummeted 46.67% over the past 11 months, despite a rally of   
nearly 15% in April and May. While other sectors of the economy saw a decline in
their earnings growth, none was as dramatic as the decline in NASDAQ earnings.  
The S&P 500 Index dropped 12.70%, while among small cap stocks, the Russell 2000
Index slid 2.79%. However, the Dow Jones Industrials gained 4.44% over the past 
11 months, while the S&P Midcap Index gained 9.32% as the change to the earnings
outlook was not nearly as severe as in other sectors. >From peak to trough, the 
S&P 500 declined 26% and the NASDAQ Composite dropped 68%--classic bear market  
declines on the part of the S&P 500 and the largest decline in the NASDAQ since 
that index was developed.                                                       

Performance: For the eleven months ended May 31, 2001, the Fund's Class Q shares
provided a total return of -33.14%, compared to the Russell Midcap Growth Index,
which returned -31.55% over the same period.                                    

Portfolio Specifics: The market was clearly unkind towards funds that invest in 
growth stocks over this period. The Fund became increasingly "defensive" in the 
second half of calendar 2000, and we exited the year with significant weightings
in energy, healthcare, and consumer stocks, as they showed the best opportunity 
for earnings growth. However, as 2001 has progressed, we have found the         
opportunity to invest in growth companies at attractive valuations, and our     
positions in technology and telecommunications shares have increased.           

Over the past fiscal year, the themes that have had the biggest positive impact 
on performance were "Re-Energizing America," the "Greying of America," and      
"Flourishing in the Managed Care Environment," while the best performing        
individual stocks in the Fund were Community Health Systems, IDEC               
Pharmaceuticals, EOG Resources, and Talbots.                                    

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     

Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who we believe can deliver          
above-average earnings growth in 2002 and beyond, and we are particularly       
focused on those companies who are improving their business models through this 
downturn and have opportunities for significant improvement in profitability    
ahead of them.                                                                  

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Portfolio                                                                       
Managers' Report                                      PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                    6/30/94  5/31/95  5/31/96  5/31/97  5/31/98  5/31/99  5/31/00  5/31/01
                                    -------  -------  -------  -------  -------  -------  -------  -------
                                                                                                          
Pilgrim MidCap Growth Fund Class Q  $10,000  $11,296  $16,380  $16,298  $19,817  $24,432  $42,057  $31,420
Russell MidCap Growth Index         $10,000  $12,092  $16,112  $17,879  $22,159  $25,625  $36,829  $27,885

                        Average Annual Total Returns for
                        the Periods Ended May 31, 2001
                        --------------------------------
                                               Since Inception
                       1 Year     5 Year       6/30/94
                       ------     ------       -------
Class Q                            -25.29%     13.91%        17.99%             
Russell MidCap Growth Index        -24.28%     11.60%        15.98%(1)          

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim MidCap Growth Fund against the Russell MidCap Growth    
Index. The Index has an inherent performance advantage over the Fund since it   
has no cash in its portfolio, imposes no sales charges and incurs no operating  
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and operating expenses otherwise payable by the Fund, subject to possible  
later reimbursement during a three-year period. Total returns would have been   
lower had there been no deferral to the Fund.                                   

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the index is shown form 07/01/94.           

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities. To the extent the Fund invests in mid-size companies,  
stocks of mid-size companies may entail greater price volatility than those of  
larger companies.                                                               

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

                                                                       Portfolio
PILGRIM GROWTH + VALUE FUND                                     Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: Navellier Fund Management, Inc. is the Sub-Advisor to
the Pilgrim Growth + Value Fund. Louis Navellier is the Chief Investment Officer
and President.                                                                  

Goal: The Pilgrim Growth + Value Fund (the "Fund") seeks to provide capital     
appreciation by investing in equity securities of companies the Portfolio       
Manager believes are poised to rise in price.                                   

Market Overview: There were few bright spots for investors during the period    
between October 31, 2000 and May 31, 2001.The volatility exhibited in the stock 
market during previous six months continued unabated as many companies warned of
revenue and profit slowdowns. Any brief attempts at rallies in the stock market 
could not be sustained as bearish sentiment and falling consumer confidence     
swamped the market early in the year. There was little room to hide during the  
period as evidenced by the fact that the S&P 500 Index fell -18.75%. The        
technology heavy NASDAQ Composite also fell a dramatic -37.19%. Much of the     
relentless selling was fueled from tax selling (investors paying taxes on last  
year's capital gains), insider selling on 144 stock and margin call selling. For
most of the period investors continued to punish tech stocks and other high P/E 
sectors. GARP (Growth At a Reasonable Price) strategies were favored by equity  
investors who typically sought refuge in value stocks over this tumultuous      
period.                                                                         

In the first quarter of the year, consumer spending was responsible for         
virtually all of the U.S. economy's growth. However, the consensus of economists
is that the U.S. economy weakened considerably late in the first quarter. This  
weakness has carried into the current quarter, which is why the Federal Reserve 
Board cut key interest rates for the fifth time this year. Furthermore,         
productivity recently fell, which is a big concern for the Federal Reserve Board
since declining productivity will continue to erode business profits and        
investor confidence. Tentative investor confidence appeared to come back late in
the period as respectable returns for the broad market were posted in April and 
May.                                                                            

Performance: The Fund's Class Q shares returned -38.00% during the seven months 
ended May 31, 2001 compared to the NASDAQ Composite which returned -37.26%, the 
Russell 2000 Growth Index which returned -15.58% and the Russell 2000 Index     
which returned 0.69%.                                                           

Portfolio Specifics: At the end of October the portfolio was heavily weighted in
healthcare and technology stocks. As we revised our models at the end of the    
fourth and first quarters, the portfolio became more broadly diversified and    
shifted away from the more vulnerable technology stocks. Over the period the    
portfolio's average market capitalization has moved from an average of $4.9     
billion down to approximately $4.1 billion. Significantly, the portfolio started
the period with a median P/E of approximately 54.1 and currently has a median   
P/E of 24.2, evidencing the shift toward more defensive stocks.                 

Two recent changes have been incorporated into our stock selection process.     
First, our primary reward to risk measure has been supplemented with short-term 
reward to risk measures. Second, we have enhanced our fundamental models with   
new fundamental variables derived from forecasted earnings and earnings growth  
data. Extensive research indicates the addition of the short-term measures and  
the new fundamental variables should provide significant opportunities for      
downside portfolio protection in declining markets without altering upside      
potential in rising markets.                                                    

Market Outlook: Much of good news that will likely drive the stock market higher
in the short term has already been announced. The Federal Reserve Board cut key 
interest rates for the fifth time this year to help insure that the U.S. economy
recovers rapidly. In the upcoming months, the $1.35 trillion tax cut will become
effective and should stimulate the U.S. economy as tax cuts are gradually phased
in over the next several years. The capital gains tax reform brewing in         
Congress, will further stimulate the stock market later this year due to the tax
advantage that stocks will have over fixed income instruments. Retail sales     
appear to be rising and it is now evident that a consumer-led economic recovery 
may be underway. The only problem on the investment horizon is that the first   
quarter earnings declined for both the S&P 500 and the NASDAQ market.           
Unfortunately, the second quarter earnings results are also expected to decline 
as much as -20% for many of the large NASDAQ stocks. The quantitative stock     
selection models that we utilize to sort, grade and ultimately select the stocks
for our portfolios are forecasting a narrow stock market in the upcoming months.
We believe only the top 10% of large capitalization stocks and top 20% of       
small-to-mid capitalization stocks will likely outperform the overall stock     
market in the upcoming months due to the weak and deteriorating fundamentals    
associated with many companies. There is currently a record $2 trillion in money
market accounts. This money will cascade into the market once investors truly   
believe that the market has bottomed and will provide plenty of fuel to drive   
stocks higher. Although, near term indicators are not overly positive, we       
believe the market environment should improve this fall when corporate profits  
are expected to turnaround. Until then, the portfolio will assume a more        
defensive stance by holding predominately recession-resistant companies that are
posting strong sales and earnings in an anemic economic environment.            

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Portfolio                                                                       
Managers' Report                                     PILGRIM GROWTH + VALUE FUND
--------------------------------------------------------------------------------

                                                       6/5/00      5/31/01
                                                      -------      -------
Pilgrim Growth + Value Fund Class Q                      $10,000      $ 5,775   
Russell 2000 Index                                       $10,000      $10,569   

          Average Annual Total Returns
          for the Period Ended
          May 31, 2001
          ----------------------------
         Since Inception
          6/5/00
          ------
Class Q                                   -42.24%                               
Russell 2000 Index                          5.69%(1)                            
Russell 2000 Growth Index                 -15.74%(1)                            

Based on a $10,000 initial investment, the graph and table above illustrates the
total return of Pilgrim Growth + Value Fund against the Russell 2000 Index. The 
Index has an inherent performance advantage over the Fund since it has no cash  
in its portfolio, imposes no sales charges and incurs no operating expenses. An 
investor cannot invest directly in an index. The Fund's performance is shown    
both with and without the imposition of sales charges.                          

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund. Total returns would have been  
lower had there been no waiver to the Fund.                                     

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the Index is shown from 06/01/00.           

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities. In exchange for higher growth potential, investing in  
stocks of smaller and mid-sized companies may entail greater price volatility   
than investing in stocks of larger companies.                                   

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

                                                                       Portfolio
PILGRIM SMALLCAP OPPORTUNITIES FUND                             Manager's Report
--------------------------------------------------------------------            

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager, ING Pilgrim Investments, LLC.                                          

Goal: The Fund 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 feels have above average prospects for growth.                

Market Overview: The year 2001 began with surprise rate cut by the Federal      
Reserve, and the Fed's influence on the economy and the stock market continued  
to be the story of the year. At this time last year, GDP was growing close to   
6%, but the effect of 175 basis points in interest rate hikes dramatically      
slowed growth in the second half of 2000. By the fourth quarter of 2000, US GDP 
had slowed to a 1.0% growth rate, and the United States faced the prospect of   
its first recession since 1990-91. Since the start of the year 2001, the Fed has
cut interest rates by 250 basis points, as the lagging economic indicators and  
corporate earnings pointed to a further deterioration in the economy.           

The deterioration in the growth of earnings was most apparent in the fastest    
growing sectors of the economy, namely technology and telecommunications.       
Healthcare stocks also struggled as investors sought the relative safety of     
value stocks, in consumer-related stocks, energy, and basic materials. The      
technology-heavy NASDAQ Composite was the hardest hit benchmark with a decline  
of 14.57% during the first five months of the year. While smaller cap stocks    
showed some strength with the Russell 2000 Index gaining 3.29%, the performance 
of other benchmarks was mixed. The Dow Jones Industrials gained 1.16% in 2001   
and the S&P Midcap Index rose 1.38%, while the S&P 500 dipped 4.37%. While there
was some evidence of a recovery in stocks, the signs of a classic bear market   
were apparent, as the S&P 500 dropped 26% from peak to trough, while the NASDAQ 
suffered a decline of 68%.                                                      

Performance: For the five months ended May 31, 2001, the Fund's Class Q shares  
provided a total return of -17.78%, compared to the Russell 2000 Index, which   
returned 3.29% over the same period.                                            

Portfolio Specifics: The spread between growth and value remained wide during   
the first five months of 2001, as the Russell 2000 Growth Index dropped 2.62%,  
while the Russell 2000 Value Index gained 8.36%. While the Fund started the year
with weightings in "defensive" sectors such as energy, healthcare, and consumer 
stocks, we found the opportunity to invest in higher growth companies at        
attractive valuations. Thus, we increased our weightings in selected technology 
industries and companies.                                                       

For the year to date period, the Fund has seen the biggest impact from the      
"Re-Energizing America" and the "New Consumer" themes, while the strongest      
contributors among the individual stocks were HS Resources, Hot Topic,          
Abercrombie & Fitch, and Wet Seal.                                              

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     

Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who we believe can deliver          
above-average earnings growth in 2002 and beyond, and we are particularly       
focused on those companies who are improving their business models through this 
downturn and have significant opportunities for improvement in profitability    
ahead of them.                                                                  

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Portfolio                                                                       
Manager's Report                             PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------

                                                  4/4/00     5/31/00     5/31/01
                                                 -------     -------     -------
Pilgrim SmallCap Opportunities Fund Class Q      $10,000     $ 8,835     $ 7,541
Russell 2000 Index                               $10,000     $ 8,850     $ 9,354

          Average Annual Total Returns for
          the Periods Ended May 31, 2001
          --------------------------------
                         Since Inception
       1 Year           4/4/00
       ------           ------
Class Q                         -14.64%          -21.59%                        
Russell 2000 Index                5.69%           -5.56%(1)                     

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim SmallCap Opportunities Fund against the Russell 2000    
Index. The Index has an inherent performance advantage over the Fund since it   
has no cash in its portfolio, imposes no sales charges and incurs no operating  
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and expenses otherwise payable by the Fund. Total returns would have been  
lower had there been no waiver to the Fund.                                     

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio manager, only 
through the end of the period as stated on the cover. The portfolio manager's   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the index is shown from 4/1/00.             

Principal Risk Factor(s): Exposure to financial and market risks that accompany 
investments in equities. In exchange for higher growth potential, investing in  
stocks of smaller companies may entail greater price volatility than investing  
in stocks of larger companies.                                                  

 See accompanying index descriptions on page 24.

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

                                                                       Portfolio
PILGRIM SMALLCAP GROWTH FUND                                    Manager's Report
--------------------------------------------------------------------------------

Portfolio Management Team: Mary Lisanti, Executive Vice-President and Portfolio 
Manager, ING Pilgrim Investments, LLC.                                          

Goal: The SmallCap Growth Fund (the "Fund") seeks maximum long-term capital     
appreciation by investing at least 65% of its total assets in equity securities 
of small U.S. companies, and at least 75% of its total assets in common stocks  
that the portfolio manager feels have above average prospects for growth.       

Market Overview: The past year has seen a dramatic change in the outlook and the
performance of the US economy, which led to an extremely volatile stock market  
over that time. At this time last year, GDP was growing close to 6%, but the    
effect of 175 basis points in interest rate hikes dramatically slowed growth in 
the second half of 2000. By the fourth quarter of 2000, US GDP had slowed to a  
1.0% growth rate, and the United States faced the prospect of its first         
recession since 1990-91. Since the start of the year 2001, the Fed has cut      
interest rates by 250 basis points, as the lagging economic indicators and      
corporate earnings pointed to a further deterioration in the economy.           

Equity investors clearly favored value stocks over growth in this environment,  
and the technology- and telecommunications-fueled rally of 1999 and early 2000  
ended as market leadership shifted to utilities, energy, basic materials, and,  
following the rate cuts, financials. The hardest hit benchmark was the NASDAQ   
Composite, which plummeted 46.67% over the past 11 months, despite a rally of   
nearly 15% in April and May. While other sectors of the economy saw a decline in
their earnings growth, none was as dramatic as the decline in NASDAQ earnings.  
The S&P 500 Index dropped 12.70%, while among small cap stocks, the Russell 2000
Index slid 2.79%. However, the Dow Jones Industrials gained 4.44% over the past 
11 months, while the S&P Midcap Index gained 9.32% as the change to the earnings
outlook was not nearly as severe as in other sectors. >From peak to trough, the 
S&P 500 declined 26% and the NASDAQ Composite dropped 68%--classic bear market  
declines on the part of the S&P 500 and the largest decline in the NASDAQ since 
that index was developed.                                                       

Performance: For the eleven months ended May 31, 2001, the Fund's Class Q shares
provided a total return of -25.46%, compared to the Russell 2000 Growth Index,  
which returned -25.37% over the same period.                                    

Portfolio Specifics: The market was clearly unkind towards funds that invest in 
growth stocks over this period. The Fund became increasingly "defensive" in the 
second half of calendar 2000, and we exited the year with significant weightings
in energy, healthcare, and consumer stocks, as they showed the best opportunity 
for earnings growth. However, as 2001 has progressed, we have found the         
opportunity to invest in growth companies at attractive valuations, and our     
positions in technology and telecommunications shares have increased.           

Over the past fiscal year, the themes that have had the biggest positive impact 
on performance were "Re-Energizing America," the "New Consumer," and            
"Flourishing in the Managed Care Environment," while the best performing        
individual stocks in the Fund were XTO Energy, Laboratory Corporation of        
America, Abercrombie & Fitch, and American Eagle Outfitters.                    

Market Outlook: The months of April and May gave some evidence to our belief    
that the higher end of the growth market was close to a bottom. We still believe
that the current economic decline is distinct from the last two recessions of   
1980-81 and 1990-1991 in that this slowdown was not caused by structural        
imbalances. Rather, this slowdown was caused by a decline in capital spending,  
centered largely around technology. Technology spending has been slowing for    
close to a year in the wake of the "Y2K" boom and the Internet boom and bust,   
and incremental data suggest that these excesses have largely been wrung out of 
the system. Although we entered the current economic slowdown with unprecedented
speed, the aggressive rate cuts by the Federal Reserve and the lack of excess   
inventory in the system could imply a more rapid recovery than in the past.     

Unless the current economic slowdown stretches beyond the end of 2001, we       
believe that we are very close to the bottom--if not beyond it. Some parts of   
the market, in particular technology, had priced in significantly lower growth  
for several years, and if the recovery plays out over the second half of the    
year, then the market will continue its recent good performance. We believe that
this market is more similar to the 1990-1991 time frame than the 1994-1995 or   
1998 corrections; the values seen at the bottom in the 1990-1991 bear market    
turned out to be the lows for the decade on many stocks. Thus, we are taking    
advantage of market volatility to initiate or add to positions in high quality  
growth companies. Our focus is on companies who we believe can deliver          
above-average earnings growth in 2002 and beyond, and we are particularly       
focused on those companies who are improving their business models through this 
downturn and have opportunities for significant improvement in profitability    
ahead of them.                                                                  

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Portfolio                                                                       
Manager's Report                                    PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                             8/31/95  5/31/96  5/31/97  5/31/98  5/31/99  5/31/00  5/31/01
                                             -------  -------  -------  -------  -------  -------  -------
                                                                                                          
Pilgrim SmallCap Opportunities Fund Class Q  $10,000  $13,280  $12,146  $14,414  $16,062  $25,250  $21,670
Russell 2000 Growth Index                    $10,000  $12,397  $11,728  $13,586  $14,120  $16,900  $14,241

                        Average Annual Total Returns for
                        the Periods Ended May 31, 2001
                        --------------------------------
                                           Since Inception
                     1 Year    5 Year      8/31/95
                     ------    ------      -------
Class Q                             -14.18%   10.29%       14.40%               
Russell 2000 Growth Index           -15.74%    2.81%        6.34%(1)            

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim SmallCap Growth Fund against the Russell 2000 Growth    
Index. The Index has an inherent performance advantage over the Fund since it   
has no cash in its portfolio, imposes no sales charges and incurs no operating  
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.                 

Total returns reflect the fact that the Investment Manager has waived certain   
fees and operating expenses otherwise payable by the Fund, subject to possible  
later reimbursement during a three-year period. Total returns would have been   
lower had there been no deferral to the Fund.                                   

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio manager, only 
through the end of the period as stated on the cover. The portfolio manager's   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for index is shown from 9/1/95.                 

Principal Risk Factor(s): In exchange for higher growth potential, stocks of    
smaller companies may entail greater price volatility than those of larger      
companies.                                                                      

 See accompanying index descriptions on page 24.

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------------                                                                    
Equity &                                                                        
Income Funds                                                                    
------------                                                                    

                                                                       Portfolio
PILGRIM BALANCED FUND                                           Managers' Report
--------------------------------------------------------------------------------

Portfolio Management Team: G. David Underwood, CFA, Vice President and Portfolio
Manager; Robert K. Kinsey, Vice President and Senior Portfolio Manager; Ed      
Schriver, Senior Vice President and Senior Portfolio Manager, ING Pilgrim       
Investments, LLC. In June 2001, Thomas Jackson, Senior Vice President and Senior
Portfolio Manager, began serving as Portfolio Manager.                          

Goal: The Pilgrim Balanced Fund (the "Fund") seeks a balance of long-term       
capital appreciation and current income by investing in a blended portfolio of  
equity and debt securities with an emphasis on overall total return.            

Market Overview: Stocks ended the first quarter of 2001 with one of the worst   
periods ever for equity returns, further pressuring markets already under siege.
The quarter started constructively with the equity markets trending upward in   
January, only to weaken markedly in February and be followed by a widespread    
rout in March. The late-quarter sell-off hit every major equity index and       
investment style. Investors continued to dump technology and telecommunications 
stocks, but pummeled the rest of the market indiscriminately. Most unusual, the 
sell down took place even as the Federal Reserve lowered interest rates. The S&P
500 lost 11.9%. Punished the most, the technology-dominated NASDAQ lost 25.5%.  

The investment grade bond market posted handsome returns for the one year       
leading up to May 31, 2001; the widely watched Lehman Aggregate Bond Index      
returned 13.12%. Although corporate bonds experienced many set-backs in the     
Summer and Fall of 2000, repeated Fed easings triggered a dramatic rally in     
credit sensitive securities and the front end of the yield curve during early   
2001. Despite the fact that issuers such as Motorola, Lucent, Xerox, Finova,    
PGE, and Comdisco entered the ranks of the credit-impaired, overall returns on  
investment grade bonds were very robust. New issue volume set multi-year records
in the first five months of 2001.                                               

The high yield market exhibited very high volatility during the twelve months   
ending May 31, 2001. Returns were significantly negative during the calendar    
year 2000, then during the first five calendar months of 2001, high yield       
returned 6.18% (as measured by the Merrill Lynch High Yield Master II index).   
Repeated interest rate cuts by the Federal Reserve during 2001, has improved the
outlook for the economy and the prospects for highly leveraged companies. Mutual
fund flows have been positive in 2001 following outflows during 2000. Investors 
continue to favor higher quality credits while continuing to shun the           
telecommunications sector.                                                      

Performance: For the eleven months ended May 31, 2001, the Fund's Class Q Shares
provided a total return of -0.70% compared to the 60% S&P 500/40% Lehman        
Brothers Aggregate Bond Index which returned -3.52% for the same period.        

Portfolio Specifics: In the equities portion of the Fund, the energy sector     
contributed most to portfolio returns. We were overweight the market with a     
strong representation in exploration and production companies and secondarily in
integrated majors and the oil service companies. Basic materials, also          
overweight, were the next best performing led by Alcoa and MMM. Other somewhat  
overweight, positively performing sectors were consumer nondurables and         
industrials. An underweight in technology nonetheless helped relative           
performance, though the stocks were off. Modestly overweight sectors that were  
off slightly were consumer cyclicals, utilities and healthcare. The equally     
weighted sectors were financials, off slightly and telecommunications, which had
flat performance.                                                               

We increased the fund's high yield allocation following the Fed's first cut in  
rates in January. The investment grade component of the funds also posted       
positive returns, but the results were not as compelling due in large part to   
our style of taking credit risk in the front of the curve. Fortunately we       
liquidated our positions in Motorola and Lucent very early in 2000, and we      
avoided the California utility debacle entirely. We added a variety of new issue
corporate bonds at attractive levels in the Winter of 2000.                     

With respect to the high yield portion of the Fund, at the end of 2000 we       
positioned the Fund for what we expected to be an improving high yield market.  
This positioning has proven very beneficial during the first five months of     
2001. We continue to have a positive outlook for high yield over the coming year
and we remain positioned accordingly. While we expect more volatility going     
forward, we continue to see very attractively priced investment opportunities.  

Market Outlook: The Federal Reserve's raising of interest rates through last May
eventually sank stocks and braked the speeding economy. As the Federal Reserve  
now reverses course and lowers rates, the economy and stock prices should move  
forward. Fed easing usually outweighs earnings deceleration in driving stock    
prices. During the past thirty years, the equity market has risen on both a     
six-month and one year horizon from the initiation of a Fed easing process.     
Unless one believes the U.S. economy is about to crumble, Fed easing would mark 
a buying opportunity for equities. We believe stock prices can continue to rise 
selectively in 2001 in concert with improvements in corporate earnings and cash 
flows.                                                                          

Overall interest rates have dropped appreciably, and we are now concerned about 
the potential for a rise in inflation as a result of aggressive Fed easings.    
Consequently we added TIPS (Treasury Inflation Protection Securities), and we   
trimmed our duration modestly. Finally, we increased our mortgage exposure to a 
slight overweight while loosening up on corporate bonds. With respect to high   
yield, we look forward to increased economic activity as a result of the Fed    
easing. Default rates are expected to peak over the next nine months or so and  
then trend lower. Strong mutual fund inflows are providing a positive technical 
backdrop and we continue to see excellent investment opportunities. Therefore,  
we remain bullish on high yield and are invested accordingly.                   

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Managers' Report                                           PILGRIM BALANCED FUND
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                              8/31/95  5/31/96  5/31/97  5/31/98  5/31/99  5/31/00  5/31/01
                                                              -------  -------  -------  -------  -------  -------  -------
                                                                                                                           
Pilgrim Balanced Fund Class Q                                 $10,000  $11,233  $12,245  $15,530  $18,159  $18,183  $18,223
60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index  $10,000  $11,346  $13,700  $16,806  $19,282  $20,701  $20,434

                      Average Annual Total Returns for
                      the Periods Ended May 31, 2001
                      --------------------------------
                                       Since Inception
                  1 Year   5 Year      8/31/95
                  ------   ------      -------
Class Q                             0.31%   10.18%       11.02%                 
60% S&P 500 Index/40% Lehman                                                    
Brothers Aggregate Bond Index    -1.29    12.49%       13.23%(1)            

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim Balanced Fund against the 60% S&P 500 Index, 40% Lehman 
Brothers Aggregate Bond Index. The Index has an inherent performance advantage  
over the Fund since it has no cash in its portfolio, imposes no sales charges   
and incurs no operating expenses. An investor cannot invest directly in an      
index. The Fund's performance is shown both with and without the imposition of  
sales charges.                                                                  

Total returns reflect the fact that the Investment Manager has waived certain   
fees and operating expenses otherwise payable by the Fund, subject to possible  
later reimbursement during a three-year period. Total returns would have been   
lower had there been no deferral to the Fund.                                   

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio managers, only
through the end of the period as stated on the cover. The portfolio managers'   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for the index is shown from 9/1/95.             

Principal Risk Factor(s): Price volatility and other risks that accompany an    
investment in equity securities. Credit, interest rate and other risks that     
accompany debt investments. The Fund may invest up to 20% of its total assets in
foreign securities. International investing does pose special risks, including  
currency fluctuation, economic and political risks not found in investments that
are solely domestic. Higher yields reflect the higher credit risks associated   
with certain lower rated securities in the Fund's portfolio and in some cases,  
the lower market prices for those instruments.                                  

See accompanying index descriptions on page 24. 

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Equity &                                                                        
Income Funds                                                                    
------------                                                                    
                                                                       Portfolio
PILGRIM CONVERTIBLE FUND                                        Manager's Report
--------------------------------------------------------------------------------

Portfolio Management: Andrew Chow, Vice President and Portfolio Manager, ING    
Pilgrim Investments, LLC.                                                       

Goal: The Pilgrim Convertible Fund (the "Fund") seeks to maximize total return  
by investing primarily in convertible securities, while maintaining aggregate   
risk measures similar to that of the overall convertible universe.              

Market Overview: The twelve-month period ending May 31, 2001 provided a severe  
rebuke to investors whose prior experience consisted of trying to pick which    
dot-com stock would double in the next three days. However investors with a     
longer frame of reference recognized that the decline in the equity markets     
merely brought valuations into line with long-run historical averages and thus  
did not move the market into a "new era". This was not a market crash presaging 
a 20 year bear market, nor was this a once in a lifetime buying opportunity. It 
simply was a correction, albeit a large one, that brought overall valuations    
back to more or less normal levels.                                             

Now, of course, within that broader picture, certain sectors of the market fared
differently. The sectors that had run up the most in the past two years, namely 
the New Economy players such as Internet, telecommunications and to a lesser    
extent the traditional technology firms, were the ones hardest hit when the     
bubble burst. In fact, now that the rose colored glasses through which investors
once gazed upon the landscape have been removed, it can be seen that many firms 
in the Internet and software areas probably don't have a viable future, even at 
today's lower valuations.                                                       

The convertible securities market was of course not immune to these changes.    
Since the convertible securities universe is overweighted in technology, one    
might have even expected convertibles to fare worse in the sell-off of the last 
year. But that would have been a bad guess. Actually the defensive nature of    
convertibles emerged as one of the major stories of the past year. As an asset  
class convertibles outperformed stocks and trounced technology-heavy indicies   
such as the Nasdaq Composite.                                                   

Performance: Below we present the total return information for various          
categories for the eleven-month period ended May 31, 2001:                      

S&P 500                                              -12.70%                    
Nasdaq Composite                                     -46.67                     
Merrill Lynch Convertible Index(1)                   -13.67                     
Credit Suisse First Boston Convertible Index         -10.14                     
Pilgrim Convertible Fund, Class Q shares             -17.50                     

However as favorable as the past year's returns for convertibles have been      
relative to other asset categories, the astute long-run investor should not be  
entirely focused on such figures. The astute long-run investor instinctively    
knows that convertible securities should outperform stocks in a bear market and 
should underperform stocks in a bull market. Instead the astute long-run        
investor looks at how asset classes perform over a cycle that encompasses both  
up and down moves and compares returns for that entire cycle, while taking into 
account the expectation that lower volatility asset classes should expect lower 
average returns. Well, the US equity markets have indeed been through just such 
a cycle and it is instructive to observe the results for the period of December 
31, 1997 to May 31, 2000.                                                       

                          Average Annual
                          Total Return
                          ------------
S&P 500                                            9.25%                        
Nasdaq Composite                                   9.36                         
Merrill Lynch Convertible Index(1)                 9.76                         
Pilgrim Convertible Fund, Class Q shares          27.58                         

For the period of the entire recent cycle, the average annual return on stocks  
in the US exceeded 9% per annum and was quite close to the long-run historical  
return to this asset class which is approximately 10% per year. Convertible     
securities, despite having lower volatility, actually posted higher returns for 
the period as a whole. Food for thought for the person who invests for the      
longer term rather than trying to time the market based on short-run            
expectations.                                                                   

Portfolio Specifics: Moving to the Pilgrim Convertible Fund specifically, your  
fund saw many changes over the past twelve months. There was a large capital    
gain distribution made in November 2000, which was the result of fairly heavy   
trading activity during the twelve-month period preceding the distribution.     
Looking forward we do not expect capital gain distributions of this magnitude to
occur since I have shifted the fund's investment style towards having a longer  
holding period and investment horizon as opposed to the more transaction        
oriented, momentum based style of the prior portfolio manager.                  

Which of course brings me to my next topic. Since taking over stewardship of    
your fund, the market has had a major correction and I've also changed the      
composition of the portfolio significantly. The size of the portfolio's         
allocation to the New Economy type stocks has decreased and we have increased   
our exposure to healthcare, energy and financial firms. Of course that is not to
say that we no longer have exposure to the technology sector. Since the         
convertible universe remains heavily tilted towards technology, we will always  
have considerable technology exposure. However it is significantly less than    
when I assumed the duties of running your fund.                                 

Market Outlook: Despite the moves in the market, I believe the big picture      
remains the same. The fund's raison d'etre is to provide investors access to an 
underutilized asset class (convertible securities) that have demonstrated an    
ability to provide more attractive risk adjusted returns than other asset       
classes. On top of the returns generated by the passive index we attempt to add 
value by using fundamental analysis to pick firms we think will outperform their
peers.                                                                          

There will of course be investors who would rather time, or attempt to time, the
market. For those folks, a convertible securities fund will probably not be     
their cup of tea. Those folks will logically be 100% invested in an aggressive  
technology growth fund (when they think the market is going up), or 100%        
invested in a money market fund (or bear fund) when they think the market is    
going down. Yet I honestly doubt whether most investors really have the         
confidence to follow such a strategy. I                                         

----------                                                                      
(1)  All Qualities, Excluding Mandatories                                       

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Portfolio                                                                       
Manager's Report                                        PILGRIM CONVERTIBLE FUND
--------------------------------------------------------------------------------

seriously dispute the claim that most investors can successfully execute such a 
strategy. For investors who know their own limitations and decline to attempt to
time the market, the logical alternative is to invest for longer time frames and
pick vehicles that can outperform throughout a full market cycle. Nothing has   
occurred recently to challenge the view that convertible securities can offer   
such an alternative. In fact, recent events simply reinforce that view.         

                                                        [Enlarge/Download Table]

                                              8/31/95  5/31/96  5/31/97  5/31/98  5/31/99  5/31/00  5/31/01
                                              -------  -------  -------  -------  -------  -------  -------
                                                                                                           
Pilgrim Convertible Fund Class Q              $10,000  $11,761  $13,476  $16,485  $20,321  $27,740  $24,648
Credit Suisse First Boston Convertible Index  $10,000  $11,333  $12,379  $14,446  $15,548  $19,801  $18,950

                                              Average Annual Total Returns for
                                              the Periods Ended May 31, 2001
                                              --------------------------------
                                                                 Since Inception
                                           1 Year    5 Year      8/31/95
                                           ------    ------      -------
Class Q                                        -11.15%   15.95%       16.99%    
Credit Suisse First Boston Convertible Index    -5.21%   10.48%       11.76%(1) 

Based on a $10,000 initial investment, the graph and table above illustrate the 
total return of Pilgrim Convertible Fund against the Credit Suisse First Boston 
Convertible Index. The Index has an inherent performance advantage over the Fund
since it has no cash in its portfolio, imposes no sales charges and incurs no   
operating expenses. An investor cannot invest directly in an index. The Fund's  
performance is shown both with and without the imposition of sales charges.     

Total returns reflect the fact that the Investment Manager has waived certain   
fees and operating expenses otherwise payable by the Fund, subject to possible  
later reimbursement during a three-year period. Total returns would have been   
lower had there been no deferral to the Fund.                                   

Performance data represents past performance and is no assurance of future      
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original     
cost.                                                                           

This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"     
statements.                                                                     

The views expressed in this report reflect those of the portfolio manager, only 
through the end of the period as stated on the cover. The portfolio manager's   
views are subject to change at any time based on market and other conditions.   

Fund holdings are subject to change daily.                                      

(1) Since inception performance for index is shown from 9/1/95.                 

Principal Risk Factor(s): The credit standing of the issuer and other factors   
may affect the investment value of a convertible security. The market value of  
convertible debt securities tends to vary inversely with the level of interest  
rates. Lower rated securities may be less liquid than higher quality            
investments. This fund also has exposure to financial, market and interest rate 
risks. Higher yields reflect the higher credit risks associated with certain    
lower rated securities in the Fund's portfolio and in some cases, the lower     
market prices for those instruments. The Fund may also invest in small and      
medium sized companies, which may be more susceptible to greater price          
volatility than larger companies.                                               

 See accompanying index descriptions on page 24.

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Pilgrim                                                                         
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INDEX DESCRIPTIONS
--------------------------------------------------------------------------------

The S&P 500 Index is a widely recognized index of 500 common stocks.            

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip    
stocks that are generally the leaders in their industry.                        

The Russell 1000 Growth Index is an index that measures the performance of those
Russell 1000 Index companies with higher price-to-book ratios and higher        
forecasted growth values.                                                       

The NASDAQ Composite Index is a broad-based capitalization-weighted index of all
NASDAQ National Market & SmallCap stocks.                                       

The Russell MidCap Growth Index consists of securities with capitalizations     
between $450 million and $3.8 billion with greater than average growth          
orientation.                                                                    

The Russell 2000 Growth Index measures the performance of those Russell 2000    
Index companies with higher price-to-book ratios and higher forecasted growth   
values.                                                                         

The Russell 2000 Index consists of the smallest 2000 companies in the Russell   
3000 Index.                                                                     

The S&P MidCap 400 Index is a capitalization-weighted index that measures the   
performance of the mid-range sector of the U.S. stock market.                   

The Russell 2000 Value Index is an index that measures the performance of those 
Russell 2000 companies with lower price-to-book ratios and lower forecasted     
growth values.                                                                  

The Lehman Brothers Aggregate Bond Index is an index of fixed income securities.

The Merrill Lynch High Yield Master II Index is an index that measures the      
performance of the non-investment grade U.S. domestic bond market.              

The Credit Suisse First Boston Convertible Index is an index representing the   
universe of convertible securities.                                             

The Merrill Lynch Convertible Index is an index representing the entire domestic
convertible market, including all credit qualities, but excluding mandatory     
preferred stock securities.                                                     

All indices are unmanaged.
 An investor cannot invest directly in an index.

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Pilgrim                                                                         
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REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

To the Shareholders and Boards of Directors and Trustees of Pilgrim Mutual      
Funds, Pilgrim Investment Funds, Inc., Pilgrim Mayflower Trust, Pilgrim Growth  
Opportunities Fund, Pilgrim SmallCap Opportunities Fund, and Pilgrim Equity     
Trust:                                                                          

We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Pilgrim MagnaCap Fund, Pilgrim Research   
Enhanced Index Fund, Pilgrim Growth Opportunities Fund, Pilgrim LargeCap Growth 
Fund, Pilgrim MidCap Opportunities Fund, Pilgrim MidCap Growth Fund, Pilgrim    
Growth + Value Fund, Pilgrim SmallCap Opportunities Fund, Pilgrim SmallCap      
Growth Fund, Pilgrim Balanced Fund, and Pilgrim Convertible Fund as of May 31,  
2001, and the statements of operations, statements of changes in net assets and 
financial highlights for all years and periods as indicated herein for the      
Pilgrim MagnaCap Fund, the statements of operations, statements of changes in   
net assets and financial highlights for all years and periods as indicated      
herein ending on or after December 31, 2000 for the Pilgrim Growth Opportunities
Fund, Pilgrim MidCap Opportunities Fund, and Pilgrim SmallCap Opportunities     
Fund, and the statements of operations, statements of changes in net assets, and
financial highlights for all years and periods as indicated herein ending on or 
after June 30, 1999 for the Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth 
Fund, Pilgrim SmallCap Growth Fund, Pilgrim Balanced Fund, and Pilgrim          
Convertible Fund, and the statements of operations, statements of changes in net
assets, and financial highlights for the seven months ended May 31, 2001 for the
Pilgrim Research Enhanced Index Fund and Pilgrim Growth + Value Fund. These     
financial statements and financial highlights are the responsibility of the     
Funds' management. Our responsibility is to express an opinion on these         
financial statements and financial highlights based on our audits. For all      
periods ending prior to January 1, 2000 the statements of changes in net assets 
and financial highlights of the Pilgrim Growth Opportunities Fund, Pilgrim      
MidCap Opportunities Fund, and Pilgrim SmallCap Opportunities Fund have been    
audited by other auditors whose report thereon dated February 17, 2000 expressed
an unqualified opinion on those financial statements and financial highlights.  
For all periods ending prior to November 1, 2000, the statements of operations, 
statements of changes in net assets, and financial highlights of the Pilgrim    
Research Enhanced Index Fund and Pilgrim Growth + Value Fund have been audited  
by other auditors whose report thereon dated December 5, 2000 expressed an      
unqualified opinion on those financial statements and financial highlights. For 
all periods ending prior to April 1, 1999, the financial highlights of the      
Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap      
Growth Fund, Pilgrim Balanced Fund and Pilgrim Convertible Fund have been       
audited by other auditors whose report thereon dated May 7, 1999 expressed an   
unqualified opinion on those financial highlights.                              

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the financial    
statements and financial highlights are free of material misstatement. An audit 
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 2001 by correspondence with the custodian and    
brokers and other appropriate audit procedures. An audit also includes assessing
the accounting principles used and significant estimates made by management, as 
well and evaluating the overall financial statement presentation. We believe    
that our audits provide a reasonable basis for our opinion.                     

