Annual Report
CLASS: Q
June 30, 1999
U.S. EQUITY FUNDS
Pilgrim LargeCap Growth Fund
Pilgrim MidCap Growth Fund
Pilgrim SmallCap Growth Fund
INTERNATIONAL EQUITY FUNDS
Pilgrim Worldwide Growth Fund
Pilgrim International Core Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim Emerging Countries Fund
INCOME FUNDS
Pilgrim Strategic Income Fund
Pilgrim High Yield Fund
Pilgrim High Yield Fund II
EQUITY & INCOME FUNDS
Pilgrim Balanced Fund
Pilgrim Convertible Fund
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Pilgrim
Funds
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TABLE OF CONTENTS
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Chairman's Message .............................. 1
Portfolio Managers' Reports:
U.S. Equity Funds .......................... 2
International Equity Funds ................. 8
Income Funds ............................... 16
Equity & Income Funds ...................... 22
Report of Independent Auditors .................. 27
Statements of Assets and Liabilities ............ 28
Statements of Operations ........................ 36
Statements of Changes in Net Assets ............. 42
Financial Highlights:
U.S. Equity Funds .......................... 49
International Equity Funds ................. 52
Income Funds ............................... 56
Equity & Income Funds ...................... 59
Notes to Financial Statements ................... 61
Portfolios of Investments:
U.S. Equity Funds .......................... 76
International Equity Funds ................. 88
Income Funds ............................... 111
Equity & Income Funds ...................... 123
Shareholder Meetings ............................ 132
Other Information ............................... 135
Tax Information ................................. 136
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Pilgrim
Funds
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CHAIRMAN'S MESSAGE
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Dear Shareholder:
We are pleased to present the Annual Report for those Pilgrim Funds which offer
Q classes(1). Effective May 21, 1999 Pilgrim assumed management of the
Nicholas-Applegate retail funds. Our fund family now has 20 funds of varying
types which provide more core investment choices for the serious investor.
There are three U.S. Equity Funds, four International Equity Funds, three Income
Funds and two Equity & Income Funds which are included in this Annual Report.
Strategic Income, High Yield, High Yield II and Balanced Funds are all managed
by seasoned investment professionals at Pilgrim Investments, Inc. LargeCap
Growth, MidCap Growth, SmallCap Growth, Worldwide Growth, International Core
Growth, International SmallCap Growth, Emerging Countries and Convertible Funds
continue to be managed by Nicholas-Applegate Capital Management who has
delivered solid gains to shareholders in the past. Each money manager has
extensive knowledge and proven experience in their specialized market segments.
At Pilgrim, we are dedicated to providing core investments for the serious
investor. We believe that the key to success is matching quality core
investments to the individual needs of investors. Core investments are the
foundation of every portfolio and the basis of other important investment
decisions. Pilgrim prides itself on providing a family of core investments
designed to help you reach your financial goals. Our goal is for every investor
to have a successful investment experience.TM/SM
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim Group, Inc.
August 25, 1999
(1) The Annual Report for all other Pilgrim Fund classes has been issued
separately.
1
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U.S. Equity
Funds
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Pilgrim
LargeCap
Growth Fund
PORTFOLIO MANAGER'S REPORT
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MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Andrew Gallagher, Partner, Portfolio Manager; Bill Chenoweth,
CFA, Partner, Portfolio Manager; Thomas Sullivan, Portfolio Manager; Emmy
Sobieski, CFA, Portfolio Manager; Trisha Schuster, CFA, Portfolio Manager.
GOAL: Pilgrim LargeCap Growth Fund seeks long-term capital appreciation by
investing primarily in equity securities of large U.S. companies.
MARKET OVERVIEW: During the second quarter of 1999, returns for large-cap stocks
were solid. The S&P 500 Index, an unmanaged index of the stocks of approximately
500 large-capitalization U.S. companies, and Russell 1000 Index, an unmanaged
index of the 1,000 largest companies in the Russell 3000 Index, each gained
7.1%. However, their returns were exceeded by small-caps and mid-caps for the
first time since the third quarter of 1997. For much of the past few years,
investors have shown a decided preference for the liquidity and safety of
large-cap stocks, especially a select few companies.