In our opinion, the financial statements and financial highlights referred to   
above, excluding those financial statements and financial highlights which were 
indicated above as having been audited by others, present fairly, in all        
material respects, the financial position of each of the aforementioned funds as
of May 31, 2001, the results of their operations, the changes in their net      
assets, and their financial highlights for the periods indicated herein, in     
conformity with accounting principles generally accepted in the United States of
America.                                                                        

KPMG LLP                                                                        

Los Angeles, California                                                         
July 9, 2001                                                                    

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U.S. Equity                                                                     
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 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                   Pilgrim         Pilgrim        Pilgrim         Pilgrim     
                                    Pilgrim       Research         Growth         LargeCap         MidCap     
                                   MagnaCap     Enhanced Index  Opportunities      Growth       Opportunities 
                                     Fund           Fund            Fund            Fund            Fund      
                                 -------------  -------------   -------------   -------------   ------------- 
                                                                                                              
ASSETS:                                                                                                       
Investments in securities, at                                                                                 
 value*                          $ 410,557,277  $ 182,189,329   $ 529,001,445   $ 489,264,436   $ 124,076,329 
Short-term securities, at value     19,926,000        192,051      13,374,000       8,757,000         985,000 
Cash                                    10,494         52,976             836          10,617             296 
Receivables:                                                                                                  
 Fund shares sold                      738,057         83,625       1,033,823       1,941,450          72,083 
 Dividends and interest                575,843        263,803          74,018         147,679          15,005 
 Investment securities sold         10,905,321        208,213      54,421,443      20,234,381       6,045,144 
 Futures variation margin                   --          1,850              --              --              -- 
 Other                                  56,143             --              --          67,114              -- 
Prepaid expenses                        55,797          8,307         264,002         106,291         100,694 
                                 -------------  -------------   -------------   -------------   ------------- 
  Total assets                     442,824,932    183,000,154     598,169,567     520,528,968     131,294,551 
                                 -------------  -------------   -------------   -------------   ------------- 
LIABILITIES:                                                                                                  
Payable for investment                                                                                        
 securities purchased               11,960,744        211,281      64,345,205       1,943,552       4,046,061 
Payable for fund shares                                                                                       
 redeemed                              589,482        871,815       1,535,842       1,404,446         272,035 
Payable to affiliates                  489,776        254,187         794,149         752,980         182,202 
Other accrued expenses and                                                                                    
 liabilities                           265,253        308,321         310,054         277,126         102,951 
                                 -------------  -------------   -------------   -------------   ------------- 
  Total liabilities                 13,305,255      1,645,604      66,985,250       4,378,104       4,603,249 
                                 -------------  -------------   -------------   -------------   ------------- 
NET ASSETS                       $ 429,519,677  $ 181,354,550   $ 531,184,317   $ 516,150,864   $ 126,691,302 
                                 =============  =============   =============   =============   ============= 
NET ASSETS WERE                                                                                               
 COMPRISED OF:                                                                                                
Paid-in capital                  $ 353,992,865  $ 200,708,816   $ 789,149,124   $ 713,369,308   $ 150,268,036 
Accumulated net investment                                                                                    
 income                                     --             --              --              --              -- 
Accumulated net realized gain                                                                                 
 (loss) on investments and                                                                                    
 futures contracts                  45,407,692    (11,618,507)   (264,906,207)   (180,607,777)    (31,047,554)
Net unrealized appreciation                                                                                   
 (depreciation) of investments                                                                                
 and futures contracts              30,119,120     (7,735,759)      6,941,400     (16,610,667)      7,470,820 
                                 -------------  -------------   -------------   -------------   ------------- 
NET ASSETS                       $ 429,519,677  $ 181,354,550   $ 531,184,317   $ 516,150,864   $ 126,691,302 
                                 =============  =============   =============   =============   ============= 
*Cost of securities              $ 380,438,157  $ 190,317,451   $ 522,060,045   $ 505,875,103   $ 116,605,509 

See Accompanying Notes to Financial Statements

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 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                            Pilgrim         Pilgrim       Pilgrim        Pilgrim   
                                              Pilgrim       Research        Growth        LargeCap        MidCap   
                                             MagnaCap    Enhanced Index  Opportunities     Growth     Opportunities
                                               Fund           Fund           Fund           Fund           Fund    
                                           ------------   ------------    ------------  ------------   ------------
                                                                                                                   
Class A:                                                                                                           
 Net assets                                $277,722,319   $ 12,748,328    $158,754,226  $161,823,992   $ 24,264,616
 Shares authorized                           80,000,000      unlimited       unlimited     unlimited      unlimited
 Par value                                 $       0.00   $       0.01    $       0.01  $       0.00   $       0.01
 Shares outstanding                          20,517,756      1,291,781       8,521,032     6,632,137      1,664,228
 Net asset value and redemption price per                                                                          
  share                                    $      13.54   $       9.87    $      18.63  $      24.40   $      14.58
 Maximum offering price per share                                                                                  
  (5.75%)(1)                               $      14.37   $      10.47    $      19.77  $      25.89   $      15.47
Class B:                                                                                                           
 Net assets                                $112,286,027   $ 76,725,798    $162,106,365  $224,571,649   $ 28,447,745
 Shares authorized                           80,000,000      unlimited       unlimited     unlimited      unlimited
 Par value                                 $       0.00   $       0.01    $       0.01  $       0.00   $       0.01
 Shares outstanding                           8,546,140      7,908,698       9,218,985     9,303,018      1,989,367
 Net asset value and redemption price per                                                                          
  share(2)                                 $      13.14   $       9.70    $      17.58  $      24.14   $      14.30
 Maximum offering price per share          $      13.14   $       9.70    $      17.58  $      24.14   $      14.30
Class C:                                                                                                           
 Net assets                                $ 10,887,238   $ 66,251,803    $ 93,537,073  $117,221,506   $ 18,900,592
 Shares authorized                           20,000,000      unlimited       unlimited     unlimited      unlimited
 Par value                                 $       0.00   $       0.01    $       0.01  $       0.00   $       0.01
 Shares outstanding                             828,333      6,826,719       5,309,113     4,870,390      1,327,151
 Net asset value and redemption price per                                                                          
  share(2)                                 $      13.14   $       9.70    $      17.62  $      24.07   $      14.24
 Maximum offering price per share          $      13.14   $       9.70    $      17.62  $      24.07   $      14.24
Class I:                                                                                                           
 Net assets                                         n/a   $ 25,172,327    $ 79,173,560           n/a   $ 52,007,043
 Shares authorized                                  n/a      unlimited       unlimited           n/a      unlimited
 Par value                                          n/a   $       0.01    $       0.01           n/a   $       0.01
 Shares outstanding                                 n/a      2,531,789       4,146,235           n/a      3,531,454
 Net asset value and redemption price per                                                                          
  share                                             n/a   $       9.94    $      19.10           n/a   $      14.73
 Maximum offering price per share                   n/a   $       9.94    $      19.10           n/a   $      14.73
Class M:                                                                                                           
 Net assets                                $ 17,440,257            n/a             n/a           n/a            n/a
 Shares authorized                            5,000,000            n/a             n/a           n/a            n/a
 Par value                                 $       0.00            n/a             n/a           n/a            n/a
 Shares outstanding                           1,304,963            n/a             n/a           n/a            n/a
 Net asset value and redemption price per                                                                          
  share                                    $      13.36            n/a             n/a           n/a            n/a
 Maximum offering price per share                                                                                  
  (3.50%)(3)                               $      13.85            n/a             n/a           n/a            n/a
Class Q:                                                                                                           
 Net assets                                $ 11,183,836   $    456,294    $  7,946,905  $ 12,533,717   $  3,071,306
 Shares authorized                           20,000,000      unlimited       unlimited     unlimited      unlimited
 Par value                                 $       0.00   $       0.01    $       0.01  $       0.00   $       0.01
 Shares outstanding                             825,558         46,301         424,881       505,163        209,901
 Net asset value and redemption price per                                                                          
  share                                    $      13.55   $       9.85    $      18.70  $      24.81   $      14.63
 Maximum offering price per share          $      13.55   $       9.85    $      18.70  $      24.81   $      14.63
Class T:                                                                                                           
 Net assets                                         n/a            n/a    $ 29,666,188           n/a            n/a
 Shares authorized                                  n/a            n/a       unlimited           n/a            n/a
 Par value                                          n/a            n/a    $       0.01           n/a            n/a
 Shares outstanding                                 n/a            n/a       1,672,788           n/a            n/a
 Net asset value and redemption price per                                                                          
  share                                             n/a            n/a    $      17.73           n/a            n/a
 Maximum offering price per share(2)                n/a            n/a    $      17.73           n/a            n/a

----------                                                                      
(1)  Maximum offering price is computed at 100/94.25 of net asset value. On     
purchases of $50,000 or more, the offering price is reduced.          
(2)  Redemption price per share may be reduced for any applicable contingent    
deferred sales charge.                                                
(3)  Maximum offering price is computed at 100/96.50 of net asset value. On     
purchases of $50,000 or more, the offering price is reduced.          

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
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 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                    Pilgrim         Pilgrim         Pilgrim        Pilgrim     
                                    MidCap         Growth +         SmallCap       SmallCap    
                                    Growth           Value       Opportunities      Growth     
                                     Fund            Fund            Fund            Fund      
                                 -------------   -------------   -------------   ------------- 
                                                                                               
ASSETS:                                                                                        
Investments in securities,                                                                     
 at value*                       $ 347,565,679   $ 639,324,197   $ 463,728,199   $ 364,432,818 
Short-term securities, at value      4,270,000      10,860,000              --       1,592,000 
Cash                                    10,677             979       4,005,501       3,590,465 
Receivables:                                                                                   
 Fund shares sold                      352,332       1,528,708         648,697         642,147 
 Dividends and interest                 37,615         126,722              --             177 
 Investment securities sold         18,298,645      43,311,222       3,911,280       3,767,819 
 Other                                   7,958              --              --              -- 
Prepaid expenses                        60,581         239,793         188,946          52,506 
                                 -------------   -------------   -------------   ------------- 
  Total assets                     370,603,487     695,391,621     472,482,623     374,077,932 
                                 -------------   -------------   -------------   ------------- 
LIABILITIES:                                                                                   
Payable for investment                                                                         
 securities purchased               11,392,808      22,091,958       5,890,746       8,464,200 
Payable for fund shares                                                                        
 redeemed                            1,743,417       1,812,844       1,217,184       1,208,560 
Payable to affiliates                  519,286       1,115,734         744,655         699,285 
Other accrued expenses and                                                                     
 liabilities                           366,852         489,714         216,120         275,506 
                                 -------------   -------------   -------------   ------------- 
  Total liabilities                 14,022,363      25,510,250       8,068,705      10,647,551 
                                 -------------   -------------   -------------   ------------- 
NET ASSETS                       $ 356,581,124   $ 669,881,371   $ 464,413,918   $ 363,430,381 
                                 =============   =============   =============   ============= 
NET ASSETS WERE                                                                                
 COMPRISED OF:                                                                                 
Paid-in capital                  $ 382,566,690   $ 937,392,517   $ 446,061,280   $ 331,520,753 
Undistributed net investment                                                                   
 income                                     --              --              --              -- 
Accumulated net realized loss                                                                  
 on investments                    (47,189,003)   (308,945,663)    (41,431,517)    (24,163,696)
Net unrealized appreciation of                                                                 
 investments                        21,203,437      41,434,517      59,784,155      56,073,324 
                                 -------------   -------------   -------------   ------------- 
NET ASSETS                       $ 356,581,124   $ 669,881,371   $ 464,413,918   $ 363,430,381 
                                 =============   =============   =============   ============= 
*Cost of securities              $ 326,362,242   $ 597,889,680   $ 403,944,044   $ 308,359,494 

See Accompanying Notes to Financial Statements

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 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                Pilgrim       Pilgrim       Pilgrim        Pilgrim   
                                 MidCap       Growth +      SmallCap       SmallCap  
                                 Growth        Value      Opportunities     Growth   
                                  Fund          Fund          Fund           Fund    
                              ------------  ------------  ------------   ------------
                                                                                     
Class A:                                                                             
 Net assets                   $ 98,529,696  $160,251,249  $159,640,668   $119,135,822
 Shares authorized               unlimited     unlimited     unlimited      unlimited
 Par value                    $       0.00  $       0.01  $       0.01   $       0.00
 Shares outstanding              6,417,555    11,546,622     4,116,358      9,897,451
 Net asset value and                                                                 
  redemption price per share  $      15.35  $      13.88  $      38.78   $      12.04
 Maximum offering price per                                                          
  share (5.75%)(1)            $      16.29  $      14.73  $      41.15   $      12.77
Class B:                                                                             
 Net assets                   $ 85,111,123  $326,139,099  $206,967,557   $ 75,304,291
 Shares authorized               unlimited     unlimited     unlimited      unlimited
 Par value                    $       0.00  $       0.01  $       0.01   $       0.00
 Shares outstanding              4,754,523    24,410,440     5,654,371      5,019,038
 Net asset value and                                                                 
  redemption price per                                                               
  share(2)                    $      17.90  $      13.36  $      36.60   $      15.00
 Maximum offering price per                                                          
  share                       $      17.90  $      13.36  $      36.60   $      15.00
Class C:                                                                             
 Net assets                   $156,528,141  $183,036,538  $ 78,657,813   $159,910,378
 Shares authorized               unlimited     unlimited     unlimited      unlimited
 Par value                    $       0.00  $       0.01  $       0.01   $       0.00
 Shares outstanding             11,138,747    13,706,008     2,153,520     13,616,035
 Net asset value and                                                                 
  redemption price per                                                               
  share(2)                    $      14.05  $      13.35  $      36.53   $      11.74
 Maximum offering price per                                                          
  share                       $      14.05  $      13.35  $      36.53   $      11.74
Class I:                                                                             
 Net assets                            n/a           n/a  $        218            n/a
 Shares authorized                     n/a           n/a     unlimited            n/a
 Par value                             n/a           n/a  $       0.01            n/a
 Shares outstanding                    n/a           n/a             6            n/a
 Net asset value and                                                                 
  redemption price per share           n/a           n/a  $      39.02            n/a
 Maximum offering price per                                                          
  share                                n/a           n/a  $      39.02            n/a
Class Q:                                                                             
 Net assets                   $ 16,412,164  $    454,485  $  2,831,854   $  9,079,890
 Shares authorized               unlimited     unlimited     unlimited      unlimited
 Par value                    $       0.00  $       0.01  $       0.01   $       0.00
 Shares outstanding                842,194        32,745        72,960        674,733
 Net asset value and                                                                 
  redemption price per share  $      19.49  $      13.88  $      38.81   $      13.46
 Maximum offering price per                                                          
  share                       $      19.49  $      13.88  $      38.81   $      13.46
Class T:                                                                             
 Net assets                            n/a           n/a  $ 16,315,808            n/a
 Shares authorized                     n/a           n/a     unlimited            n/a
 Par value                             n/a           n/a  $       0.01            n/a
 Shares outstanding                    n/a           n/a       441,696            n/a
 Net asset value and                                                                 
  redemption price per share           n/a           n/a  $      36.94            n/a
 Maximum offering price per                                                          
  share (2)                            n/a           n/a  $      36.94            n/a

----------                                                                      
(1)  Maximum offering price is computed at 100/94.25 of net asset value. On     
purchases of $50,000 or more, the offering price is reduced.          
(2)  Redemption price per share may be reduced for any applicable contingent    
deferred sales charge.                                                

See Accompanying Notes to Financial Statements

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Equity &                                                                        
Income Funds                                                                    
------------                                                                    

 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                             Pilgrim          Pilgrim    
                                                             Balanced       Convertible  
                                                               Fund            Fund      
                                                           -------------   ------------- 
                                                                                         
ASSETS:                                                                                  
Investments in securities, at value*                       $ 118,257,663   $ 357,525,287 
Short-term securities, at value                               11,844,000      14,676,000 
Cash                                                                 762          10,848 
Receivables:                                                                             
 Fund shares sold                                                 42,480         801,976 
 Dividends and interest                                        1,017,734       1,506,475 
 Investment securities sold                                    3,671,439              -- 
Prepaid expenses                                                  69,713          61,942 
Reimbursement due from manager                                   159,582              -- 
                                                           -------------   ------------- 
  Total assets                                               135,063,373     374,582,528 
                                                           -------------   ------------- 
LIABILITIES:                                                                             
Payable for investment securities purchased                    6,407,398         500,000 
Payable for fund shares redeemed                                 276,500       1,111,530 
Payable to affiliates                                            155,754         513,891 
Other accrued expenses and liabilities                           141,871         204,096 
                                                           -------------   ------------- 
  Total liabilities                                            6,981,523       2,329,517 
                                                           -------------   ------------- 
NET ASSETS                                                 $ 128,081,850   $ 372,253,011 
                                                           =============   ============= 
NET ASSETS WERE COMPRISED OF:                                                            
Paid-in capital                                            $ 128,047,437   $ 417,064,163 
Undistributed net investment income                              776,758       2,222,925 
Accumulated net realized gain (loss) on investments           (2,005,733)     (1,078,952)
Net unrealized appreciation (depreciation) of investments      1,263,388     (45,955,125)
                                                           -------------   ------------- 
NET ASSETS                                                 $ 128,081,850   $ 372,253,011 
                                                           =============   ============= 
*Cost of securities                                        $ 116,994,275   $ 403,480,412 

See Accompanying Notes to Financial Statements

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------------                                                                    
Equity &                                                                        
Income Funds                                                                    
------------                                                                    

 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2001
--------------------------------------------------------------------------------

                                                    Pilgrim        Pilgrim
                                                     Balanced      Convertible
                                                   Fund           Fund
                                                     ------------   ------------
Class A:                                                                        
 Net assets                                          $ 61,477,190   $ 98,895,557
 Shares authorized                                      unlimited      unlimited
 Par value                                           $       0.00   $       0.00
 Shares outstanding                                     4,623,365      5,526,844
 Net asset value and redemption price per share      $      13.30   $      17.89
 Maximum offering price per share (5.75%)(1)         $      14.11   $      18.99
Class B:                                                                        
 Net assets                                          $ 35,828,427   $125,365,806
 Shares authorized                                      unlimited      unlimited
 Par value                                           $       0.00   $       0.00
 Shares outstanding                                     2,509,226      6,409,406
 Net asset value and redemption price per share(2)   $      14.28   $      19.56
 Maximum offering price per share                    $      14.28   $      19.56
Class C:                                                                        
 Net assets                                          $ 22,678,633   $118,362,840
 Shares authorized                                      unlimited      unlimited
 Par value                                           $       0.00   $       0.00
 Shares outstanding                                     1,774,339      6,456,963
 Net asset value and redemption price per share(2)   $      12.78   $      18.33
 Maximum offering price per share                    $      12.78   $      18.33
Class Q:                                                                        
 Net assets                                          $    372,810   $ 29,628,808
 Shares authorized                                      unlimited      unlimited
 Par value                                           $       0.00   $       0.00
 Shares outstanding                                        28,173      1,705,648
 Net asset value and redemption price per share      $      13.23   $      17.37
 Maximum offering price per share                    $      13.23   $      17.37
Class T:                                                                        
 Net assets                                          $  7,724,790            n/a
 Shares authorized                                      unlimited            n/a
 Par value                                           $       0.00            n/a
 Shares outstanding                                       542,743            n/a
 Net asset value and redemption price per share      $      14.23            n/a
 Maximum offering price per share (2)                $      14.23            n/a

----------                                                                      
(1)  Maximum offering price is computed at 100/94.25 of net asset value. On     
purchases of $50,000 or more, the offering price is reduced.          
(2)  Redemption price per share may be reduced for any applicable contingent    
deferred sales charge.                                                

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                             Pilgrim MagnaCap Fund       Pilgrim Research Enhanced Index Fund
                                          ----------------------------   ------------------------------------
                                             Eleven           Year              Seven             Year       
                                          Months Ended        Ended         Months Ended          Ended      
                                             May 31,        June 30,           May 31,         October 31,   
                                              2001            2000              2001              2000       
                                          ------------    ------------      ------------       ------------  
                                                                                                             
INVESTMENT INCOME:                                                                                           
 Dividends, net of foreign taxes          $  5,360,188    $  6,411,880      $  1,496,923       $  3,189,778  
 Interest                                      852,753       1,359,240            30,745            215,827  
                                          ------------    ------------      ------------       ------------  
  Total investment income                    6,212,941       7,771,120         1,527,668          3,405,605  
                                          ------------    ------------      ------------       ------------  
EXPENSES:                                                                                                    
 Investment management fees                  2,711,207       3,251,123           815,269          1,741,851  
 Distribution fees                                                                                           
  Class A                                      801,313         994,817            27,937             84,544  
  Class B                                      822,246       1,030,869           478,131          1,023,994  
  Class C                                       52,661          26,458           442,861            891,570  
  Class M                                       93,774         108,690                --                 --  
  Class Q                                       24,454          14,864               482                260  
 Administrative fees                                --              --           116,467                 --  
 Transfer agent fees                           550,664         721,472           112,706            236,223  
 Shareholder reporting fees                    132,901         146,421            84,634             24,884  
 Registration and filing fees                   97,133         100,509            53,924            104,627  
 Recordkeeping and pricing fees                 68,367          82,218                --                 --  
 Professional fees                              57,009          60,170            44,996             36,875  
 Custody fees                                   51,225          52,887            74,003            211,510  
 Shareholder servicing fees                     24,130          31,735            11,180            272,002  
 Director's fees                                25,833          29,515             6,360             10,980  
 Insurance fees                                  8,229          21,139                --                 --  
 Miscellaneous fees                              8,137          13,160             4,240              7,572  
 Interest and credit facility fees                  --           6,126                --                 --  
 Merger fees                                    52,548              --                --                 --  
                                          ------------    ------------      ------------       ------------  
  Total expenses                             5,581,831       6,692,173         2,273,190          4,646,892  
                                          ------------    ------------      ------------       ------------  
Less:                                                                                                        
 Earnings credits                                   --             740                --                 --  
                                          ------------    ------------      ------------       ------------  
  Net expenses                               5,581,831       6,691,433         2,273,190          4,646,892  
                                          ------------    ------------      ------------       ------------  
 Net investment income (loss)                  631,110       1,079,687          (745,522)        (1,241,287) 
                                          ------------    ------------      ------------       ------------  
REALIZED AND UNREALIZED GAIN (LOSS)                                                                          
 ON INVESTMENTS AND FUTURES:                                                                                 
 Net realized gain (loss) on investments    63,559,889      29,968,024        (9,758,933)        (1,264,718) 
 Net change in unrealized appreciation                                                                       
  (depreciation) of investments and                                                                          
  futures                                  (72,272,816)    (35,597,984)      (17,931,672)         4,751,252  
                                          ------------    ------------      ------------       ------------  
  Net realized and unrealized gain                                                                           
   (loss) on investments and futures        (8,712,927)     (5,629,960)      (27,690,605)         3,486,534  
                                          ------------    ------------      ------------       ------------  
 Increase (decrease) in net assets                                                                           
  resulting from operations               $ (8,081,817)   $ (4,550,273)     $(28,436,127)      $  2,245,247  
                                          ============    ============      ============       ============  

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                         Pilgrim Growth Opportunities Fund   Pilgrim LargeCap Growth Fund  
                                         ---------------------------------  ------------------------------ 
                                               Five             Year           Eleven            Year      
                                           Months Ended        Ended        Months Ended        Ended      
                                              May 31,        December 31,      May 31,         June 30,    
                                               2001             2000            2001             2000      
                                           -------------    -------------   -------------    ------------- 
                                                                                                           
INVESTMENT INCOME:                                                                                         
 Dividends, net of foreign taxes           $     781,394    $   2,931,434   $   1,920,959    $     979,861 
 Interest                                        187,511        1,364,416       2,083,969        1,001,252 
                                           -------------    -------------   -------------    ------------- 
  Total investment income                        968,905        4,295,850       4,004,928        1,981,113 
                                           -------------    -------------   -------------    ------------- 
EXPENSES:                                                                                                  
 Investment management fees                    2,339,228        5,951,486       4,287,057        2,997,541 
 Distribution fees                                                                                         
  Class A                                        218,699          606,227         586,867          375,756 
  Class B                                        754,553        2,064,851       2,674,191        1,990,735 
  Class C                                        434,962        1,053,127       1,319,351          824,123 
  Class Q                                          8,746           17,579          43,024           38,960 
  Class T                                        140,433          645,962              --               -- 
 Administrative fees                             246,235               --              --               -- 
 Transfer agent fees                             241,629          555,472       1,136,272          638,226 
 Shareholder reporting fees                      142,601          266,464         420,631          145,839 
 Registration and filing fees                    117,867          344,099         158,010           87,246 
 Recordkeeping and pricing fees                       --               --         103,300           66,942 
 Professional fees                                57,995           99,148         126,868           39,618 
 Custody fees                                     86,372          176,223          98,748           45,643 
 Shareholder servicing fees                      215,400          868,829          30,990           27,554 
 Director's fees                                   4,466           24,758          47,229           16,842 
 Insurance fees                                    1,822               --           7,605              998 
 Miscellaneous fees                                5,000              523          24,168            7,788 
 Interest and credit facility fees                    --               --              --           15,244 
 Merger fees                                          --               --          51,582               -- 
                                           -------------    -------------   -------------    ------------- 
  Total expenses                               5,016,008       12,674,748      11,115,893        7,319,055 
                                           -------------    -------------   -------------    ------------- 
Less:                                                                                                      
 Waived and reimbursed                                                                                     
  fees/(recoupment)                                   --               --         (10,162)              -- 
 Earnings credits                                     --               --              --           19,972 
                                           -------------    -------------   -------------    ------------- 
  Net expenses                                 5,016,008       12,674,748      11,126,055        7,299,083 
                                           -------------    -------------   -------------    ------------- 
 Net investment income (loss)                 (4,047,103)      (8,378,898)     (7,121,127)      (5,317,970)
                                           -------------    -------------   -------------    ------------- 
REALIZED AND UNREALIZED GAIN (LOSS)                                                                        
 ON INVESTMENTS:                                                                                           
 Net realized gain (loss) on investments    (186,849,526)     (44,978,445)   (174,109,898)      13,498,698 
 Net change in unrealized appreciation                                                                     
  (depreciation) of investments               (9,865,713)    (137,522,500)   (173,014,281)     147,558,169 
                                           -------------    -------------   -------------    ------------- 
  Net realized and unrealized gain                                                                         
   (loss) on investments                    (196,715,239)    (182,500,945)   (347,124,179)     161,056,867 
                                           -------------    -------------   -------------    ------------- 
 Increase (decrease) in net assets                                                                         
  resulting from operations                $(200,762,342)   $(190,879,843)  $(354,245,306)   $ 155,738,897 
                                           =============    =============   =============    ============= 

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                          Pilgrim MidCap Opportunities Fund    Pilgrim MidCap Growth Fund   
                                          ---------------------------------  ------------------------------ 
                                                Five            Year             Eleven           Year      
                                            Months Ended        Ended         Months Ended       Ended      
                                               May 31,       December 31,        May 31,        June 30,    
                                                2001            2000              2001            2000      
                                           -------------    -------------    -------------    ------------- 
                                                                                                            
INVESTMENT INCOME:                                                                                          
 Dividends, net of foreign taxes           $     179,172    $     413,143    $   1,247,144    $     240,274 
 Interest                                        124,492          560,889        1,380,116          831,678 
                                           -------------    -------------    -------------    ------------- 
  Total investment income                        303,664          974,032        2,627,260        1,071,952 
                                           -------------    -------------    -------------    ------------- 
EXPENSES:                                                                                                   
 Investment management fees                      567,295        1,439,697        3,249,540        3,101,608 
 Distribution fees                                                                                          
  Class A                                         34,653           61,730          424,676          389,998 
  Class B                                        125,218          273,856          989,467          822,217 
  Class C                                         86,072          198,779        1,960,515        2,056,051 
  Class Q                                          3,089            3,614           43,758           40,692 
 Administrative fees                              56,730               --               --               -- 
 Transfer agent fees                              62,971          109,413          752,079          561,763 
 Shareholder reporting fees                       22,875           50,978          326,079          172,610 
 Registration and filing fees                     17,122           48,244           93,252           82,483 
 Recordkeeping and pricing fees                    5,000               --           85,709           77,837 
 Professional fees                                48,405           35,368           68,393           45,075 
 Custody fees                                     23,842           49,422           72,989           54,743 
 Shareholder servicing fees                       37,630          155,988           24,790           23,703 
 Director's fees                                   4,228            4,892           15,745           16,500 
 Insurance fees                                      448               --            5,461            4,793 
 Miscellaneous fees                               36,742              662            8,085           86,883 
 Interest and credit facility fees                    --               --               --            3,556 
 Merger fees                                      50,373               --               --               -- 
                                           -------------    -------------    -------------    ------------- 
  Total expenses                               1,182,693        2,432,643        8,120,538        7,540,512 
                                           -------------    -------------    -------------    ------------- 
Less:                                                                                                       
 Waived and reimbursed                                                                                      
  fees/(recoupment)                                   --               --          (29,600)          10,354 
 Earnings credits                                     --               --               --            5,832 
                                           -------------    -------------    -------------    ------------- 
  Net expenses                                 1,182,693        2,432,643        8,150,138        7,524,326 
                                           -------------    -------------    -------------    ------------- 
 Net investment loss                            (879,029)      (1,458,611)      (5,522,878)      (6,452,374)
                                           -------------    -------------    -------------    ------------- 
REALIZED AND UNREALIZED GAIN (LOSS)                                                                         
 ON INVESTMENTS:                                                                                            
 Net realized gain (loss) on investments     (25,966,455)       7,746,077      (18,681,763)      85,093,448 
 Net change in unrealized appreciation                                                                      
  (depreciation) of investments              (14,150,486)     (15,822,878)    (163,691,749)     119,946,995 
                                           -------------    -------------    -------------    ------------- 
  Net realized and unrealized gain                                                                          
   (loss) on investments                     (40,116,941)      (8,076,801)    (182,373,512)     205,040,443 
                                           -------------    -------------    -------------    ------------- 
 Increase (decrease) in net assets                                                                          
  resulting from operations                $ (40,995,970)   $  (9,535,412)   $(187,896,390)   $ 198,588,069 
                                           =============    =============    =============    ============= 

                                            Pilgrim Growth + Value Fund                                     
                                           ------------------------------                                   
                                              Seven             Year                                        
                                           Months Ended        Ended                                        
                                              May 31,        October 31,                                    
                                               2001             2000                                        
                                           -------------    -------------                                   
INVESTMENT INCOME:                                                                                          
 Dividends, net of foreign taxes           $     346,205    $     221,045                                   
 Interest                                        785,243        2,463,831                                   
                                           -------------    -------------                                   
  Total investment income                      1,131,448        2,684,876                                   
                                           -------------    -------------                                   
EXPENSES:                                                                                                   
 Investment management fees                    4,401,021        7,639,602                                   
 Distribution fees                                                                                          
  Class A                                        321,026          510,815                                   
  Class B                                      2,136,886        3,956,212                                   
  Class C                                      1,189,813        1,978,306                                   
  Class Q                                          1,058              591                                   
 Administrative fees                             440,102               --                                   
 Transfer agent fees                             410,197          763,960                                   
 Shareholder reporting fees                      479,562           82,396                                   
 Registration and filing fees                     45,557           78,985                                   
 Recordkeeping and pricing fees                       --               --                                   
 Professional fees                               176,748           53,616                                   
 Custody fees                                    128,900          229,188                                   
 Shareholder servicing fees                      282,099          836,071                                   
 Director's fees                                  59,370           17,980                                   
 Insurance fees                                       --               --                                   
 Miscellaneous fees                               32,932           16,501                                   
 Interest and credit facility fees                    --               --                                   
 Merger fees                                          --               --                                   
                                           -------------    -------------                                   
  Total expenses                              10,105,271       16,164,223                                   
                                           -------------    -------------                                   
Less:                                                                                                       
 Waived and reimbursed                                                                                      
  fees/(recoupment)                                   --               --                                   
 Earnings credits                                     --               --                                   
                                           -------------    -------------                                   
  Net expenses                                10,105,271       16,164,223                                   
                                           -------------    -------------                                   
 Net investment loss                          (8,973,823)     (13,479,347)                                  
                                           -------------    -------------                                   
REALIZED AND UNREALIZED GAIN (LOSS)                                                                         
 ON INVESTMENTS:                                                                                            
 Net realized gain (loss) on investments    (301,751,046)      96,147,664                                   
 Net change in unrealized appreciation                                                                      
  (depreciation) of investments             (104,576,146)      50,016,590                                   
                                           -------------    -------------                                   
  Net realized and unrealized gain                                                                          
   (loss) on investments                    (406,327,192)     146,164,254                                   
                                           -------------    -------------                                   
 Increase (decrease) in net assets                                                                          
  resulting from operations                $(415,301,015)   $ 132,684,907                                   
                                           =============    =============                                   

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
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STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                         Pilgrim SmallCap Opportunities Fund   Pilgrim SmallCap Growth Fund  
                                         -----------------------------------  ------------------------------ 
                                                Five             Year            Eleven            Year      
                                            Months Ended        Ended         Months Ended        Ended      
                                              May 31,        December 31,        May 31,         June 30,    
                                                2001            2000              2001             2000      
                                           -------------    -------------     -------------    ------------- 
                                                                                                             
INVESTMENT INCOME:                                                                                           
 Dividends, net of foreign taxes           $     188,929    $     614,237     $     426,546    $     413,944 
 Interest                                        363,842        2,120,653         1,511,456          913,329 
                                           -------------    -------------     -------------    ------------- 
  Total investment income                        552,771        2,734,890         1,938,002        1,327,273 
                                           -------------    -------------     -------------    ------------- 
EXPENSES:                                                                                                    
 Investment management fees                    1,954,402        5,594,488         4,007,172        4,206,863 
 Distribution fees                                                                                           
  Class A                                        196,303          585,069           461,866          488,534 
  Class B                                        878,520        3,213,859           807,309          727,465 
  Class C                                        338,772        1,261,617         1,777,357        1,977,269 
  Class Q                                          2,392            3,349            25,674           26,579 
  Class T                                         69,541          284,800                --               -- 
 Administrative fees                             195,440               --                --               -- 
 Transfer agent fees                             221,132          542,846           787,229          610,182 
 Shareholder reporting fees                       60,278          268,242           249,881          167,232 
 Registration and filing fees                     16,952           85,229            84,723           91,096 
 Recordkeeping and pricing fees                       --               --            97,700           81,596 
 Professional fees                                49,303          180,320            73,329           56,326 
 Custody fees                                     48,301          210,233            87,405           85,460 
 Shareholder servicing fees                       92,991          826,269            26,800           25,209 
 Director's fees                                   5,083           32,598            20,100           22,000 
 Insurance fees                                    2,263               --             5,531            5,699 
 Miscellaneous fees                                5,600          182,082            27,338          185,057 
 Interest and credit facility fees                    --               --                --           34,152 
 Merger fees                                      58,589               --                --               -- 
                                           -------------    -------------     -------------    ------------- 
  Total expenses                               4,195,862       13,271,001         8,539,414        8,790,719 
                                           -------------    -------------     -------------    ------------- 
Less:                                                                                                        
 Waived and reimbursed                                                                                       
  fees/(recoupment)                                   --               --           (47,191)         204,352 
                                           -------------    -------------     -------------    ------------- 
  Net expenses                                 4,195,862       13,271,001         8,586,605        8,586,367 
                                           -------------    -------------     -------------    ------------- 
 Net investment loss                          (3,643,091)     (10,536,111)       (6,648,603)      (7,259,094)
                                           -------------    -------------     -------------    ------------- 
REALIZED AND UNREALIZED GAIN (LOSS)                                                                          
 ON INVESTMENTS:                                                                                             
 Net realized gain (loss) on investments     (21,202,558)     (16,488,885)        5,605,591       85,003,902 
 Net change in unrealized appreciation                                                                       
  (depreciation) of investments              (81,917,523)     (45,920,205)     (130,267,810)     102,235,975 
                                           -------------    -------------     -------------    ------------- 
  Net realized and unrealized gain                                                                           
   (loss) on investments                    (103,120,081)     (62,409,090)     (124,662,219)     187,239,877 
                                           -------------    -------------     -------------    ------------- 
 Increase (decrease) in net assets                                                                           
  resulting from operations                $(106,763,172)   $ (72,945,201)    $(131,310,822)   $ 179,980,783 
                                           =============    =============     =============    ============= 

See Accompanying Notes to Financial Statements

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-------------                                                                   
Equity &                                                                        
Income Funds                                                                    
-------------                                                                   

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                              Pilgrim Balanced Fund           Pilgrim Convertible Fund   
                                          ------------------------------   ------------------------------
                                             Eleven            Year           Eleven            Year     
                                          Months Ended         Ended       Months Ended        Ended     
                                            May 31,          June 30,        May 31,          June 30,   
                                              2001             2000            2001             2000     
                                          -------------    -------------   -------------    -------------
                                                                                                         
INVESTMENT INCOME:                                                                                       
 Dividends, net of foreign taxes          $     968,015    $     623,513   $   4,926,859    $   3,844,668
 Interest                                     4,941,149        2,269,878       9,777,380        7,216,183
                                          -------------    -------------   -------------    -------------
  Total investment income                     5,909,164        2,893,391      14,704,239       11,060,851
                                          -------------    -------------   -------------    -------------
EXPENSES:                                                                                                
 Investment management fees                     913,795          476,583       3,050,129        2,652,928
 Distribution fees                                                                                       
  Class A                                       197,467           81,266         387,083          317,132
  Class B                                       348,399          162,089       1,259,355        1,028,519
  Class C                                       217,645          210,792       1,288,620        1,267,593
  Class Q                                           787              495         104,120           83,759
  Class T                                        63,756           21,291              --               --
 Transfer agent fees                            225,412          186,550         663,018          444,782
 Shareholder reporting fees                      98,542           44,134         166,058          126,626
 Registration and filing fees                    51,274           13,913         101,565           62,729
 Recordkeeping and pricing fees                      --           21,505          80,065           69,402
 Professional fees                               47,582           38,871          61,190           48,814
 Custody fees                                    52,656           14,996          44,455           56,900
 Shareholder servicing fees                      16,100            7,816          26,465           24,890
 Director's fees                                  4,049            3,180          16,878           15,000
 Insurance fees                                      --              801           4,781            2,892
 Miscellaneous fees                              30,399           15,536          28,639           74,289
 Interest and credit facility fees                   --              347              --            9,316
 Merger fees                                         --           29,494              --               --
                                          -------------    -------------   -------------    -------------
  Total expenses                              2,267,863        1,329,659       7,282,421        6,285,571
                                          -------------    -------------   -------------    -------------
Less:                                                                                                    
 Waived and reimbursed                                                                                   
  fees/(recoupment)                             262,968          179,601         (28,211)              --
 Earnings credits                                    --            1,211              --           51,091
                                          -------------    -------------   -------------    -------------
  Net expenses                                2,004,895        1,148,847       7,310,632        6,234,480
                                          -------------    -------------   -------------    -------------
 Net investment income                        3,904,269        1,744,544       7,393,607        4,826,371
                                          -------------    -------------   -------------    -------------
REALIZED AND UNREALIZED GAIN (LOSS)                                                                      
 ON INVESTMENTS:                                                                                         
 Net realized gain (loss) on investments     (1,616,640)      10,481,616      25,240,635       70,655,086
 Net change in unrealized appreciation                                                                   
  (depreciation) of investments              (3,330,551)     (17,791,175)   (125,518,453)      29,680,606
                                          -------------    -------------   -------------    -------------
  Net realized and unrealized gain                                                                       
   (loss) on investments                     (4,947,191)      (7,309,559)   (100,277,818)     100,335,692
                                          -------------    -------------   -------------    -------------
 Increase (decrease) in net assets                                                                       
  resulting from operations               $  (1,042,922)   $  (5,565,015)  $ (92,884,211)   $ 105,162,063
                                          =============    =============   =============    =============

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
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 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                         Pilgrim MagnaCap Fund              
                                            ----------------------------------------------- 
                                            Eleven Months         Year            Year      
                                                Ended            Ended            Ended     
                                             May 31, 2001    June 30, 2000    June 30, 1999 
                                            -------------    -------------    ------------- 
                                                                                            
FROM OPERATIONS:                                                                            
Net investment income                       $     631,110    $   1,079,687    $   1,122,179 
Net realized gain on investments               63,559,889       29,968,024       49,186,475 
Net change in unrealized appreciation                                                       
 (depreciation) of investments                (72,272,816)     (35,597,984)      17,754,811 
                                            -------------    -------------    ------------- 
Net increase (decrease) in net assets                                                       
 resulting from operations                  $  (8,081,817)   $  (4,550,273)   $  68,063,465 
                                            -------------    -------------    ------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                             
Net investment income:                                                                      
  Class A                                      (1,630,626)      (1,038,566)        (713,703)
  Class B                                         (22,115)              --               -- 
  Class C                                            (945)              --               -- 
  Class M                                          (4,626)         (12,763)            (963)
  Class Q                                         (66,993)              --               -- 
Net realized gain from investments            (47,090,684)     (48,878,271)     (45,964,037)
                                            -------------    -------------    ------------- 
Total distributions                           (48,815,989)     (49,929,600)     (46,678,703)
                                            -------------    -------------    ------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                            
Net proceeds from sale of shares               36,855,285      169,844,202      272,199,176 
Net proceeds from shares issued in merger      69,632,639               --               -- 
Shares resulting from dividend                                                              
 reinvestments                                 40,302,303       45,853,052       37,748,339 
                                            -------------    -------------    ------------- 
                                              146,790,227      215,697,254      309,947,515 
Cost of shares redeemed                       (78,040,728)    (245,236,862)    (270,865,970)
                                            -------------    -------------    ------------- 
Net increase (decrease) in net assets                                                       
 resulting from capital share transactions     68,749,499      (29,539,608)      39,081,545 
                                            -------------    -------------    ------------- 
Net increase (decrease) in net assets          11,851,693      (84,019,481)      60,466,307 
                                            -------------    -------------    ------------- 
NET ASSETS:                                                                                 
Beginning of period                           417,667,984      501,687,465      441,221,158 
                                            -------------    -------------    ------------- 
End of period                               $ 429,519,677    $ 417,667,984    $ 501,687,465 
                                            =============    =============    ============= 
Undistributed net investment income at end                                                  
 of period                                  $          --    $     872,876    $     536,313 
                                            =============    =============    ============= 

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
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--------------------------------------------------------------------------------

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                                                     Pilgrim Research Enhanced Index Fund            
                                            ---------------------------------------------------------
                                            Seven Months            Year                Period       
                                               Ended               Ended                Ended        
                                            May 31, 2001      October 31, 2000    October 31, 1999(1)
                                            ------------      ----------------    -------------------
                                                                                                     
FROM OPERATIONS:                                                                                     
Net investment loss                         $    (745,522)     $  (1,241,287)       $    (160,475)   
Net realized gain (loss) on investments        (9,758,933)        (1,264,718)           2,844,931    
Net change in unrealized appreciation                                                                
 (depreciation) of investments                (17,931,672)         4,751,252            5,444,661    
                                            -------------      -------------        -------------    
Net increase (decrease) in net assets                                                                
 resulting from operations                  $ (28,436,127)     $   2,245,247        $   8,129,117    
                                            -------------      -------------        -------------    
FROM DIVIDENDS TO SHAREHOLDERS:                                                                      
Net realized gain from investments                     --         (3,268,200)                  --    
                                            -------------      -------------        -------------    
Total distributions                                    --         (3,268,200)                  --    
                                            -------------      -------------        -------------    
FROM CAPITAL SHARE TRANSACTIONS:                                                                     
Net proceeds from sale of shares               22,144,706         70,474,849          231,460,935    
Shares resulting from dividend                                                                       
 reinvestments                                         --          1,900,825                   --    
                                            -------------      -------------        -------------    
                                               22,144,706         72,375,674          231,460,935    
Cost of shares redeemed                       (47,147,064)       (66,766,343)          (9,383,395)   
                                            -------------      -------------        -------------    
Net increase (decrease) in net assets                                                                
 resulting from capital share transactions    (25,002,358)         5,609,331          222,077,540    
                                            -------------      -------------        -------------    
Net increase (decrease) in net assets         (53,438,485)         4,586,378          230,206,657    
                                            -------------      -------------        -------------    
NET ASSETS:                                                                                          
Beginning of period                           234,793,035        230,206,657                   --    
                                            -------------      -------------        -------------    
End of period                               $ 181,354,550      $ 234,793,035        $ 230,206,657    
                                            =============      =============        =============    
Undistributed net investment income at                                                               
 end of period                              $          --      $          --        $          --    
                                            =============      =============        =============    

----------                                                                      
(1)  Fund commenced operations on December 30, 1998.                            