During the second quarter, investors showed renewed interest in the fundamental
strengths and attractive valuations within smaller-cap segments. The U.S. stock
market was also characterized by higher long-term interest rates and the
outperformance of value versus growth stocks.
PERFORMANCE: For the three-month period ending June 30, 1999*, the Fund's Class
Q shares provided a total return of 12.64%, compared to the Russell 1000 Growth
Index, an unmanaged index consisting of those companies among the Russell 1000
Index with higher than average price-to-book ratios and forecasted growth, which
gained 3.85% for the same period.
PORTFOLIO SPECIFICS: Superior stock selection, especially in the consumer
services and technology sectors, resulted in the fund's outperformance. The
top-performing holdings in the quarter were MGM Grand, AT&T and Republic
Service. In addition to strong gambling operations, MGM benefits from its
convention center operations, a recent acquisition and cost-cutting efforts.
AT&T continues to build on its traditional strength in long-distance
communications by branching out into wireless and cable.
During the quarter, as a result of our bottom-up approach, we increased our
exposure to technology-related stocks to approximately 30% of the fund. We
trimmed exposure to consumer non-durables, consumer services and retail stocks
during the quarter.
MARKET OUTLOOK: We view the Fed's decision to raise short-term interest rates by
25 basis points on the last day of the quarter as a sign of its proactive
approach. That move could keep the economy in a modest growth phase and limit
inflation concerns, both positives for the stock market. In addition, the Fed's
announcement that it had changed its bias from "tightening" to "neutral" may
relieve some investor worries about the potential for additional rate hikes in
the near future. This bodes well for growth stocks. We are encouraged by the
broader advance stocks displayed in the second quarter. The environment for
active management has improved.
We continue to see robust growth opportunities within the technology sector,
especially the telecommunications and telecommunications equipment industries
where demand remains strong. In addition, wireless communications, particularly
among companies specializing in digital technology, remains an area of strength.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
2
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7/21/97 6/98 6/30/99
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Pilgrim LargeCap Growth Fund Class Q 10,000 13,606 23,264
Russell 1000 Growth Index 10,000 12,428 16,018
Average Annual Total Returns
for the periods ended June 30, 1999
-----------------------------------
Since Inception
1 Year 7/21/97
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Class Q 70.98% 54.53%
Russell 1000 Growth Index 27.27% 27.20%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth Index, an
unmanaged index consisting of those companies among the Russell 1000 Index with
higher price-to-book ratios and forecasted growth. The Index has an inherent
performance advantage over the Fund since it has no cash in its portfolio and
incurs no operating expenses. An investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
three-year period. Total returns would have been lower has 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities.
3
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U.S. Equity
Funds
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Pilgrim
MidCap
Growth Fund
PORTFOLIO MANAGER'S REPORT
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MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Bill Chenoweth, CFA, Partner, Portfolio Manager; Andrew
Gallagher, Partner, Portfolio Manager; Thomas Sullivan, Portfolio Manager; Emmy
Sobieski, CFA, Portfolio Manager; Trisha Schuster, CFA, Portfolio Manager; Tom
Smith, Investment Analyst.
GOAL: Pilgrim MidCap Growth Fund seeks maximum long-term capital appreciation
through investments primarily in equity securities of medium-sized U.S.
companies.
MARKET OVERVIEW: For much of the second quarter, the U.S. equity market was
characterized by a resurgence among value stocks. While investors showed renewed
interest in the small-cap and mid-cap segments of the market, value stocks
outperformed. In this difficult environment, our growth-oriented investment
style was not in favor.
In addition, rising interest rates during the quarter impacted stocks with
strong earnings growth rates and high price-to-earnings ratios, often precisely
the types of stocks in which we invest.
PERFORMANCE: During the three-month period ended June 30, 1999*, the Fund's
Class Q shares provided a total return of 7.16%, compared to the Russell MidCap
Growth Index, an unmanaged index consisting of the 800 smallest companies in the
Russell 1000 Index with higher than average price-to-book ratios and forecasted
growth, which gained 10.34% for the same period.
PORTFOLIO SPECIFICS: Our significant weighting in technology-related industries
negatively affected the fund's performance. Given the market dynamics and
investor preference for value-oriented issues, technology stocks were
vulnerable.
However, later in the quarter, fund returns benefited from the rebound among
select technology stocks. We continue to see promise within the technology
sector on a stock-specific basis, especially within the telecommunications
industry, due to escalating demand.
In fact, among the fund's best-performing holdings for the quarter were Conexant
Systems, a manufacturer of semiconductor products for communications
applications, and Winstar Communications, a local and long-distance
telecommunications services provider.
As a result of the continued application of our bottom-up stock selection
process, we increased our exposure to technology-related and energy-related
stocks, and reduced our weighting in financial-related stocks versus the prior
quarter.
MARKET OUTLOOK: Based on the fundamental strengths, the outlook for all our
holdings right now is extremely encouraging. While the potential for rising
interest rates remains a concern, we think the Fed's proactive efforts should
keep the economy in a modest growth phase and limit inflation, both good factors
for stocks. Further, our bottom-up approach is highly adaptable and helps us
capture areas of strength wherever they're occurring. We expect earnings will
continue to accelerate, and our style of stock picking will continue to do well.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
4
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<TABLE>
<CAPTION>
6/30/94 6/95 6/96 6/97 6/98 6/30/99
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<S> <C> <C> <C> <C> <C> <C>
Pilgrim MidCap Growth Fund Class Q 10,000 12,136 15,978 16,906 21,051 26,423
Russell MidCap Growth Index 10,000 12,643 15,627 18,379 22,791 27,420
</TABLE>
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
1 Year 6/30/94
------ ---------------
Class Q 25.52% 21.45%
Russell MidCap Growth Index 20.31% 22.35%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim MidCap Growth Fund against the Russell MidCap Growth Index, an
unmanaged index consisting of the 800 smallest companies in the Russell 1000
Index with higher than average price-to-book ratios and forecasted growth. The
Index has an inherent performance advantage over the Fund since it has no cash
in its portfolio and incurs no operating expenses. An investor cannot invest
directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fees and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. To the extent the Fund invests in smallcap companies,
stocks of smaller companies may entail greater price variability than those of
larger companies.
5
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U.S. Equity
Funds
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Pilgrim
SmallCap
Growth Fund
PORTFOLIO MANAGER'S REPORT
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MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Thomas E. Bleakley, Partner, Portfolio Manager; Aaron M.
Harris, Portfolio Manager; John C. McCraw, Portfolio Manager; Paul E. Cluskey,
Portfolio Manager; Travis Prentice, Investment Analyst.
GOAL: Pilgrim SmallCap Growth Fund seeks maximum long-term capital appreciation
through investments primarily in equity securities of small-sized U.S.
companies.
MARKET OVERVIEW: Similar to mid-cap stocks, small-cap stocks had been largely
overlooked for much of the past few years. However, in the second quarter,
investors returned and performance results for small-caps outpaced large-caps
for the first time since the third quarter of 1997.
In addition to the resurgence of small-cap stocks, the second quarter was
characterized by higher long-term interest rates and the outperformance of value
versus growth stocks. Amid a rising interest rate environment, investors turned
to lower valuation stocks. The Russell 2000 Value Index, an unmanaged index
consisting of those Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth values, gained 16.6% versus a 14.8% advance for the
Russell 2000 Growth Index, an unmanaged index consisting of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth values.
PERFORMANCE: During the three-month period ended June 30, 1999*, the Fund's
Class Q shares provided a total return of 14.17% compared to the Russell 2000
Growth Index, which gained 14.75% for the same period.
PORTFOLIO SPECIFICS: Holdings in the financial services and healthcare sectors
boosted relative performance during the quarter. Among the best-performing
financial services stocks were Metris and E-Loan. Strong-performing
healthcare-related stocks included Mede America and Andrx.
Exposure to technology-related stocks negatively affected relative performance
during the quarter. Internet-leveraged stocks that came under profit-taking
pressure such as Earthweb, NetObjects and Fatbrain.com detracted from returns.
While returns for technology-related stocks were disappointing, especially early
in the quarter, they rebounded sharply and we continue to see robust growth
opportunities within the technology sector. During the quarter, we reduced our
exposure to software stocks amid sluggish sales stemming from uncertainty
regarding the Y2K issue. However, we continue to find other exciting
stock-specific opportunities within the technology sector. Holdings in the
technology-related and healthcare sectors continue to comprise more than 40% of
the fund.