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
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 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

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                                                     Pilgrim Growth Opportunities Fund            
                                           -------------------------------------------------------
                                            Five Months            Year                Year       
                                               Ended              Ended               Ended       
                                           May 31, 2001     December 31, 2000    December 31, 1999
                                           ------------     -----------------    -----------------
                                                                                                  
FROM OPERATIONS:                                                                                  
Net investment loss                        $  (4,047,103)     $  (8,378,898)       $  (2,696,734) 
Net realized gain (loss) on investments     (186,849,526)       (44,978,445)          99,757,033  
Net change in unrealized appreciation                                                             
 (depreciation) of investments                (9,865,713)      (137,522,500)          83,704,065  
                                           -------------      -------------        -------------  
Net increase (decrease) in net assets                                                             
 resulting from operations                 $(200,762,342)     $(190,879,843)       $ 180,764,364  
                                           -------------      -------------        -------------  
FROM DIVIDENDS TO SHAREHOLDERS:                                                                   
Net realized gain from investments                    --        (41,120,168)        (103,343,720) 
                                           -------------      -------------        -------------  
Total distributions                                   --        (41,120,168)        (103,343,720) 
                                           -------------      -------------        -------------  
FROM CAPITAL SHARE TRANSACTIONS:                                                                  
Net proceeds from sale of shares              85,048,337        726,623,810          138,399,126  
Net proceeds from shares issued in merger             --                 --                   --  
Shares resulting from dividend                                                                    
 reinvestments                                        --         30,960,648           94,714,507  
Redemption of Class I shares                          --                 --                   --  
                                           -------------      -------------        -------------  
                                              85,048,337        757,584,458          233,113,633  
Cost of shares redeemed                      (80,753,091)      (225,228,540)         (64,957,986) 
                                           -------------      -------------        -------------  
Net increase in net assets resulting from                                                         
 capital share transactions                    4,295,246        532,355,918          168,155,647  
                                           -------------      -------------        -------------  
Net increase (decrease) in net assets       (196,467,096)       300,355,907          245,576,291  
                                           -------------      -------------        -------------  
NET ASSETS:                                                                                       
Beginning of period                          727,651,413        427,295,506          181,719,215  
                                           -------------      -------------        -------------  
End of period                              $ 531,184,317      $ 727,651,413        $ 427,295,506  
                                           =============      =============        =============  
Undistributed net investment income                                                               
 at end of period                          $          --      $          --        $          --  
                                           =============      =============        =============  

                                                       Pilgrim LargeCap Growth Fund               
                                           ---------------------------------------------------    
                                           Eleven Months          Year           Three Months     
                                               Ended              Ended              Ended        
                                           May 31, 2001       June 30, 2000      June 30, 1999    
                                           -------------      -------------      -------------    
FROM OPERATIONS:                                                                                  
Net investment loss                        $  (7,121,127)     $  (5,317,970)     $    (163,823)   
Net realized gain (loss) on investments     (174,109,898)        13,498,698          2,418,689    
Net change in unrealized appreciation                                                             
 (depreciation) of investments              (173,014,281)       147,558,169          6,320,924    
                                           -------------      -------------      -------------    
Net increase (decrease) in net assets                                                             
 resulting from operations                 $(354,245,306)     $ 155,738,897      $   8,575,790    
                                           -------------      -------------      -------------    
FROM DIVIDENDS TO SHAREHOLDERS:                                                                   
Net realized gain from investments            (8,506,681)        (3,085,512)                --    
                                           -------------      -------------      -------------    
Total distributions                           (8,506,681)        (3,085,512)                --    
                                           -------------      -------------      -------------    
FROM CAPITAL SHARE TRANSACTIONS:                                                                  
Net proceeds from sale of shares             305,120,966        532,535,020         52,500,065    
Net proceeds from shares issued in merger    110,393,160                 --                 --    
Shares resulting from dividend                                                                    
 reinvestments                                 5,079,126          2,521,879                 --    
Redemption of Class I shares                          --                 --         (6,420,194)   
                                           -------------      -------------      -------------    
                                             420,593,252        535,056,899         46,079,871    
Cost of shares redeemed                     (238,728,153)       (93,636,480)        (3,028,700)   
                                           -------------      -------------      -------------    
Net increase in net assets resulting from                                                         
 capital share transactions                  181,865,099        441,420,419         43,051,171    
                                           -------------      -------------      -------------    
Net increase (decrease) in net assets       (180,886,888)       594,073,804         51,626,961    
                                           -------------      -------------      -------------    
NET ASSETS:                                                                                       
Beginning of period                          697,037,752        102,963,948         51,336,987    
                                           -------------      -------------      -------------    
End of period                              $ 516,150,864      $ 697,037,752      $ 102,963,948    
                                           =============      =============      =============    
Undistributed net investment income                                                               
 at end of period                          $          --      $          --      $          --    
                                           =============      =============      =============    

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

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                                                     Pilgrim MidCap Opportunities Fund            
                                            ----------------------------------------------------  
                                             Five Months            Year               Year       
                                                Ended              Ended              Ended       
                                            May 31, 2001     December 31, 2000   December 31, 1999
                                            -------------      -------------       -------------  
                                                                                                  
FROM OPERATIONS:                                                                                  
Net investment loss                         $    (879,029)     $  (1,458,611)      $    (533,884) 
Net realized gain (loss) on investments       (25,966,455)         7,746,077          15,933,086  
Net change in unrealized appreciation                                                             
 (depreciation) of investments                (14,150,486)       (15,822,878)         23,414,702  
                                            -------------      -------------       -------------  
Net increase (decrease) in net assets                                                             
 resulting from operations                  $ (40,995,970)     $  (9,535,412)      $  38,813,904  
                                            -------------      -------------       -------------  
FROM DIVIDENDS TO SHAREHOLDERS:                                                                   
Net realized gain from investments                     --        (15,667,624)        (10,428,057) 
                                            -------------      -------------       -------------  
Total distributions                                    --        (15,667,624)        (10,428,057) 
                                            -------------      -------------       -------------  
FROM CAPITAL SHARE TRANSACTIONS:                                                                  
Net proceeds from sale of shares                9,802,023        106,404,210          15,834,997  
Net proceeds from shares issued in merger      30,843,894                 --                  --  
Shares resulting from dividend                                                                    
 reinvestments                                         --         12,544,986          10,198,746  
Redemption of Class I shares                           --                 --                  --  
                                            -------------      -------------       -------------  
                                               40,645,917        118,949,196          26,033,743  
Cost of shares redeemed                       (31,459,743)       (22,301,858)         (1,640,736) 
                                            -------------      -------------       -------------  
Net increase (decrease) in net assets                                                             
 resulting from capital share transactions      9,186,174         96,647,338          24,393,007  
                                            -------------      -------------       -------------  
Net increase (decrease) in net assets         (31,809,796)        71,444,302          52,778,854  
                                            -------------      -------------       -------------  
NET ASSETS:                                                                                       
Beginning of period                           158,501,098         87,056,796          34,277,942  
                                            -------------      -------------       -------------  
End of period                               $ 126,691,302      $ 158,501,098       $  87,056,796  
                                            =============      =============       =============  
Undistributed net investment income                                                               
 at end of period                           $          --      $          --       $          --  
                                            =============      =============       =============  

                                                        Pilgrim MidCap Growth Fund                
                                            ---------------------------------------------------   
                                            Eleven Months           Year          Three Months    
                                                Ended              Ended             Ended        
                                             May 31, 2001      June 30, 2000      June 30, 1999   
                                            -------------      -------------      -------------   
FROM OPERATIONS:                                                                                  
Net investment loss                         $  (5,522,878)     $  (6,452,374)     $  (1,221,010)  
Net realized gain (loss) on investments       (18,681,763)        85,093,448         37,699,336   
Net change in unrealized appreciation                                                             
 (depreciation) of investments               (163,691,749)       119,946,995        (14,395,996)  
                                            -------------      -------------      -------------   
Net increase (decrease) in net assets                                                             
 resulting from operations                  $(187,896,390)     $ 198,588,069      $  22,082,330   
                                            -------------      -------------      -------------   
FROM DIVIDENDS TO SHAREHOLDERS:                                                                   
Net realized gain from investments            (93,914,355)       (88,397,148)                --   
                                            -------------      -------------      -------------   
Total distributions                           (93,914,355)       (88,397,148)                --   
                                            -------------      -------------      -------------   
FROM CAPITAL SHARE TRANSACTIONS:                                                                  
Net proceeds from sale of shares              222,525,037        353,806,052         14,162,841   
Net proceeds from shares issued in merger              --                 --                 --   
Shares resulting from dividend                                                                    
 reinvestments                                 44,622,188         78,987,177                 --   
Redemption of Class I shares                           --                 --       (168,592,944)  
                                            -------------      -------------      -------------   
                                              267,147,225        432,793,229       (154,430,103)  
Cost of shares redeemed                      (170,111,949)      (281,762,942)       (21,991,325)  
                                            -------------      -------------      -------------   
Net increase (decrease) in net assets                                                             
 resulting from capital share transactions     97,035,276        151,030,287       (176,421,428)  
                                            -------------      -------------      -------------   
Net increase (decrease) in net assets        (184,775,469)       261,221,208       (154,339,098)  
                                            -------------      -------------      -------------   
NET ASSETS:                                                                                       
Beginning of period                           541,356,593        280,135,385        434,474,483   
                                            -------------      -------------      -------------   
End of period                               $ 356,581,124      $ 541,356,593      $ 280,135,385   
                                            =============      =============      =============   
Undistributed net investment income                                                               
 at end of period                           $          --      $          --      $          --   
                                            =============      =============      =============   

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

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                                                         Pilgrim Growth + Value Fund                 
                                           --------------------------------------------------------- 
                                            Seven Months             Year                 Year       
                                                Ended               Ended                Ended       
                                            May 31, 2001       October 31, 2000     October 31, 1999 
                                           ---------------      ---------------      --------------- 
                                                                                                     
FROM OPERATIONS:                                                                                     
Net investment loss                        $    (8,973,823)     $   (13,479,347)     $    (5,045,729)
Net realized gain (loss) on investments       (301,751,046)          96,147,664           83,963,594 
Net change in unrealized appreciation                                                                
 (depreciation) of investments                (104,576,146)          50,016,590           83,444,021 
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets                                                                
 resulting from operations                 $  (415,301,015)     $   132,684,907      $   162,361,886 
                                           ---------------      ---------------      --------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                                      
Net realized gain from investments             (93,173,524)         (52,769,105)                  -- 
Tax return of capital                           (2,724,028)                  --                   -- 
                                           ---------------      ---------------      --------------- 
Total distributions                            (95,897,552)         (52,769,105)                  -- 
                                           ---------------      ---------------      --------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                                     
Net proceeds from sale of shares               271,208,423          795,463,400          215,319,842 
Net proceeds from shares issued in merger               --                   --                   -- 
Shares resulting from dividend                                                                       
 reinvestments                                  62,411,607           32,130,552                   -- 
                                           ---------------      ---------------      --------------- 
                                               333,620,030          827,593,952          215,319,842 
Cost of shares redeemed                       (199,253,732)        (253,638,470)        (161,711,440)
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets                                                                
 resulting from capital share transaction      134,366,298          573,955,482           53,608,402 
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets         (376,832,269)         653,871,284          215,970,288 
                                           ---------------      ---------------      --------------- 
NET ASSETS:                                                                                          
Beginning of period                          1,046,713,640          392,842,356          176,872,068 
                                           ---------------      ---------------      --------------- 
End of period                              $   669,881,371      $ 1,046,713,640      $   392,842,356 
                                           ===============      ===============      =============== 
Undistributed net investment income                                                                  
 at end of period                          $            --      $            --      $            -- 
                                           ===============      ===============      =============== 

                                                     Pilgrim SmallCap Opportunities Fund             
                                           --------------------------------------------------------- 
                                             Five Months             Year                 Year       
                                                Ended               Ended                Ended       
                                            May 31, 2001       December 31, 2000    December 31, 1999
                                           ---------------      ---------------      --------------- 
FROM OPERATIONS:                                                                                     
Net investment loss                        $    (3,643,091)     $   (10,536,111)     $    (4,533,770)
Net realized gain (loss) on investments        (21,202,558)         (16,488,885)         148,711,313 
Net change in unrealized appreciation                                                                
 (depreciation) of investments                 (81,917,523)         (45,920,205)         125,857,120 
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets                                                                
 resulting from operations                 $  (106,763,172)     $   (72,945,201)     $   270,034,663 
                                           ---------------      ---------------      --------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                                      
Net realized gain from investments                      --          (99,067,878)         (49,037,189)
Tax return of capital                                   --                   --                   -- 
                                           ---------------      ---------------      --------------- 
Total distributions                                     --          (99,067,878)         (49,037,189)
                                           ---------------      ---------------      --------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                                     
Net proceeds from sale of shares                39,685,223          488,213,149          120,520,056 
Net proceeds from shares issued in merger       29,533,351                   --                   -- 
Shares resulting from dividend                                                                       
 reinvestments                                          --           69,587,907           33,630,861 
                                           ---------------      ---------------      --------------- 
                                                69,218,574          557,801,056          154,150,917 
Cost of shares redeemed                        (71,756,890)        (306,341,551)         (98,356,454)
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets                                                                
 resulting from capital share transaction       (2,538,316)         251,459,505           55,794,463 
                                           ---------------      ---------------      --------------- 
Net increase (decrease) in net assets         (109,301,488)          79,446,426          276,791,937 
                                           ---------------      ---------------      --------------- 
NET ASSETS:                                                                                          
Beginning of period                            573,715,406          494,268,980          217,477,043 
                                           ---------------      ---------------      --------------- 
End of period                              $   464,413,918      $   573,715,406      $   494,268,980 
                                           ===============      ===============      =============== 
Undistributed net investment income                                                                  
 at end of period                          $            --      $            --      $            -- 
                                           ===============      ===============      =============== 

See Accompanying Notes to Financial Statements

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U.S. Equity                                                                     
Funds                                                                           
-----------                                                                     

 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

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                                                        Pilgrim SmallCap Growth Fund            
                                            --------------------------------------------------- 
                                            Eleven Months           Year          Three Months  
                                               Ended               Ended              Ended     
                                            May 31, 2001       June 30, 2000      June 30, 1999 
                                            -------------      -------------      ------------- 
                                                                                                
FROM OPERATIONS:                                                                                
Net investment loss                         $  (6,648,603)     $  (7,259,094)     $  (1,566,497)
Net realized gain on investments                5,605,591         85,003,902         67,438,450 
Net change in unrealized appreciation                                                           
 (depreciation) of investments               (130,267,810)       102,235,975        (18,557,187)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from operations                  $(131,310,822)     $ 179,980,783      $  47,314,766 
                                            -------------      -------------      ------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                                 
Net realized gain from investments            (55,662,276)      (158,396,508)                -- 
                                            -------------      -------------      ------------- 
Total distributions                           (55,662,276)      (158,396,508)                -- 
                                            -------------      -------------      ------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                                
Net proceeds from sale of shares              219,056,344        364,010,289         17,931,971 
Shares resulting from dividend                                                                  
 reinvestments                                 23,213,444        136,805,877                 -- 
Redemption of Class I shares                           --                 --       (221,318,827)
                                            -------------      -------------      ------------- 
                                              242,269,788        500,816,166       (203,386,856)
Cost of shares redeemed                      (199,385,564)      (331,453,908)       (33,776,345)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from capital share transactions     42,884,224        169,362,258       (237,163,201)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets        (144,088,874)       190,946,533       (189,848,435)
                                            -------------      -------------      ------------- 
NET ASSETS:                                                                                     
Beginning of period                           507,519,255        316,572,722        506,421,157 
                                            -------------      -------------      ------------- 
End of period                               $ 363,430,381      $ 507,519,255      $ 316,572,722 
                                            =============      =============      ============= 
Undistributed net investment income                                                             
 at end of period                           $          --      $          --      $          -- 
                                            =============      =============      ============= 

See Accompanying Notes to Financial Statements

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------------                                                                    
Equity &                                                                        
Income Funds                                                                    
------------                                                                    

 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                           Pilgrim Balanced Fund                
                                            --------------------------------------------------- 
                                            Eleven Months           Year          Three Months  
                                                Ended              Ended              Ended     
                                             May 31, 2001      June 30, 2000      June 30, 1999 
                                            -------------      -------------      ------------- 
                                                                                                
FROM OPERATIONS:                                                                                
Net investment income                       $   3,904,269      $   1,744,544      $     149,349 
Net realized gain (loss) on investments        (1,616,640)        10,481,616          4,490,910 
Net change in unrealized appreciation                                                           
 (depreciation) of investments                 (3,330,551)       (17,791,175)        (4,167,142)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from operations                  $  (1,042,922)     $  (5,565,015)     $     473,117 
                                            -------------      -------------      ------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                                 
Net investment income:                                                                          
  Class A                                      (2,160,525)          (229,987)           (34,428)
  Class B                                        (985,710)          (140,731)           (14,576)
  Class C                                        (682,525)          (417,990)           (47,586)
  Class Q                                         (10,659)            (4,652)              (798)
  Class T                                        (298,008)                --                 -- 
Net realized gain from investments            (10,205,280)        (7,355,531)                -- 
                                            -------------      -------------      ------------- 
Total distributions                           (14,342,707)        (8,148,891)           (97,388)
                                            -------------      -------------      ------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                                
Net proceeds from sale of shares               32,659,504         14,115,466          2,993,582 
Net proceeds from shares issued in merger              --        120,445,073                 -- 
Shares resulting from dividend                                                                  
 reinvestments                                 11,072,991          6,982,714             41,034 
Redemption of Class I shares                           --                 --                 -- 
                                            -------------      -------------      ------------- 
                                               43,732,495        141,543,253          3,034,616 
Cost of shares redeemed                       (41,904,310)       (24,486,297)        (2,512,012)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from capital share transactions      1,828,185        117,056,956            522,604 
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets         (13,557,444)       103,343,050            898,333 
                                            -------------      -------------      ------------- 
NET ASSETS:                                                                                     
Beginning of period                           141,639,294         38,296,244         37,397,911 
                                            -------------      -------------      ------------- 
End of period                               $ 128,081,850      $ 141,639,294      $  38,296,244 
                                            =============      =============      ============= 
Undistributed net investment income (loss)                                                      
 at end of period                           $     776,758      $   1,009,916      $     (16,013)
                                            =============      =============      ============= 

                                                         Pilgrim Convertible Fund               
                                            --------------------------------------------------- 
                                            Eleven Months           Year          Three Months  
                                                Ended              Ended              Ended     
                                             May 31, 2001      June 30, 2000      June 30, 1999 
                                            -------------      -------------      ------------- 
FROM OPERATIONS:                                                                                
Net investment income                       $   7,393,607      $   4,826,371      $   1,054,881 
Net realized gain (loss) on investments        25,240,635         70,655,086         13,167,798 
Net change in unrealized appreciation                                                           
 (depreciation) of investments               (125,518,453)        29,680,606          3,889,849 
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from operations                  $ (92,884,211)     $ 105,162,063      $  18,112,528 
                                            -------------      -------------      ------------- 
FROM DIVIDENDS TO SHAREHOLDERS:                                                                 
Net investment income:                                                                          
  Class A                                      (2,742,655)        (1,119,420)          (310,471)
  Class B                                      (1,907,503)          (674,174)          (167,244)
  Class C                                      (2,150,950)          (908,198)          (265,212)
  Class Q                                      (1,131,972)          (450,509)           (88,744)
  Class T                                              --                 --                 -- 
Net realized gain from investments            (91,080,548)       (42,129,281)                -- 
                                            -------------      -------------      ------------- 
Total distributions                           (99,013,628)       (45,281,582)          (831,671)
                                            -------------      -------------      ------------- 
FROM CAPITAL SHARE TRANSACTIONS:                                                                
Net proceeds from sale of shares              161,509,462        220,047,461         28,114,039 
Net proceeds from shares issued in merger              --                 --                 -- 
Shares resulting from dividend                                                                  
 reinvestments                                 62,313,647         38,566,753            465,422 
Redemption of Class I shares                           --                 --        (91,378,691)
                                            -------------      -------------      ------------- 
                                              223,823,109        258,614,214        (62,799,230)
Cost of shares redeemed                      (143,352,464)       (93,851,800)       (13,251,963)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets                                                           
 resulting from capital share transactions     80,470,645        164,762,414        (76,051,193)
                                            -------------      -------------      ------------- 
Net increase (decrease) in net assets        (111,427,194)       224,642,895        (58,770,336)
                                            -------------      -------------      ------------- 
NET ASSETS:                                                                                     
Beginning of period                           483,680,205        259,037,310        317,807,646 
                                            -------------      -------------      ------------- 
End of period                               $ 372,253,011      $ 483,680,205      $ 259,037,310 
                                            =============      =============      ============= 
Undistributed net investment income (loss)                                                      
 at end of period                           $   2,222,925      $   2,762,398      $     195,337 
                                            =============      =============      ============= 

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM MAGNACAP FUND                                                 HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                 Class Q             
                                                     --------------------------------
                                                     Eleven Months       Period      
                                                         Ended            Ended      
                                                      May 31, 2001   June 30, 2000(1)
                                                      ------------   ----------------
                                                                                     
Per Share Operating Performance:                                                     
 Net asset value, beginning of period             $       15.84           16.26      
 Income from investment operations:                                                  
 Net investment income                            $        0.07            0.05      
 Net realized and unrealized loss on investments  $       (0.38)          (0.47)     
 Total from investment operations                 $       (0.31)          (0.42)     
 Less distributions from:                                                            
 Net investment income                            $        0.10              --      
 Net realized gains on investments                $        1.88              --      
 Total distributions                              $        1.98              --      
 Net asset value, end of period                   $       13.55           15.84      
 Total Return(2):                                 %       (2.60)          (2.58)     
Ratios/Supplemental Data:                                                            
 Net assets, end of period (000's)                $      11,184           9,928      
 Ratios to average net assets:                                                       
 Expenses(3)                                      %        1.11            1.24      
 Net investment income (3)                        %        0.53            0.46      
 Portfolio turnover                               %          92              26      

----------                                                                      
(1)  Class Q commenced offering of shares on November 19, 1999.                 
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than one year.                                 

See Accompanying Notes to Financial Statements

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FINANCIAL                                                                       
HIGHLIGHTS                                  PILGRIM RESEARCH ENHANCED INDEX FUND
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                   Class Q
                                                     ---------------------------
                                                     Seven Months   Period Ended
                                                     Ended May 31,   October 31,
                                                       2001          2000(1)
                                                       ----          -------
Per Share Operating Performance:                                                
Net asset value, beginning of period              $     11.17          11.98  
Income from investment operations:                                            
Net investment income                             $        --             --  
Net realized and unrealized loss on investments   $     (1.32)         (0.81) 
Total from investment operations                  $     (1.32)         (0.81) 
Net asset value, end of period                    $      9.85          11.17  
Total return(2)                                   %    (11.82)         (6.76) 
Ratios and supplemental data:                                                   
Net assets, end of period (000's)                 $       456            273  
Ratios to average net assets:                                                 
Expenses(3)                                       %      1.29           1.32  
Net investment income (loss)(3)                   %      0.03          (0.05) 
Portfolio turnover                                %        26             57  

----------                                                                      
(1)  Class Q commenced offering of shares on April 4, 2000.                     
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than one year.                                 

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM GROWTH OPPORTUNITIES FUND                                     HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                   Class Q
                                                      --------------------------
                                                                  Period
                                                  Five Months      Ended
                                                         Ended      December 31,
                                                   May 31, 2001    2000(1)
                                                   ------------    -------
Per Share Operating Performance:                                                
Net asset value, beginning of period              $      25.48        32.58   
Income from investment operations:                                            
Net investment loss                               $      (0.10)       (0.15)  
Net realized and unrealized loss on investments   $      (6.68)       (5.46)  
Total from investment operations                  $      (6.78)       (5.61)  
Less distributions from:                                                      
Net realized gains on investments                 $         --         1.49   
Total distributions                               $         --         1.49   
Net asset value, end of period                    $      18.70        25.48   
Total return(2)                                   %     (26.61)      (17.55)  
Ratios and supplemental data:                                                   
Net assets, end of period (000s)                  $      7,947       10,274   
Ratios to average net assets:                                                 
Expenses(3)                                       %       1.56         1.41   
Net investment loss(3)                            %      (1.17)       (0.81)  
Portfolio turnover                                %        217          326   

----------                                                                      
(1)  Class Q commenced offering of shares on June 1, 2000.                      
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than a year.                                   

See Accompanying Notes to Financial Statements

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FINANCIAL                                                                       
HIGHLIGHTS                                          PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                                    Class Q                            
                                                            ---------------------------------------------------------  
                                                            Eleven Months    Year    Three Months   Year      Period   
                                                               Ended        Ended       Ended       Ended      Ended   
                                                               May 31,     June 30,    June 30,    March 31,  March 31,
                                                                2001         2000       1999(2)      1999      1998(1) 
                                                                ----         ----       -------      ----      ------- 
                                                                                                                       
Per Share Operating Performance:                                                                                       
 Net asset value, beginning of period                    $      43.71        28.43       25.24       15.66      12.50  
 Income from investment operations:                                                                                    
 Net investment loss                                     $      (0.17)       (0.20)      (0.03)      (0.02)     (0.01) 
 Net realized and unrealized gain (loss) on investments  $     (18.26)       15.86        3.22        9.87       3.26  
 Total from investment operations                        $     (18.43)       15.66        3.19        9.85       3.25  
 Less distributions from:                                                                                              
 Net investment income                                   $         --           --          --          --       0.01  
 Net realized gains on investments                       $       0.47         0.38          --        0.27       0.08  
 Total distributions                                     $       0.47         0.38          --        0.27       0.09  
 Net asset value, end of period                          $      24.81        43.71       28.43       25.24      15.66  
 Total Return(3):                                        %     (42.50)       55.57       12.64       63.76      62.47  
Ratios/Supplemental Data:                                                                                              
 Net assets, end of period ($000's)                      $     12,534       24,838       6,044       4,908        799  
 Ratios to average net assets:                                                                                         
 Net expenses after expense reimbursement(4)(5)          %       1.19         1.26        1.23        1.26       1.25  
 Gross expenses prior to expense reimbursement(4)        %       1.19         1.26        1.25        1.91      10.45  
 Net investment loss after expense reimbursement(4)(5)   %      (0.50)       (0.77)      (0.36)      (0.28)     (0.62) 
 Portfolio turnover                                      %        331          139          27         253        306  

----------                                                                      
(1)  The Fund commenced operations on July 21, 1997.                            
(2)  Effective May 24, 1999, Pilgrim Investments Inc., became the Investment    
  Manager of the Fund; concurrently, Nicholas-Applegate Capital Management
    was appointed as sub-advisor and the Fund changed its year end to June 30.
(3)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(4)  Annualized for periods less than one year.                                 
(5)  The Investment Manager has agreed to limit expenses, excluding, interest,  
taxes, brokerage and extraordinary expenses.                          

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM MIDCAP OPPORTUNITIES FUND                                     HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                     Class Q
                                                       -------------------------
                                                   Five Months    Period
                                                      Ended        Ended
                                                         May 31,    December 31,
                                                        2001       2000(1)
                                                        ----       -------
Per Share Operating Performance                                                 
Net asset value, beginning of period               $     19.16        22.57   
Income from investment operations:                                            
Net investment loss                                $     (0.08)       (0.06)  
Net realized and unrealized loss on investments    $     (4.45)       (1.17)  
Total from investment operations                   $     (4.53)       (1.23)  
Less distributions from:                                                      
Net realized gains on investments                  $        --         2.18   
Total distributions                                $        --         2.18   
Net asset value, end of period                     $     14.63        19.16   
Total return(2):                                   %    (23.64)       (5.86)  
Ratios and supplemental data:                                                   
Net assets, end of period (000s)                   $     3,071        3,264   
Ratios to average net assets:                                                 
Expenses(3)                                        %      1.82         1.61   
Net investment loss(3)                             %     (1.28)       (0.91)  
Portfolio turnover                                 %       182          188   

----------                                                                      
(1)  Class Q commenced offering of shares on April 4, 2000.                     
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than one year.                                 

See Accompanying Notes to Financial Statements

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FINANCIAL                                                                       
HIGHLIGHTS                                            PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                                           Class Q                               
                                                            -------------------------------------------------------------------  
                                                            Eleven Months   Year   Three Months                                  
                                                               Ended       Ended      Ended           Year Ended March 31,       
                                                               May 31,    June 30,   June 30,    ------------------------------  
                                                                2001        2000      1999(1)    1999     1998     1997    1996  
                                                                ----        ----      -------    ----     ----     ----    ----  
                                                                                                                                 
Per Share Operating Performance:                                                                                                 
 Net asset value, beginning of period                    $      35.67      26.94       25.14     23.30    18.01    17.99   13.66 
 Income from investment operations:                                                                                              
 Net investment loss                                     $      (0.12)     (0.29)      (0.06)    (0.12)   (0.21)   (0.04)  (0.07)
 Net realized and unrealized gain (loss) on investments  $     (10.10)     17.92        1.86      3.56     7.48     0.32    4.86 
 Total from investment operations                        $     (10.22)     17.63        1.80      3.44     7.27     0.28    4.79 
 Less distributions from:                                                                                                        
 Net realized gains on investments                       $       5.96       8.90          --      1.60     1.98     0.26    0.46 
 Total distributions                                     $       5.96       8.90          --      1.60     1.98     0.26    0.46 
 Net asset value, end of period                          $      19.49      35.67       26.94     25.14    23.30    18.01   17.99 
 Total Return(2):                                        %     (33.14)     77.87        7.16     15.77    42.00     1.39   35.37 
Ratios/Supplemental Data:                                                                                                        
 Net assets, end of period (000's)                       $     16,412     19,792      19,383    14,350   12,204   13,115   4,274 
 Ratios to average net assets:                                                                                                   
 Net expenses after expense                                                                                                      
 reimbursement/recoupment(3)(4)                          %       1.19       1.26        1.24      1.23     1.22     1.25    1.23 
 Gross expenses prior to expense                                                                                                 
 reimbursement/recoupment(3)                             %       1.18       1.26        1.25      1.31     1.95     1.84    2.84 
 Net investment loss after expense                                                                                               
 reimbursement/recoupment(3)(4)                          %      (0.58)     (1.00)      (0.95)    (0.71)   (0.97)   (0.69)  (0.57)
 Portfolio turnover                                      %        262        148          55       154      200      153     114 

----------                                                                      
(1)  Effective May 24, 1999, Pilgrim Investments, Inc. became the Investment    
     Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2)  Total return is calculated assuming reinvestment of dividends and capital  
    gain distributions at net asset value. Total return for less than one year
is not annualized.                                                    
(3)  Annualized for periods less than one year.                                 
(4)  The Investment Manager has agreed to limit expenses, excluding, interest,  
taxes, brokerage and extraordinary expenses.                          

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM GROWTH + VALUE FUND                                           HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                     Class Q                 
                                                     ----------------------------------------
                                                        Seven Months         Period Ended    
                                                     Ended May 31, 2001   October 31, 2000(1)
                                                     ------------------   -------------------
                                                                                             
Per Share Operating Performance:                                                             
 Net asset value, beginning of period             $         24.90                26.73       
 Income from investment operations:                                                          
 Net investment loss                              $         (0.18)               (0.05)      
 Net realized and unrealized loss on investments  $         (8.62)               (1.78)      
 Total from investment operations                 $         (8.80)               (1.83)      
 Less distributions from:                                                                    
 Net realized gains on investments                $          2.16                  --        
 Tax return of capital                            $          0.06                  --        
 Total distributions                              $          2.22                  --        
 Net asset value, end of the period               $         13.88                24.90       
 Total return(2)                                  %        (38.00)               (6.85)      
Ratios and supplemental data:                                                                
 Net assets, end of period (000's)                $           454                1,346       
 Ratios to average net assets:                                                               
 Expenses(3)                                      %          1.69                 1.53       
 Net investment loss(3)                           %         (1.43)               (1.19)      
 Portfolio turnover                               %            95                  163       

----------                                                                      
(1)  Class Q commenced offering of shares operations on June 5, 2000.           
(2)  Total return is calculated assuming reinvestment of dividends and capital  
    gain distributions at net asset value. Total return for less than one year
is not annualized.                                                    
(3)  Annualized for periods less than one year.                                 

See Accompanying Notes to Financial Statements

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FINANCIAL                                                                       
HIGHLIGHTS                                   PILGRIM SMALLCAP OPPORTUNITIES FUND
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                     Class Q
                                                      --------------------------
                                                  Five Months     Period
                                                    Ended        Ended
                                                        May 31,     December 31,
                                                       2001        2000(1)
                                                       ----        -------
Per Share Operating Performance:                                                
Net asset value, beginning of period              $     47.20         60.86   
Income from investment operations:                                            
Net investment loss                               $     (0.20)        (0.27)  
Net realized and unrealized loss on investments   $     (8.19)        (4.49)  
Total from investment operations                  $     (8.39)        (4.76)  
Less distributions from:                                                      
Net realized gains on investments                 $        --          8.90   
Total distributions                               $        --          8.90   
Net asset value, end of period                    $     38.81         47.20   
Total return(2)                                   %    (17.78)        (8.29)  
Ratios and supplemental data:                                                   
Net assets, end of period (000s)                  $     2,832         2,545   
Ratios to average net assets:                                                 
Expenses(3)                                       %      1.56          1.40   
Net investment loss(3)                            %     (1.28)        (1.10)  
Portfolio turnover                                %       104           134   

----------                                                                      
(1)  Class Q commenced offering of shares on April 4, 2000.                     
(2)  Total return is calculated assuming reinvestment of dividends and capital  
    gain distributions at net asset value. Total return for less than one year
is not annualized.                                                    
(3)  Annualized for periods less than one year.                                 

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM SMALLCAP GROWTH FUND                                          HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                                           Class Q                               
                                                          ---------------------------------------------------------------------- 
                                                          Eleven Months   Year   Three Months                            Period  
                                                             Ended       Ended      Ended       Year Ended March 31,      Ended  
                                                             May 31,    June 30,   June 30,    ----------------------   March 31,
                                                              2001       2000       1999(1)    1999     1998     1997    1996(2) 
                                                              ----       ----       -------    ----     ----     ----    ------- 
                                                                                                                                 
Per Share Operating Performance:                                                                                                 
 Net asset value, beginning of period                    $    20.47      21.19       18.56     19.27    13.19    14.16    12.50  
 Income from investment operations:                                                                                              
 Net investment income (loss)                            $    (0.16)     (0.21)      (0.06)    (0.15)    0.03    (0.07)   (0.03) 
 Net realized and unrealized gain (loss) on investments  $    (4.61)     10.30        2.69      0.22     6.16    (0.77)    1.69  
 Total from investment operations                        $    (4.77)     10.09        2.63      0.07     6.19    (0.84)    1.66  
 Less distributions from:                                                                                                        
 Net realized gains on investments                       $     2.24      10.81          --      0.78     0.11     0.13       --  
 Total distributions                                     $     2.24      10.81          --      0.78     0.11     0.13       --  
 Net asset value, end of period                          $    13.46      20.47       21.19     18.56    19.27    13.19    14.16  
 Total Return(2):                                        %   (25.46)     61.08       14.17      0.96    47.01    (6.03)   13.28  
Ratios/Supplemental Data:                                                                                                        
 Net assets, end of period (000's)                       $    9,080     12,569      11,013     9,107   12,508    1,013      314  
 Ratios to average net assets:                                                                                                   
 Net expenses after expense                                                                                                      
 reimbursement/recoupment(3)(4)                          %     1.50       1.52        1.45      1.53     1.52     1.51     1.49  
 Gross expenses prior to expense                                                                                                 
 reimbursement/recoupment(3)                             %     1.49       1.57        1.49      1.63     2.39    10.79    37.86  
 Net investment loss after expense                                                                                               
 reimbursement/recoupment(3)(4)                          %    (1.01)     (1.21)      (1.21)    (0.97)   (1.52)   (1.02)   (1.05) 
 Portfolio turnover                                      %      170        127          32        90       92      113      130  

----------                                                                      
(1)  Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment   
     Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than one year.                                 
(4)  The Investment Manager has agreed to limit expenses, excluding, interest,  
taxes, brokerage and extraordinary expenses.                          

See Accompanying Notes to Financial Statements

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FINANCIAL                                                                       
HIGHLIGHTS                                                 PILGRIM BALANCED FUND
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                                             Class Q                               
                                                           ------------------------------------------------------------------------
                                                           Eleven Months   Year    Three Months                            Period  
                                                              Ended       Ended       Ended      Year Ended March 31,       Ended  
                                                              May 31,    June 30,    June 30,   ----------------------    March 31,
                                                               2001        2000      1999(1)    1999     1998     1997     1996(1) 
                                                               ----        ----      -------    ----     ----     ----     ------- 
                                                                                                                                   
Per Share Operating Performance:                                                                                                   
 Net asset value, beginning of period                    $     14.94       19.04      18.85     18.48    13.42    12.69     12.50  
 Income from investment operations:                                                                                                
 Net investment income                                   $      0.44        0.54       0.11      0.44     0.30     0.24      0.15  
 Net realized and unrealized gain (loss) on investments  $     (0.54)      (0.57)      0.16      2.50     5.07     0.73      0.19  
 Total from investment operations                        $     (0.10)      (0.03)      0.27      2.94     5.37     0.97      0.34  
 Less distributions from:                                                                                                          
 Net investment income                                   $      0.47        0.40       0.08      0.50     0.31     0.24      0.15  
 Net realized gains on investments                       $      1.14        3.67         --      2.07       --       --        --  
 Total distributions                                     $      1.61        4.07       0.08      2.57     0.31     0.24      0.15  
 Net asset value, end of period                          $     13.23       14.94      19.04     18.85    18.48    13.42     12.69  
 Total Return(2):                                        %     (0.70)      (0.60)      1.44     17.49    40.21     7.60      2.77  
Ratio/Supplemental Data:                                                                                                           
 Net assets, end of period (000's)                       $       373         230        190       176      166       73         1  
 Ratio to average net assets:                                                                                                      
 Net expenses after expense reimbursement(3)(4)          %      1.25        1.30       1.25      1.25     1.26     1.26      1.25  
 Gross expenses prior to expense reimbursement(3)        %      1.46        1.51       1.51      1.63    11.28   126.75  3,094.48  
 Net investment income after expense                                                                                               
 reimbursement(3)(4)                                     %      3.61        3.36       2.30      2.41     4.09     2.15      2.16  
 Portfolio turnover                                      %        76         173         63       165      260      213       197  

----------                                                                      
(1)  Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment   
Manager of the Fund and the Fund changed its year end to June 30.     
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value and excluding the deduction
  of sales charges. Total return for less than one year is not annualized.
(3)  Annualized for periods less than one year.                                 
(4)  The Investment Manager has agreed to limit expenses, excluding, interest,  
taxes, brokerage and extraordinary expenses                           

See Accompanying Notes to Financial Statements

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                                                                       FINANCIAL
PILGRIM CONVERTIBLE FUND                                              HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of beneficial interest outstanding throughout each    
period.                                                                         

                                                        [Enlarge/Download Table]

                                                                                           Class Q                               
                                                            ---------------------------------------------------------------------
                                                            Eleven Months   Year   Three Months                          Period  
                                                               Ended       Ended      Ended      Year Ended March 31,     Ended  
                                                               May 31,    June 30,   June 30,   ---------------------   March 31,
                                                                2001        2000      1999(1)   1999    1998     1997    1996(2) 
                                                                ----        ----      -------   ----    ----     ----    ------- 
                                                                                                                                 
Per Share Operating Performance:                                                                                                 
 Net asset value, beginning of period                    $      26.85       22.51      21.22    18.47   15.19    13.72    12.50  
 Income from investment operations:                                                                                              
 Net investment income                                   $       0.59        0.44       0.09     0.43    0.48     0.42     0.17  
 Net realized and unrealized gain (loss) on investments  $      (4.84)       7.82       1.31     3.09    4.19     1.50     1.22  
 Total from investment operations                        $      (4.25)       8.26       1.40     3.52    4.67     1.92     1.39  
 Less distributions from:                                                                                                        
 Net investment income                                   $       0.53        0.35       0.11     0.46    0.48     0.42     0.17  
 Net realized gains on investments                       $       4.70        3.57         --     0.31    0.91     0.03       --  
 Total distributions                                     $       5.23        3.92       0.11     0.77    1.39     0.45     0.17  
 Net asset value, end of period                          $      17.37       26.85      22.51    21.22   18.47    15.19    13.72  
 Total Return(2):                                        %     (17.50)      40.36       6.62    19.66   31.54    14.13    11.13  
Ratios/Supplemental Data:                                                                                                        
 Net assets, end of period (000's)                       $     29,629      56,165     17,537    8,741   7,080    4,599    1,085  
 Ratio to average net assets:                                                                                                    
 Net expenses after expense                                                                                                      
 reimbursement/recoupment(3)(4)                          %       1.15        1.25       1.23     1.23    1.22     1.25     1.25  
 Gross expenses prior to expense                                                                                                 
 reimbursement/recoupment(3)                             %       1.14        1.25       1.23     1.35    2.35     2.90     9.21  
 Net investment income after expense                                                                                             
 reimbursement/recoupment(3)(4)                          %       2.47        1.88       2.04     2.37    5.99     3.29     3.59  
 Portfolio turnover                                      %        145         129         28      138     160      167      145  

----------                                                                      
(1)  Effective May 24, 1999, Pilgrim Investments, Inc., became the Investment   
Manager of the Fund and the Fund changed its year end to June 30.     
(2)  Total return is calculated assuming reinvestment of all dividends and      
   capital gain distributions at net asset value. Total return for less than
one year is not annualized.                                           
(3)  Annualized for periods less than one year.                                 
(4)  The Investment Manager has agreed to limit expenses, excluding, interest,  
taxes, brokerage and extraordinary expenses.                          

See Accompanying Notes to Financial Statements

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001
--------------------------------------------------------------------------------

NOTE 1 -- ORGANIZATION                                                          

Organization. The Pilgrim Funds are comprised of Pilgrim Mutual Funds ("PMF"),  
Pilgrim Investment Funds, Inc. ("PIF"), Pilgrim Mayflower Trust ("PMT"), Pilgrim
Growth Opportunities Fund, Pilgrim SmallCap Opportunities Fund and Pilgrim      
Equity Trust ("PET"), which are each open-end investment management companies   
registered under the Investment Company Act of 1940, as amended.                

PMF is a Delaware business trust organized in 1992 with twelve separate series  
(Portfolios). Five of the Portfolios in this report are: Pilgrim LargeCap Growth
Fund ("LargeCap Growth"), Pilgrim MidCap Growth Fund ("MidCap Growth"), Pilgrim 
SmallCap Growth Fund ("SmallCap Growth"), Pilgrim Balanced Fund ("Balanced") and
Pilgrim Convertible Fund ("Convertible"). PIF is a Maryland Corporation         
organized in 1969 with two separate series (Portfolios). One of the Portfolios  
in this report is: Pilgrim MagnaCap Fund ("MagnaCap"). PMT is a Massachusetts   
business trust organized in 1992 with three separate series (Portfolios). Two of
the Portfolios in this report are: Pilgrim Growth + Value Fund ("Growth +       
Value") and Pilgrim Research Enhanced Index Fund ("Research Enhanced Index").   
Pilgrim Growth Opportunities Fund ("Growth Opportunities") is a Massachusetts   
business trust organized in 1986. Pilgrim SmallCap Opportunities Fund ("SmallCap
Opportunities") is a Massachusetts business trust organized in 1986. PET is a   
Massachusetts business trust organized in 1998 with one series: Pilgrim MidCap  
Opportunities Fund ("MidCap Opportunities"). The investment objective of each   
Fund is described in each Fund's prospectus.                                    

Each Fund offers at least four of the following classes of shares: Class A,     
Class B, Class C, Class I, Class M, Class Q and Class T. The separate classes of
shares differ principally in the applicable sales charges (if any), distribution
fees, shareholder servicing fees and transfer agency fees. Shareholders of each 
class also bear certain expenses that pertain to that particular class. All     
shareholders bear the common expenses of the Fund and earn income from the      
portfolio pro rata based on the average daily net assets of each class, without 
distinction between share classes. Dividends are determined separately for each 
class based on income and expenses allocable to each class. Realized gains are  
allocated to each class pro rata based on the net assets of each class on the   
date of distribution. No class has preferential dividend rights. Differences in 
per share dividend rates generally result from the relative weighting of pro    
rata income and realized gain allocations and from differences in separate class
expenses, including distribution, and shareholder servicing fees. Class B       
shares, along with their pro rata reinvested dividend shares, automatically     
convert to Class A shares approximately eight years after purchase.             

On September 1, 2000, ING Groep N.V. (NYSE:ING) acquired ReliaStar Financial    
Corp., the indirect parent company of Pilgrim Investments, Inc., Adviser to the 
Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group,    
Inc., Administrator to the Funds. In conjunction with the acquistions the       
Adviser, Distributor and Administrator changed their names to ING Pilgrim       
Investments, Inc., ING Pilgrim Securities, Inc. and ING Pilgrim Group, Inc.,    
respectively, effective September 8, 2000. Effective February 26, 2001, ING     
Pilgrim Investments, Inc. was merged into the newly formed ING Pilgrim          
Investments, LLC. Effective February 27, 2001, ING Pilgrim Group, Inc. was      
merged into the newly formed ING Pilgrim Group, LLC ("IPG").                    

Reorganizations. Before a shareholder approved reorganization effective July 24,
1998, the funds comprising PMF invested all of their assets in corresponding    
portfolios of Nicholas-Applegate Investment Trust, an arrangement known as a    
"master/feeder" structure. Upon the reorganization, the Institutional Portfolio 
series of the Trust were renamed Funds and were authorized to issue multiple    
classes of shares, and their outstanding shares were classified as Class I      
shares. At the same time, the A, B, C and Advisory Portfolios of the Trust      
transferred their assets to the corresponding Funds, and their shareholders     
received Class A, B, C and Q shares of the Funds on a tax-free basis. Effective 
May                                                                             

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

7, 1999 and concurrent with the change in investment adviser, from Nicholas     
Applegate Capital Management to Pilgrim Investments, Inc. the Institutional     
Classes of PMF were transferred in a tax free reorganization to new funds being 
managed by Nicholas-Applegate Capital Management.                               

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES                                       

The following significant accounting policies are consistently followed by the  
Funds in the preparation of their financial statements, and such policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.                                               

A.   Security Valuation. Investments in equity securities traded on a national  
  securities exchange or included on the NASDAQ National Market System are
     valued at the last reported sale price. Securities traded on an exchange or
NASDAQ for which there has been no sale and securities traded in the  
  over-the-counter-market are valued at the mean between the last reported
  bid and ask prices. All investments quoted in foreign currencies will be
    valued daily in U.S. dollars on the basis of the foreign currency exchange
  rates prevailing at the time such valuation is determined by each Fund's
custodian. Debt securities are valued at bid prices obtained from     
independent services or from one or more dealers making markets in the
securities. U.S. Government obligations are valued by using market    
  quotations or independent pricing services which uses prices provided by
market-makers or estimates of market values obtained from yield data  
relating to instruments or securities with similar characteristics.   
     Securities for which market quotations are not readily available are valued
at their respective fair values as determined in good faith and in    
accordance with policies set by the Board of Directors. Investments in
   securities maturing in less than 60 days from the date of acquisition are
valued at amortized cost, which, when combined with accrued interest, 
approximates market value.                                            

B.   Security Transactions and Revenue Recognition. Securities transactions are 
    accounted for on the trade date. Realized gains and losses are reported on
  the basis of identified cost of securities delivered. Interest income is
recorded on an accrual basis. Dividend income is recorded on the      
   ex-dividend date, or for certain foreign securities, when the information
     becomes available to the funds. Premium amortization and discount accretion
are determined by the effective yield method.                         

C.   Foreign Currency Translation. The books and records of the funds are       
 maintained in U.S. dollars. Any foreign currency amounts are translated
into U.S. dollars on the following basis:                             

(1)  Market value of investment securities, other assets and
               liabilities -- at the exchange rates prevailing at the end of the
day.                                              

          (2)  Purchases and sales of investment securities, income and expenses
               -- at the rates of exchange prevailing on the respective dates of
such transactions.                                

    Although the net assets and the market values are presented at the foreign
    exchange rates at the end of the day, the Funds do not isolate the 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. Such fluctuations are included with the net
  realized and unrealized gains or losses from investments. For securities
    which are subject to foreign withholding tax upon disposition, liabilities
   are recorded on the statement of assets and liabilities for the estimated
tax withholding based on the securities current market value. Upon    
   disposition, realized gains or losses on such securities are recorded net
of foreign withholding tax.                                           

     Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies,     

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Pilgrim                                                                         
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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

     currency gains or losses realized between the trade and settlement dates on
   securities transactions, the difference between the amounts of dividends,
   interest, and foreign withholding taxes recorded on the Fund's books, and
  the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the
 value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate. Foreign 
   security and currency transactions may involve certain considerations and
 risks not typically associated with investing in U.S. companies and the
   U.S. Government. These risks include but are not limited to re-evaluation
    of currencies and future adverse political and economic developments which
    could cause securities and their markets to be less liquid and prices more
   volatile than those of comparable U.S. companies and the U.S. Government.

D.   Foreign Currency Transactions and Futures Contracts. Certain funds may     
  enter into foreign currency exchange transactions to convert to and from
    different foreign currencies and to and from the U.S. dollar in connection
   with the planned purchases or sales of securities. The Funds either enter
    into these transactions on a spot basis at the spot rate prevailing in the
    foreign currency exchange market or use forward foreign currency contracts
   to purchase or sell foreign currencies. When the contract is fulfilled or
closed, gains or losses are realized. Until then, the gain or loss is 
   included in unrealized appreciation or depreciation. Risks may arise upon
entering into forward contracts from the potential inability of       
  counterparties to meet the terms of their forward contracts and from the
  potential inability of counterparties to meet the terms of their forward
contracts and from unanticipated movements in the value of foreign    
currencies relative to the U.S. dollar.                               

Each Fund may enter into futures contracts involving foreign currency,
 interest rates, securities and securities indices, for hedging purposes
  only. A futures contract obligates the seller of the contract to deliver
   and the purchaser of the contract to take delivery of the type of foreign
    currency, financial instrument or security called for in the contract at a
specified future time for a specified price. Upon entering into such a
 contract, a Fund is required to deposit and maintain as collateral such
     initial margin as required by the exchange on which the contract is traded.
Pursuant to the contract, a Fund agrees to receive from or pay to the 
broker an amount equal to the daily fluctuations in the value of the  
    contract. Such receipts or payments are known as variation margins and are
  recorded as unrealized gains or losses by the Fund. When the contract is
  closed, the Fund records a realized gain or loss equal to the difference
   between the value of the contract at the time it was opened and the value
    at the time it was closed. There were no open futures contracts at May 31,
2001.                                                                 

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Pilgrim                                                                         
Funds                                                                           
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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

E.   Distributions to Shareholders. The Funds record distributions to their     
shareholders on ex-date. Each Fund pays dividends, if any, as follows:

Annually                        Semi-Annually            Quarterly    
--------                        -------------            ---------    
Research Enhanced Index         MagnaCap                 Balanced     
Growth Opportunities                                     Convertible  
LargeCap Growth                                                       
Midcap Opportunities                                                  
MidCap Growth                                                         
Growth + Value                                                        
SmallCap Opportunities                                                
SmallCap Growth                                                       

 Each Fund distributes capital gains, to the extent available, annually.

 The amount of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax    
     regulations, which may differ from accounting principles generally accepted
  in the United States of America. These "book/tax" differences are either
considered temporary or permanent in nature. Key differences are the  
   treatment of short-term capital gains, foreign currency transactions, and
other temporary differences. To the extent that these differences are 
permanent in nature, such amounts are reclassified within the capital 
    accounts based on their federal tax-basis treatment; temporary differences
     do not require reclassifications. Distributions which exceed net investment
    income and net realized capital gains for financial reporting purposes but
not for tax purposes, are reported as distributions in excess of net  
 investment income and/or net realized capital gains. To the extent they
exceed net investment income and/or net realized capital gains for tax
purposes, they are reported as distributions of paid-in capital.      
    Accordingly, the following amounts have been increased (decreased) through
reclassification as of May 31, 2001:                                  

                                                             Accumulated
                                          Undistributed     net realized
                             Paid in      net investment     gain (loss)
                              Capital          income       on investments
                            ------------     ----------     --------------
 MagnaCap                  $    808,218     $  221,319      $(1,029,537)
Research Enhanced Index       (745,522)       745,522               --
 Growth Opportunities        (4,045,481)     4,047,103           (1,622)
 LargeCap Growth             (1,511,623)     7,121,127       (5,609,504)
 MidCap Opportunites          1,076,867        879,029       (1,955,896)
 MidCap Growth               (5,522,877)     5,522,878               (1)
Growth + Value             (11,697,851)     8,973,823        2,724,028
 SmallCap Opportunities       3,087,438      3,643,091       (6,730,529)
 SmallCap Growth             (6,648,603)     6,732,735          (84,132)

F.   Federal Income Taxes. It is the policy of the Funds, to comply with the    
    requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of their net 
     investment income and any net realized capital gains to their shareholders.
     Therefore, a federal income tax or excise tax provision is not required. In
  addition, by distributing during each calendar year substantially all of
     its net investment income and net realized capital gains, each Fund intends
not to be subject to any federal excise tax.                          

 The Board of Directors intends to offset any net capital gains with any
    available capital loss carryforward until each carryforward has been fully
 utilized or expires. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or   
expires.                                                              

Capital loss carryforwards were the following at May 31, 2001:        

                                  Expiration
               Amount            Dates
                ------------      ------------
Research Enhanced Index     $  8,618,344      2008 to 2009            
Growth Opportunities         254,659,070          2009                
LargeCap Growth              174,106,032      2009 to 2010            
MidCap Opportunites           31,574,828      2008 to 2009            
Growth + Value               308,761,269          2009                
SmallCap Opportunities        58,556,297          2009                

     The capital loss carryforwards of LargeCap Growth, MidCap Opportunities and
SmallCap Opportunities include capital losses acquired from mergers as
    discussed in Note 1. The yearly utilization of the acquired capital losses
is limited by the Internal Revenue Code.                              

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

G.   Use of Estimates. Management of the Funds has made certain estimates and   
   assumptions relating to the reporting of assets, liabilities, income, and
expenses to prepare these financial statements in conformity with     
   accounting principles generally accepted in the United States of America.
Actual results could differ from these estimates.                     

H.   Repurchase Agreements. Each Fund may invest in repurchase agreements only  
    with government securities dealers recognized by the Board of Governors of
the Federal Reserve System or with member banks of the Federal Reserve
System. Under such agreements, the seller of the security agrees to   
     repurchase it at a mutually agreed upon time and price. The resale price is
   in excess of the purchase price and reflects an agreed upon interest rate
for the period of time the agreement is outstanding. The period of the
   repurchase agreements is usually short, from overnight to one week, while
    the underlying securities generally have longer maturities. Each Fund will
     always receive as collateral securities acceptable to it whose market value
 is equal to at least 100% of the amount being invested by the Fund. 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. If the seller defaults, a Fund might incur a loss or
delay in the realization of proceeds if the value of the collateral   
    securing the repurchase agreement declines, and it might incur disposition
costs in liquidating the collateral.                                  

I.   Securities Lending. Each Fund had the option to temporarily loan 331|M/3%  
    of its total assets to brokers, dealers or other financial institutions in
   exchange for a negotiated lender's fee. The borrower is required to fully
 collateralize the loans with cash, letters of credit or U.S. Government
securities.                                                           

NOTE 3 -- INVESTMENT TRANSACTIONS                                               

For the periods ended May 31, 2001, the cost of purchases and proceeds from the 
sales of securities, excluding short-term securities, were as follows:          

        Purchases            Sales
          --------------      --------------
MagnaCap                    $  364,214,288      $  416,407,851                  
Research Enhanced Index         52,908,607          77,514,019                  
Growth Opportunities         1,293,187,893       1,388,065,423                  
LargeCap Growth              2,013,928,467       1,973,473,389                  
MidCap Opportunites            262,855,686         244,106,177                  
MidCap Growth                1,171,208,199       1,181,644,050                  
Growth + Value                 776,389,472         709,796,045                  
SmallCap Opportunities         529,809,902         487,837,445                  
SmallCap Growth                662,733,101         674,442,329                  
Balanced                        96,596,366         105,787,945                  
Convertible                    614,524,610         621,840,215                  

NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES                         

Each of the Funds has entered into an Investment Management Agreement with ING  
Pilgrim Investments, LLC. ("the Manager"), a wholly-owned subsidiary of ING     
Groep N.V. The investment management agreements compensate the Manager with a   
fee, computed daily and payable monthly, based on the average daily net assets  
of each Fund, at the following annual rates:                                    

For MagnaCap -- 1.00% for the first $30 million, 0.75% of the next $220 million,
0.625% of the next $250 million and 0.50% in excess of $500 million; for        
Researched Enhanced Index -- 0.70%; for Growth Opportunities -- 0.95%; for      
LargeCap Growth, MidCap Growth, Balanced and Convertible -- 0.75% for the first 
$500 million, 0.675% of the next $500 million and 0.65% in excess of $1.0       
billion; for MidCap Opportunities, Growth + Value, SmallCap Opportunities and   
SmallCap Growth -- 1.00%.                                                       

J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), a registered investment
advisor, serves as subadvisor to the Research Enhanced Index Fund pursuant to a 
Subadvisory Agreement, dated December 31, 1998, between Adviser and J.P. Morgan.
For its services, J.P. Morgan receives from the Adviser, a fee equal to 0.20% of
the average daily net assets of the Fund.                                       

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor, 
serves as subadvisor to the Growth + Value Fund pursuant to a Subadvisory       
Agreement, dated July 31, 1996 and amended and restated on July 1, 1998, between
Adviser and Navellier. For its services, Navellier receives from the Adviser, a 
fee equal to 0.50% of the average daily net assets of the Fund.                 

IPG (the "Administrator"), serves as administrator to each Fund. The Funds      
compensate the Administrator with a fee calculated at an annual rate of 0.10% of
each Fund's average daily net assets.                                           

NOTE 5 -- DISTRIBUTION AND SERVICE FEES                                         

Each share class of the Funds (except as noted below) has adopted a Plan        
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING      
Pilgrim Securities, Inc. (the "Distributor") is reimbursed or compensated       
(depending on the class of shares) by the Funds for expenses incurred in the    
distribution of each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 
Plans, the Distributor is entitled to a payment each month for actual expenses  
incurred in the distribution and promotion of each Fund's shares, including     
expenses incurred in printing prospectuses and reports used for sales purposes, 
expenses incurred in preparing and printing sales literature and other such     
distribution related expenses, including any distribution or shareholder        
servicing fees ("Service Fees") paid to securities dealers who have executed a  
distribution agreement with the Distributor. Under the 12b-1 Plans, each class  
of shares of the Fund pays the Distributor a combined Distribution and Service  
Fee based on average daily net assets at the following rates:                   

                                                        [Enlarge/Download Table]

                         Class A  Class B  Class C  Class I  Class M  Class Q  Class T
                         -------  -------  -------  -------  -------  -------  -------
                                                                                      
MagnaCap                   0.30%   1.00%    1.00%     N/A      0.75%    0.25%    N/A  
Research Enhanced Index    0.30    1.00     1.00      N/A       N/A     0.25     N/A  
Growth Opportunities       0.30    1.00     1.00      N/A       N/A     0.25    0.95  
LargeCap Growth            0.35    1.00     1.00      N/A       N/A     0.25     N/A  
MidCap Opportunities       0.30    1.00     1.00      N/A       N/A     0.25     N/A  

                         Class A  Class B  Class C  Class I  Class M  Class Q  Class T
                         -------  -------  -------  -------  -------  -------  -------
MidCap Growth              0.35    1.00     1.00      N/A       N/A     0.25     N/A  
Growth + Value             0.30    1.00     1.00      N/A       N/A     0.25     N/A  
SmallCap Opportunities     0.30    1.00     1.00      N/A       N/A     0.25    0.95  
SmallCap Growth            0.35    1.00     1.00      N/A       N/A     0.25     N/A  
Balanced                   0.35    1.00     1.00      N/A       N/A     0.25    0.75  
Convertible                0.35    1.00     1.00      N/A       N/A     0.25     N/A  

For the periods ended May 31, 2001, the Distributor has retained $615,442 as    
sales charges from the proceeds of Class A Shares sold, $322,957 from the       
proceeds of Class C Shares redeemed, and $1,031 from the proceeds of Class M    
Shares sold.                                                                    

Each of the Funds has entered into a Service Agreement whereby IPG will act as  
Shareholder Service Agent for each Fund. The agreement provides that IPG will be
compensated for incoming and outgoing shareholder telephone calls and letters,  
and all reasonable out-of-pocket expenses incurred in connection with the       
performance of such services. Fees accrued during the periods ended May 31, 2001
are shown in the accompanying Statements of Operations.                         

NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES                

At May 31, 2001, the Funds had the following amounts recorded in payable to     
affiliates on the accompanying Statements of Assets and Liabilities (see Notes  
4, 5 and 8):                                                                    

                                                        [Enlarge/Download Table]

                                                         Accrued                          
                            Accrued                    Shareholder                        
                           Investment      Accrued     Services and  Recoupment           
                           Management  Administrative  Distribution  of Waived            
                              Fees          Fees           Fees         Fees       Total  
                             -------       ------         -------      ------    ---------
                                                                                          
MagnaCap                     263,600           --         221,392       4,784      489,776
Researched Enhanced Index    110,414       15,773         128,000          --      254,187
Growth Opportunities         449,505       47,316         297,328          --      794,149
LargeCap Growth              346,567           --         406,413          --      752,980
MidCap Opportunities         111,447       11,145          59,610          --      182,202
MidCap Growth                233,846           --         266,788      18,652      519,286
Growth + Value               577,691       57,769         480,274          --    1,115,734
SmallCap Opportunities       401,528       40,153         302,974          --      744,655
SmallCap Growth              316,106           --         318,574      64,605      699,285
Balanced                      82,027       17,888          55,839          --      155,754
Convertible                  242,092           --         269,479       2,320      513,891

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

NOTE 7 -- TRANSFER AGENT FEES                                                   

Expenses associated with transfer agent services are allocated to each class of 
shares of the Funds based on actual charges incurred.                           

For the periods ended May 31, 2001, transfer agent fees and expenses were:      

                                                        [Enlarge/Download Table]

                          Class A  Class B   Class C   Class I  Class M  Class Q  Class T    Total   
                          -------  -------   -------   -------  -------  -------  -------  ----------
                                                                                                     
MagnaCap                 $400,422  $123,295  $  7,909  $    --  $18,745  $   293  $    --  $  550,664
Research Enhanced Index    10,304    53,015    49,086      297       --        4       --     112,706
Growth Opportunities       85,137    88,087    50,775       33       --      360   17,237     241,629
LargeCap Growth           334,766   534,133   263,594       --       --    3,779       --   1,136,272
MidCap Opportunities       21,920    24,185    16,627      228       --       11       --      62,971
MidCap Growth             218,070   177,933   352,403       --       --    3,673       --     752,079
Growth + Value             99,753   199,243   110,947       --       --      254       --     410,197
SmallCap Opportunities     74,253    99,753    38,510       --       --      297    8,319     221,132
SmallCap Growth           263,650   161,322   355,060       --       --    7,197       --     787,229
Balanced                  104,362    64,427    40,251       --       --      662   15,710     225,412
Convertible               198,881   226,553   231,764       --       --    5,820       --     663,018

NOTE 8 -- EXPENSE LIMITATIONS                                                   

For the following Funds, the Investment Manager has voluntarily agreed to limit 
expenses, excluding interest, taxes, brokerage and extraordinary expenses to the
levels listed below:                                                            

                       Class A   Class B   Class C   Class M   Class Q   Class T
                       -------   -------   -------   -------   -------   -------
LargeCap Growth          1.60%     2.25%     2.25%     N/A       1.25%      N/A 
MidCap Growth            1.60      2.25      2.25      N/A       1.25       N/A 
SmallCap Growth          1.95      2.60      2.60      N/A       1.50       N/A 
Balanced                 1.60      2.25      2.25      N/A       1.25      1.75 
Convertible              1.60      2.25      2.25      N/A       1.25       N/A 

Each Fund will at a later date reimburse the Investment Manager for management  
during the previous 36 months, but only if, after such reimbursement, the Fund's
expense ratio does not exceed the percentage described above. Waived and        
reimbursed fees and any recoupment by the Investment Manager of such waived and 
reimbursed fees are reflected on the accompanying Statements of Operations for  
each Fund.                                                                      

NOTE 9 -- LINE OF CREDIT                                                        

The Funds, in addition to certain other funds managed by the Adviser, 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 $125,000,000. 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 to which the   
line of credit is available 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 periods ended May 31, 2001, the Funds did not have any loans         
outstanding under the line of credit.                                           

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

NOTE 10 -- CAPITAL SHARES                                                       

Transactions in capital shares and dollars were as follows:                     

                                                        [Enlarge/Download Table]

                                            Class A Shares                                    Class B Shares                  
                            -----------------------------------------------   ----------------------------------------------- 
                               Eleven                                            Eleven                                       
                               Months            Year             Year           Months            Year             Year      
                                Ended            Ended           Ended            Ended            Ended            Ended     
                               May 31,         June 30,         June 30,         May 31,         June 30,         June 30,    
                                2001             2000             1999            2001             2000             1999      
                            -------------    -------------    -------------   -------------    -------------    ------------- 
                                                                                                                              
Pilgrim MagnaCap                                                                                                              
 (Number of Shares)                                                                                                           
Shares sold                       911,087        8,302,663       13,502,711       1.079,075        1,126,639        2,873,334 
Shares issued in merger         1,823,060               --               --       2,675,379               --               -- 
Shares issued as                                                                                                              
 reinvestment of                                                                                                              
 dividends                      2,065,847        2,042,086        1,828,625         547,903          670,172          516,048 
Shares redeemed                (3,467,219)     (11,985,501)     (14,934,578)     (1,401,394)      (2,847,837)      (1,307,942)
                            -------------    -------------    -------------   -------------    -------------    ------------- 
Net increase (decrease)                                                                                                       
 in shares outstanding          1,332,775       (1,640,752)         396,758       2,900,963       (1,051,026)       2,081,440 
                            =============    =============    =============   =============    =============    ============= 
Pilgrim MagnaCap ($)                                                                                                          
Shares sold                 $  13,700,644    $ 134,588,976    $ 222,180,950   $  14,758,082    $  18,234,831    $  46,072,779 
Shares issued in merger        24,128,851               --               --      33,904,811               --               -- 
Shares issued as                                                                                                              
 reinvestment of                                                                                                              
 dividends                     29,583,918       33,390,241       28,388,968       7,628,566       10,716,050        7,888,183 
Shares redeemed               (51,340,796)    (193,866,999)    (246,413,983)    (20,174,618)     (44,525,122)     (20,667,305)
                            -------------    -------------    -------------   -------------    -------------    ------------- 
Net increase (decrease)     $  16,072,617    $ (25,887,782)   $   4,155,935   $  36,116,841    $ (15,574,241)   $  33,293,657 
                            =============    =============    =============   =============    =============    ============= 

                                             Class C Shares                                                                   
                            -----------------------------------------------                                                   
                                Eleven                                                                                        
                                Months            Year           Period                                                       
                                Ended            Ended            Ended                                                       
                               June 30,         June 30,         June 30,                                                     
                                 2001             2000           1999(1)                                                      
                            -------------    -------------    -------------                                                   
Pilgrim MagnaCap                                                                                                              
 (Number of Shares)                                                                                                           
Shares sold                       452,160          355,043           34,608                                                   
Shares issued in merger           320,750               --               --                                                   
Shares issued as                                                                                                              
 reinvestment of                                                                                                              
 dividends                         29,252           13,431               --                                                   
Shares redeemed                  (210,840)        (166,071)              --                                                   
                            -------------    -------------    -------------                                                   
Net increase (decrease)                                                                                                       
 in shares outstanding            591,322          202,403           34,608                                                   
                            =============    =============    =============                                                   
Pilgrim MagnaCap ($)                                                                                                          
Shares sold                 $   6,214,939    $   5,649,398    $     588,611                                                   
Shares issued in merger         4,079,042               --               --                                                   
Shares issued as                                                                                                              
 reinvestment of                                                                                                              
 dividends                        407,569          214,760               --                                                   
Shares redeemed                (2,826,362)      (2,597,664)              --                                                   
                            -------------    -------------    -------------                                                   
Net increase (decrease)     $   7,875,188    $   3,266,494    $     588,611                                                   
                            =============    =============    =============                                                   

                                            Class M Shares                           Class Q Shares                           
                            -----------------------------------------------   ------------------------------                  
                                Eleven                                           Eleven                                       
                                Months            Year             Year          Months           Period                      
                                Ended            Ended            Ended           Ended            Ended                      
                               May 31,          June 30,         June 30,        May 31,          June 30,                    
                                 2001             2000             1999           2001            2000(2)                     
                            -------------    -------------    -------------   -------------    -------------                  
Pilgrim MagnaCap                                                                                                              
 (Number of Shares)                                                                                                           
Shares sold                        30,058           71,735          210,689         113,698          627,893                  
Shares issued in merger           531,039               --               --          52,762               --                  
Shares issued as reinvest-                                                                                                    
 ment of dividends                 96,050           94,820           95,725          92,505               --                  
Shares redeemed                  (186,663)        (265,773)        (238,673)        (60,151)          (1,149)                 
                            -------------    -------------    -------------   -------------    -------------                  
Net increase (decrease)                                                                                                       
 in shares outstanding            470,484          (99,218)          67,741         198,814          626,744                  
                            =============    =============    =============   =============    =============                  
Pilgrim MagnaCap ($)                                                                                                          
Shares sold                  $    429,381    $   1,164,803    $   3,356,295   $   1,752,239    $  10,206,194                  
Shares issued in merger         6,853,720               --               --         666,215               --                  
Shares issued as                                                                                                              
 reinvestment of dividends      1,358,565        1,532,001        1,471,188       1,323,685               --                  
Shares redeemed                (2,763,847)      (4,228,665)      (3,784,141)       (935,105)         (18,412)                 
                            -------------    -------------    -------------   -------------    -------------                  
Net increase (decrease)      $  5,877,819    $  (1,531,861)   $   1,043,342   $   2,807,034    $  10,187,782                  
                            =============    =============    =============   =============    =============                  

----------                                                                      
(1)  Commenced offering of shares on June 1, 1999.                              
(2)  Commenced offering of shares on November 22, 1999.                         

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                               Class A Shares                                    Class B Shares                  
                               -----------------------------------------------   ----------------------------------------------- 
                                   Seven                                            Seven                                        
                                   Months           Year             Year           Months            Year             Year      
                                   Ended           Ended            Ended           Ended            Ended            Ended      
                                  May 31,        October 31,      October 31,       May 31,        October 31,      October 31,  
                                    2001            2000             1999            2001             2000             1999      
                               -------------    -------------    -------------   -------------    -------------    ------------- 
                                                                                                                                 
Pilgrim Research Enhanced                                                                                                        
 Index (Number of Shares)                                                                                                        
Shares sold                          370,903          905,210        2,723,102         687,827        2,050,650        9,270,282 
Shares issued as reinvestment                                                                                                    
 of dividends                             --           14,197               --              --           52,910               -- 
Shares redeemed                   (1,189,056)      (1,242,238)        (290,337)     (1,293,360)      (2,542,262)        (317,349)
                               -------------    -------------    -------------   -------------    -------------    ------------- 
Net increase (decrease) in                                                                                                       
 shares                                                                                                                          
 outstanding                        (818,153)        (322,831)       2,432,765        (605,533)        (438,702)       8,952,933 
                               =============    =============    =============   =============    =============    ============= 
Pilgrim Research                                                                                                                 
 Enhanced Index ($)                                                                                                              
Shares sold                    $   3,773,518    $  10,303,882    $  29,720,302   $   7,017,926    $  23,253,462    $ 100,006,579 
Shares issued as                                                                                                                 
 reinvestment of dividends                --          165,396               --              --          612,733               -- 
Shares redeemed                  (12,089,290)     (14,134,442)      (3,146,624)    (12,699,740)     (28,592,017)      (3,429,082)
                               -------------    -------------    -------------   -------------    -------------    ------------- 
Net increase (decrease)        $  (8,315,772)   $  (3,665,164)   $  26,573,678   $  (5,681,814)   $  (4,725,822)   $  96,577,497 
                               =============    =============    =============   =============    =============    ============= 

                                               Class C Shares                                                                    
                               -----------------------------------------------                                                   
                                  Seven                                                                                          
                                  Months            Year              Year                                                       
                                  Ended            Ended             Ended                                                       
                                  May 31,        October 31,       October 31,                                                   
                                   2001             2000              1999                                                       
                               -------------    -------------    -------------                                                   
Pilgrim Research Enhanced                                                                                                        
 Index (Number of Shares)                                                                                                        
Shares sold                        1,081,677        3,232,804        7,106,428                                                   
Shares issued as reinvestment                                                                                                    
 of dividends                             --           64,089               --                                                   
Shares redeemed                   (2,260,540)      (2,138,973)        (258,766)                                                  
                               -------------    -------------    -------------                                                   
Net increase (decrease) in                                                                                                       
 shares                                                                                                                          
 outstanding                      (1,178,863)       1,157,920        6,847,662                                                   
                               =============    =============    =============                                                   
Pilgrim Research                                                                                                                 
 Enhanced Index ($)                                                                                                              
Shares sold                    $  11,050,075    $  36,538,030    $  76,733,954                                                   
Shares issued as                                                                                                                 
 reinvestment of dividends                --          751,195               --                                                   
Shares redeemed                  (22,266,858)     (23,939,384)      (2,807,689)                                                  
                               -------------    -------------    -------------                                                   
Net increase (decrease)        $ (11,216,783)   $  13,349,841    $  73,926,265                                                   
                               =============    =============    =============                                                   

                                               Class I Shares                            Class Q Shares                          
                               -----------------------------------------------   ------------------------------                  
                                   Seven                                            Seven                                        
                                   Months           Year             Year           Months            Year                       
                                   Ended           Ended            Ended           Ended            Ended                       
                                   May 31,       October 31,      October 31,       May 31,        October 31,                   
                                    2001            2000             1999            2001             2000                       
                               -------------    -------------    -------------   -------------    -------------                  
Pilgrim Research                                                                                                                 
 Enhanced Index                                                                                                                  
 (Number of Shares)                                                                                                              
Shares sold                               --               --        2,500,010          30,835           33,521                  
Shares issued as                                                                                                                 
 reinvestment of dividends                --           31,779               --              --               --                  
Shares redeemed                           --               --               --          (8,978)          (9,077)                 
                               -------------    -------------    -------------   -------------    -------------                  
Net increase in shares                                                                                                           
 outstanding                              --           31,779        2,500,010          21,857           24,444                  
                               =============    =============    =============   =============    =============                  
Pilgrim Research                                                                                                                 
 Enhanced Index ($)                                                                                                              
Shares sold                    $          --    $          --    $  25,000,100   $     303,187    $     379,475                  
Shares issued as                                                                                                                 
 reinvestment of dividends                --          371,501               --              --               --                  
Shares redeemed                           --               --               --         (91,176)        (100,500)                 
                               -------------    -------------    -------------   -------------    -------------                  
Net increase                   $          --    $     371,501    $  25,000,100   $     212,011    $     278,975                  
                               =============    =============    =============   =============    =============                  

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                       Class A Shares                               Class B Shares                  
                                        -------------------------------------------   -------------------------------------------   
                                         Five Months       Year            Year       Five Months        Year            Year       
                                            Ended         Ended            Ended         Ended          Ended           Ended       
                                           May 31,     December 31,    December 31,     May 31,      December 31,    December 31,   
                                            2001           2000            1999           2001           2000            1999       
                                        ------------   -------------   ------------   ------------   -------------   ------------   
                                                                                                                                    
Pilgrim Growth Opportunitites                                                                                                       
 (Number of Shares)                                                                                                                 
Shares sold                                2,281,701       9,073,117      1,872,541        953,281       7,518,752      2,027,675   
Shares issued as reinvestment of divi-                                                                                              
 dends                                            --         340,940        666,579             --         313,178        419,874   
Shares redeemed                           (1,877,278)     (4,350,033)      (613,071)    (1,044,539)     (1,307,372)      (269,785)  
                                        ------------   -------------   ------------   ------------   -------------   ------------   
Net increase (decrease) in shares                                                                                                   
 outstanding                                 404,423       5,064,024      1,926,049        (91,258)      6,524,558      2,177,764   
                                        ============   =============   ============   ============   =============   ============   
Pilgrim Growth Opportunitites ($)                                                                                                   
Shares sold                             $ 48,811,178   $ 302,644,101   $ 58,142,156   $ 19,318,917   $ 239,059,218   $ 60,130,033   
Shares issued as reinvestment of divi-                                                                                              
 dends                                            --       9,343,843     17,817,292             --       8,129,351     10,812,398   
Shares redeemed                          (37,623,802)   (138,551,847)   (19,006,293)   (19,637,536)    (38,068,877)    (8,084,430)  
                                        ------------   -------------   ------------   ------------   -------------   ------------   
Net increase (decrease)                 $ 11,187,376   $ 173,436,097   $ 56,953,155   $   (318,619)  $ 209,119,692   $ 62,858,001   
                                        ============   =============   ============   ============   =============   ============   

                                                       Class C Shares                                                               
                                        -------------------------------------------                                                 
                                        Five Months        Year            Year                                                     
                                           Ended          Ended            Ended                                                    
                                          May 31,      December 31,    December 31,                                                 
                                            2001           2000            1999                                                     
                                        ------------   -------------   ------------                                                 
Pilgrim Growth Opportunitites                                                                                                       
 (Number of Shares)                                                                                                                 
Shares sold                                  775,265       5,330,125        608,874                                                 
Shares issued as reinvestment of divi-                                                                                              
 dends                                            --         167,384         57,478                                                 
Shares redeemed                             (869,143)       (756,091)       (68,548)                                                
                                        ------------   -------------   ------------                                                 
Net increase (decrease) in shares                                                                                                   
 outstanding                                 (93,878)      4,741,418        597,804                                                 
                                        ============   =============   ============                                                 
Pilgrim Growth Opportunitites ($)                                                                                                   
Shares sold                             $ 15,469,116   $ 169,365,141   $ 18,046,757                                                 
Shares issued as reinvestment of divi-                                                                                              
 dends                                            --       4,361,451      1,505,195                                                 
Shares redeemed                          (16,496,360)    (21,462,799)    (2,043,259)                                                
                                        ------------   -------------   ------------                                                 
Net increase (decrease)                 $ (1,027,244)  $ 152,263,793   $ 17,508,693                                                 
                                        ============   =============   ============                                                 

                                                        Class T Shares                                Class I Shares                
                                         --------------------------------------------   ------------------------------------------- 
                                          Five Months        Year            Year       Five Months         Year            Year    
                                             Ended           Ended           Ended         Ended            Ended           Ended   
                                            May 31,      December 31,    December 31,     May 31,       December 31,    December 31,
                                              2001           2000            1999          2001            2000            1999     
                                         ------------    ------------    ------------   -----------    ------------    ------------ 
Pilgrim Growth Opportunitites                                                                                                       
 (Number of Shares)                                                                                                                 
Shares sold                                     3,661          37,238          67,360            --             258           1,435 
Shares issued as reinvestment of divi-                                                                                              
 dends                                             --         103,870         887,743            --         208,890       1,554,695 
Shares redeemed                              (310,534)       (785,108)       (364,750)         (442)           (154)       (786,186)
                                         ------------    ------------    ------------   -----------    ------------    ------------ 
Net increase (decrease) in shares                                                                                                   
 outstanding                                 (306,873)       (644,000)        590,353          (442)        208,994         769,944 
                                         ============    ============    ============   ===========    ============    ============ 
Pilgrim Growth Opportunitites ($)                                                                                                   
Shares sold                              $     96,693    $  1,235,846    $  2,034,349   $        --    $     12,307    $     45,831 
Shares issued as reinvestment of divi-                                                                                              
 dends                                             --       2,718,440      22,790,921            --       5,853,263      41,788,702 
Shares redeemed                            (6,071,229)    (24,995,887)    (10,823,333)       (8,973)         (5,261)    (25,000,672)
                                         ------------    ------------    ------------   -----------    ------------    ------------ 
Net increase (decrease)                  $ (5,974,536)   $(21,041,601)   $ 14,001,937   $    (8,973)   $  5,860,309    $ 16,833,861 
                                         ============    ============    ============   ===========    ============    ============ 

                                               Class Q Shares                                                                       
                                         ----------------------------                                                               
                                          Five Months      Period                                                                   
                                             Ended          Ended                                                                   
                                            May 31,      December 31,                                                               
                                             2001           2000(1)                                                                 
                                         ------------    ------------                                                               
Pilgrim Growth Opportunitites                                                                                                       
 (Number of Shares)                                                                                                                 
Shares sold                                    66,494         452,836                                                               
Shares issued as reinvestment of divi-                                                                                              
 dends                                             --          20,223                                                               
Shares redeemed                               (44,793)        (69,879)                                                              
                                         ------------    ------------                                                               
Net increase (decrease) in shares                                                                                                   
 outstanding                                   21,701         403,180                                                               
                                         ============    ============                                                               
Pilgrim Growth Opportunitites ($)                                                                                                   
Shares sold                              $  1,352,433    $ 14,307,198                                                               
Shares issued as reinvestment of divi-                                                                                              
 dends                                             --         554,300                                                               
Shares redeemed                              (915,191)     (2,143,870)                                                              
                                         ------------    ------------                                                               
Net increase (decrease)                  $    437,242    $ 12,717,628                                                               
                                         ============    ============                                                               

----------                                                                      
(1)  Commenced offering of shares on June 1, 2000.                              