MARKET OUTLOOK: The fundamental strengths of fund holdings inspire optimism. We
continue to find promising stocks meeting our investment criteria. Further, we
view the Fed's decision to raise short-term interest rates by 25 basis points on
the last day of the quarter as a sign of its proactive approach. That move could
keep the economy in a modest growth phase and limit inflation concerns, both
positives for the stock market.
We are encouraged by the broader advance stocks displayed in the second quarter.
The environment for active management has improved.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
6
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8/31/95 6/96 6/97 6/98 6/30/99
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Pilgrim SmallCap Growth Fund Class Q 10,000 12,440 13,033 14,942 18,047
Russell 2000 Growth Index 10,000 11,593 12,117 13,715 14,855
Average Annual Total Returns for
the Periods Ended June 30, 1999
-------------------------------
Since Inception
1 Year 8/31/95
----------- -----------------
Class Q 20.78% 16.67%
Russell 2000 Growth Index 8.30% 10.88%
Based on a $10,000 initial investment, the graph above illustrates 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 and incurs no operating expenses. An investor cannot
invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): In exchange for higher growth potential, stocks of
smaller companies may entail greater price variability than those of larger
companies. International investing does pose special risks, including currency
fluctuation and political risks not found in investments that are solely
domestic.
7
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International
Equity Funds
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Pilgrim
Worldwide
Growth Fund
PORTFOLIO MANAGER'S REPORT
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MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Lawrence S. Speidell, CFA, Partner, Director of
Global/Systematic Portfolio Management and Research; Andrew B. Gallagher,
Partner, Portfolio Manager; Loretta J. Morris, Partner, Portfolio Manager;
Ernesto Ramos, Ph.D., Senior Portfolio Manager; Melisa A. Grigolite, Portfolio
Manager.
GOAL: Pilgrim Worldwide Growth Fund seeks maximum long-term capital appreciation
through investments in equity securities of issuers located in countries around
the world, which may include the U.S.
MARKET OVERVIEW: The positive trends of mergers and acquisitions, economic
recoveries in Asian countries, as well as the continued low-inflation
environment worldwide boosted returns for global equity markets in the second
quarter.
In the United States, the potent combination of robust economic growth and
non-existent inflation drove large-cap stocks to record highs, with the S&P 500
Index, an unmanaged index of the stocks of approximately 500
large-capitalization U.S. Companies, gaining 7.1% in the second quarter. In
Japan, a much-anticipated economic recovery in the first quarter carried the
country's equity market higher. Japan's gross domestic product grew 1.9% in the
first three months of 1999 following six quarters of negative growth. In Europe,
optimism that economic growth will pick up in the second half of 1999 also
boosted equity market returns.
Equity markets around the globe benefited from the positive trends of:
* merger and acquisition activities,
* corporate restructuring, and
* privatization and deregulation of industries.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 10.29% compared to the MSCI World Index, an
unmanaged index comprised of more than 1400 securities listed on exchanges in
the U.S., Europe, Canada, Australia, New Zealand and the Far East, which gained
4.48% for the same period.
PORTFOLIO SPECIFICS: Stock selection in Japan, the Netherlands and Finland
positively impacted returns. Among the fund's top-performing holdings during the
period were Thailand-based Siam Commercial Bank, Japan's Softbank Corp., a
software/Internet company, and STMicroelectronics, a semiconductor manufacturer
based in the Netherlands.
We increased our weighting in the Pacific Rim to over 13% as of June 30 from
about 9% at the end of March as we continue to find stocks benefiting from the
positive changes in the region. Our bottom-up stock selection approach also
helped us uncover exciting opportunities in Europe, where the fund had over a
24% weighting as of the end of June. The fund's weighting in the United States
and Canada stood at over 51% during the period.