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                    Class A Shares                                 Class B Shares               
                                    --------------------------------------------   -------------------------------------------- 
                                    Eleven Months        Year       Three Months   Eleven Months       Year        Three Months 
                                        Ended           Ended           Ended          Ended          Ended            Ended    
                                       May 31,         June 30,       June 30,        May 31,        June 30,        June 30,   
                                         2001            2000           1999           2001            2000            1999     
                                    -------------   -------------   ------------   -------------   -------------   ------------ 
                                                                                                                                
Pilgrim LargeCap Growth                                                                                                         
 (Number of Shares)                                                                                                             
Shares sold                             3,579,855       4,427,459        601,704       2,915,079       6,775,370      1,006,149 
Shares issued in merger                 2,888,990              --             --         652,330              --             -- 
Shares issued as reinvestment of                                                                                                
 dividends                                 47,176          21,754             --          61,221          38,999             -- 
Shares redeemed                        (4,203,463)     (1,201,487)       (28,795)     (2,085,769)       (796,940)       (63,827)
                                    -------------   -------------   ------------   -------------   -------------   ------------ 
Net increase in shares outstanding      2,312,558       3,247,726        572,909       1,542,861       6,017,429        942,322 
                                    =============   =============   ============   =============   =============   ============ 
Pilgrim LargeCap Growth ($)                                                                                                     
Shares sold                         $ 121,958,781   $ 159,716,404   $ 16,107,475   $ 102,214,098   $ 236,388,229   $ 27,013,724 
Shares issued in merger                77,301,925              --             --      17,296,035              --             -- 
Shares issued as reinvestment of                                                                                                
 dividends                              1,672,391         708,311             --       2,155,612       1,276,968             -- 
Shares redeemed                      (122,216,465)    (45,373,374)      (769,089)    (64,408,711)    (30,088,529)    (1,716,619)
                                    -------------   -------------   ------------   -------------   -------------   ------------ 
Net increase                        $  78,716,632   $ 115,051,341   $ 15,338,386   $  57,257,034   $ 207,576,668   $ 25,297,105 
                                    =============   =============   ============   =============   =============   ============ 

                                                   Class C Shares                                  Class Q Shares               
                                    --------------------------------------------    -----------------------------------------   
                                    Eleven Months       Year         Three Months   Eleven Months       Year      Three Months  
                                        Ended          Ended            Ended           Ended           Ended         Ended     
                                       May 31,        June 30,         June 30,        May 31,        June 30,       June 30,   
                                        2001            2000             1999            2001           2000           1999     
                                    ------------    -------------    -----------    ------------    ------------    ---------   
Pilgrim LargeCap Growth                                                                                                         
 (Number of Shares)                                                                                                             
Shares sold                            1,965,952        3,308,222        322,341         381,911         424,166       27,961   
Shares issued in merger                  594,903               --             --           2,399              --           --   
Shares issued as reinvestment of                                                                                                
 dividends                                28,660           13,490             --           6,871           2,730           --   
Shares redeemed                       (1,284,529)        (388,728)       (10,496)       (454,258)        (71,210)      (9,901)  
                                    ------------    -------------    -----------    ------------    ------------    ---------   
Net increase (decrease) in shares                                                                                               
 outstanding                           1,304,986        2,932,984        311,845         (63,077)        355,686       18,060   
                                    ============    =============    ===========    ============    ============    =========   
Pilgrim LargeCap Growth ($)                                                                                                     
Shares sold                         $ 69,760,356    $ 120,907,907    $ 8,625,780    $ 11,187,731    $ 15,522,480    $ 753,086   
Shares issued in merger               15,730,119               --             --          65,081              --           --   
Shares issued as reinvestment of                                                                                                
 dividends                             1,004,118          443,449             --         247,005          93,151           --   
Shares redeemed                      (39,024,155)     (15,356,494)      (279,527)    (13,078,822)     (2,818,083)    (263,465)  
                                    ------------    -------------    -----------    ------------    ------------    ---------   
Net increase (decrease)             $ 47,470,438    $ 105,994,862    $ 8,346,253    $ (1,579,005)   $ 12,797,548    $ 489,621   
                                    ============    =============    ===========    ============    ============    =========   

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                   Class A Shares                                 Class B Shares                
                                    --------------------------------------------   -------------------------------------------- 
                                    Five Months         Year            Year       Five Months         Year            Year     
                                       Ended            Ended          Ended          Ended            Ended          Ended     
                                      May 31,       December 31,    December 31,     May 31,       December 31,    December 31, 
                                       2001             2000            1999           2001            2000            1999     
                                    ------------    ------------    ------------   ------------    ------------    ------------ 
                                                                                                                                
Pilgrim MidCap Opportunities                                                                                                    
 (Number of Shares)                                                                                                             
Shares sold                              271,311       1,539,052         283,890        188,773       1,564,330         374,335 
Shares issued in merger                1,712,771              --              --        190,728              --              -- 
Shares issued as reinvestment of                                                                                                
 dividends                                    --          91,879          24,465             --         104,104          14,896 
Shares redeemed                       (1,666,345)       (579,993)        (59,847)      (281,653)       (167,531)         (9,457)
                                    ------------    ------------    ------------   ------------    ------------    ------------ 
Net increase (decrease) in shares                                                                                               
 outstanding                             317,737       1,050,938         248,508         97,848       1,500,903         379,774 
                                    ============    ============    ============   ============    ============    ============ 
Pilgrim MidCap Opportunities ($)                                                                                                
Shares sold                         $  4,156,261    $ 35,460,776    $  4,973,246   $  2,917,853    $ 35,935,995    $  6,815,739 
Shares issued in merger               26,643,510              --              --      2,913,949              --              -- 
Shares issued as reinvestment of                                                                                                
 dividends                                    --       1,828,926         383,131             --       2,039,665         234,378 
Shares redeemed                      (23,089,620)    (12,947,201)     (1,090,275)    (4,168,040)     (3,675,916)       (158,643)
                                    ------------    ------------    ------------   ------------    ------------    ------------ 
Net increase (decrease)             $  7,710,151    $ 24,342,501    $  4,266,102   $  1,663,762    $ 34,299,744    $  6,891,474 
                                    ============    ============    ============   ============    ============    ============ 

                                                   Class C Shares                                                               
                                    --------------------------------------------                                                
                                    Five Months         Year            Year                                                    
                                       Ended            Ended          Ended                                                    
                                      May 31,       December 31,    December 31,                                                
                                        2001            2000            1999                                                    
                                    ------------    ------------    ------------                                                
Pilgrim MidCap Opportunities                                                                                                    
 (Number of Shares)                                                                                                             
Shares sold                               96,579       1,317,500         222,578                                                
Shares issued in merger                   84,547              --              --                                                
Shares issued as reinvestment of                                                                                                
 dividends                                    --          73,211           8,538                                                
Shares redeemed                         (239,763)       (221,802)        (20,948)                                               
                                    ------------    ------------    ------------                                                
Net increase (decrease) in shares                                                                                               
 outstanding                             (58,637)      1,168,909         210,168                                                
                                    ============    ============    ============                                                
Pilgrim MidCap Opportunities ($)                                                                                                
Shares sold                         $  1,510,855    $ 30,373,920    $  4,045,982                                                
Shares issued in merger                1,286,435              --              --                                                
Shares issued as reinvestment of                                                                                                
 dividends                                    --       1,427,606         134,709                                                
Shares redeemed                       (3,570,512)     (4,645,276)       (391,819)                                               
                                    ------------    ------------    ------------                                                
Net increase (decrease)             $   (773,222)   $ 27,156,250    $  3,788,872                                                
                                    ============    ============    ============                                                

                                                   Class I Shares                        Class Q Shares                         
                                    --------------------------------------------   ----------------------------                 
                                    Five Months         Year            Year       Five Months        Period                    
                                       Ended            Ended           Ended         Ended           Ended                     
                                      May 31,       December 31,    December 31,     May 31,       December 31,                 
                                        2001            2000            1999          2001           2000(1)                    
                                    ------------    ------------    ------------   ------------    ------------                 
Pilgrim MidCap Opportunities                                                                                                    
 (Number of Shares)                                                                                                             
Shares sold                                   --              --               2         80,120         204,027                 
Shares issued in merger                       --              --              --             --              --                 
Shares issued as reinvestment of                                                                                                
 dividends                                    --         346,770         609,885             --          15,211                 
Shares redeemed                               --              --              --        (40,530)        (48,927)                
                                    ------------    ------------    ------------   ------------    ------------                 
Net increase in shares outstanding            --         346,770         609,887         39,590         170,311                 
                                    ============    ============    ============   ============    ============                 
Pilgrim MidCap Opportunities ($)                                                                                                
Shares sold                         $       (663)   $         --    $         30   $  1,217,717    $  4,633,519                 
Shares issued in merger                       --              --              --             --              --                 
Shares issued as reinvestment of                                                                                                
 dividends                                    --       6,945,794       9,446,529             --         302,995                 
Shares redeemed                               --              --              --       (631,571)     (1,033,465)                
                                    ------------    ------------    ------------   ------------    ------------                 
Net increase (decrease)             $       (663)   $  6,945,794    $  9,446,559   $    586,146    $  3,903,049                 
                                    ============    ============    ============   ============    ============                 

----------                                                                      
(1)  Commenced offering of shares on March 1, 2000.                             

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                    Class A Shares                                Class B Shares               
                                   ---------------------------------------------   ------------------------------------------- 
                                   Eleven Months         Year        Three Months  Eleven Months       Year        Three Months
                                       Ended            Ended           Ended          Ended           Ended          Ended    
                                      May 31,          June 30,        June 30,       May 31,        June 30,        June 30,  
                                        2001             2000            1999          2001            2000            1999    
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
                                                                                                                               
Pilgrim MidCap Growth                                                                                                          
 (Number of Shares)                                                                                                            
Shares sold                            5,124,587        9,111,415        170,704      1,646,795       1,509,894        124,529 
Shares issued as reinvestment of                                                                                               
 dividends                               730,615          974,160             --        562,821         643,222             -- 
Shares redeemed                       (4,973,887)      (7,669,485)      (440,581)      (976,225)       (591,401)      (113,758)
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
Net increase (decrease) in shares                                                                                              
 outstanding                             881,315        2,416,090       (269,877)     1,233,391       1,561,715         10,771 
                                   =============    =============    ===========   ============    ============    =========== 
Pilgrim MidCap Growth ($)                                                                                                      
Shares sold                        $ 115,738,212    $ 250,678,628    $ 3,480,826   $ 42,712,613    $ 49,598,444    $ 3,003,625 
Shares issued as reinvestment of                                                                                               
 dividends                            15,357,672       19,950,802             --     13,845,392      15,501,828             -- 
Shares redeemed                     (110,007,054)    (210,070,998)    (9,018,100)   (22,240,353)    (18,149,395)    (2,758,710)
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
Net increase (decrease)            $  21,088,830    $  60,558,432    $(5,537,274)  $ 34,317,652    $ 46,950,877    $   244,915 
                                   =============    =============    ===========   ============    ============    =========== 

                                                    Class C Shares                                Class Q Shares               
                                   ---------------------------------------------   ------------------------------------------- 
                                    Eleven Months       Year         Three Months  Eleven Months       Year        Three Months
                                        Ended           Ended           Ended          Ended           Ended          Ended    
                                       May 31,        June 30,         June 30,       May 31,        June 30,        June 30,  
                                        2001            2000             1999           2001           2000            1999    
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
Pilgrim MidCap Growth                                                                                                          
 (Number of Shares)                                                                                                            
Shares sold                            2,717,077        1,413,615        127,317        350,209         428,283        201,861 
Shares issued as reinvestment of                                                                                               
 dividends                               612,243        2,159,370             --        135,012         102,573             -- 
Shares redeemed                       (1,799,928)      (1,287,410)      (465,369)      (197,877)       (695,575)       (52,773)
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
Net increase (decrease) in shares                                                                                              
 outstanding                           1,529,392        2,285,575       (338,052)       287,344        (164,719)       149,088 
                                   =============    =============    ===========   ============    ============    =========== 
Pilgrim MidCap Growth ($)                                                                                                      
Shares sold                        $  54,386,322    $  37,423,320    $ 2,416,875   $  9,687,890    $ 16,105,660    $ 5,261,515 
Shares issued as reinvestment of                                                                                               
 dividends                            11,822,410       40,876,879             --      3,596,714       2,657,668             -- 
Shares redeemed                      (32,537,509)     (31,578,669)    (8,876,675)    (5,327,033)    (21,963,880)    (1,337,840)
                                   -------------    -------------    -----------   ------------    ------------    ----------- 
Net increase (decrease)            $  33,671,223    $  46,721,530    $(6,459,800)  $  7,957,571    $ (3,200,552)   $ 3,923,675 
                                   =============    =============    ===========   ============    ============    =========== 

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                    Class A Shares                                   Class B Shares                 
                                     ---------------------------------------------    --------------------------------------------- 
                                     Seven Months         Year            Year        Seven Months        Year             Year     
                                        Ended            Ended           Ended            Ended          Ended            Ended     
                                       May 31,        October 31,     October 31,        May 31,      October 31,      October 31,  
                                         2001             2000            1999            2001            2000             1999     
                                     -------------   -------------   -------------    ------------    -------------    ------------ 
                                                                                                                                    
Pilgrim Growth + Value                                                                                                              
 (Number of Shares)                                                                                                                 
Shares sold                              6,753,538      11,866,737       8,330,313       5,608,121       11,175,519       3,968,213 
Shares issued as reinvestment of                                                                                                    
 dividends                                 891,094         380,695              --       1,515,476          806,730              -- 
Shares redeemed                         (6,441,138)     (6,015,701)     (7,420,035)     (3,701,720)      (2,742,651)     (2,518,709)
                                     -------------   -------------   -------------    ------------    -------------    ------------ 
Net increase in shares outstanding       1,203,494       6,231,731         910,278       3,421,877        9,239,598       1,449,504 
                                     =============   =============   =============    ============    =============    ============ 
Pilgrim Growth + Value ($)                                                                                                          
Shares sold                          $ 111,564,124   $ 303,851,859   $ 119,944,285    $ 93,178,069    $ 278,695,932    $ 62,085,069 
Shares issued as reinvestment of                                                                                                    
dividends                               17,584,472       8,366,591              --      28,929,059       17,285,755              -- 
Shares redeemed                       (103,349,835)   (151,084,341)   (104,892,760)    (53,957,953)     (67,678,591)    (36,547,165)
                                     -------------   -------------   -------------    ------------    -------------    ------------ 
Net increase                         $  25,798,761   $ 161,134,109   $  15,051,525    $ 68,149,175    $ 228,303,096    $ 25,537,904 
                                     =============   =============   =============    ============    =============    ============ 

                                                               Class C Shares                        Class Q Shares                 
                                                ---------------------------------------------    --------------------------         
                                                Seven Months        Year             Year        Seven Months      Period           
                                                    Ended          Ended             Ended           Ended         Ended            
                                                   May 31,      October 31,       October 31,       May 31,     October 31,         
                                                    2001            2000             1999            2001         2000(1)           
                                                ------------    -------------    ------------    -----------    -----------         
Pilgrim Growth + Value                                                                                                              
 (Number of Shares)                                                                                                                 
Shares sold                                        3,982,395        8,365,370       2,142,358          8,425         54,841         
Shares issued as reinvestment of dividends           827,517          302,389              --          5,569             --         
Shares redeemed                                   (2,713,026)      (1,424,913)     (1,416,685)       (35,320)          (770)        
                                                ------------    -------------    ------------    -----------    -----------         
Net increase (decrease) in shares outstanding      2,096,886        7,242,846         725,673        (21,326)        54,071         
                                                ============    =============    ============    ===========    ===========         
Pilgrim Growth + Value ($)                                                                                                          
Shares sold                                     $ 66,299,168    $ 211,475,739    $ 33,290,488    $   167,062    $ 1,439,870         
Shares issued as reinvestment of dividends        15,788,143        6,478,206              --        109,933             --         
Shares redeemed                                  (41,360,170)     (34,857,895)    (20,271,515)      (585,774)       (17,643)        
                                                ------------    -------------    ------------    -----------    -----------         
Net increase (decrease)                         $ 40,727,141    $ 183,096,050    $ 13,018,973    $  (308,779)   $ 1,422,227         
                                                ============    =============    ============    ===========    ===========         

----------                                                                      
(1)  Commenced offering of shares on June 5, 2000.                              

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                    Class A Shares                                  Class B Shares                 
                                    ---------------------------------------------    --------------------------------------------- 
                                    Five Months         Year             Year        Five Months          Year            Year     
                                       Ended           Ended             Ended          Ended            Ended            Ended    
                                      May 31,       December 31,     December 31,      May 31,        December 31,    December 31, 
                                       2001             2000             1999           2001              2000            1999     
                                    ------------    -------------    ------------    ------------    -------------    ------------ 
                                                                                                                                   
Pilgrim SmallCap Opportunities                                                                                                     
 (Number of Shares)                                                                                                                
Shares sold                              805,278        4,441,888       1,243,016         127,540        1,707,949         989,671 
Shares issued in merger                  634,284               --              --          93,498               --              -- 
Shares issued as reinvestment of                                                                                                   
 dividends                                    --          466,417         215,723              --          683,360         520,483 
Shares redeemed                       (1,081,378)      (3,228,805)       (947,712)       (533,148)      (1,063,776)     (1,261,882)
                                    ------------    -------------    ------------    ------------    -------------    ------------ 
Net increase (decrease) in shares                                                                                                  
 outstanding                             358,184        1,679,500         511,027        (312,110)       1,327,533         248,272 
                                    ============    =============    ============    ============    =============    ============ 
Pilgrim SmallCap Opportunities ($)                                                                                                 
Shares sold                         $ 31,370,059    $ 289,038,217    $ 55,402,036    $  4,753,320    $ 106,992,786    $ 41,747,885 
Shares issued in merger               24,496,877               --              --       3,413,381               --              -- 
Shares issued as reinvestment of                                                                                                   
 dividends                                    --       22,787,725       8,110,268              --       31,619,407      18,773,628 
Shares redeemed                      (38,841,872)    (204,676,330)    (36,030,267)    (19,107,874)     (61,751,282)    (43,273,188)
                                    ------------    -------------    ------------    ------------    -------------    ------------ 
Net increase (decrease)             $ 17,025,064    $ 107,149,612    $ 27,482,037    $(10,941,173)   $  76,860,911    $ 17,248,325 
                                    ============    =============    ============    ============    =============    ============ 

                                                   Class C Shares                                                                  
                                    ---------------------------------------------                                                  
                                    Five Months         Year             Year                                                      
                                       Ended            Ended            Ended                                                     
                                      May 31,       December 31,     December 31,                                                  
                                       2001             2000             1999                                                      
                                    ------------    -------------    ------------                                                  
Pilgrim SmallCap Opportunities                                                                                                     
 (Number of Shares)                                                                                                                
Shares sold                               65,064        1,356,512         540,114                                                  
Shares issued in merger                   44,557               --              --                                                  
Shares issued as reinvestment of                                                                                                   
 dividends                                    --          237,876          83,500                                                  
Shares redeemed                         (292,981)        (531,379)       (403,119)                                                 
                                    ------------    -------------    ------------                                                  
Net increase (decrease) in shares                                                                                                  
 outstanding                            (183,360)       1,063,009         220,495                                                  
                                    ============    =============    ============                                                  
Pilgrim SmallCap Opportunities ($)                                                                                                 
Shares sold                         $  2,418,338    $  87,619,842    $ 22,951,710                                                  
Shares issued in merger                1,623,093               --              --                                                  
Shares issued as reinvestment of                                                                                                   
 dividends                                    --       10,986,485       3,031,530                                                  
Shares redeemed                      (10,518,379)     (29,398,162)    (13,179,237)                                                 
                                    ------------    -------------    ------------                                                  
Net increase (decrease)             $ (6,476,948)   $  69,208,165    $ 12,804,003                                                  
                                    ============    =============    ============                                                  

                                                  Class T Shares                               Class I Shares                      
                                    -----------------------------------------       ------------------------------------           
                                    Five Months        Year           Year         Five Months     Year           Year             
                                       Ended          Ended          Ended            Ended        Ended         Ended             
                                      May 31,      December 31,   December 31,       May 31,    December 31,   December 31,        
                                        2001           2000           1999            2001          2000          1999             
                                    -----------    -----------    -----------       --------      --------      --------           
Pilgrim SmallCap Opportunities                                                                                                     
 (Number of Shares)                                                                                                                
Shares sold                                 235          9,929         10,438             --            --             4           
Shares issued in merger                      --             --             --             --            --            --           
Shares issued as reinvestment                                                                                                      
 of dividends                                --         81,043        102,739             --             1             1           
Shares redeemed                         (78,959)      (156,635)      (168,928)            --            --            --           
                                    -----------    -----------    -----------       --------      --------      --------           
Net increase (decrease) in shares                                                                                                  
 outstanding                            (78,724)       (65,663)       (55,751)            --             1             5           
                                    ===========    ===========    ===========       ========      ========      ========           
Pilgrim SmallCap Opportunities ($)                                                                                                 
Shares sold                         $     8,792    $   642,005    $   418,294       $     --      $     --      $    130           
Shares issued in merger                      --             --             --             --            --            --           
Shares issued as reinvestment                                                                                                      
 of dividends                                --      3,780,127      3,715,408             --            39            27           
Shares redeemed                      (2,874,330)    (9,395,885)    (5,873,761)            --            --            --           
                                    -----------    -----------    -----------       --------      --------      --------           
Net increase (decrease)             $(2,865,538)   $(4,973,753)   $(1,740,059)      $     --      $     39      $    157           
                                    ===========    ===========    ===========       ========      ========      ========           

                                         Class Q Shares                                                                            
                                    -------------------------                                                                      
                                    Five Months      Period                                                                        
                                       Ended         Ended                                                                         
                                      May 31,     December 31,                                                                     
                                       2001         2000(1)                                                                        
                                    -----------    -----------                                                                     
Pilgrim SmallCap Opportunities                                                                                                     
 (Number of Shares)                                                                                                                
Shares sold                              29,782         66,690                                                                     
Shares issued in merger                      --             --                                                                     
Shares issued as reinvestment                                                                                                      
 of dividends                                --          8,491                                                                     
Shares redeemed                         (10,751)       (21,253)                                                                    
                                    -----------    -----------                                                                     
Net increase (decrease) in shares                                                                                                  
 outstanding                             19,031         53,928                                                                     
                                    ===========    ===========                                                                     
Pilgrim SmallCap Opportunities ($)                                                                                                 
Shares sold                         $ 1,134,714    $ 3,920,299                                                                     
Shares issued in merger                      --             --                                                                     
Shares issued as reinvestment                                                                                                      
 of dividends                                --        414,124                                                                     
Shares redeemed                        (414,435)    (1,119,892)                                                                    
                                    -----------    -----------                                                                     
Net increase (decrease)             $   720,279    $ 3,214,531                                                                     
                                    ===========    ===========                                                                     

----------                                                                      
(1)  Commenced offering of shares on April 4, 2000.                             

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                               Class A Shares                  
                                               ----------------------------------------------- 
                                               Eleven Months        Year         Three Months  
                                                   Ended           Ended             Ended     
                                                  May 31,         June 30,         June 30,    
                                                    2001            2000             1999      
                                               -------------    -------------    ------------- 
                                                                                               
Pilgrim SmallCap Growth                                                                        
 (Number of Shares)                                                                            
Shares sold                                        9,181,910       15,288,354          384,655 
Shares issued as reinvestment of dividends           551,809        3,070,550               -- 
Shares redeemed                                   (8,987,003)     (14,588,761)        (652,027)
                                               -------------    -------------    ------------- 
Net increase (decrease) in shares outstanding        746,716        3,770,143         (267,372)
                                               =============    =============    ============= 
Pilgrim SmallCap Growth ($)                                                                    
Shares sold                                    $ 142,706,037    $ 278,913,445    $   6,777,887 
Shares issued as reinvestment of dividends         8,310,245       44,737,909               -- 
Shares redeemed                                 (139,058,315)    (268,674,614)     (11,423,224)
                                               -------------    -------------    ------------- 
Net increase (decrease)                        $  11,957,967    $  54,976,740    $  (4,645,337)
                                               =============    =============    ============= 

                                                               Class B Shares                  
                                               ----------------------------------------------- 
                                               Eleven Months        Year         Three Months  
                                                   Ended            Ended           Ended      
                                                  May 31,         June 30,         June 30,    
                                                   2001             2000             1999      
                                               -------------    -------------    ------------- 
Pilgrim SmallCap Growth                                                                        
 (Number of Shares)                                                                            
Shares sold                                        1,379,310        1,419,656           62,154 
Shares issued as reinvestment of dividends           350,332        1,314,209               -- 
Shares redeemed                                     (933,473)        (566,759)        (144,208)
                                               -------------    -------------    ------------- 
Net increase (decrease) in shares outstanding        796,169        2,167,106          (82,054)
                                               =============    =============    ============= 
Pilgrim SmallCap Growth ($)                                                                    
Shares sold                                    $  26,043,753    $  34,348,864    $   1,379,964 
Shares issued as reinvestment of dividends         6,589,750       23,529,097               -- 
Shares redeemed                                  (16,489,403)     (13,214,538)      (3,209,533)
                                               -------------    -------------    ------------- 
Net increase (decrease)                        $  16,144,100    $  44,663,423    $  (1,829,569)
                                               =============    =============    ============= 

                                                               Class C Shares                  
                                               --------------------------------------------    
                                               Eleven Months       Year        Three Months    
                                                   Ended           Ended           Ended       
                                                  May 31,        June 30,        June 30,      
                                                   2001            2000            1999        
                                               -------------    -------------    ------------- 
Pilgrim SmallCap Growth                                                                        
 (Number of Shares)                                                                            
Shares sold                                        3,065,747        1,763,791           82,725 
Shares issued as reinvestment of dividends           471,165        4,523,712               -- 
Shares redeemed                                   (2,659,459)      (1,707,156)        (680,850)
                                               -------------    -------------    ------------- 
Net increase (decrease) in shares outstanding        877,453        4,580,347         (598,125)
                                               =============    =============    ============= 
Pilgrim SmallCap Growth ($)                                                                    
Shares sold                                    $  43,097,468    $  33,117,558    $   1,433,335 
Shares issued as reinvestment of dividends         6,935,554       64,870,028               -- 
Shares redeemed                                  (36,661,237)     (30,746,993)     (11,755,815)
                                               -------------    -------------    ------------- 
Net increase (decrease)                        $  13,371,785    $  67,240,593    $ (10,322,480)
                                               =============    =============    ============= 

                                                               Class Q Shares                  
                                               ----------------------------------------------- 
                                               Eleven Months        Year         Three Months  
                                                   Ended            Ended           Ended      
                                                  May 31,         June 30,         June 30,    
                                                    2001            2000             1999      
                                               -------------    -------------    ------------- 
Pilgrim SmallCap Growth                                                                        
 (Number of Shares)                                                                            
Shares sold                                          420,877          752,728          421,173 
Shares issued as reinvestment of dividends            82,164          226,472               -- 
Shares redeemed                                     (442,449)        (884,884)        (392,013)
                                               -------------    -------------    ------------- 
Net increase (decrease) in shares outstanding         60,592           94,316           29,160 
                                               =============    =============    ============= 
Pilgrim SmallCap Growth ($)                                                                    
Shares sold                                    $   7,209,086    $  17,630,422    $   8,340,785 
Shares issued as reinvestment of dividends         1,377,895        3,668,843               -- 
Shares redeemed                                   (7,176,609)     (18,817,763)      (7,387,773)
                                               -------------    -------------    ------------- 
Net increase (decrease)                        $   1,410,372    $   2,481,502    $     953,012 
                                               =============    =============    ============= 

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

                                                        [Enlarge/Download Table]

                                                              Class A Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended          Ended           Ended     
                                                  May 31,        June 30,        June 30,   
                                                   2001            2000            1999     
                                               ------------    ------------    ------------ 
                                                                                            
Pilgrim Balanced                                                                            
 (Number of Shares)                                                                         
Shares sold                                       1,463,798         462,023          69,501 
Shares issued in merger                                  --       3,669,160              -- 
Shares issued as reinvestment of dividends          430,851         120,353           1,015 
Shares redeemed                                  (1,499,291)       (523,820)        (70,425)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding       395,358       3,727,716              91 
                                               ============    ============    ============ 
Pilgrim Balanced ($)                                                                        
Shares sold                                    $ 20,216,598    $  7,288,215    $  1,354,890 
Shares issued in merger                                  --      57,648,201              -- 
Shares issued as reinvestment of dividends        5,925,370       1,895,528          19,370 
Shares redeemed                                 (21,129,277)     (8,162,726)     (1,361,704)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $  5,012,691    $ 58,669,218    $     12,556 
                                               ============    ============    ============ 

                                                              Class B Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                   2001            2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Balanced                                                                            
 (Number of Shares)                                                                         
Shares sold                                         453,764         236,780          62,785 
Shares issued in merger                                  --       2,263,054              -- 
Shares issued as reinvestment of dividends          179,566          87,982             554 
Shares redeemed                                    (673,174)       (386,298)        (12,468)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding       (39,844)      2,201,518          50,871 
                                               ============    ============    ============ 
Pilgrim Balanced ($)                                                                        
Shares sold                                    $  6,755,688    $  4,171,242    $  1,288,434 
Shares issued in merger                                  --      38,096,820              -- 
Shares issued as reinvestment of dividends        2,642,601       1,483,448          11,321 
Shares redeemed                                 (10,233,160)     (6,483,178)       (256,849)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $   (834,871)   $ 37,268,332    $  1,042,906 
                                               ============    ============    ============ 

                                                              Class C Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended          Ended            Ended    
                                                  May 31,        June 30,        June 30,   
                                                    2001           2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Balanced                                                                            
 (Number of Shares)                                                                         
Shares sold                                         397,383         168,630          17,557 
Shares issued in merger                                  --         813,022              -- 
Shares issued as reinvestment of dividends          113,417         235,394             519 
Shares redeemed                                    (525,040)       (579,424)        (47,391)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding       (14,240)        637,622         (29,315)
                                               ============    ============    ============ 
Pilgrim Balanced ($)                                                                        
Shares sold                                    $  5,227,356    $  2,578,680    $    324,318 
Shares issued in merger                                  --      12,280,463              -- 
Shares issued as reinvestment of dividends        1,496,911       3,561,673           9,545 
Shares redeemed                                  (7,140,840)     (8,869,902)       (878,533)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $   (416,573)   $  9,550,914    $   (544,670)
                                               ============    ============    ============ 

                                                              Class Q Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                    2001           2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Balanced                                                                            
 (Number of Shares)                                                                         
Shares sold                                          27,145           4,284           1,351 
Shares issued in merger                                  --              --              -- 
Shares issued as reinvestment of dividends            2,793           2,693              42 
Shares redeemed                                     (17,144)         (1,565)           (781)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding        12,794           5,412             612 
                                               ============    ============    ============ 
Pilgrim Balanced ($)                                                                        
Shares sold                                    $    389,776    $     66,184    $     25,940 
Shares issued in merger                                  --              --              -- 
Shares issued as reinvestment of dividends           37,994          42,058             798 
Shares redeemed                                    (234,653)        (24,419)        (14,926)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $    193,117    $     83,823    $     11,812 
                                               ============    ============    ============ 

                                                      Class T Shares                        
                                               ----------------------------                 
                                               Eleven Months      Period                    
                                                   Ended           Ended                    
                                                  May 31,        June 30,                   
                                                    2001          2000(1)                   
                                               ------------    ------------                 
Pilgrim Balanced                                                                            
 (Number of Shares)                                                                         
Shares sold                                           4,667           1,889                 
Shares issued in merger                                  --         737,757                 
Shares issued as reinvestment of dividends           65,876              --                 
Shares redeemed                                    (208,190)        (59,256)                
                                               ------------    ------------                 
Net increase (decrease) in shares outstanding      (137,647)        680,390                 
                                               ============    ============                 
Pilgrim Balanced ($)                                                                        
Shares sold                                    $     70,086    $     11,152                 
Shares issued in merger                                  --      12,419,589                 
Shares issued as reinvestment of dividends          970,115              --                 
Shares redeemed                                  (3,166,380)       (946,072)                
                                               ------------    ------------                 
Net increase (decrease)                        $ (2,126,179)   $ 11,484,669                 
                                               ============    ============                 

----------                                                                      
(1)  Commenced offering of shares on March 31, 2000.                            

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                              Class A Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                   2001            2000            1999     
                                               ------------    ------------    ------------ 
                                                                                            
Pilgrim Convertible                                                                         
 (Number of Shares)                                                                         
Shares sold                                       2,382,181       2,765,285         240,854 
Shares issued as reinvestment of dividends          989,422         432,032           8,766 
Shares redeemed                                  (2,581,631)     (1,602,580)       (106,071)
                                               ------------    ------------    ------------ 
Net increase in shares outstanding                  789,972       1,594,737         143,549 
                                               ============    ============    ============ 
Pilgrim Convertible ($)                                                                     
Shares sold                                    $ 52,464,635    $ 74,411,486    $  5,446,752 
Shares issued as reinvestment of dividends       19,822,295      10,028,609         201,806 
Shares redeemed                                 (51,967,967)    (41,141,454)     (2,398,688)
                                               ------------    ------------    ------------ 
Net increase                                   $ 20,318,963    $ 43,298,641    $  3,249,870 
                                               ============    ============    ============ 

                                                              Class B Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                   2001            2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Convertible                                                                         
 (Number of Shares)                                                                         
Shares sold                                       2,141,257       2,212,800         377,405 
Shares issued as reinvestment of dividends          923,386         446,940           4,334 
Shares redeemed                                  (1,281,373)       (721,161)       (155,682)
                                               ------------    ------------    ------------ 
Net increase in shares outstanding                1,783,270       1,938,579         226,057 
                                               ============    ============    ============ 
Pilgrim Convertible ($)                                                                     
Shares sold                                    $ 52,883,513    $ 62,613,451    $  9,316,686 
Shares issued as reinvestment of dividends       20,109,225      11,247,841         108,485 
Shares redeemed                                 (28,949,115)    (20,328,894)     (3,833,777)
                                               ------------    ------------    ------------ 
Net increase                                   $ 44,043,623    $ 53,532,398    $  5,591,394 
                                               ============    ============    ============ 

                                                              Class C Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                   2001            2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Convertible                                                                         
 (Number of Shares)                                                                         
Shares sold                                       1,819,012       1,543,879         204,264 
Shares issued as reinvestment of dividends          663,511         594,205           3,236 
Shares redeemed                                  (1,553,690)       (827,109)       (276,138)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding       928,833       1,310,975         (68,638)
                                               ============    ============    ============ 
Pilgrim Convertible ($)                                                                     
Shares sold                                    $ 40,238,507    $ 41,908,144    $  4,732,365 
Shares issued as reinvestment of dividends       13,561,955      14,012,886          75,700 
Shares redeemed                                 (31,759,310)    (22,139,549)     (6,363,756)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $ 22,041,152    $ 33,781,481    $ (1,555,691)
                                               ============    ============    ============ 

                                                              Class Q Shares                
                                               -------------------------------------------- 
                                               Eleven Months       Year        Three Months 
                                                   Ended           Ended          Ended     
                                                  May 31,        June 30,        June 30,   
                                                    2001           2000            1999     
                                               ------------    ------------    ------------ 
Pilgrim Convertible                                                                         
 (Number of Shares)                                                                         
Shares sold                                         719,641       1,566,620         393,267 
Shares issued as reinvestment of dividends          452,416         144,983           3,568 
Shares redeemed                                  (1,558,160)       (398,796)        (29,839)
                                               ------------    ------------    ------------ 
Net increase (decrease) in shares outstanding      (386,103)      1,312,807         366,996 
                                               ============    ============    ============ 
Pilgrim Convertible ($)                                                                     
Shares sold                                    $ 15,922,807    $ 41,114,380    $  8,618,236 
Shares issued as reinvestment of dividends        8,820,172       3,277,417          79,431 
Shares redeemed                                 (30,676,072)    (10,241,903)       (655,742)
                                               ------------    ------------    ------------ 
Net increase (decrease)                        $ (5,933,093)   $ 34,149,894    $  8,041,925 
                                               ============    ============    ============ 

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

NOTE 11 -- CUSTODIAL AGREEMENT                                                  

State Street Kansas City ("SSKC") (formerly Investors Fiduciary Trust Company)  
and State Street Boston ("SSB") serve as the Funds' custodian and recordkeeper. 
Custody fees paid to SSKC or SSB are reduced by an earnings credit based on the 
cash balances held by SSKC or SSB for each of the Funds.                        

NOTE 12 -- WHEN ISSUED SECURITIES                                               

The Balanced Fund, at times, may purchase FNMA/GNMA certificates on a delayed   
delivery, forward or when-issued basis with payment and delivery often taking   
place a month or more after the initiation of the transaction. It is the Fund's 
policy to record when-issued FNMA/GNMA certificates (and the corresponding      
obligation to pay for the securities) at the time the purchase commitment       
becomes fixed -- generally on the trade date. At May 31, 2001, the Balanced Fund
had one when-issued FNMA certificate with a value of $1,026,875.                

NOTE 13 -- FUTURES CONTRACTS                                                    

On May 31, 2001, the Research Enhanced Index Fund had $190,000 principal amount 
of U.S. Treasury obligations pledged as collateral to cover margin requirements 
for open futures contracts.                                                     

Open futures contracts at May 31, 2001, were as follows:                        

Number                                              
    of                                        Unrealized
Contract     Contracts     Expiration     Commitment     Appreciation           
--------     ---------     ----------     ----------     ------------           
S&P 500          1           June-01         Buy           $200,312             

NOTE 14 -- CHANGES IN THE FUND'S YEAR-END                                       

Effective May 31, 2001, the Funds changed their year-end to May 31 from: June 30
for MagnaCap, LargeCap Growth, MidCap Growth, SmallCap Growth, Balanced and     
Convertible; October 31 for Researched Enhanced Index and Growth + Value;       
December 31 for Growth Opportunities, MidCap Opportunities and SmallCap         
Opportunities. This change was done to facilitate the administration of the     
funds.                                                                          

NOTE 15 -- REORGANIZATIONS                                                      

On February 23, 2001 and March 23, 2001, certain Funds, as listed below (each   
an: "Acquiring Fund"), acquired the assets and liabilities of other Funds, also 
listed below (each an: "Acquired Fund"), in a tax-free reorganization, pursuant 
to a plan of reorganization that was approved by each Acquired Fund's           
shareholders. The number and value of shares issued by the Acquiring Fund to    
each Acquired Fund's shareholders as of the reorganization date are presented in
Note 10 -- Capital Shares. Net assets and unrealized appreciation/(depreciation)
as of the reorganization date were as follows:                                  

                                                        [Enlarge/Download Table]

                                                                       Acquired      
                                          Total net   Total net          Fund        
                                          assets of   assets of       Unrealized     
      Acquiring            Acquired       Aquiring    Acquired       appreciation/   
         Fund                Fund         Fund (000)  Fund (000)  (depreciation)(000)
         ----                ----         ----------  ----------  -------------------
                                                                                     
MagnaCap                Pilgrim LargeCap   $368,822    $ 33,476        $     66      
                        Leaders Fund                                                 
                        Pilgrim MidCap      374,813      36,156           1,955      
                        Value Fund                                                   

LargeCap Growth         ING Focus Fund      516,080      57,162           3,788      

                        ING Large Cap       516,080      53,231         (10,466)     
                        Growth Fund                                                  

MidCap Opportunites     ING Mid Cap         129,048      30,844           4,660      
                        Growth Fund                                                  

SmallCap Opportunities  ING Small Cap       466,139      29,533          (1,205)     
                        Growth Fund                                                  

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NOTES TO FINANCIAL STATEMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

NOTE 16 -- FOREIGN TAXES WITHHELD                                               

For the periods ended May 31, 2001 the Funds had foreign taxes withheld which   
have been deducted from dividend income:                                        

Magna Cap                     $45,444                                           
Researched Enhanced Index       6,637                                           
Growth Opportnunities           7,336                                           
LargeCap Growth                 1,085                                           
MidCap Opportunities               --                                           
MidCap Growth                      --                                           
Growth + Value                  5,272                                           
SmallCap Opportunities            815                                           
SmallCap Growth                    --                                           
Balanced                        7,367                                           
Convertible                        --                                           

NOTE 17 -- SUBSEQUENT EVENTS                                                    

Subsequent to May 31, 2001 the following funds declared dividends from net      
investment income of:                                                           

Per Share                                       
Amount        Payable Date      Record Date   
------        ------------      -----------   
Balanced                                                                        
Class A          $0.1270       July 5, 2001     June 29, 2001                   
Class B          $0.1000       July 5, 2001     June 29, 2001                   
Class C          $0.1000       July 5, 2001     June 29, 2001                   
Class Q          $0.1310       July 5, 2001     June 29, 2001                   
Class T          $0.1060       July 5, 2001     June 29, 2001                   

Convertible                                                                     
Class A          $0.1160       July 5, 2001     June 29, 2001                   
Class B          $0.0780       July 5, 2001     June 29, 2001                   
Class C          $0.0780       July 5, 2001     June 29, 2001                   
Class Q          $0.1200       July 5, 2001     June 29, 2001                   

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 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 95.58%                                                            
Aerospace/Defense: 2.60%              
   134,000          United Technologies Corp.                    $  11,163,540
                                                                 -------------
                                                                    11,163,540
                                                                 -------------
Banks: 2.43%                          
   211,950          J.P. Morgan Chase & Co.                         10,417,343
                                                                 -------------
                                                                    10,417,343
                                                                 -------------
Beverages: 1.28%                      
   122,400          Pepsico, Inc.                                    5,478,624
                                                                 -------------
                                                                     5,478,624
                                                                 -------------
Chemicals: 4.35%                      
   200,000          Air Products & Chemicals, Inc.                   9,354,000
   150,000          PPG Industries, Inc.                             8,340,000
    21,200          Sigma-Aldrich Corp.                              1,009,544
         1   @@     Syngenta AG ADR                                         10
                                                                 -------------
                                                                    18,703,554
                                                                 -------------
Commercial Services: 0.16%            
    20,000          Equifax, Inc.                                      701,600
                                                                 -------------
                                                                       701,600
                                                                 -------------
Computers: 8.11%                      
   477,600          Compaq Computer Corp.                            7,636,824
   306,100          Dell Computer Corp.                              7,456,596
   207,500    @     EMC Corp.-Mass.                                  6,557,000
   118,000          International Business Machines Corp.           13,192,400
       276    @     McData Corp.                                         6,999
                                                                 -------------
                                                                    34,849,819
                                                                 -------------
Distribution/Wholesale: 0.30%         
    29,000          Grainger (W.W.), Inc.                            1,281,510
                                                                 -------------
                                                                     1,281,510
                                                                 -------------
Diversified Financial Services: 4.37% 
    10,866          Citigroup, Inc.                                    556,883
   185,000          Franklin Resources, Inc.                         8,232,500
   150,900          Freddie Mac                                      9,989,580
                                                                 -------------
                                                                    18,778,963
                                                                 -------------
Electric: 6.57%                       
    26,500          Cinergy Corp.                                      936,775
   238,400          Duke Energy Corp.                               10,899,648
   150,000          Entergy Corp.                                    6,480,000
   420,900          The Southern Co.                                 9,907,986
                                                                 -------------
                                                                    28,224,409
                                                                 -------------
Electronics: 1.50%                    
    25,500  @,@@    Flextronics Intl. Ltd.                             643,110
   268,800    @     Solectron Corp.                                  5,798,016
                                                                 -------------
                                                                     6,441,126
                                                                 -------------
Energy: 0.24%                         
    46,000          Grant Pride, Inc.                                1,035,920
                                                                 -------------
                                                                     1,035,920
                                                                 -------------
Environmental Control: 0.23%          
    52,700    @     Republic Services, Inc.                            968,626
                                                                 -------------
                                                                       968,626
                                                                 -------------
Food: 0.13%                           
    10,800    @     Safeway, Inc.                                      547,020
                                                                 -------------
                                                                       547,020
                                                                 -------------
Healthcare-Products: 0.13%            
     9,000    @     St. Jude Medical, Inc.                             553,680
                                                                 -------------
                                                                       553,680
                                                                 -------------
Household Products/Wares: 2.70%       
   118,500          Avery Dennison Corp.                             6,929,880
   121,000          Fortune Brands, Inc.                             4,156,350
    38,000          The Dial Corp.                                     526,300
                                                                 -------------
                                                                    11,612,530
                                                                 -------------
Insurance: 8.46%                      
   142,067          American Intl. Group                            11,507,427
   250,000          Jefferson-Pilot Corp.                           11,847,500
   123,800          Marsh & McLennan Cos., Inc.                     12,986,620
                                                                 -------------
                                                                    36,341,547
                                                                 -------------
Leisure Time: 1.91%                   
   291,200   @@     Carnival Corp.                                   8,220,576
                                                                 -------------
                                                                     8,220,576
                                                                 -------------
Lodging: 0.21%                        
    24,100          Starwood Hotels & Resorts Worldwide, Inc.          911,703
                                                                 -------------
                                                                       911,703
                                                                 -------------
Machinery-Diversified: 2.52%          
   230,000          Rockwell Intl. Corp.                            10,810,000
                                                                 -------------
                                                                    10,810,000
                                                                 -------------
Media: 0.12%                          
    12,100    @     Comcast Corp.                                      495,616
                                                                 -------------
                                                                       495,616
                                                                 -------------
Mining: 4.14%                         
   100,000   @@     Alcan, Inc.                                      4,480,000
   308,800          Alcoa, Inc.                                     13,324,720
                                                                 -------------
                                                                    17,804,720
                                                                 -------------
Miscellaneous Manufacturing: 7.83%    
   110,000          Danaher Corp.                                    6,927,800
   215,700          General Electric Co.                            10,569,300
    54,000          Minnesota Mining & Manufacturing Co.             6,403,320
   169,722   @@     Tyco Intl. Ltd.                                  9,750,529
                                                                 -------------
                                                                    33,650,949
                                                                 -------------
Oil & Gas: 5.35%                      
    12,200          Amerada Hess Corp.                               1,044,808
   200,000          Conoco, Inc.                                     6,240,000
     6,600          Exxon Mobil Corp.                                  585,750
   304,700          Halliburton Co.                                 14,241,678
    23,000   @@     Santa Fe Intl. Corp.                               848,240
                                                                 -------------
                                                                    22,960,476
                                                                 -------------
Pharmaceuticals: 0.44%                
    49,300          Omnicare, Inc.                                   1,033,328
    19,500          Pfizer, Inc.                                       836,355
                                                                 -------------
                                                                     1,869,683
                                                                 -------------
Pipelines: 0.16%                      
    11,400          El Paso Corp.                                      694,260
                                                                 -------------
                                                                       694,260
                                                                 -------------
Retail: 9.52%                         
   198,500    @     Best Buy Co., Inc.                              10,550,275
    23,600    @     BJ's Wholesale Club, Inc.                        1,150,500
     9,500          Home Depot, Inc.                                   468,255
   259,400          McDonald's Corp.                                 7,854,632
   237,100          Sears, Roebuck & Co.                             9,455,547
    19,000    @     Tricon Global Restaurants, Inc.                    868,300
    15,100          Walgreen Co.                                       606,869
   192,300          Wal-Mart Stores, Inc.                            9,951,525
                                                                   -----------
                                                                    40,905,903
                                                                   -----------
Savings & Loans: 0.19%                
    71,000          Sovereign Bancorp, Inc.                            804,430
                                                                 -------------
                                                                       804,430
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
MagnaCap                                                                        
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Semiconductors: 1.64%                 
   240,000    @     Advanced Micro Devices                       $   6,780,000
     7,600          Texas Instruments, Inc.                            259,312
                                                                 -------------
                                                                     7,039,312
                                                                 -------------
Software: 6.57%                       
   480,300          Computer Associates Intl., Inc.                 13,621,308
   211,100    @     Microsoft Corp.                                 14,603,898
                                                                 -------------
                                                                    28,225,206
                                                                 -------------
Telecommunications: 8.40%             
    26,500    @     Broadwing, Inc.                                    654,285
   118,500    @     Cisco Systems, Inc.                              2,282,310
   177,900   @@     Nokia OYJ ADR                                    5,201,796
   242,100          SBC Communications, Inc.                        10,422,405
   202,500    @     Tellabs, Inc.                                    6,887,025
   595,600    @     WorldCom, Inc.                                  10,625,504
                                                                 -------------
                                                                    36,073,325
                                                                 -------------
Tobacco: 3.02%                        
   252,700          Philip Morris Cos., Inc.                        12,991,307
                                                                 -------------
                                                                    12,991,307
                                                                 -------------
                    Total Common Stock (Cost $380,438,157)         410,557,277
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 4.64%                                                   
Repurchase Agreement: 4.64%           
$19,926,000            State Street Bank Repurchase Agreement                   
      4.000%, due 06/01/01, (Collateralized by
      $15,285,000 U.S. Treasury Bonds, 8.875%,
                      Due 08/15/17 Market Value $20,328,454)     $  19,926,000
                                                                 -------------
Total Short-Term Investments          
                      (Cost $19,926,000)                            19,926,000
                                                                 -------------
Total Investments in Securities       
                      (Cost $400,364,157)*             100.22%   $ 430,483,277
                     Other Assets and Liabilities-Net    -0.22%        (963,600)
                                                       ------    -------------
                    Net Assets                         100.00%   $ 429,519,677
                                                       ======    =============
@    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                $  53,628,291
                     Gross Unrealized Depreciation                  (23,509,171)
                                                                 -------------
                    Net Unrealized Appreciation                  $  30,119,120
                                                                 =============

See Accompanying Notes to Financial Statements

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 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 100.46%                                                           
Advertising: 0.08%                    
     1,600          Omnicom Group                                $     148,928
                                                                 -------------
                                                                       148,928
                                                                 -------------
Aerospace/Defense: 1.19%              
    15,900          Boeing Co.                                         999,951
     7,300          Goodrich Corp.                                     304,994
     5,200          Lockheed Martin Corp.                              199,108
     7,900          United Technologies Corp.                          658,149
                                                                 -------------
                                                                     2,162,202
                                                                 -------------
Airlines: 0.47%                       
     1,000    @     Continental Airlines, Inc.                          49,170
     7,100          Delta Air Lines, Inc.                              338,102
    23,500          Southwest Airlines                                 470,000
                                                                 -------------
                                                                       857,272
                                                                 -------------
Apparel: 0.31%                        
     6,800    @     Jones Apparel Group, Inc.                          300,560
     6,400          Nike, Inc.                                         263,040
                                                                 -------------
                                                                       563,600
                                                                 -------------
Auto Manufacturers: 0.78%             
    25,400          Ford Motor Co.                                     618,489
    12,000          General Motors Corp.                               682,800
     2,400          Paccar, Inc.                                       115,248
                                                                 -------------
                                                                     1,416,537
                                                                 -------------
Auto Parts & Equipment: 0.25%         
    23,300          Delphi Automotive Systems                          342,510
     3,100    @     Lear Corp.                                         108,128
                                                                 -------------
                                                                       450,638
                                                                 -------------
Banks: 4.94%                          
    13,900          Amsouth Bancorporation                             255,621
    21,200          Bank of America Corp.                            1,256,100
    12,800          Bank of New York Co., Inc.                         699,008
    36,100          Bank One Corp.                                   1,429,560
     3,400          Banknorth Group, Inc.                               69,054
       100          Comerica, Inc.                                       5,690
     1,200          Compass Bancshares, Inc.                            29,256
    27,000          First Union Corp.                                  870,750
     2,300          FleetBoston Financial Corp.                         95,657
     4,500          Hibernia Corp.                                      73,260
     2,700          Huntington Bancshares                               40,446
    18,600          Keycorp                                            442,308
     6,700          Mellon Financial Corp.                             306,994
     6,000          National Commerce Financial Corp.                  145,800
     2,800          Northern Trust Corp.                               185,220
    12,600          PNC Financial Services Group, Inc.                 872,550
     9,000          SouthTrust Corp.                                   224,730
     1,500          Suntrust Banks, Inc.                                92,130
    64,600          US Bancorp                                       1,440,580
     8,000          Wells Fargo & Co.                                  376,640
       700          Wilmington Trust Corp.                              44,702
                                                                 -------------
                                                                     8,956,056
                                                                 -------------
Beverages: 1.72%                      
     8,500          Anheuser-Busch Cos., Inc.                          374,000
    40,800          Coca-Cola Co.                                    1,933,920
    18,100          Pepsico, Inc.                                      810,156
                                                                 -------------
                                                                     3,118,076
                                                                 -------------
Biotechnology: 0.79%                  
    18,300    @     Amgen, Inc.                                      1,214,754
     3,300    @     Human Genome Sciences, Inc.                        218,955
                                                                 -------------
                                                                     1,433,709
                                                                 -------------
Chemicals: 1.63%                      
     6,500          Air Products & Chemicals, Inc.                     304,005
    16,400          Dow Chemical Co.                                   587,284
    12,200          Du Pont (E.I.) de Nemours & Co.                    566,080
    10,500          PPG Industries, Inc.                               583,800
     9,800          Praxair, Inc.                                      492,842
    12,900          Rohm & Haas Co.                                    428,280
                                                                 -------------
                                                                     2,962,291
                                                                 -------------
Commercial Services: 0.37%            
    35,400    @     Cendant Corp.                                      678,972
                                                                 -------------
                                                                       678,972
                                                                 -------------
Computers: 5.30%                      
    35,700          Compaq Computer Corp.                              570,843
    39,800    @     Dell Computer Corp.                                969,528
     7,000          Electronic Data Systems Corp.                      428,750
    36,700    @     EMC Corp.-Mass.                                  1,159,720
    26,600          Hewlett-Packard Co.                                779,912
    31,200          International Business Machines Corp.            3,488,160
       900    @     Lexmark Intl., Inc.                                 55,791
    13,100    @     NCR Corp.                                          614,259
     4,400    @     Quantum Corp.                                       52,756
    18,700    @     Seagate Technology                                   1,496
    63,300    @     Sun Microsystems, Inc.                           1,042,551
     6,800    @     Veritas Software Corp.                             450,500
                                                                 -------------
                                                                     9,614,266
                                                                 -------------
Cosmetics/Personal Care: 1.87%        
     4,700          Colgate-Palmolive Co.                              266,208
     6,500          Estee Lauder Cos., Inc.                            263,900
    21,900          Gillette Co.                                       633,567
    12,000          Kimberly-Clark Corp.                               725,400
    23,400          Procter & Gamble Co.                             1,503,216
                                                                 -------------
                                                                     3,392,291
                                                                 -------------
Distribution/Wholesale: 0.12%         
     5,000          Grainger (W.W.), Inc.                              220,950
                                                                 -------------
                                                                       220,950
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
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 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Diversified Financial Services: 7.87% 
     2,200          AG Edwards, Inc.                             $      93,544
    19,900          American Express Co.                               838,188
     4,400    @     AmeriCredit Corp.                                  229,680
       800          The Bear Stearns Cos., Inc.                         43,480
    14,700          Capital One Financial Corp.                        957,117
    12,100          CIT Group, Inc.                                    480,370
    94,600          Citigroup, Inc.                                  4,848,250
     8,100          Countrywide Credit Industries, Inc.                313,713
    20,100          Fannie Mae                                       1,657,044
     1,100          Franklin Resources, Inc.                            48,950
    15,000          Freddie Mac                                        993,000
     6,300          Goldman Sachs Group, Inc.                          599,130
    10,900          Household Intl., Inc.                              715,694
       400          Legg Mason, Inc.                                    18,300
     9,200          MBNA Corp.                                         331,752
     3,800          Merrill Lynch & Co.                                246,886
    12,000          Morgan Stanley ean Witter & Co.                    780,120
    13,600          Providian Financial Corp.                          771,936
     9,200          Stilwell Financial, Inc.                           302,128
                                                                 -------------
                                                                    14,269,282
                                                                 -------------
Electric: 3.05%                       
     1,200    @     AES Corp.                                           54,480
     5,800          Ameren Corp.                                       258,680
       600          American Electric Power                             30,120
     7,800          Cinergy Corp.                                      275,730
     8,000          CMS Energy Corp.                                   237,360
     5,000          Consolidated Edison, Inc.                          195,750
     1,100          Dominion Resources, Inc.                            72,930
     8,400          DTE Energy Co.                                     375,648
    13,800          Edison Intl.                                       149,454
    19,400          Entergy Corp.                                      838,080
     5,200          FPL Group, Inc.                                    302,900
     6,100          GPU, Inc.                                          204,655
     8,500          NiSource, Inc.                                     266,050
    19,000          PG&E Corp.                                         216,600
     4,600          Pinnacle West Capital Corp.                        229,770
     2,000          Potomac Electric Power                              44,320
    13,200          Progress Energy, Inc.                              561,660
     3,500          Reliant Energy, Inc.                               161,280
    11,200          TXU Corp.                                          552,608
     6,400          Wisconsin Energy Corp.                             149,120
    11,400          XCEL Energy, Inc.                                  345,420
                                                                 -------------
                                                                     5,522,615
                                                                 -------------
  Electrical Components & Equipment: 0.33%
     8,900          Emerson Electric Co.                               602,619
                                                                 -------------
                                                                       602,619
                                                                 -------------
Electronics: 0.49%                    
     6,900    @     Agilent Technologies, Inc.                         231,426
     4,600          Applied Biosystems Group -- Applera Corp.          141,496
     4,500          Johnson Controls, Inc.                             316,800
     4,200          Parker Hannifin Corp.                              202,902
                                                                 -------------
                                                                       892,624
                                                                 -------------
Environmental Control: 0.18%          
    11,700          Waste Management, Inc.                             327,366
                                                                 -------------
                                                                       327,366
                                                                 -------------
Food: 1.93%                           
     2,600          Campbell Soup Co.                                   76,804
     8,600          General Mills, Inc.                                364,296
    10,700          Heinz Co.                                          463,417
       800          Hershey Foods Corp.                                 48,512
    10,200          Kellogg Co.                                        272,544
    21,600    @     Kroger Co.                                         538,704
     5,300          Quaker Oats Co.                                    508,058
    13,800    @     Safeway, Inc.                                      698,970
     9,500   @@     Unilever NV ADR                                    528,105
                                                                 -------------
                                                                     3,499,410
                                                                 -------------
Forest Products & Paper: 0.33%        
     5,400          Georgia-Pacific Group                              191,430
     4,100          International Paper Co.                            156,825
     2,200          Temple-Inland, Inc.                                116,842
     2,300          Weyerhaeuser Co.                                   131,583
                                                                 -------------
                                                                       596,680
                                                                 -------------
Hand/Machine Tools: 0.09%             
     4,200          Black & Decker Corp.                               166,530
                                                                 -------------
                                                                       166,530
                                                                 -------------
Healthcare-Products: 2.72%            
     4,600          Bard, Inc.                                         259,670
    11,000          Baxter Intl., Inc.                                 543,180
    12,500          Becton Dickinson & Co.                             429,125
     9,100    @     Boston Scientific Corp.                            157,612
     9,000    @     Guidant Corp.                                      337,950
    23,700          Johnson & Johnson                                2,297,715
    14,100          Medtronic, Inc.                                    606,018
     5,000    @     St. Jude Medical, Inc.                             307,600
                                                                 -------------
                                                                     4,938,870
                                                                 -------------
Healthcare-Services: 0.68%            
     6,300    @     Aetna, Inc.                                        147,105
     9,200          HCA -- The Healthcare Co.                          371,128
    15,800    @     Tenet Healthcare Corp.                             718,742
                                                                 -------------
                                                                     1,236,975
                                                                 -------------
Insurance: 4.25%                      
     2,700          Aflac, Inc.                                         87,561
    21,900          Allstate Corp.                                     985,938
     7,200          AMBAC Financial Group, Inc.                        403,560
    16,300          American General Corp.                             737,249
    33,600          American Intl. Group                             2,721,600
     6,700          Cigna Corp.                                        632,949
     4,500          Hartford Financial Services                        304,650
     6,100          Lincoln National Corp.                             300,364
     3,800          Marsh & McLennan Cos.                              398,620
     7,900          MBIA, Inc.                                         416,725
     2,200          Metlife, Inc.                                       70,070
     1,600          Protective Life Corp.                               52,688
     5,200          St Paul Cos.                                       263,120
     6,700          Torchmark Corp.                                    254,064
     2,400          UNUMProvident Corp.                                 77,784
                                                                 -------------
                                                                     7,706,942
                                                                 -------------
Internet: 0.59%                       
    31,100          Charles Schwab Corp.                               584,680
    16,200    @     E*trade Group, Inc.                                121,500
       800    @     eBay, Inc.                                          48,416
     2,200    @     IndyMac Bancorp, Inc.                               51,150
       300    @     Openwave Systems, Inc.                              11,499
       500    @     Symantec Corp.                                      35,320
    18,300    @     TD Waterhouse Group, Inc.                          217,221
                                                                 -------------
                                                                     1,069,786
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Research                                                                        
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Index Fund                                                                      

PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued) 
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Leisure Time: 0.17%                   
     6,400          Harley-Davidson, Inc.                        $     300,608
                                                                 -------------
                                                                       300,608
                                                                 -------------
Lodging: 0.64%                        
       400    @     Harrah's Entertainment, Inc.                        14,628
    20,200          Hilton Hotels Corp.                                250,278
    10,000          Marriott Intl., Inc.                               473,600
    11,100          Starwood Hotels & Resorts Worldwide, Inc.          419,913
                                                                 -------------
                                                                     1,158,419
                                                                 -------------
Machinery-Construction & Mining: 0.02%
       700          Caterpillar, Inc.                                   37,912
                                                                 -------------
                                                                        37,912
                                                                 -------------
Machinery-Diversified: 0.39%          
     4,100          Dover Corp.                                        173,799
     6,700          Ingersoll-Rand Co.                                 330,645
     4,300          Rockwell Intl. Corp.                               202,100
                                                                 -------------
                                                                       706,544
                                                                 -------------
Media: 4.89%                          
     3,300    @     Adelphia Communications                            126,324
    75,200    @     AOL Time Warner, Inc.                            3,927,696
    16,500    @     AT&T -- Liberty Media Corp.                        278,025
     1,800    @     Charter Communications, Inc.                        40,248
     3,100    @     Clear Channel Communications                       189,007
     8,400    @     Comcast Corp.                                      344,064
     4,400    @     Fox Entertainment Group, Inc.                      114,840
    10,500          Gannett Co., Inc.                                  695,940
    11,900    @     Gemstar-TV Guide Intl., Inc.                       432,803
     1,300          Knight Ridder, Inc.                                 71,422
     4,300          New York Times Co.                                 180,987
       800          Tribune Co.                                         34,344
    33,100    @     Viacom, Inc.                                     1,907,884
    16,600          Walt Disney Co.                                    524,892
                                                                 -------------
                                                                     8,868,476
                                                                 -------------
Mining: 0.59%                         
    24,800          Alcoa, Inc.                                      1,070,120
                                                                 -------------
                                                                     1,070,120
                                                                 -------------
Miscellaneous Manufacturing: 6.90%    
     4,000          Cooper Industries, Inc.                            152,120
     5,500          Danaher Corp.                                      346,390
    12,100          Eastman Kodak Co.                                  572,693
     3,700          Eaton Corp.                                        289,340
   158,700          General Electric Co.                             7,776,300
    17,700          Honeywell Intl., Inc.                              856,680
     2,100          Illinois Tool Works                                143,766
     6,100          ITT Industries, Inc.                               284,626
    36,300   @@     Tyco Intl. Ltd.                                  2,085,435
                                                                 -------------
                                                                    12,507,350
                                                                 -------------
Office/Business Equipment: 0.02%      
     4,200          Xerox Corp.                                         41,622
                                                                 -------------
                                                                        41,622
                                                                 -------------
Oil & Gas: 7.36%                      
     1,100          Amerada Hess Corp.                                  94,204
     8,100          Anadarko Petroleum Corp.                           507,141
     1,700          Apache Corp.                                       101,235
    12,800          Baker Hughes, Inc.                                 504,320
    12,800          Chevron Corp.                                    1,229,440
       400          Conoco, Inc. Class A                                12,368
     8,900          Conoco, Inc. Class B                               277,680
     6,100    @     Cooper Cameron Corp.                               422,608
     2,300          Devon Energy Corp.                                 133,883
     2,100          Diamond Offshore Drilling                           83,181
     1,700          Ensco Intl., Inc.                                   54,757
    63,300          Exxon Mobil Corp.                                5,617,875
    10,300    @     Global Marine, Inc.                                264,195
       400          Halliburton Co.                                     18,696
     6,500    @     Rowan Cos., Inc.                                   194,545
    37,800   @@     Royal Dutch Petroleum Co. ADR                    2,305,044
     1,600          Schlumberger Ltd.                                  100,848
    19,800          Texaco, Inc.                                     1,413,720
       300          Transocean Sedco Forex, Inc.                        16,035
                                                                 -------------
                                                                    13,351,775
                                                                 -------------
Packaging & Containers: 0.08%         
     9,600    @     Smurfit-Stone Container Corp.                      143,712
                                                                 -------------
                                                                       143,712
                                                                 -------------
Pharmaceuticals: 8.77%                
    18,200          Abbott Laboratories                                946,036
     7,000    @     Alza Corp.                                         330,050
    22,500          American Home Products Corp.                     1,424,250
    26,100          Bristol-Myers Squibb Co.                         1,415,664
    15,800          Eli Lilly & Co.                                  1,338,260
     5,000    @     Forest Laboratories, Inc.                          370,300
     1,000    @     Medimmune, Inc.                                     39,870
    39,400          Merck & Co., Inc.                                2,875,806
     1,600          Omnicare, Inc.                                      33,536
   108,100          Pfizer, Inc.                                     4,636,409
    26,100          Pharmacia Corp.                                  1,267,416
    29,200          Schering-Plough Corp.                            1,224,940
                                                                 -------------
                                                                    15,902,537
                                                                 -------------
Pipelines: 0.65%                      
     6,900          Dynegy, Inc.                                       340,170
     6,300          El Paso Corp.                                      383,670
     8,600          Enron Corp.                                        455,026
       200          Williams Cos., Inc.                                  7,880
                                                                 -------------
                                                                     1,186,746
                                                                 -------------
Retail: 6.23%                         
     4,600    @     Abercrombie & Fitch Co.                            189,658
     2,600    @     Best Buy Co., Inc.                                 138,190
     7,400    @     Costco Wholesale Corp.                             287,934
     4,300          CVS Corp.                                          236,070
    13,600    @     Federated Department Stores                        609,280
     8,800          The Gap, Inc.                                      272,800
    43,200          Home Depot, Inc.                                 2,129,328
     4,200    @     Kohls Corp.                                        258,510
     8,300          Limited, Inc.                                      135,290
     4,800          Lowe's Cos.                                        333,744
    13,100          May Department Stores Co.                          428,370
    28,300          McDonald's Corp.                                   856,924
    22,200          Target Corp.                                       839,160
       200          Tiffany & Co.                                        6,916
    18,500          TJX Cos., Inc.                                     619,010
     9,600          Walgreen Co.                                       385,824
    68,900          Wal-Mart Stores, Inc.                            3,565,575
                                                                 -------------
                                                                    11,292,583
                                                                 -------------
Savings & Loans: 0.74%                
     5,400          Charter One Financial, Inc.                        163,350
     3,000          Dime Bancorp, Inc.                                 105,900
     4,200          Golden State Bancorp, Inc.                         122,598
     3,700          Greenpoint Financial Corp.                         140,563
    22,650          Washington Mutual, Inc.                            806,793
                                                                 -------------
                                                                     1,339,204
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Research                                                                        
Enhanced                                                                        
Index Fund                                                                      

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Semiconductors: 3.87%                 
    10,200    @     Altera Corp.                                 $     244,800
     3,700    @     Analog Devices, Inc.                               164,835
    15,400    @     Applied Materials, Inc.                            768,922
     3,500    @     Broadcom Corp.                                     116,410
     2,000    @     Cypress Semiconductor Corp.                         42,300
   112,200          Intel Corp.                                      3,030,522
     4,300    @     Lattice Semiconductor Corp.                         93,568
     8,800          Linear Technology Corp.                            422,400
     6,300    @     LSI Logic Corp.                                    115,353
     6,500    @     Maxim Integrated Products                          331,630
     9,300    @     Micron Technology, Inc.                            348,750
     1,200    @     PMC -- Sierra, Inc.                                 37,560
    27,100          Texas Instruments, Inc.                            924,652
     9,100    @     Xilinx, Inc.                                       375,375
                                                                 -------------
                                                                     7,017,077
                                                                 -------------
Software: 5.15%                       
     4,500          Adobe Systems, Inc.                                178,965
       400          Autodesk, Inc.                                      12,212
    12,200          Automatic Data Processing                          655,628
       500    @     BEA Systems, Inc.                                   17,940
       900    @     BMC Software, Inc.                                  21,510
     7,000    @     Citrix Systems, Inc.                               167,300
     4,600          Computer ssociates Intl., Inc.                     130,456
     3,300    @     Intuit, Inc.                                       105,798
    87,300    @     Microsoft Corp.                                  6,039,414
    93,100    @     Oracle Corp.                                     1,424,430
     9,900    @     Parametric Technology Corp.                        117,810
     1,900    @     Peoplesoft, Inc.                                    76,665
     4,200    @     Peregrine Systems, Inc.                            116,298
     6,200    @     Siebel Systems, Inc.                               281,232
                                                                   -----------
                                                                     9,345,658
                                                                   -----------
Telecommunications: 9.29%             
     2,200          Alltel Corp.                                       127,578
    45,900          AT&T Corp.                                         971,703
     7,175    @     Avaya, Inc.                                        116,235
    22,500          BellSouth Corp.                                    927,675
     3,600    @     Broadwing, Inc.                                     88,884
     4,100    @     Cabletron Systems                                   79,581
     5,200    @     Ciena Corp.                                        281,580
   127,300    @     Cisco Systems, Inc.                              2,451,798
    15,600          Corning, Inc.                                      295,152
    24,500  @,@@    Global Crossing Ltd.                               311,150
    20,300    @     JDS Uniphase Corp.                                 339,213
     1,600    @     Juniper Networks, Inc.                              68,048
     9,600    @     Level 3 Communications, Inc.                       107,520
    51,800          Lucent Technologies, Inc.                          408,184
    39,900          Motorola, Inc.                                     586,530
    19,500    @     Nextel Communications, Inc.                        310,440
    47,500   @@     Nortel Networks Corp.                              633,175
    13,400    @     Qualcomm, Inc.                                     813,916
    35,900          Qwest Communications Intl.                       1,318,966
    50,300          SBC Communications, Inc.                         2,165,415
    29,200    @     Sprint Corp. (PCS Group)                           642,400
     9,200    @     Tellabs, Inc.                                      312,892
    48,500          Verizon Communications, Inc.                     2,660,225
    45,900    @     WorldCom, Inc.                                     818,856
                                                                 -------------
                                                                    16,837,116
                                                                 -------------
Tobacco: 1.58%                        
    55,700          Philip Morris Cos., Inc.                         2,863,537
                                                                 -------------
                                                                     2,863,537
                                                                 -------------
Toys/Games/Hobbies: 0.26%             
     8,300          Hasbro, Inc.                                       124,500
    18,900          Mattel, Inc.                                       336,420
                                                                 -------------
                                                                       460,920
                                                                 -------------
Transportation: 0.52%                 
    17,000          Burlington Northern Santa Fe Corp.                 528,190
     3,200          C.H. Robinson Worldwide, Inc.                       95,520
     2,700    @     FedEx Corp.                                        108,000
     2,800          Norfolk Southern Corp.                              62,076
     2,400          Union Pacific Corp.                                138,000
                                                                 -------------
                                                                       931,786
                                                                 -------------
Trucking & Leasing: 0.01%             
       500          Gatx Corp.                                          20,140
                                                                 -------------
                                                                        20,140
                                                                 -------------
                    Total Common Stock (Cost $190,126,539)         182,189,329
                                                                 -------------
Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 0.11%                                                   
U.S. Government Obligations: 0.11%    
$  190,000           U.S. Treasury Note, 5.875%, due 11/30/01     $     192,051 
                                                                 -------------
                    Total Short-Term Investments (Cost $190,912)       192,051
                                                                 -------------
Total Investments in Securities       
                      (Cost $190,317,451)*             100.57%   $ 182,381,380
                     Other Assets and Liabilities-Net    -0.57%      (1,026,830)
                                                       ------    -------------
                    Net Assets                         100.00%   $ 181,354,550
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
ADR  American Depository Receipt                                                
*    Cost for federal income tax purposes is $193,117,302. Net unrealized       
depreciation consists of:                                             

                    Gross Unrealized Appreciation                $  14,995,112
                     Gross Unrealized Depreciation                  (25,731,034)
                                                                 -------------
                     Net Unrealized Depreciation                  $ (10,735,922)
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Growth                                                                          
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 99.59%                                                            
Apparel: 3.03%                        
   170,100    @     Coach, Inc.                                  $   5,962,005
    77,500    @     Columbia Sportswear Co.                          5,432,750
   106,600    @     Jones Apparel Group, Inc.                        4,711,720
                                                                 -------------
                                                                    16,106,475
                                                                 -------------
Banks: 1.60%                          
    78,900          Bank of New York Co., Inc.                       4,308,729
    91,600          Mellon Financial Corp.                           4,197,112
                                                                 -------------
                                                                     8,505,841
                                                                 -------------
Biotechnology: 6.41%                  
    74,200    @     Enzon, Inc.                                      5,194,000
   113,500    @     Human Genome Sciences, Inc.                      7,530,725
    70,700    @     IDEC Pharmaceuticals Corp.                       4,355,120
    93,000    @     Invitrogen Corp.                                 6,659,730
   186,500    @     Millennium Pharmaceuticals                       7,118,705
    51,300    @     Myriad Genetics, Inc.                            3,183,165
                                                                 -------------
                                                                    34,041,445
                                                                 -------------
Commercial Services: 1.75%            
   320,700    @     Cendant Corp.                                    6,151,026
    61,500    @     Concord EFS, Inc.                                3,118,050
                                                                 -------------
                                                                     9,269,076
                                                                 -------------
Computers: 7.39%                      
   199,000    @     Brocade Communications System                    7,761,000
   192,800    @     Electronics for Imaging, Inc.                    4,629,128
    82,000          International Business Machines Corp.            9,167,600
   142,100    @     McData Corp.                                     4,376,680
    90,000    @     Sungard Data Systems, Inc.                       5,353,200
   119,900    @     Veritas Software Corp.                           7,943,375
                                                                 -------------
                                                                    39,230,983
                                                                 -------------
 Diversified Finanancial Services: 1.05%
   291,600    @     Instinet Group, Inc.                             5,560,812
                                                                 -------------
                                                                     5,560,812
                                                                 -------------
  Electrical Components & Equipment: 1.24%
   199,900    @     Capstone Turbine Corp.                           6,570,713
                                                                 -------------
                                                                     6,570,713
                                                                 -------------
Electronics: 1.57%                    
   178,300    @     FEI Co.                                          6,311,820
    60,200    @     Varian, Inc.                                     2,043,790
                                                                 -------------
                                                                     8,355,610
                                                                 -------------
Food: 1.07%                           
    99,200    @     Whole Foods Market, Inc.                         5,681,184
                                                                 -------------
                                                                     5,681,184
                                                                 -------------
Healthcare-Products: 6.58%            
   355,400    @     Boston Scientific Corp.                          6,155,528
   199,300    @     Cytyc Corp.                                      4,344,740
    94,600  @,@@    ESC Medical Systems Ltd.                         2,577,850
   161,200    @     Henry Schein, Inc.                               6,085,300
   126,100    @     Minimed, Inc.                                    5,897,697
    80,500    @     Resmed, Inc.                                     4,395,300
    75,600    @     Varian Medical Systems, Inc.                     5,481,000
                                                                 -------------
                                                                    34,937,415
                                                                 -------------
Healthcare-Services: 2.91%            
    40,500    @     Laboratory Corp. of America Holdings             5,680,530
    45,800    @     Quest Diagnostics, Inc.                          5,661,338
   105,500    @     Rightchoice Managed Care, Inc.                   4,114,500
                                                                 -------------
                                                                    15,456,368
                                                                 -------------
Internet: 2.80%                       
   138,300    @     eBay, Inc.                                       8,369,916
   111,500    @     TMP Worldwide, Inc.                              6,497,105
                                                                 -------------
                                                                    14,867,021
                                                                 -------------
Machinery-Diversified: 2.20%          
   120,000    @     Brooks Automation, Inc.                          5,905,200
   167,600    @     Global Power Equipment Group, Inc.               5,782,200
                                                                 -------------
                                                                    11,687,400
                                                                 -------------
Oil & Gas: 9.59%                      
   236,300          Baker Hughes, Inc.                               9,310,220
   221,500    @     National-Oilwell, Inc.                           7,641,750
   311,900    @     Pride Intl., Inc.                                8,305,897
   134,000    @     Spinnaker Exploration Co.                        5,451,120
   141,100          Transocean Sedco Forex, Inc.                     7,541,795
   161,000    @     Veritas DGC, Inc.                                5,636,610
   125,900    @     Weatherford Intl., Inc.                          7,096,983
                                                                 -------------
                                                                    50,984,375
                                                                 -------------
Pharmaceuticals: 3.84%                
   221,300    @     Celgene Corp.                                    6,278,281
    42,300    @     CV Therapeutics, Inc.                            1,989,369
   124,500    @     Gilead Sciences, Inc.                            6,442,875
   113,800    @     Imclone Systems, Inc.                            5,650,170
                                                                 -------------
                                                                    20,360,695
                                                                 -------------
Pipelines: 1.87%                      
   178,500    @     Aquila, Inc.                                     5,301,450
   117,800          Williams Cos., Inc.                              4,641,320
                                                                 -------------
                                                                     9,942,770
                                                                 -------------
Retail: 8.24%                         
   222,600    @     Abercrombie & Fitch Co.                          9,177,798
   274,250    @     American Eagle Outfitters                       10,078,688
   153,800    @     AnnTaylor Stores Corp.                           5,247,656
   291,000          The Gap, Inc.                                    9,021,000
   102,600          Lowe's Co.                                       7,133,778
    90,800          Tiffany & Co.                                    3,139,864
                                                                 -------------
                                                                    43,798,784
                                                                 -------------
Savings & Loans: 3.20%                
   401,700          Charter One Financial, Inc.                     12,151,425
   135,450          Washington Mutual, Inc.                          4,824,729
                                                                 -------------
                                                                    16,976,154
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Growth                                                                          
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Semiconductors: 13.19%                
    88,700    @     International Rectifier Corp.                $   5,327,322
   275,900    @     Intersil Corp.                                   8,991,581
   334,500    @     Lam Research Corp.                               9,238,890
   194,400    @     LTX Corp.                                        4,716,144
   108,000    @     Maxim Integrated Products                        5,510,160
   166,800    @     Microsemi Corp.                                  9,591,000
   104,900    @     Novellus Systems, Inc.                           5,024,710
    99,600    @     Nvidia Corp.                                     8,526,756
    74,200    @     PMC -- Sierra, Inc.                              2,322,460
   147,900    @     Rudolph Technologies, Inc.                       6,516,474
   180,400    @     Simplex Solutions, Inc.                          4,293,520
                                                                 -------------
                                                                    70,059,017
                                                                 -------------
Software: 8.75%                       
   131,400    @     BEA Systems, Inc.                                4,714,632
   162,800    @     HNC Software                                     4,569,796
   212,600    @     Manugistics Group, Inc.                          7,634,466
   109,300    @     Mercury Interactive Corp.                        6,474,932
    39,900    @     Microsoft Corp.                                  2,760,282
   338,100    @     Peregrine Systems, Inc.                          9,361,989
   192,600    @     Serena Software, Inc.                            5,038,416
   131,200    @     Siebel Systems, Inc.                             5,951,232
                                                                 -------------
                                                                    46,505,745
                                                                 -------------
Telecommunications: 11.31%            
   194,400    @     Advanced Fibre Communications, Inc.              3,600,288
   203,800    @     Ciena Corp.                                     11,035,770
   114,200    @     Digital Lightwave, Inc.                          5,319,436
    97,200    @     Echostar Communications Corp.                    2,973,348
   190,200    @     Emulex Corp.                                     6,598,038
   158,900    @     Finisar Corp.                                    2,391,445
   132,700    @     JDS Uniphase Corp.                               2,217,417
   163,700    @     RF Micro Devices, Inc.                           4,269,296
   113,600          Scientific-Atlanta, Inc.                         5,965,136
   219,000    @     Sonus Networks, Inc.                             5,641,440
   193,800    @     Tellium, Inc.                                    5,131,824
   210,800    @     UTStarcom, Inc.                                  4,960,124
                                                                 -------------
                                                                    60,103,562
                                                                 -------------
                    Total Common Stock (Cost $522,060,045)         529,001,445
                                                                 -------------
Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 2.52%                                                   
Repurchase Agreement: 2.52%           
$13,374,000          State Street Bank & Trust Repurchase Agreement,            
     4.000%, due 06/01/01 (Collateralized by
      $13,490,000 U.S. Treasury Notes, 5.875%,
                      Due 11/30/01, Market Value $13,641,763)    $  13,374,000
                                                                 -------------
Total Short-Term Investments          
                      (Cost $13,374,000)                            13,374,000
                                                                 -------------
Total Investments in Securities       
                      (Cost $535,434,045)*             102.11%   $ 542,375,445
                     Other Assets and Liabilities-Net    -2.11%     (11,191,128)
                                                       ------    -------------
                    Net Assets                         100.00%   $ 531,184,317
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $545,722,196. Net unrealized       
appreciation consists of:                                             

                    Gross Unrealized Appreciation                $  19,316,323
                     Gross Unrealized Depreciation                  (22,663,074)
                                                                 -------------
                     Net Unrealized Appreciation                  $  (3,346,751)
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
LargeCap                                                                        
Growth                                                                          
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 94.79%                                                            
Aerospace/Defense: 2.08%              
   170,900          Boeing Co.                                   $  10,747,901
                                                                 -------------
                                                                    10,747,901
                                                                 -------------
Banks: 1.36%                          
   128,800    @     Bank of New York, Inc.                           7,033,768
                                                                 -------------
                                                                     7,033,768
                                                                 -------------
Biotechnology: 5.66%                  
   314,300    @     Chiron Corp.                                    16,208,451
   196,000    @     Human Genome Sciences, Inc.                     13,004,600
                                                                 -------------
                                                                    29,213,051
                                                                 -------------
Commercial Services: 1.33%            
   199,100          McKesson HBOC, Inc.                              6,882,887
                                                                 -------------
                                                                     6,882,887
                                                                 -------------
Computers: 13.14%                     
   335,100    @     Brocade Communications System                   13,068,900
   238,900    @     Dell Computer Corp.                              5,819,604
   388,900    @     EMC Corp.-Mass.                                 12,289,240
   183,100          International Business Machines Corp.           20,470,580
   243,900    @     Veritas Software Corp.                          16,158,375
                                                                 -------------
                                                                    67,806,699
                                                                 -------------
Diversified Financial Services: 5.06% 
   132,200          Goldman Sachs Group, Inc.                       12,572,220
   282,400    @     Instinet Group, Inc.                             5,385,368
   125,400          Morgan Stanley Dean Witter & Co.                 8,152,254
                                                                 -------------
                                                                    26,109,842
                                                                 -------------
Electronics: 1.92%                    
   392,800  @,@@    Flextronics Intl. Ltd.                           9,906,416
                                                                 -------------
                                                                     9,906,416
                                                                 -------------
Enterprise Software: 1.60%            
   230,400    @     BEA Systems, Inc.                                8,266,752
                                                                 -------------
                                                                     8,266,752
                                                                 -------------
Forest Products & Paper: 1.50%        
   135,200          Weyerhaeuser Co.                                 7,734,792
                                                                 -------------
                                                                     7,734,792
                                                                 -------------
Internet: 3.11%                       
   265,200    @     eBay, Inc.                                      16,049,904
                                                                 -------------
                                                                    16,049,904
                                                                 -------------
Lodging: 1.03%                        
   112,700          Marriott Intl., Inc.                             5,337,472
                                                                 -------------
                                                                     5,337,472
                                                                 -------------
Machinery-Construction & Mining: 2.07%
   197,100          Caterpillar, Inc.                               10,674,936
                                                                 -------------
                                                                    10,674,936
                                                                 -------------
Media: 6.16%                          
   210,400    @     AOL Time Warner, Inc.                           10,989,192
   379,500    @     USA Networks, Inc.                               9,813,870
   346,800          Walt Disney Co.                                 10,965,816
                                                                 -------------
                                                                    31,768,878
                                                                 -------------
Medical: 1.91%                        
   199,600          Baxter Intl., Inc.                               9,856,248
                                                                 -------------
                                                                     9,856,248
                                                                 -------------
Miscellaneous Manufacturing: 4.96%    
   312,000          General Electric Co.                            15,288,000
   179,700   @@     Tyco Intl. Ltd.                                 10,323,765
                                                                 -------------
                                                                    25,611,765
                                                                 -------------
Oil & Gas: 6.27%                      
   307,500          Baker Hughes, Inc.                              12,115,500
    76,000          Texaco, Inc.                                     5,426,400
   276,800          Transocean Sedco Forex, Inc.                    14,794,960
                                                                 -------------
                                                                    32,336,860
                                                                 -------------
Pipelines: 2.34%                      
   306,800          Williams Cos., Inc.                             12,087,920
                                                                 -------------
                                                                    12,087,920
                                                                 -------------
Retail: 6.37%                         
   575,500          The Gap, Inc.                                   17,840,500
   305,300          Home Depot, Inc.                                15,048,237
                                                                 -------------
                                                                    32,888,737
                                                                 -------------
Semiconductors: 8.08%                 
   194,400    @     Analog Devices, Inc.                             8,660,520
   242,500    @     Applied Materials, Inc.                         12,108,025
   127,400    @     Lam Research Corp.                               3,518,788
   186,800    @     Novellus Systems, Inc.                           8,947,720
   238,400   @@     STMicroelectronics NV ADR                        8,475,120
                                                                 -------------
                                                                    41,710,173
                                                                 -------------
Software: 7.53%                       
   359,300    @     Microsoft Corp.                                 24,856,374
   451,800    @     Oracle Corp.                                     6,912,540
   156,000    @     Siebel Systems, Inc.                             7,076,160
                                                                 -------------
                                                                    38,845,074
                                                                 -------------
Telecommunications: 11.31%            
   612,250          AT+T Corp.                                      10,316,413
   327,100    @     CIENA Corp.                                     17,712,465
   264,800    @     Cisco Systems, Inc.                              5,100,048
   222,400    @     Qualcomm, Inc.                                  13,508,576
   176,900          Scientific-Atlanta, Inc.                         9,289,019
   385,600   @@     Telefonaktiebolaget LM Ericsson ADR              2,467,840
                                                                 -------------
                                                                    58,394,361
                                                                 -------------
                    Total Common Stock (Cost $505,875,103)         489,264,436
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 1.70%                                                   
Repurchase Agreement: 1.70%                     
$ 8,757,000     State Street Bank Repurchase Agreement 4.000%,                  
due 06/01/01, (Collateralized by $6,720,000 
U.S. Treasury Bonds, 8.875%, Due 08/15/17,  
                 Market Value $8,937,338)                        $   8,757,000
                                                                 -------------
               Total Short-Term Investments (Cost $8,757,000)        8,757,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $514,632,103)*                   96.49%   $ 498,021,436
               Other Assets and Liabilities-Net          3.51%      18,129,428
                                                       ------    -------------
               Net Assets                              100.00%   $ 516,150,864
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
ADR  American Depository Receipt                                                
*    Cost for federal income tax purposes is $521,133,848. Net unrealized       
depreciation consists of:                                             

               Gross Unrealized Appreciation                     $   8,243,767
                Gross Unrealized Depreciation                       (31,356,179)
                                                                 -------------
                Net Unrealized Depreciation                       $ (23,112,412)
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
MidCap                                                                          
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 97.93%                                                            
Banks: 4.90%                          
    12,900          City National Corp.                          $     549,927
    23,100          Commerce Bancorp, Inc.                           1,584,660
    48,200          First Tennessee National Corp.                   1,715,920
    19,500          North Fork Bancorporation                          556,530
    43,100          TCF Financial Corp.                              1,805,459
                                                                 -------------
                                                                     6,212,496
                                                                 -------------
Biotechnology: 6.89%                  
    23,600    @     Genzyme Corp.                                    2,523,784
    22,200    @     Human Genome Sciences, Inc.                      1,472,970
    22,200    @     IDEC Pharmaceuticals Corp.                       1,367,520
    27,500    @     Invitrogen Corp.                                 1,969,275
    36,600    @     Millennium Pharmaceuticals                       1,397,022
                                                                 -------------
                                                                     8,730,571
                                                                 -------------
Chemicals: 0.31%                      
     8,300          Air Products & Chemicals, Inc.                     388,191
                                                                 -------------
                                                                       388,191
                                                                 -------------
Commercial Services: 4.04%            
    61,400    @     Caremark Rx, Inc.                                  999,592
    80,300    @     Cendant Corp.                                    1,540,154
    41,100    @     Concord EFS, Inc.                                2,083,770
    17,500    @     Robert Half Intl., Inc.                            493,500
                                                                 -------------
                                                                     5,117,016
                                                                 -------------
Computers: 5.40%                      
    39,500    @     Brocade Communications System                    1,540,500
    29,100    @     Lexmark Intl., Inc.                              1,803,909
    62,500    @     McData Corp.                                     1,925,000
    26,500    @     Sungard Data Systems, Inc.                       1,576,220
                                                                 -------------
                                                                     6,845,629
                                                                 -------------
Diversified Financial Services: 1.90% 
    31,600          Heller Financial, Inc.                           1,087,040
    69,200    @     Instinet Group, Inc.                             1,319,644
                                                                 -------------
                                                                     2,406,684
                                                                 -------------
Electric: 3.05%                       
    26,600    @     Calpine Corp.                                    1,311,380
    20,900    @     NRG Energy, Inc.                                   612,997
    44,500    @     Orion Power Holdings, Inc.                       1,217,075
    20,900    @     Reliant Resources, Inc.                            718,960
                                                                 -------------
                                                                     3,860,412
                                                                 -------------
  Electrical Components & Equipment: 2.31%
    37,300    @     American Power Conversion                          605,752
    70,700    @     Capstone Turbine Corp.                           2,323,909
                                                                 -------------
                                                                     2,929,661
                                                                 -------------
Electronics: 0.45%                    
    19,500    @     Jabil Circuit, Inc.                                572,910
                                                                 -------------
                                                                       572,910
                                                                 -------------
Engineering & Construction: 1.82%     
    39,500          Fluor Corp.                                      2,303,640
                                                                 -------------
                                                                     2,303,640
                                                                 -------------
Forest Products & Paper: 0.96%        
    21,300          Weyerhaeuser Co.                                 1,218,573
                                                                 -------------
                                                                     1,218,573
                                                                 -------------
Healthcare--Products: 2.73%           
    31,400          Biomet, Inc.                                     1,402,638
    82,700    @     Boston Scientific Corp.                          1,432,364
    13,400    @     Minimed, Inc.                                      626,718
                                                                 -------------
                                                                     3,461,720
                                                                 -------------
Healthcare-Services: 1.07%            
     9,700    @     Laboratory Corp. of America Holdings             1,360,522
                                                                 -------------
                                                                     1,360,522
                                                                 -------------
Insurance: 3.46%                      
    25,550          AMBAC Financial Group, Inc.                      1,432,078
   128,600          Conseco, Inc.                                    2,240,212
     8,400          Radian Group, Inc.                                 713,160
                                                                 -------------
                                                                     4,385,450
                                                                 -------------
Internet: 1.36%                       
    29,500    @     TMP Worldwide, Inc.                              1,718,965
                                                                 -------------
                                                                     1,718,965
                                                                 -------------
Media: 3.06%                          
    74,100    @     Hispanic Broadcasting Corp.                      1,833,975
    37,400    @     Univision Communications, Inc.                   1,635,502
    13,000    @     Westwood One, Inc.                                 402,870
                                                                 -------------
                                                                     3,872,347
                                                                 -------------
Metal Fabricate/Hardware: 1.97%       
    42,400    @     The Shaw Group, Inc.                             2,492,272
                                                                 -------------
                                                                     2,492,272
                                                                 -------------
Office/Business Equipment: 0.55%      
    71,000          Xerox Corp.                                        703,610
                                                                 -------------
                                                                       703,610
                                                                 -------------
Oil & Gas: 10.14%                     
    15,200    @     Cooper Cameron Corp.                             1,053,056
    57,100          Diamond Offshore Drilling                        2,261,731
    42,500    @     Grant Prideco, Inc.                                957,100
    13,400    @     Lone Star Technologies                             598,310
    67,700    @     National--Oilwell, Inc.                          2,335,650
     8,600    @     Noble Drilling Corp.                               367,220
    24,800   @@     Santa Fe Intl. Corp.                               914,624
     7,200    @     Smith Intl., Inc.                                  559,440
    21,300          Tidewater, Inc.                                    999,183
    28,300    @     Varco Intl., Inc.                                  681,747
    37,600    @     Weatherford Intl., Inc.                          2,119,512
                                                                 -------------
                                                                    12,847,573
                                                                 -------------
Pharmaceuticals: 2.69%                
    25,600    @     Gilead Sciences, Inc.                            1,324,800
    27,437    @     King Pharmaceuticals, Inc.                       1,387,763
    17,300    @     Medimmune, Inc.                                    689,751
                                                                 -------------
                                                                     3,402,314
                                                                 -------------
Pipelines: 1.86%                      
    44,400    @     Aquila, Inc.                                     1,318,680
    21,000          Dynegy, Inc.                                     1,035,300
                                                                 -------------
                                                                     2,353,980
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
MidCap                                                                          
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
 ------                                                            -------------
Retail: 8.72%                         
    31,000    @     Abercrombie & Fitch Co.                      $   1,278,130
    51,100    @     American Eagle Outfitters                        1,877,925
    36,000    @     AnnTaylor Stores Corp.                           1,228,320
    33,000    @     Best Buy Co., Inc.                               1,753,950
    12,600    @     BJ's Wholesale Club, Inc.                          614,250
    51,300    @     Dollar Tree Stores, Inc.                         1,322,514
    21,600          Tiffany & Co.                                      746,928
    66,400          TJX Cos., Inc.                                   2,221,744
                                                                 -------------
                                                                    11,043,761
                                                                 -------------
Semiconductors: 12.89%                
    22,800    @     Analog Devices, Inc.                             1,015,740
    11,400    @     Broadcom Corp.                                     379,164
    55,800    @     Cirrus Logic, Inc.                               1,104,840
    63,800    @     Elantec Semiconductor, Inc.                      2,041,600
    16,100    @     International Rectifier Corp.                      966,966
    65,900    @     Intersil Corp.                                   2,147,681
    19,500    @     KLA-Tencor Corp.                                 1,006,590
    62,300    @     Lam Research Corp.                               1,720,726
    22,800    @     Nvidia Corp.                                     1,951,908
    25,000    @     PMC -- Sierra, Inc.                                782,500
    49,200    @     Teradyne, Inc.                                   1,960,620
    54,900    @     Transmeta Corp.                                    667,584
    14,300    @     Xilinx, Inc.                                       589,875
                                                                 -------------
                                                                    16,335,794
                                                                 -------------
Software: 4.63%                       
    41,400    @     Manugistics Group, Inc.                          1,486,674
    25,400    @     Mercury Interactive Corp.                        1,504,696
    22,900    @     Micromuse, Inc.                                    872,490
    72,100    @     Peregrine Systems, Inc.                          1,996,449
                                                                 -------------
                                                                     5,860,309
                                                                 -------------
Telecommunications: 10.18%            
    69,900    @     Echostar Communications Corp.                    2,138,241
    45,300    @     Emulex Corp.                                     1,571,457
    50,200    @     Finisar Corp.                                      755,510
    26,200    @     JDS Uniphase Corp.                                 437,802
    50,600    @     RF Micro Devices, Inc.                           1,319,648
    34,900          Scientific-Atlanta, Inc.                         1,832,599
    44,000    @     Sonus Networks, Inc.                             1,133,440
    63,900  @,@@    Tycom Ltd.                                       1,137,420
   109,600    @     Utstarcom, Inc.                                  2,578,888
                                                                 -------------
                                                                    12,905,005
                                                                 -------------
Transportation: 0.59%                 
    11,600          Expeditors Intl. of Washington, Inc.               746,924
                                                                 -------------
                                                                       746,924
                                                                 -------------
                    Total Common Stock (Cost $116,605,509)         124,076,329
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 0.78%                                                   
Repurchase Agreement: 0.78%                     
$   985,000     State Street Bank & Trust Repurchase Agreement,                 
4.000%, due 06/01/01, (Collateralized by    
$760,000 U.S. Treasury Bonds, 9.000%, Due   
                 11/15/18, Market Value $1,010,800)              $     985,000
                                                                 -------------
               Total Short-Term Investments (Cost $985,000)            985,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $117,590,509)*                   98.71%   $ 125,061,329
               Other Assets and Liabilities-Net          1.29%       1,629,973
                                                       ------    -------------
               Net Assets                              100.00%   $ 126,691,302
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $119,019,131. Net unrealized       
appreciation consists of:                                             

               Gross Unrealized Appreciation                     $   9,584,843
                Gross Unrealized Depreciation                        (3,542,645)
                                                                 -------------
               Net Unrealized Appreciation                       $   6,042,198
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
MidCap                                                                          
Growth                                                                          
Fund                                                                            

PORTFOLIO OF INVESTMENTS as of May 31, 2001 
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 97.47%                                                            
Banks: 4.30%                          
    70,500          Commerce Bancorp, Inc.                       $   4,836,300
   134,700          First Tennessee National Corp.                   4,795,320
   136,200          TCF Financial Corp.                              5,705,418
                                                                 -------------
                                                                    15,337,038
                                                                 -------------
Biotechnology: 5.74%                  
    66,500    @     Genzyme Corp. - General Division                 7,111,510
    54,600    @     Human Genome Sciences, Inc.                      3,622,710
    62,900    @     IDEC Pharmaceuticals Corp.                       3,874,640
    34,000    @     Invitrogen Corp.                                 2,434,740
    90,000    @     Millennium Pharmaceuticals                       3,435,300
                                                                 -------------
                                                                    20,478,900
                                                                 -------------
Commercial Services: 3.57%            
   171,400    @     Caremark Rx, Inc.                                2,790,392
   210,800    @     Cendant Corp.                                    4,043,144
   116,600    @     Concord EFS, Inc.                                5,911,620
                                                                 -------------
                                                                    12,745,156
                                                                 -------------
Computers: 5.38%                      
   110,300    @     Brocade Communications System                    4,301,700
    81,800    @     Lexmark Intl., Inc.                              5,070,782
   175,800    @     McData Corp.                                     5,414,640
    74,100    @     Sungard Data Systems, Inc.                       4,407,468
                                                                 -------------
                                                                    19,194,590
                                                                 -------------
Diversified Financial Services: 1.95% 
    95,100          Heller Financial, Inc.                           3,271,440
   193,200    @     Instinet Group, Inc.                             3,684,324
                                                                 -------------
                                                                     6,955,764
                                                                 -------------
Electric: 2.92%                       
    68,200    @     Calpine Corp.                                    3,362,260
    54,700    @     NRG Energy, Inc.                                 1,604,351
   125,500    @     Orion Power Holdings, Inc.                       3,432,425
    58,400    @     Reliant Resources, Inc.                          2,008,960
                                                                 -------------
                                                                    10,407,996
                                                                 -------------
  Electrical Components & Equipment: 1.95%
   211,900    @     Capstone Turbine Corp.                           6,965,153
                                                                 -------------
                                                                     6,965,153
                                                                 -------------
Electronics: 0.94%                    
   105,800    @     American Power Conversion Corp.                  1,718,192
    55,200    @     Jabil Circuit, Inc.                              1,621,776
                                                                 -------------
                                                                     3,339,968
                                                                 -------------
Engineering & Construction: 1.81%     
   110,400          Fluor Corp.                                      6,438,528
                                                                 -------------
                                                                     6,438,528
                                                                 -------------
Forest Products & Paper: 0.95%        
    59,300          Weyerhaeuser Co.                                 3,392,553
                                                                 -------------
                                                                     3,392,553
                                                                 -------------
Healthcare-Products: 1.92%            
   292,500    @     Boston Scientific Corp.                          5,066,100
    37,900    @     Minimed, Inc.                                    1,772,583
                                                                 -------------
                                                                     6,838,683
                                                                 -------------
Healthcare-Services: 1.08%            
    27,400    @     Laboratory Corp. of America Holdings             3,843,124
                                                                 -------------
                                                                     3,843,124
                                                                 -------------
Insurance: 2.41%                      
   359,900          Conseco, Inc.                                    6,269,458
    27,300          Radian Group, Inc.                               2,317,770
                                                                 -------------
                                                                     8,587,228
                                                                 -------------
Internet: 1.19%                       
    72,700    @     TMP Worldwide, Inc.                              4,236,229
                                                                 -------------
                                                                     4,236,229
                                                                 -------------
Media: 3.04%                          
   207,000    @     Hispanic Broadcasting Corp.                      5,123,250
   104,500    @     Univision Communications, Inc.                   4,569,785
    36,700    @     Westwood One, Inc.                               1,137,333
                                                                 -------------
                                                                    10,830,368
                                                                 -------------
Medical: 0.96%                        
    76,700    @     Biomet, Inc.                                     3,426,189
                                                                 -------------
                                                                     3,426,189
                                                                 -------------
Metal Fabricate/Hardware: 1.96%       
   119,100    @     The Shaw Group, Inc.                             7,000,698
                                                                 -------------
                                                                     7,000,698
                                                                 -------------
Office/Business Equipment: 0.55%      
   198,200          Xerox Corp.                                      1,964,162
                                                                 -------------
                                                                     1,964,162
                                                                 -------------
Oil & Gas: 9.88%                      
    42,500    @     Cooper Cameron Corp.                             2,944,400
   159,800          Diamond Offshore Drilling                        6,329,678
   118,900    @     Grant Prideco, Inc.                              2,677,628
   220,300    @     National-Oilwell, Inc.                           7,600,350
    69,400   @@     Santa Fe Intl. Corp.                             2,559,472
    35,200    @     Smith Intl., Inc.                                2,735,040
    59,600          Tidewater, Inc.                                  2,795,836
    79,400    @     Varco Intl., Inc.                                1,912,746
   100,500    @     Weatherford Intl., Inc.                          5,665,185
                                                                 -------------
                                                                    35,220,335
                                                                 -------------
Pharmaceuticals: 3.63%                
    71,500    @     Gilead Sciences, Inc.                            3,700,125
    78,000    @     King Pharmaceuticals, Inc.                       3,945,240
   132,500    @     Medimmune, Inc.                                  5,282,775
                                                                 -------------
                                                                    12,928,140
                                                                 -------------
Pipelines: 1.85%                      
   124,600    @     Aquila, Inc.                                     3,700,620
    58,900          Dynegy, Inc.                                     2,903,770
                                                                 -------------
                                                                     6,604,390
                                                                 -------------
Retail: 8.76%                         
    87,200    @     Abercrombie and Fitch Co.                        3,595,256
   143,300    @     American Eagle Outfitters, Inc.                  5,266,275
   100,000    @     AnnTaylor Stores Corp.                           3,412,000
    93,500    @     Best Buy Co., Inc.                               4,969,525
   145,500    @     Dollar Tree Stores, Inc.                         3,750,990
    61,400          Tiffany & Co.                                    2,123,212
   242,800          TJX Cos., Inc.                                   8,124,088
                                                                 -------------
                                                                    31,241,346
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
MidCap                                                                          
Growth                                                                          
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Semiconductors: 13.49%                
   114,600   @      Analog Devices, Inc.                         $   5,105,430
    31,900   @      Broadcom Corp.                                   1,060,994
   158,300   @      Cirrus Logic, Inc.                               3,134,340
   179,400   @      Elantec Semiconductor, Inc.                      5,740,800
    45,800   @      International Rectifier Corp.                    2,750,748
   183,900   @      Intersil Corp.                                   5,993,301
    54,700   @      KLA-Tencor Corp.                                 2,823,614
   174,100   @      Lam Research Corp.                               4,808,642
    64,000   @      Nvidia Corp.                                     5,479,040
    69,900   @      PMC -- Sierra, Inc.                              2,187,870
   138,200   @      Teradyne, Inc.                                   5,507,270
   153,300   @      Transmeta Corp.                                  1,864,128
    40,000   @      Xilinx, Inc.                                     1,650,000
                                                                 -------------
                                                                    48,106,177
                                                                 -------------
Software: 5.72%                       
    74,400   @      Manugistics Group, Inc.                          2,671,704
   106,800   @      Mercury Interactive Corp.                        6,326,832
   142,000   @      Micromuse, Inc.                                  5,410,200
   216,900   @      Peregrine Systems, Inc.                          6,005,961
                                                                 -------------
                                                                    20,414,697
                                                                 -------------
Telecommunications: 10.93%            
   195,200   @      Echostar Communications Corp.                    5,971,168
   163,400   @      Emulex Corp.                                     5,668,346
   141,300   @      Finisar Corp.                                    2,126,565
   240,100   @      JDS Uniphase Corp.                               4,012,071
   141,200   @      RF Micro Devices, Inc.                           3,682,496
    75,700          Scientific-Atlanta, Inc.                         3,975,007
   123,400   @      Sonus Networks, Inc.                             3,178,784
   175,600   @      Tycom Ltd.                                       3,125,680
   307,500   @      Utstarcom, Inc.                                  7,235,475
                                                                 -------------
                                                                    38,975,592
                                                                 -------------
Transportation: 0.59%                 
    32,500          Expeditors Intl. of Washington, Inc.             2,092,675
                                                                 -------------
                                                                     2,092,675
                                                                 -------------
                    Total Common Stock (Cost $326,362,242)         347,565,679
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 1.20%                                                   
Repurchase Agreement: 1.20%                     
$4,270,000      State Street Bank Repurchase Agreement 4.000%,                  
due 06/01/01, (Collateralized by $3,275,000 
U.S. Treasury Bonds, 8.875%, Due 08/15/17,  
                 Market Value $4,355,622)                        $   4,270,000
                                                                 -------------
               Total Short-Term Investments (Cost $4,270,000)        4,270,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $330,632,242)*                  98.67%    $ 351,835,679
               Other Assets and Liabilities-Net         1.33%        4,745,445
                                                      ------     -------------
               Net Assets                             100.00%    $ 356,581,124
                                                      ======     =============

@    Nonincome producing security                                               
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $333,431,261. Net unrealized       
appreciation consists of:                                             

               Gross Unrealized Appreciation                     $  27,936,069
                Gross Unrealized Depreciation                        (9,531,651)
                                                                 -------------
               Net Unrealized Appreciation                       $  18,804,418
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Growth + Value                                                                  
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 95.44%                                                            
Apparel: 6.02%                        
   374,600    @     Jones Apparel Group, Inc.                    $  16,557,320
   459,000    @     Reebok Intl. Ltd.                               13,237,560
   300,900    @     Skechers U.S.A., Inc.                           10,561,590
                                                                 -------------
                                                                    40,356,470
                                                                 -------------
Commercial Services: 10.69%           
   577,000    @     Concord EFS, Inc.                               29,253,900
   314,600    @     Pharmaceutical Product Development              10,095,514
   236,000    @     Professional Detailing, Inc.                    21,851,240
   233,200    @     Rent-A-Center, Inc.                             10,438,032
                                                                 -------------
                                                                    71,638,686
                                                                 -------------
Computers: 6.52%                      
   186,200    @     Affiliated Computer Services, Inc.              13,452,950
   308,700    @     Bisys Group, Inc.                               15,780,744
   550,600    @     Mentor Graphics Corp.                           14,480,780
                                                                 -------------
                                                                    43,714,474
                                                                 -------------
Diversified Financial Services: 4.51% 
   578,400    @     AmeriCredit Corp.                               30,192,480
                                                                 -------------
                                                                    30,192,480
                                                                 -------------
  Electrical Components & Equipment: 0.83%
   181,500          C&D Technologies, Inc.                           5,572,050
                                                                 -------------
                                                                     5,572,050
                                                                 -------------
Electronics: 1.52%                    
   499,500    @     Merix Corp.                                     10,219,770
                                                                 -------------
                                                                    10,219,770
                                                                 -------------
Healthcare-Products: 11.08%           
   466,600          Biomet, Inc.                                    20,843,022
   323,000    @     Henry Schein, Inc.                              12,193,250
   406,000    @     Respironics, Inc.                               11,359,880
   214,000    @     St. Jude Medical, Inc.                          13,165,280
   289,000    @     Stryker Corp.                                   16,603,050
                                                                 -------------
                                                                    74,164,482
                                                                 -------------
Healthcare-Services: 8.74%            
   108,200    @     Laboratory Corp. of America Holdings            15,176,132
   299,300    @     Lincare Holdings, Inc.                          17,371,372
   167,200    @     Quest Diagnostics, Inc.                         20,667,592
    93,500    @     Trigon Healthcare, Inc.                          5,328,565
                                                                 -------------
                                                                    58,543,661
                                                                 -------------
Home Builders: 2.62%                  
   473,900          Lennar Corp.                                    17,534,300
                                                                 -------------
                                                                    17,534,300
                                                                 -------------
Insurance: 5.12%                      
   282,600          Loews Corp.                                     19,496,574
   391,000          Torchmark Corp.                                 14,826,720
                                                                 -------------
                                                                    34,323,294
                                                                 -------------
Leisure Time: 0.69%                   
   202,800          Callaway Golf Co.                                4,605,588
                                                                 -------------
                                                                     4,605,588
                                                                 -------------
Machinery-Diversified: 0.09%          
    20,000          Stewart & Stevenson Services                       582,000
                                                                 -------------
                                                                       582,000
                                                                 -------------
Oil & Gas: 4.78%                      
   407,800    @     Nabors Industries, Inc.                         20,736,630
   382,500          XTO Energy, Inc.                                11,283,750
                                                                 -------------
                                                                    32,020,380
                                                                 -------------
Pharmaceuticals: 2.68%                
   310,700    @     Amerisource Health Corp.                        17,930,497
                                                                 -------------
                                                                    17,930,497
                                                                 -------------
Retail: 7.85%                         
   382,700    @     Abercrombie & Fitch Co.                         15,778,721
   445,250    @     American Eagle Outfitters                       16,362,937
   280,200    @     Brinker Intl., Inc.                              6,878,910
   377,200          Talbots, Inc.                                   13,579,200
                                                                 -------------
                                                                    52,599,768
                                                                 -------------
Semiconductors: 10.66%                
   317,700    @     Integrated Device Technology, Inc.              11,640,528
   537,900    @     International Rectifier Corp.                   32,306,274
   320,000    @     Nvidia Corp.                                    27,395,200
                                                                 -------------
                                                                    71,342,002
                                                                 -------------
Software: 3.23%                       
   163,000    @     Activision, Inc.                                 5,551,780
   555,800          IMS Health, Inc.                                16,107,084
                                                                 -------------
                                                                    21,658,864
                                                                 -------------
Telecommunications: 6.20%             
   549,500    @     Emulex Corp.                                    19,062,155
   427,600          Scientific-Atlanta, Inc.                        22,453,276
                                                                 -------------
                                                                    41,515,431
                                                                 -------------
Transportation: 1.61%                 
   216,200   @@     Teekay Shipping Corp.                           10,810,000
                                                                 -------------
                                                                    10,810,000
                                                                 -------------
                    Total Common Stock (Cost $597,889,680)         639,324,197
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 1.62%                                                 
Repurchase Agreement: 1.62%                     
$10,860,000     State Street Bank & Trust Repurchase Agreement,                 
4.000%, due 06/01/01 (Collateralized by     
$9,540,000 U.S Treasury Bonds, 7.500%,      
                 Due 11/15/16, Market Value $11,078,325)         $  10,860,000
                                                                 -------------
               Total Short-Term Investments (Cost $10,860,000)      10,860,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $608,749,680)*                  97.06%    $ 650,184,197
               Other Assets and Liabilities-Net         2.94%       19,697,174
                                                      ------     -------------
               Net Assets                             100.00%    $ 669,881,371
                                                      ======     =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $608,931,614. Net unrealized       
appreciation consists of:                                             

               Gross Unrealized Appreciation                     $  59,303,876
                Gross Unrealized Depreciation                       (18,051,293)
                                                                 -------------
               Net Unrealized Appreciation                       $  41,252,583
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
SmallCap                                                                        
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 99.85%                                                            
Apparel: 2.20%                        
   160,466    @     Coach, Inc.                                  $   5,624,333
    65,800    @     Columbia Sportswear Co.                          4,612,580
                                                                 -------------
                                                                    10,236,913
                                                                 -------------
Banks: 0.33%                          
    36,400          TCF Financial Corp.                              1,524,796
                                                                 -------------
                                                                     1,524,796
                                                                 -------------
Biotechnology: 4.28%                  
    65,000    @     Enzon, Inc.                                      4,550,000
   289,100  @,@@    Hemosol, Inc.                                    2,804,270
    67,600    @     Invitrogen Corp.                                 4,840,836
    44,900    @     Myriad Genetics, Inc.                            2,786,045
    66,000    @     Protein Design Labs, Inc.                        4,897,860
                                                                 -------------
                                                                    19,879,011
                                                                 -------------
Building Materials: 0.48%             
   139,100    @     Dal-Tile Intl., Inc.                             2,225,600
                                                                 -------------
                                                                     2,225,600
                                                                 -------------
Commercial Services: 4.37%            
   365,900    @     Caremark Rx, Inc.                                5,956,852
   194,400    @     Pharmaceutical Product Development               6,238,296
   112,500    @     Resources Connection                             3,453,750
   249,900    @     Sylvan Learning Systems, Inc.                    4,623,150
                                                                 -------------
                                                                    20,272,048
                                                                 -------------
Computers: 3.63%                      
   271,300    @     Electronics for Imaging, Inc.                    6,513,913
    83,100    @     Manhattan Associates, Inc.                       2,743,131
    89,600    @     Mercury Computer Systems, Inc.                   4,273,920
   172,000    @     Numerical Technologies, Inc.                     3,336,800
                                                                 -------------
                                                                    16,867,764
                                                                 -------------
Diversified Financial Services: 2.29% 
   128,300    @     AmeriCredit Corp.                                6,697,260
   115,000          Heller Financial, Inc.                           3,956,000
                                                                 -------------
                                                                    10,653,260
                                                                 -------------
  Electrical Components & Equipment: 2.60%
   201,700    @     Advanced Energy Industries                       6,595,590
   166,300    @     Capstone Turbine Corp.                           5,466,281
                                                                 -------------
                                                                    12,061,871
                                                                 -------------
Electronics: 2.20%                    
   151,900    @     FEI Co.                                          5,377,260
   142,900    @     Varian, Inc.                                     4,851,455
                                                                 -------------
                                                                    10,228,715
                                                                 -------------
Environmental Control: 1.81%          
    83,600    @     Stericycle, Inc.                                 3,580,588
   161,000    @     Waste Connections, Inc.                          4,807,460
                                                                 -------------
                                                                     8,388,048
                                                                 -------------
Food: 1.04%                           
    84,400    @     Whole Foods Market, Inc.                         4,833,588
                                                                 -------------
                                                                     4,833,588
                                                                 -------------
Healthcare-Products: 7.89%            
    41,400    @     Biosite Diagnostics, Inc.                        2,108,502
   179,000    @     Cardiodynamics                                     957,650
   124,800    @     Cytyc Corp.                                      2,720,640
    81,800  @,@@    ESC Medical Systems Ltd.                         2,229,050
   205,900    @     Henry Schein, Inc.                               7,772,725
   142,900    @     Inverness Medical Technology, Inc.               5,187,270
   114,100    @     Kensey Nash Corp.                                1,483,300
    50,400    @     Med-Design Corp.                                 1,163,736
    84,600    @     Minimed, Inc.                                    3,956,742
    85,500    @     Resmed, Inc.                                     4,668,300
    60,400    @     Varian Medical Systems, Inc.                     4,379,000
                                                                 -------------
                                                                    36,626,915
                                                                 -------------
Healthcare-Services: 2.94%            
    93,800    @     American Healthways, Inc.                        2,435,048
   182,300    @     Amsurg Corp.                                     4,138,210
    85,600    @     Rightchoice Managed Care, Inc.                   3,338,400
   113,400    @     Specialty Laboratories                           3,734,262
                                                                 -------------
                                                                    13,645,920
                                                                 -------------
Internet: 0.56%                       
   179,500    @     Network Associates, Inc.                         2,606,340
                                                                 -------------
                                                                     2,606,340
                                                                 -------------
Machinery-Diversified: 2.67%          
   150,700    @     Brooks Automation, Inc.                          7,415,947
   144,700    @     Global Power Equipment Group, Inc.               4,992,150
                                                                 -------------
                                                                    12,408,097
                                                                 -------------
Media: 1.33%                          
   180,800    @     Cumulus Media, Inc.                              2,164,176
   130,100    @     Emmis Communications Corp.                       4,023,993
                                                                 -------------
                                                                     6,188,169
                                                                 -------------
Metal Fabricate/Hardware: 1.52%       
   120,400    @     The Shaw Group, Inc.                             7,077,112
                                                                 -------------
                                                                     7,077,112
                                                                 -------------
Oil & Gas: 14.55%                     
   141,000    @     Dril-Quip, Inc.                                  4,441,500
   107,400    @     Evergreen Resources, Inc.                        4,833,000
   114,900    @     Grant Prideco, Inc.                              2,587,548
   131,400    @     Hydril Co.                                       3,909,150
   446,600    @     Key Energy Services, Inc.                        6,118,420
   131,200    @     Marine Drilling Co., Inc.                        3,411,200
   190,000    @     National-Oilwell, Inc.                           6,555,000
   299,300    @     Pride Intl., Inc.                                7,970,359
   220,400    @     Seitel, Inc.                                     3,857,000
   194,500    @     Spinnaker Exploration Co.                        7,912,260
   139,200    @     Veritas DGC, Inc.                                4,873,392
    92,100    @     Westport Resources Corp.                         2,675,505
   199,900    @     W-H Energy Services, Inc.                        6,016,990
    80,950          XTO Energy, Inc.                                 2,388,025
                                                                 -------------
                                                                    67,549,349
                                                                 -------------
Pharmaceuticals: 4.24%                
   159,800    @     Abgenix, Inc.                                    6,369,628
    78,000    @     Alkermes, Inc.                                   2,361,060
   167,400    @     Cubist Pharmaceuticals, Inc.                     4,670,460
    24,000    @     CV Therapeutics, Inc.                            1,128,720
   104,100    @     Imclone Systems, Inc.                            5,168,565
                                                                 -------------
                                                                    19,698,433
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
SmallCap                                                                        
Opportunities                                                                   
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Retail: 12.90%                        
   231,800    @     Abercrombie & Fitch Co.                      $   9,557,114
    85,350    @     American Eagle Outfitters                        3,136,613
   154,200    @     AnnTaylor Stores Corp.                           5,261,304
    91,800    @     Bebe Stores, Inc.                                2,466,666
    15,300    @     BUCA, Inc.                                         333,540
   180,600    @     Charlotte Russe Holding, Inc.                    4,970,112
    72,000    @     Childrens Place                                  2,062,800
    80,416    @     HOT Topic, Inc.                                  2,320,002
    80,600    @     Krispy Kreme Doughnuts, Inc.                     5,892,666
   161,300    @     P.F. Chang's China Bistro, Inc.                  6,242,310
    91,000          TJX Cos., Inc.                                   3,044,860
    82,000    @     Tweeter Home Entertainment Group, Inc.           2,214,000
   184,400    @     Wet Seal, Inc.                                   6,463,220
   177,100    @     Williams-Sonoma, Inc.                            5,964,728
                                                                 -------------
                                                                    59,929,935
                                                                 -------------
Semiconductors: 12.73%                
   230,500  @,@@    ASM Intl. NV                                     5,100,965
   135,600    @     ATMI, Inc.                                       3,551,025
   175,400    @     Cirrus Logic, Inc.                               3,472,920
   150,700    @     Elantec Semiconductor, Inc.                      4,822,400
    90,000    @     Entegris, Inc.                                   1,098,000
    18,400    @     Intersil Corp.                                     599,656
   270,900    @     Lam Research Corp.                               7,482,258
   219,900    @     LTX Corp.                                        5,334,774
   199,200    @     Microsemi Corp.                                 11,454,000
     8,500    @     Novellus Systems, Inc.                             407,150
   220,500  @,@@    O2Micro Intl. Ltd.                               2,229,255
   100,300    @     Rudolph Technologies, Inc.                       4,419,218
   193,100    @     Simplex Solutions, Inc.                          4,595,780
    98,900    @     Veeco Instruments, Inc.                          4,560,279
                                                                 -------------
                                                                    59,127,680
                                                                 -------------
Software: 6.36%                       
   127,600    @     Eclipsys Corp.                                   2,774,024
   154,000    @     HNC Software                                     4,322,780
   214,700    @     Manugistics Group, Inc.                          7,709,877
   120,000    @     NetIQ Corp.                                      2,916,000
   241,400    @     Peregrine Systems, Inc.                          6,684,366
   196,200    @     Serena Software, Inc.                            5,132,592
                                                                 -------------
                                                                    29,539,639
                                                                 -------------
Telecommunications: 6.93%             
   168,100    @     Advanced Fibre Communications, Inc.              3,113,212
   284,800    @     Avici Systems, Inc.                              2,885,024
   172,000    @     Digital Lightwave, Inc.                          8,011,760
   139,200    @     Finisar Corp.                                    2,094,960
    70,900    @     Ixia                                               957,150
   268,500    @     New Focus, Inc.                                  2,682,314
   130,800    @     Powerwave Technologies, Inc.                     1,778,880
   138,000    @     RF Micro Devices, Inc.                           3,599,040
   101,700    @     Sonus Networks, Inc.                             2,619,792
   166,800    @     Tellium, Inc.                                    4,416,864
                                                                 -------------
                                                                    32,158,996
                                                                 -------------
                    Total Common Stock (Cost $403,944,044)         463,728,199
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
Total Investments in Securities       
                      (Cost $403,944,044)*              99.85%   $ 463,728,199
                    Other Assets and Liabilities-Net     0.15%         685,719
                                                       ------    -------------
                    Net Assets                         100.00%   $ 464,413,918
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $405,751,109. Net unrealized       
appreciation consists of:                                             

                    Gross Unrealized Appreciation                $  71,779,737
                     Gross Unrealized Depreciation                  (13,802,647)
                                                                 -------------
                    Net Unrealized Appreciation                  $  59,977,090
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
SmallCap                                                                        
Growth                                                                          
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 100.27%                                                           
Apparel: 2.98%                        
   125,502    @     Coach, Inc.                                  $   4,398,845
    51,700    @     Columbia Sportswear Co.                          3,624,170
    65,600    @     Timberland Co.                                   2,828,016
                                                                 -------------
                                                                    10,851,031
                                                                 -------------
Banks: 0.33%                          
    28,300          TCF Financial Corp.                              1,185,487
                                                                 -------------
                                                                     1,185,487
                                                                 -------------
Biotechnology: 4.15%                  
    51,200    @     Enzon, Inc.                                      3,584,000
   216,300  @,@@    Hemosol, Inc.                                    2,098,110
    47,400    @     Invitrogen Corp.                                 3,394,314
    35,400    @     Myriad Genetics, Inc.                            2,196,570
    51,600    @     Protein Design Labs, Inc.                        3,829,236
                                                                 -------------
                                                                    15,102,230
                                                                 -------------
Building Materials: 0.48%             
   109,100    @     Dal-Tile Intl., Inc.                             1,745,600
                                                                 -------------
                                                                     1,745,600
                                                                 -------------
Commercial Services: 4.98%            
   429,300    @     Caremark Rx, Inc.                                6,989,004
   147,800    @     Pharmaceutical Product Development               4,742,902
    87,800    @     Resources Connection                             2,695,460
   197,700    @     Sylvan Learning Systems, Inc.                    3,657,450
                                                                 -------------
                                                                    18,084,816
                                                                 -------------
Computers: 3.57%                      
   211,900    @     Electronics for Imaging, Inc.                    5,087,719
    42,400    @     Manhattan Associates, Inc.                       1,399,624
    70,000    @     Mercury Computer Systems, Inc.                   3,339,000
   162,500    @     Numerical Technologies, Inc.                     3,152,500
                                                                 -------------
                                                                    12,978,843
                                                                 -------------
Diversified Financial Services: 2.21% 
    95,900    @     AmeriCredit Corp.                                5,005,980
    88,000          Heller Financial, Inc.                           3,027,200
                                                                 -------------
                                                                     8,033,180
                                                                 -------------
  Electrical Components & Equipment: 2.42%
   146,700    @     Advanced Energy Industries, Inc.                 4,797,090
   121,800    @     Capstone Turbine Corp.                           4,003,566
                                                                 -------------
                                                                     8,800,656
                                                                 -------------
Electronics: 2.16%                    
   119,300    @     FEI Co.                                          4,223,220
   106,700    @     Varian, Inc.                                     3,622,465
                                                                 -------------
                                                                     7,845,685
                                                                 -------------
Environmental Control: 2.42%          
    66,900    @     Stericycle, Inc.                                 2,865,327
   198,900    @     Waste Connections, Inc.                          5,939,154
                                                                 -------------
                                                                     8,804,481
                                                                 -------------
Food: 1.04%                           
    66,200    @     Whole Foods Market, Inc.                         3,791,274
                                                                 -------------
                                                                     3,791,274
                                                                 -------------
Healthcare-Products: 6.91%            
    97,400    @     Cytyc Corp.                                      2,123,320
    64,600  @,@@    ESC Medical Systems Ltd.                         1,760,350
   152,000    @     Henry Schein, Inc.                               5,738,000
   103,300    @     Inverness Medical Technology, Inc.               3,749,790
    81,500    @     Kensey Nash Corp.                                1,059,500
    39,800    @     Med-Design Corp.                                   918,982
    66,200    @     Minimed, Inc.                                    3,096,174
    63,900    @     Resmed, Inc.                                     3,488,940
    44,000    @     Varian Medical Systems, Inc.                     3,190,000
                                                                 -------------
                                                                    25,125,056
                                                                 -------------
Healthcare-Services: 3.15%            
    74,200    @     American Healthways, Inc.                        1,926,232
   143,900    @     Amsurg Corp.                                     3,266,530
    32,300    @     Biosite Diagnostics, Inc.                        1,645,039
    44,600    @     Rightchoice Managed Care, Inc.                   1,739,400
    86,700    @     Specialty Laboratories                           2,855,031
                                                                 -------------
                                                                    11,432,232
                                                                 -------------
Internet: 0.57%                       
   141,700    @     Network Associates, Inc.                         2,057,484
                                                                 -------------
                                                                     2,057,484
                                                                 -------------
Machinery-Diversified: 2.68%          
   117,400    @     Brooks Automation, Inc.                          5,777,254
   114,500    @     Global Power Equipment Group, Inc.               3,950,250
                                                                 -------------
                                                                     9,727,504
                                                                 -------------
Media: 1.34%                          
   142,200    @     Cumulus Media, Inc.                              1,702,134
   102,600    @     Emmis Communications Corp.                       3,173,418
                                                                 -------------
                                                                     4,875,552
                                                                 -------------
Metal Fabricate/Hardware: 1.53%       
    94,400    @     The Shaw Group, Inc.                             5,548,832
                                                                 -------------
                                                                     5,548,832
                                                                 -------------
Networking Products: 0.96%            
   131,100    @     Tellium, Inc.                                    3,471,528
                                                                 -------------
                                                                     3,471,528
                                                                 -------------
Oil & Gas: 12.93%                     
   110,600    @     Dril-Quip, Inc.                                  3,483,900
    88,100    @     Evergreen Resources, Inc.                        3,964,500
    90,500    @     Grant Prideco, Inc.                              2,038,060
   103,700    @     Hydril Co.                                       3,085,075
   125,600    @     Marine Drilling Co., Inc.                        3,265,600
    69,500    @     National-Oilwell, Inc.                           2,397,750
   272,350    @     Pride Intl., Inc.                                7,252,681
   172,600    @     Seitel, Inc.                                     3,020,500
   149,400    @     Spinnaker Exploration Co.                        6,077,592
   110,000    @     Veritas DGC, Inc.                                3,851,100
   156,600    @     W-H Energy Services, Inc.                        4,713,660
    68,000    @     Westport Resources Corp.                         1,975,400
    63,200          XTO Energy, Inc.                                 1,864,400
                                                                 -------------
                                                                    46,990,218
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
SmallCap                                                                        
Growth                                                                          
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Pharmaceuticals: 5.23%                
   125,100    @     Abgenix, Inc.                                $   4,986,486
    60,900    @     Alkermes, Inc.                                   1,843,443
   122,100    @     Cubist Pharmaceuticals, Inc.                     3,406,590
    18,800    @     CV Therapeutics, Inc.                              884,164
    81,500    @     Imclone Systems, Inc.                            4,046,475
    76,000    @     King Pharmaceuticals, Inc.                       3,844,080
                                                                 -------------
                                                                    19,011,238
                                                                 -------------
Retail: 13.23%                        
   181,500    @     Abercrombie and Fitch Co.                        7,483,245
    87,000    @     American Eagle Outfitters, Inc.                  3,197,250
   120,900    @     AnnTaylor Stores Corp.                           4,125,108
    72,700    @     Bebe Stores, Inc.                                1,953,449
    12,200    @     BUCA, Inc.                                         265,960
   134,900    @     Charlotte Russe Holding, Inc.                    3,712,448
    56,400    @     Childrens Place                                  1,615,860
    49,200    @     Factory 2-U Stores, Inc.                         1,524,708
    63,700    @     HOT Topic, Inc.                                  1,837,745
    63,000    @     Krispy Kreme Doughnuts, Inc.                     4,605,930
   114,400    @     P.F. Chang's China Bistro, Inc.                  4,427,280
    66,400          TJX Cos., Inc.                                   2,221,744
    64,700    @     Tweeter Home Entertainment Group, Inc.           1,746,900
   140,500    @     Wet Seal, Inc.                                   4,924,525
   131,900    @     Williams-Sonoma, Inc.                            4,442,392
                                                                 -------------
                                                                    48,084,544
                                                                 -------------
Semiconductors: 12.95%                
   180,000    @     ASM Intl. NV                                     3,983,400
   106,600    @     ATMI, Inc.                                       2,791,588
   136,500    @     Cirrus Logic, Inc.                               2,702,700
   117,900    @     Elantec Semiconductor, Inc.                      3,772,800
    79,000    @     Intersil Corp.                                   2,574,610
   211,400    @     Lam Research Corp.                               5,838,868
   172,200    @     LTX Corp.                                        4,177,572
   155,600    @     Microsemi Corp.                                  8,947,000
   164,900  @,@@    O2Micro Intl. Ltd.                               1,667,139
    78,600    @     Rudolph Technologies, Inc.                       3,463,116
   151,500    @     Simplex Solutions, Inc.                          3,605,700
    76,900    @     Veeco Instruments, Inc.                          3,545,859
                                                                 -------------
                                                                    47,070,352
                                                                 -------------
Software: 6.23%                       
    94,200    @     Eclipsys Corp.                                   2,047,908
   115,100    @     HNC Software                                     3,230,857
   167,700    @     Manugistics Group, Inc.                          6,022,107
    93,600    @     NETIQ Corp.                                      2,274,480
   178,000    @     Peregrine Systems, Inc.                          4,928,820
     4,400    @     Quest Software, Inc.                               137,104
   153,600    @     Serena Software, Inc.                            4,018,176
                                                                 -------------
                                                                    22,659,452
                                                                 -------------
Telecommunications: 5.82%             
   132,700    @     Advanced Fibre Communication                     2,457,604
   222,400    @     Avici Systems, Inc.                              2,252,912
   134,300    @     Digital Lightwave, Inc.                          6,255,693
    83,500    @     Finisar Corp.                                    1,256,675
    42,400    @     Ixia                                               572,400
   210,100    @     New Focus, Inc.                                  2,098,899
   102,900    @     Powerwave Technologies, Inc.                     1,399,440
   107,800    @     RF Micro Devices, Inc.                           2,811,424
    79,600    @     Sonus Networks, Inc.                             2,050,496
                                                                 -------------
                                                                    21,155,543
                                                                 -------------
                    Total Common Stock (Cost $308,359,494)         364,432,818
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 0.44%                                                   
Repurchase Agreement: 0.44%                     
$ 1,592,000     State Street Bank Repurchase Agreement 4.000%,                  
due 06/01/01, (Collateralized by $1,225,000 
U.S. Treasury Bonds, 8.875%, Due 08/15/17,  
                 Market Value $1,629,202)                        $   1,592,000
                                                                 -------------
               Total Short-Term Investments (Cost $1,592,000)        1,592,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $309,951,494)*                  100.71%   $ 366,024,818
                Other Assets and Liabilities- Net        -0.71%      (2,594,437)
                                                       ------    -------------
               Net Assets                              100.00%   $ 363,430,381
                                                       ======    =============
@    Non-income producing security                                              
@@   Foreign Issuer                                                             
*    Cost for federal income tax purposes is $310,686,018. Net unrealized       
appreciation consists of:                                             

               Gross Unrealized Appreciation                     $  65,710,319
                Gross Unrealized Depreciation                       (10,371,519)
                                                                 -------------
               Net Unrealized Appreciation                       $  55,338,800
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Balanced                                                                        
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 47.69%                                                            
Aerospace/Defense: 1.53%              
    23,500          United Technologies Corp.                    $   1,957,785
                                                                 -------------
                                                                     1,957,785
                                                                 -------------
Banks: 1.92%                          
    50,100          J.P. Morgan Chase & Co.                          2,462,415
                                                                 -------------
                                                                     2,462,415
                                                                 -------------
Beverages: 1.25%                      
    16,000          Coca-Cola Co.                                      758,400
    18,900          Pepsico, Inc.                                      845,964
                                                                 -------------
                                                                     1,604,364
                                                                 -------------
Chemicals: 0.01%                      
       920   @@     Syngenta AG ADR                                      9,200
                                                                 -------------
                                                                         9,200
                                                                 -------------
Computers: 2.71%                      
    51,200          Compaq Computer Corp.                              818,688
     7,700    @     Dell Computer Corp.                                187,572
    32,900    @     EMC Corp.-Mass.                                  1,039,640
    12,600          International Business Machines Corp.            1,408,680
       548    @     McData Corp.                                        13,897
                                                                 -------------
                                                                     3,468,477
                                                                 -------------
Diversified Financial Services: 2.24% 
    15,000          American Express Co.                               631,800
    18,266          Citigroup, Inc.                                    936,133
    19,600          Freddie Mac                                      1,297,520
                                                                 -------------
                                                                     2,865,453
                                                                 -------------
Electric: 2.77%                       
    19,400    @     Calpine Corp.                                      956,420
    28,600          Duke Energy Corp.                                1,307,592
    13,001          Mirant Corp.                                       510,939
    32,700          The Southern Co.                                   769,758
                                                                 -------------
                                                                     3,544,709
                                                                 -------------
Electronics: 1.22%                    
    45,000  @,@@    Flextronics Intl. Ltd.                           1,134,900
    19,900    @     Solectron Corp.                                    429,243
                                                                 -------------
                                                                     1,564,143
Energy: 0.01%                         
    29,192    @     Orion Refining Corp.                                10,508
                                                                 -------------
                                                                        10,508
                                                                 -------------
Food: 0.72%                           
    18,200    @     Safeway, Inc.                                      921,830
                                                                 -------------
                                                                       921,830
                                                                 -------------
Home Furnishings: 0.65%               
    10,600   @@     Sony Corp. ADR                                     827,860
                                                                 -------------
                                                                       827,860
                                                                 -------------
Insurance: 2.66%                      
    10,060          American Intl. Group                               814,860
    46,000          John Hancock Financial Services                  1,822,060
     7,400          Marsh & McLennan Cos.                              776,260
                                                                 -------------
                                                                     3,413,180
                                                                 -------------
Leisure Time: 1.21%                   
    55,000   @@     Carnival Corp.                                   1,552,650
                                                                 -------------
                                                                     1,552,650
                                                                 -------------
Media: 1.98%                          
    32,800    @     AOL Time Warner, Inc.                            1,713,144
    20,000    @     Comcast Corp.                                      819,200
                                                                 -------------
                                                                     2,532,344
                                                                 -------------
Mining: 2.54%                         
    32,000   @@     Alcan, Inc.                                      1,433,600
    42,300          Alcoa, Inc.                                      1,825,245
                                                                 -------------
                                                                     3,258,845
                                                                 -------------
Miscellaneous Manufacturing: 3.28%    
    35,500          General Electric Co.                             1,739,500
    12,500          Minnesota Mining & Manufacturing Co.             1,482,250
    17,100   @@     Tyco Intl. Ltd.                                    982,395
                                                                 -------------
                                                                     4,204,145
                                                                 -------------
Oil & Gas: 2.74%                      
     9,162          Exxon Mobil Corp.                                  813,128
    20,000          Halliburton Co.                                    934,800
    13,000   @@     Royal Dutch Petroleum Co.                          792,740
    18,000          Transocean Sedco Forex, Inc.                       962,100
                                                                 -------------
                                                                     3,502,768
                                                                 -------------
Pharmaceuticals: 2.03%                
    27,200          Abbott Laboratories                              1,413,856
    27,675          Pfizer, Inc.                                     1,186,981
                                                                 -------------
                                                                     2,600,837
                                                                 -------------
Pipelines: 0.81%                      
    17,000    @     El Paso Corp.                                    1,035,300
                                                                 -------------
                                                                     1,035,300
                                                                 -------------
Retail: 5.51%                         
    36,000    @     Best Buy Co., Inc.                               1,913,400
    16,700          Home Depot, Inc.                                   823,143
       112   @,X    International Fast Food Corp.                          585
    30,900          McDonald's Corp.                                   935,651
    23,300          Sears, Roebuck and Co.                             929,204
    27,100          Walgreen Co.                                     1,089,149
    26,500          Wal-Mart Stores, Inc.                            1,371,375
                                                                 -------------
                                                                     7,062,507
                                                                 -------------
Semiconductors: 2.18%                 
    55,000    @     Advanced Micro Devices                           1,553,750
    36,400          Texas Instruments, Inc.                          1,241,968
                                                                 -------------
                                                                     2,795,718
                                                                 -------------
Software: 2.59%                       
    32,000          Computer Associates Intl., Inc.                    907,520
    14,600          First Data Corp.                                   957,906
    20,900    @     Microsoft Corp.                                  1,445,862
                                                                 -------------
                                                                     3,311,288
                                                                 -------------
Telecommunications: 3.26%             
    20,100          BellSouth Corp.                                    828,723
    15,900    @     Cisco Systems, Inc.                                306,233
    31,525  @,@@    Global Crossing Ltd.                               400,368
    20,100   @@     Nokia OYJ ADR                                      587,724
    31,448    @     Verizon Communications, Inc.                     1,724,966
    18,300    @     WorldCom, Inc.                                     326,472
                                                                 -------------
                                                                     4,174,486
                                                                 -------------
Tobacco: 1.22%                        
    30,400          Philip Morris Cos., Inc.                         1,562,864
                                                                 -------------
                                                                     1,562,864
                                                                 -------------
Transportation: 0.65%                 
    20,900    @     FedEx Corp.                                        836,000
                                                                 -------------
                                                                       836,000
                                                                 -------------
                    Total Common Stock (Cost $55,417,525)           61,079,676
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Balanced                                                                        
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
CORPORATE BONDS: 16.84%                                                         
Aerospace/Defense: 0.41%              
$   825,000          Simula, Inc., 8.000%, due 05/01/04                 528,000 
                                                                 -------------
                                                                       528,000
                                                                 -------------
Airlines: 0.71%                       
936,875          Continental Airlines, Inc., 6.545%,                    
                      due 02/02/19                                     907,518
                                                                 -------------
                                                                       907,518
                                                                 -------------
Banks: 0.86%                          
 1,095,000   @@     Banco Santander-Chile, 6.500%, due 11/01/05      1,102,935
                                                                 -------------
                                                                     1,102,935
                                                                 -------------
Building Materials: 0.32%             
   400,000          Dayton Superior Corp., 13.000%, due 06/15/09       410,000
                                                                 -------------
                                                                       410,000
                                                                 -------------
Chemicals: 0.12%                      
800,000          Sterling Chemicals, Inc., 11.750%,                     
                      due 08/15/06                                     149,000
                                                                 -------------
                                                                       149,000
                                                                 -------------
Commercial Services: 0.75%            
   250,000          Mail-Well, Inc., 8.750%, due 12/15/08              220,000
   840,000          Neff Corp., 10.250%, due 06/01/08                  441,000
   225,000          United Rentals, Inc., 8.800%, due 08/15/08         203,625
   100,000          United Rentals, Inc., 9.000%, due 04/01/09          91,000
                                                                 -------------
                                                                       955,625
                                                                 -------------
Diversified Financial Services: 2.07% 
   160,000   @@     Amvescap PLC, 6.375%, due 05/15/03                 161,606
   500,000          Citigroup, Inc., 5.700%, due 02/06/04              505,090
 1,000,000          Ford Credit Co., 7.875%, due 06/15/10            1,051,451
   500,000          Household Finance Corp., 8.000%, due 05/09/05      535,309
660,000          Madison River Finance Corp., 13.250%,                  
                      due 03/01/10                                     399,300
                                                                 -------------
                                                                     2,652,756
                                                                 -------------
Electric: 1.22%                       
   100,000          AES Corp., 9.375%, due 09/15/10                    102,625
   300,000          AES Corp., 9.500%, due 06/01/09                    309,750
   400,000          Calpine Corp., 8.625%, due 08/15/10                400,556
   300,000          CMS Energy Corp., 9.875%, due 10/15/07             319,168
   400,000          TNP Enterprises, Inc., 10.250%, due 04/01/10       436,500
                                                                 -------------
                                                                     1,568,599
                                                                 -------------
Environmental Control: 0.20%          
250,000          Allied Waste North America, 10.000%,                   
                      due 08/01/09                                     259,375
                                                                 -------------
                                                                       259,375
                                                                 -------------
Forest Products & Paper: 0.58%        
200,000          Buckeye Technologies, Inc., 9.250%,                    
                      due 09/15/08                                     201,000
   800,000   @@     Doman Industries Ltd., 8.750%, due 03/15/04        540,000
                                                                 -------------
                                                                       741,000
                                                                 -------------
Holding Companies-Diversified: 0.33%  
   430,000          Penhall Intl., Inc., 12.000%, due 08/01/06         427,850
                                                                 -------------
                                                                       427,850
                                                                 -------------
Home Builders: 0.06%                  
    75,000          Lennar Corp., 7.625%, due 03/01/09                  73,046
                                                                 -------------
                                                                        73,046
                                                                 -------------
Internet: 0.16%                       
   300,000    +     Amazon.Com, Inc., 0/10.000%, due 05/01/08          199,875
                                                                 -------------
                                                                       199,875
                                                                 -------------
Iron/Steel: 0.11%                     
   100,000          AK Steel Corp., 7.875%, due 02/15/09                98,250
    50,000          Armco, Inc., 9.000%, due 09/15/07                   49,563
                                                                 -------------
                                                                       147,813
                                                                 -------------
Leisure Time: 0.31%                   
600,000          Trump Atlantic City Associates, 11.250%,               
                      due 05/01/06                                     399,750
                                                                 -------------
                                                                       399,750
                                                                 -------------
Lodging: 0.39%                        
    75,000          Prime Hospitality Corp., 9.750%, due 04/01/07       77,063
   400,000          Station Casinos, Inc., 9.875%, due 07/01/10        419,500
                                                                 -------------
                                                                       496,563
                                                                 -------------
Media: 1.73%                          
500,000          Charter Communications Holdings Corp.,                 
                      8.625%, due 04/01/09                             480,000
 1,200,000          Classic Cable, Inc., 10.500%, due 03/01/10         423,000
   175,000          Echostar DBS Corp., 9.250%, due 02/01/06           177,188
600,000          Northland Cable Television, Inc., 10.250%,             
                      due 11/15/07                                     424,500
600,000  @@,+    Telewest Communications PLC, 0/11.375%,                
                      due 02/01/10                                     330,000
 1,450,000    +     UPC, 0/13.750%, due 02/01/10                       377,000
                                                                 -------------
                                                                     2,211,688
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Balanced                                                                        
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
Oil & Gas: 2.20%                      
$   500,000          Energy Corp. of America, 9.500%,                           
                      due 05/15/07                               $     407,500
   100,820  @@,#    Hurricane Hydrocarbons, 16.000%, due 12/31/01       97,039
   600,000          Northern Oil ASA, 10.000%, due 05/15/05            429,000
1,000,000          Occidental Petroleum Corp., 7.650%,                      
                      due 02/15/06                                   1,055,023
300,000          Premcor Refining Group, Inc., 8.625%,                  
                      due 08/15/08                                     262,500
   800,000          United Refining Co., 10.750%, due 06/15/07         564,000
                                                                 -------------
                                                                     2,815,062
                                                                 -------------
Regional(state/province): 0.35%       
   450,000   @@     Province of Quebec, 5.500%, due 04/11/06           444,009
                                                                 -------------
                                                                       444,009
                                                                 -------------
Retail: 0.87%                         
823,000          Hollywood Entertainment Corp., 10.625%,                
                      due 08/15/04                                     646,055
   450,000          Wal-Mart Stores, Inc., 6.875%, due 08/10/09        468,482
                                                                 -------------
                                                                     1,114,537
                                                                 -------------
Telecommunications: 2.65%             
$700,000           Adelphia Business Solutions, Inc., 12.000%,              
                      due 11/01/07                                     304,500
1,000,000  @@,+    Call-Net Enterprises, Inc., 0/8.940%,                    
                      due 08/15/08                                     190,000
600,000   @@     Call-Net Enterprises, Inc., 8.000%,                    
                      due 08/15/08                                     171,000
700,000          Concentric Network Corp., 12.750%,                     
                      due 12/15/07                                     346,500
300,000          Intermedia Communications, 12.250%,                    
                      due 03/01/09                                     220,500
   500,000          ITC Deltacom, Inc., 8.875%, due 03/01/08           322,500
   400,000          McLeodUSA, Inc., 11.375%, due 01/01/09             302,000
425,000          Metromedia Fiber Network, Inc., 10.000%,               
                      due 12/15/09                                     240,125
1,000,000          NEON Communications, Inc., 12.750%,                      
                      due 08/15/08                                     400,000
   425,000          NMS Communciations Corp., 5.000%, due 10/15/05     221,000
2,000,000  ++,#    SA Telecommunications, Inc., 10.000%,                    
                      due 08/15/06                                          --
500,000          WinStar Communications, Inc., 12.750%,                 
                      due 04/15/10                                      13,125
   450,000          WorldCom, Inc., 6.500%, due 05/15/04               451,509
800,000    +     XO Communications, Inc., 0/9.450%,                     
                      due 04/15/08                                     212,000
                                                                 -------------
                                                                     3,394,759
                                                                 -------------
Transportation: 0.44%                 
    75,000          Gulfmark Offshore, Inc., 8.750%, due 06/01/08       75,750
   500,000          Norfolk Southern Corp., 6.750%, due 02/15/11       492,273
                                                                 -------------
                                                                       568,023
                                                                 -------------
                    Total Corporate Bonds (Cost $25,132,236)        21,567,783
                                                                 -------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 16.19%                                      
       Federal Home Loan Mortgage Association: 2.36%
   946,927          5.500%, due 01/01/14                               921,180
   472,917          6.000% due 04/01/14                                468,481
 1,616,240          7.000% due 06/01/29                              1,631,384
                                                                 -------------
                                                                     3,021,045
                                                                 -------------
      Federal National Mortgage Association: 9.60%
   450,000          5.500%, due 05/02/06                               449,804
 3,300,000          6.420%, TBA, due 06/01/31                        3,320,109
 1,565,611          6.500%, due 06/01/14                             1,576,367
   382,718          6.500%, due 08/01/15                               385,432
 1,200,000          6.625%, due 10/15/07                             1,258,634
 2,509,959          7.000%, due 03/01/15                             2,570,439
 1,000,000          7.250%, due 01/15/10                             1,081,404
 1,000,000          7.500%, TBA, due 09/01/30                        1,019,063
   611,984          8.000%, due 08/01/30                               633,783
                                                                 -------------
                                                                    12,295,035
                                                                 -------------
         Government National Mortgage Association: 4.23%
 3,321,236          6.500%, due 06/15/29                             3,293,694
 1,097,319          7.500%, due 11/15/29                             1,128,034
   956,253          8.000%, due 07/15/30                               992,849
                                                                 -------------
                                                                     5,414,577
                                                                 -------------
  Total U.S. Government Agency Obligations
                      (Cost $20,418,832)                            20,730,657
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Balanced                                                                        
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
U.S. TREASURY OBLIGATIONS: 8.44%                                                
U.S. Treasury Bonds: 2.42%            
$ 3,000,000          6.125%, due 08/15/29                         $   3,095,610 
                                                                 -------------
                                                                     3,095,610
                                                                 -------------
U.S. Treasury Notes: 6.02%            
 2,793,414          3.875%, due 01/15/09                             2,919,120
   300,000          4.750%, due 01/31/03                               302,847
   450,000          5.750%, due 11/15/05                               464,086
 3,750,000          6.500%, due 02/15/10                             4,026,694
                                                                 -------------
                                                                     7,712,747
                                                                 -------------
Total U.S. Treasury Obligations       
                      (Cost $10,896,910)                            10,808,357
                                                                 -------------
COLLATERALIZED MORTGAGE OBLIGATIONS: 2.46%                                      
Commercial MBS: 1.90%                 
$   490,000    #     Allied Capital Commercial Mortgage Trust,                  
                      6.710%, due 12/25/04                       $     499,577
   374,109    #     Criimi Mae CMBS Corp., 5.697%, due 10/20/01        374,893
450,000          First Union National Bank-Bank of America              
Commercial Mortgage Trust, 6.136%,
                      due 12/15/10                                     437,330
1,085,354          GMAC Commercial Mortgage Securities, Inc.,               
                      6.974%, due 05/15/08                           1,123,587
                                                                 -------------
                                                                     2,435,387
                                                                 -------------
Home Equity ABS: 0.56%                
700,000          Emergent Home Equity Loan Trust, 7.080%,               
                      due 12/15/28                                     714,508
                                                                 -------------
                                                                       714,508
                                                                 -------------
   Total Collateralized Mortgage Obligations
                      (Cost $3,068,967)                              3,149,895
                                                                 -------------

Shares                                                                Value     
------                                                            ------------- 
PREFERRED STOCK: 0.70%                                                          
Diversified Financial Services: 0.67% 
    60,000          North Atlantic Trading Co.                   $     855,000
                                                                 -------------
Restaraunts: 0.00%                    
    13,251    X     International Fast Food Corp.                           --
                                                                 -------------
Telecommunications: 0.03%             
     3,236          XO Communications, Inc.                             47,726
                                                                 -------------
                    Total Preferred Stock (Cost $2,001,852)            902,726
                                                                 -------------
WARRANTS: 0.01%                                                               
Building Materials: 0.00%             
       400          Dayton Superior Corp.                        $       8,050

Food/Beverage: 0.00%                  
       370          North Atlantic Trading Co.                               4
                                                                 -------------
Miscellaneous Manufacturing: 0.01%    
       500          Packaged Ice, Inc.                                  10,500
                                                                 -------------
Telecommunications: 0.00%             
       500          Iridium World Communications, Inc.                       5
     1,000          UNIFI Communications, Inc.                              10
                                                                 -------------
                                                                            15
                                                                 -------------
                    Total Warrants (Cost $57,953)                       18,569
                                                                 -------------
Total Long-Term Investments           
                     (Cost $116,994,275)                           118,257,663
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 9.25%                                                   
Repurchase Agreement: 9.25%                     
$11,844,000     State Street Bank & Trust Repurchase Agreement,                 
4.000%, due 06/01/01 (Collateralized by     
$10,405,000 U.S. Treasury Bonds, 7.500%,    
                 Due 11/15/16, Market Value $12,082,806)         $  11,844,000
                                                                 -------------
               Total Short-Term Investments (Cost $11,844,000)      11,844,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $128,838,275)*                  101.58%   $ 130,101,663
                Other Assets and Liabilities-Net         -1.58%      (2,019,813)
                                                       ------    -------------
               Net Assets                              100.00%   $ 128,081,850
                                                       ======    =============

@    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.                                                 
+    Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.                                                                
++   Defaulted security                                                         
&    Payment in-kind security                                                   
@@   Foreign Issuer                                                             
X    Market value determined by Pilgrim Valuation Committee appointed by the    
Fund's Board of Directors.                                            
ADR  American Depository Receipt                                                
*    Cost for federal income tax purposes is $128,879,174. Net unrealized       
appreciation consists of:                                             

               Gross Unrealized Appreciation                     $  11,103,886
                Gross Unrealized Depreciation                        (9,881,397)
                                                                 -------------
               Net Unrealized Appreciation                       $   1,222,489
                                                                 =============

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Convertible                                                                     
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
COMMON STOCK: 15.07%                                                            
Biotechnology: 0.99%                  
    60,000    @     IDEC Pharmaceuticals Corp.                   $   3,696,000
                                                                 -------------
                                                                     3,696,000
                                                                 -------------
Media: 2.11%                          
   127,100          MediaOne Group, Inc.                             7,848,425
                                                                 -------------
                                                                     7,848,425
                                                                 -------------
Oil & Gas: 0.72%                      
    50,000          Transocean Sedco Forex, Inc.                     2,672,500
                                                                 -------------
                                                                     2,672,500
                                                                 -------------
Savings & Loans: 4.43%                
   253,700          Sovereign Bancorp, Inc.                         16,490,500
                                                                 -------------
                                                                    16,490,500
                                                                 -------------
Semiconductors: 5.13%                 
   675,640    @     Advanced Micro Devices                          19,086,830
                                                                 -------------
                                                                    19,086,830
                                                                 -------------
Telecommunications: 0.00%             
     5,098    @     WinStar Communications, Inc.                           459
                                                                 -------------
                                                                           459
                                                                 -------------
Transportation: 1.69%                 
   105,800          United Parcel Service, Inc.                      6,289,810
                                                                 -------------
                                                                     6,289,810
                                                                 -------------
                    Total Common Stock (Cost $52,300,592)           56,084,524
                                                                 -------------
COVERTIBLE PREFERRED STOCKS: 10.63%                                             
Diversified Financial Services: 3.25% 
   207,668          AES Trust VII                                $  12,096,661
                                                                 -------------
                                                                    12,096,661
                                                                 -------------
Electric: 2.88%                       
   104,781          Calpine Capital Trust II                        10,726,955
                                                                 -------------
                                                                    10,726,955
                                                                 -------------
Food: 0.67%                           
    60,000          Suiza Capital Trust II                           2,475,600
                                                                 -------------
                                                                     2,475,600
                                                                 -------------
Media: 0.76%                          
   171,769          UnitedGlobalCom, Inc.                        $   2,834,189
                                                                 -------------
                                                                     2,834,189
                                                                 -------------
Oil & Gas: 1.84%                      
   122,005          Weatherford Intl., Inc.                          6,862,781
                                                                 -------------
                                                                     6,862,781
                                                                 -------------
Retail: 0.05%                         
     3,500          Wendy's Financing I                                182,875
                                                                 -------------
                                                                       182,875
                                                                 -------------
Telecommunications: 1.18%             
    28,411   @@     Global Crossing Ltd.                             4,346,883
    51,932          WinStar Communications, Inc.                        25,974
                                                                 -------------
                                                                     4,372,857
                                                                 -------------
Total Convertible Preferred Stocks    
                      (Cost $42,945,342)                            39,551,918
                                                                 -------------
CONVERTIBLE CORPORATE BONDS: 67.70%                                             
Biotechnology: 6.88%                  
 8,000,000          Aviron, 5.250%, due 02/01/08                 $   8,550,000
2,360,000    @     IDEC Pharmaceuticals Corp., 0.000%,                      
                      due 02/16/19                                   6,018,000
9,511,000          Millennium Pharmaceuticals, 5.500%,                      
                      due 01/15/07                                  11,044,648
                                                                 -------------
                                                                    25,612,648
                                                                 -------------
Computers: 8.28%                      
12,574,000    #     ASML Lithography Holding NV, 4.250%,                      
                      due 11/30/04                                  12,228,215
18,126,000          Hewlett-Packard Co., 0.010%, due 10/14/17       10,082,587
 2,729,000          Veritas Software Corp., 1.856%, due 08/13/06     5,348,840
   450,000          Veritas Software Corp., 5.250%, due 11/01/04     3,161,813
                                                                 -------------
                                                                    30,821,455
                                                                 -------------
Distribution/Wholesale: 1.24%         
 5,000,000          Costco Wholesale Corp., 0.010%, due 08/19/17     4,612,500
                                                                 -------------
                                                                     4,612,500
                                                                 -------------
Diversified Financial Services: 0.93% 
 2,000,000          Merrill Lynch & Co., 0.000%, due 05/23/31    $   1,042,500
500,000          Orion Power Holdings, Inc., 4.500%,                    
                      due 06/01/08                                     500,000
3,500,000    #     Verizon Global Funding Corp., 0.000%,                    
                      due 05/15/21                                   1,907,500
                                                                 -------------
                                                                     3,450,000
                                                                 -------------
Electronics: 8.45%                    
 4,034,000          OAK Industries, Inc., 4.875%, due 03/01/08       4,971,905
 5,000,000          Sanmina Corp., 0.000%, due 09/12/20              1,837,500
 2,771,000          Sanmina Corp., 4.250%, due 05/01/04              3,872,472
35,128,000          Solectron Corp., 0.010%, due 05/08/20           18,266,560
 5,000,000          Solectron Corp., 0.000%, due 01/27/19            2,506,250
                                                                 -------------
                                                                    31,454,687
                                                                 -------------
Healthcare-Services: 4.39%            
6,946,000    #     Universal Health Services, 0.426%,                       
                      due 06/23/20                                   3,828,983
16,000,000          Wellpoint Health Networks, 0.000%,                        
                      due 07/02/19                                  12,500,000
                                                                 -------------
                                                                    16,328,983
                                                                 -------------
Media: 7.89%                          
12,997,000          AT&T -- Liberty Media Corp., 4.000%,                      
                      due 11/15/29                                   9,455,318
20,594,000          Clear Channel Communications, 1.500%,                     
                      due 12/01/02                                  19,924,695
                                                                 -------------
                                                                    29,380,013
                                                                 -------------

See Accompanying Notes to Financial Statements

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Pilgrim                                                                         
Convertible                                                                     
Fund                                                                            

 PORTFOLIO OF INVESTMENTS as of May 31, 2001 (Continued)
--------------------------------------------------------------------------------

Shares                                                                Value     
------                                                            ------------- 
Oil & Gas: 10.51%                     
7,556,000          Anadarko Petroleum Corp., 0.000%,                        
                      due 03/07/20                               $   5,950,350
 2,518,000          Devon Energy Corp., 4.900%, due 08/15/08         2,599,835
13,235,000          Kerr-McGee Corp., 5.250%, due 02/15/10          17,056,606
21,703,000          Transocean Sedco Forex, Inc., 0.000%,                     
                      due 03/24/20                                  13,537,246
                                                                 -------------
                                                                    39,144,037
                                                                 -------------
Pharmaceuticals: 3.89%                
 3,200,000          Alza Corp., 0.000%, due 07/28/20                 2,292,000
 2,500,000          COR Therapeutics, Inc., 5.000%, due 03/01/07     3,087,500
 5,426,000   @@     Elan Finance Corp. Ltd., 0.000%, due 12/14/18    4,612,100
 6,148,000    #     Roche Holdings, Inc., 0.010%, due 01/19/15       4,480,355
                                                                 -------------
                                                                    14,471,955
                                                                 -------------
Semiconductors: 5.06%                 
8,466,000          Cypress Semiconductor Corp., 4.000%,                     
                      due 02/01/05                                   7,513,575
 8,058,000   @@     STMicroelectronics NV, 0.010%, due 09/22/09      8,652,278
 4,000,000  @@,#    STMicroelectronics NV, 0.000%, due 11/16/10      2,660,000
                                                                 -------------
                                                                    18,825,853
                                                                 -------------
Software: 2.05%                       
 6,500,000          Nvidia Corp., 4.750%, due 10/15/07               7,653,750
                                                                 -------------
                                                                     7,653,750
                                                                 -------------
Telecommunications: 8.13%             
 3,000,000          CIENA Corp., 3.750%, due 02/01/08                2,542,500
13,000,000          Corning, Inc., 0.000%, due 11/08/15              7,686,250
2,425,000          Gilat Satellite Networks Ltd., 4.250%,                   
                      due 03/15/05                                   1,461,063
 8,471,000          Juniper Networks, Inc., 4.750%, due 03/15/07     6,300,305
14,741,000          Nextel Communications, Inc., 5.250%,                      
                      due 01/15/10                                   9,157,846
 4,000,000          Oni Systems Corp., 5.000%, due 10/15/05          3,105,000
                                                                 -------------
                                                                    30,252,964
                                                                 -------------
Convertible Corporate Bonds           
                      (Cost $298,441,378)                          252,008,845
                                                                 -------------
WARRANTS: 2.65%                                                                 
Savings & Loans: 2.65%                
   190,000    #     Washington Mutual, Inc.                          9,880,000
                                                                 -------------
                                                                     9,880,000
                                                                 -------------
                    Total Warrants (Cost $9,793,100)                 9,880,000
                                                                 -------------
Total Long-Term Investments           
                      (Cost $403,480,412)                          357,525,287
                                                                 -------------

Principal                                                                       
Amount                                                                Value     
---------                                                         ------------- 
SHORT TERM INVESTMENTS: 3.94%                                                   
Repurchase Agreement: 3.94%                     
$14,676,000     State Street Bank Repurchase Agreement 4.000%,                  
due 06/01/01, (Collateralized by $11,260,000
U.S. Treasury Bonds, 8.875%, Due 08/15/17,  
                 Market Value $14,975,361)                       $  14,676,000
                                                                 -------------
               Total Short-Term Investments (Cost $14,676,000)      14,676,000
                                                                 -------------
Total Investments in Securities                 
                 (Cost $418,156,412)*                   99.99%   $ 372,201,287
               Other Assets and Liabilities-Net          0.01%          51,724
                                                       ------    -------------
               Net Assets                              100.00%   $ 372,253,011
                                                       ======    =============

@    Non-income producing security                                              
@@   Foreign Issuer                                                             
#    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.                                                 
*    Cost for federal income tax purposes is $420,888,677. Net unrealized       
depreciation consists of:                                             

               Gross Unrealized Appreciation                     $  22,988,029
                Gross Unrealized Depreciation                       (71,675,419)
                                                                 -------------
                Net Unrealized Depreciation                       $ (48,687,390)
                                                                 =============

See Accompanying Notes to Financial Statements

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SHAREHOLDER MEETINGS (Unaudited)
--------------------------------------------------------------------------------

A special meeting of shareholders of the ING Funds, held February 22, 2001, at  
the offices of ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ     
85258.                                                                          

A brief description of each matter voted upon as well as the results are        
outlined below:                                                                 

Shares voted    
                    Shares     against or      Shares      Broker      Total
                  voted for     withheld     abstained    non-vote     Voted
                  ---------     --------     ---------    --------     -----
ING Focus Fund                                                                  

1.   To approve an agreement and plan of reorganization providing for the       
     acquisition of all of the assets and liabilities of each class of ING Focus
Fund by Pilgrim LargeCap Growth Fund in exchange for shares in the    
corresponding class of Pilgrim LargeCap Growth Fund and the subsequent
liquidation of ING Focus Fund.                                        

                    2,878,685        5,656       17,564        --      2,901,905

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    2,862,427        9,292       30,186        --      2,901,905

ING Large Cap Growth                                                            

1.   To approve an agreement and plan of reorganization providing for the       
     acquisition of all of the assets and liabilities of each class of ING Large
   Cap Growth Fund by Pilgrim LargeCap Growth Fund in exchange for shares in
    the corresponding class of Pilgrim LargeCap Growth Fund and the subsequent
liquidation of ING Large Cap Growth Fund.                             

                    2,943,616       16,367       36,711        --      2,996,694

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    2,942,444        8,527       45,723        --      2,996,694

ING Mid Cap Growth                                                              

1.   To approve an agreement and plan of reorganization providing for the       
   acquisition of all of the assets and liabilities of each class of ING Mid
     Cap Growth Fund by Pilgrim MidCap Opportunities Fund in exchange for shares
 in the corresponding class of Pilgrim MidCap Opportunities Fund and the
subsequent liquidation of ING Mid Cap Growth Fund.                    

                    2,592,947        3,429       11,450        --      2,607,826

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    2,591,049        2,303       14,474        --      2,607,826

ING Small Cap Growth                                                            

1.   To approve an agreement and plan of reorganization providing for the       
     acquisition of all of the assets and liabilities of each class of ING Small
Cap Growth Fund by Pilgrim SmallCap Opportunities Fund in exchange for
  shares in the corresponding class of Pilgrim SmallCap Opportunities Fund
and the subsequent liquidation of ING Small Cap Growth Fund.          

                    3,007,395        7,160       12,232        --      3,026,787

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    3,003,117        5,806       17,864        --      3,026,787

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SHAREHOLDER MEETINGS (Unaudited)
--------------------------------------------------------------------------------

Shares voted    
                    Shares     against or      Shares      Broker      Total
                  voted for     withheld     abstained    non-vote     Voted
                  ---------     --------     ---------    --------     -----

A special meeting of shareholders of the Pilgrim Group held February 23, 2001,  
at the offices of ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ  
85258.                                                                          

A brief description of each matter voted upon as well as the results are        
outlined below:                                                                 

Pilgrim Large Cap Leaders                                                       

1.   To approve an agreement and plan of reorganization providing for the       
     aquisition of all of the assets and liabilities of Pilgrim LargeCap Leaders
by Pilgrim MagnaCap Fund.                                             

                    1,174,456       23,913       41,971        --      1,240,340

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    1,159,381       25,484       55,475        --      1,240,340

Pilgrim MidCap Value Fund                                                       

1.   To approve an agreement and plan of reorganization providing for the       
 aquisition of all of the assets and liabilities of Pilgrim MidCap Value
Fund by Pilgrim MagnaCap Fund.                                        

                    1,362,340       49,581       37,110        --      1,449,031

2.   To transact such other business as may properly come before the Special    
Meeting or any adjournments thereof.                                  

                    1,391,606       23,061       34,364        --      1,449,031

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-------                                                                         
Pilgrim                                                                         
Funds                                                                           
-------                                                                         

 TAX INFORMATION (Unaudited)
--------------------------------------------------------------------------------

Dividends paid during the periods ended May 31, 2001 were as follows:           

Fund Name                       Type          Per Share Amount                  
---------                       ----          ----------------                  
MagnaCap                                                                        
Class A                        NII               $0.0877                    
Class B                        NII               $0.0041                    
Class C                        NII               $0.0041                    
Class M                        NII               $0.0055                    
Class Q                        NII               $0.1027                    
All Classes                   LTCG               $1.8760                    

LargeCap Growth                                                                 
All Classes                   STCG               $0.1710                    
All Classes                   LTCG               $0.2950                    

MidCap Growth                                                                   
Class A                       STCG               $0.8256                    
Class B                       STCG               $0.9656                    
Class C                       STCG               $0.7583                    
Class Q                       STCG               $1.0454                    
Class A                       LTCG               $3.8774                    
Class B                       LTCG               $4.5349                    
Class C                       LTCG               $3.5611                    
Class Q                       LTCG               $4.9097                    

Growth + Value                                                                  
All Classes                   LTCG               $2.1526                    
All Classes                    ROC               $0.0629                    

SmallCap Growth                                                                 
Class A                       LTCG               $2.0134                    
Class B                       LTCG               $2.5150                    
Class C                       LTCG               $1.9673                    
Class Q                       LTCG               $2.2417                    

Balanced                                                                        
Class A                        NII               $0.5051                    
Class B                        NII               $0.3937                    
Class C                        NII               $0.3898                    
Class Q                        NII               $0.4563                    
Class T                        NII               $0.4799                    
Class A                       STCG               $0.0826                    
Class B                       STCG               $0.0885                    
Class C                       STCG               $0.0794                    
Class Q                       STCG               $0.0821                    
Class T                       STCG               $0.0883                    
Class A                       LTCG               $1.0693                    
Class B                       LTCG               $1.1465                    
Class C                       LTCG               $1.0282                    
Class Q                       LTCG               $1.0628                    
Class T                       LTCG               $1.1443                    

Convertible                                                                     
Class A                        NII               $0.5061                    
Class B                        NII               $0.3373                    
Class C                        NII               $0.3455                    
Class Q                        NII               $0.5288                    
Class A                       STCG               $2.8578                    
Class B                       STCG               $3.1192                    
Class C                       STCG               $2.9252                    
Class Q                       STCG               $2.7688                    
Class A                       LTCG               $1.9978                    
Class B                       LTCG               $2.1805                    
Class C                       LTCG               $2.0448                    
Class Q                       LTCG               $1.9355                    

----------                                                                      
NII -- Net investment income                                                    
STCG -- Short-term capital gain                                                 
LTCG -- Long-term capital gain                                                  
ROC -- Return of Capital                                                        

The above figures may differ from those cited elsewhere in this report due to   
differences in the calculation of income and gains for Securities and Exchange  
Commission (book) purposes and Internal Revenue Service (tax) purposes.         

Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investments in the Funds. In January 2001,     
shareholders, excluding corporate shareholders, received an IRS Form 1099 DIV   
regarding the federal tax status of the dividends and distributions received by 
them in calendar 2000.                                                          

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INVESTMENT MANAGER                                                              

ING Pilgrim Investments, LLC                                                    
7337 E. Doubletree Ranch Road                                                   
Scottsdale, Arizona 85258                                                       

ADMINISTRATOR                                                                   

ING Pilgrim Group, LLC                                                          
7337 E. Doubletree Ranch Road                                                   
Scottsdale, Arizona 85258                                                       

DISTRIBUTOR                                                                     

ING Pilgrim Securities, Inc.                                                    
7337 E. Doubletree Ranch Road                                                   
Scottsdale, Arizona 85258                                                       
1-800-334-3444                                                                  

TRANSFER AGENT                                                                  

DST Systems, Inc.                                                               
P.O. Box 419368                                                                 
Kansas City, Missouri 64141-6368                                                

CUSTODIAN                                                                       

State Street Bank & Trust                                                       
One Heritage Drive                                                              
North Quincy, Massachusetts 02171                                               

State Street Bank & Trust                                                       
801 Pennsylvania Avenue                                                         
Kansas City, Missouri 64105                                                     

LEGAL COUNSEL                                                                   

Dechert                                                                         
1775 Eye Street, N.W.                                                           
Washington, D.C. 20006                                                          

INDEPENDENT AUDITORS                                                            

KPMG LLP                                                                        
355 South Grand Avenue                                                          
Los Angeles, California 90071                                                   

Prospectus containing more complete information regarding the Funds, including  
charges and expenses, may be obtained by calling ING Pilgrim Securities, Inc.   
Distributor at 1-800-334-3444. Please read the prospectus carefully before you  
invest or send money.                                                           

[LOGO] ING PILGRIM                                         QUSEQANN053101-073001

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘N-30D’ Filing		Date		First		Last			Other Filings
Corrected on:		11/27/02
Filed as of:		8/2/01							497
Filed on:		8/1/01							485APOS,  485BPOS,  497
		7/15/01		3
		7/9/01		27					NSAR-A/A
		7/5/01		76
		6/29/01		76					24F-2NT,  NSAR-A
For Period End:		5/31/01		1		103			24F-2NT,  485APOS,  485BPOS,  497,  N-30D,  NSAR-B,  NSAR-BT
		3/23/01		75					24F-2NT
		2/27/01		57					497
		2/26/01		57
		2/23/01		75		102
		2/22/01		101
		12/31/00		27		43			24F-2NT,  N-30D,  NSAR-A,  NSAR-B,  NT-NSAR
		12/5/00		27
		11/1/00		27					485BPOS
		10/31/00		16		52			24F-2NT,  N-30D,  NSAR-B,  NTFNSAR
		9/8/00		3		57			N-30D
		9/1/00		3		57
		6/30/00		39		46			24F-2NT,  N-30D,  NSAR-A,  NSAR-B,  NSAR-B/A
		6/5/00		52		70
		6/1/00		48		66
		5/31/00		6		24
		4/4/00		47		71			497
		3/31/00		73					NSAR-A
		3/1/00		68					NSAR-A,  NSAR-B
		2/17/00		27
		1/1/00		27
		12/31/99		41		43			24F-2NT,  N-30D,  NSAR-A,  NSAR-B
		11/22/99		64
		11/19/99		46
		10/31/99		40		43			24F-2NT,  N-30D,  NSAR-B
		6/30/99		27		45			24F-2NT,  N-30D,  N-30D/A,  NSAR-A,  NSAR-B,  NTFNSAR
		6/1/99		64					497
		5/24/99		49		56			485BPOS
		5/7/99		27					DEF 14A,  PRES14A
		4/1/99		27
		12/31/98		61					24F-2NT,  485APOS,  N-30D,  NSAR-A,  NSAR-B
		12/30/98		40
		7/24/98		57					497
		7/1/98		62
		12/31/97		24					24F-2NT,  485APOS,  N-30D,  NSAR-A,  NSAR-B
		7/21/97		49
		7/31/96		62
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