MARKET OUTLOOK: The long-term prospects for global investing remain promising as
economic growth in many countries is expected to improve throughout 1999 and
2000. Factors such as the resumption of consumer demand in European countries
and the economic recovery in emerging Asian nations and in Japan are seen to
provide a favorable backdrop for stock pickers.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
8
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8/31/95 6/96 6/97 6/98 6/30/99
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Pilgrim Worldwide Growth Fund Class Q 10,000 11,376 13,792 17,328 23,956
MSCI World Index 10,000 11,391 13,720 15,851 18,114
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
1 Year 8/31/95
------ ---------------
Class Q 38.25% 25.62%
MSCI World Index 14.28% 16.77%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim Worldwide Growth Fund against the Morgan Stanley Capital
International (MSCI) World Index. The Index has an inherent performance
advantage over the Fund since it has no cash in its portfolio and incurs no
operating expenses. An investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including currency flucuation and political risks not found in investments that
are solely domestic.
The Fund may invest in companies located in countries with emerging securities
markets when the sub-advisor believes they present attractive investment
opportunities. Risks of foreign investing are generally intensified for
investments in emerging markets.
9
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International
Equity Funds
- -----------
Pilgrim
International Core
Growth Fund
PORTFOLIO MANAGER'S REPORT
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MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Lawrence S. Speidell, CFA, Partner, Director of
Global/Systematic Portfolio Management and Research; Loretta J. Morris, Partner,
Portfolio Manager; Ernesto Ramos, Ph.D., Senior Portfolio Manager; Melisa A.
Grigolite, Portfolio Manager.
GOAL: Pilgrim International Core Growth Fund seeks maximum long-term capital
appreciation through investments primarily in companies located outside the
United States and whose capitalizations are in the top 75% of publicly-traded
companies in their countries.
MARKET OVERVIEW: During the second quarter, evidence of strong economic growth
in the United States triggered rising interest rates and inflation concerns.
Among international markets, yield curves steepened in concert with the U.S.
market as investors feared monetary tightening would be needed to curb inflation
pressures and crimp a robust U.S. economy. Extending that scenario, investors
looked ahead and feared slower U.S. economic growth would negatively impact the
rest of the world. Despite these fears, non-U.S. stocks posted gains.
International equity markets benefited from the positive trends of:
* merger and acquisition activities,
* corporate restructuring, and
* privatization and deregulation of industries.
In Japan, evidence of economic recovery, as reflected by the 1.9% rise in the
country's Gross Domestic Product (GDP) in the first quarter of 1999, contributed
to the favorable environment in international investing late in the quarter. The
positive GDP figure, which ended six quarters of negative growth, signaled the
return of investor confidence in the country during the period.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 6.92%, compared to the MSCI EAFE Index, an
unmanaged index of major overseas markets, which gained 2.19% for the same
period.
PORTFOLIO SPECIFICS: Stock selection in Japan and the Netherlands positively
impacted returns for the fund. Holdings in the technology, retail trade, and
commercial/ industrial sectors contributed to gains. We have uncovered exciting
opportunities on a stock-by-stock basis in Japan. Companies such as: Softbank
Corp., a software/Internet firm; Ryohin Keikaku, a retail company; and Shohkoh
Fund, a lending firm, were among our best-performing holdings in the period.
In the United Kingdom, we own ARM Holdings PLC, the fund's top contributor in
the second quarter. The company designs reduced instruction set computing (RISC)
microprocessors. It licenses and sells its technology and products to
semiconductor and electronics manufacturers, including Alcatel, Intel, Lucent,
Samsung, Sony and Texas Instruments.
As of June 30, the fund had a 51% weighting in Europe and 32% in the Pacific
Rim.
MARKET OUTLOOK: Looking ahead, the long-term prospects for international
investing remain promising as economic growth in many countries is expected to
improve throughout 1999 and 2000. Factors such as the resumption of consumer
demand in European countries, and the economic recovery in emerging Asian
nations and in Japan are seen to provide a favorable backdrop for stock pickers.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
10
<PAGE>
- --------------------------------------------------------------------------------
2/28/97 6/97 6/98 6/30/99
------- ---- ---- -------
Pilgrim Int'l Core Growth Fund Class Q 10,000 11,952 14,856 15,818
MSCI EAFE Index 10,000 11,281 11,794 12,507
Average Annual Total Returns for the
Periods Ended June 30, 1999
------------------------------------
Since Inception
1 Year 2/28/97
------ ---------------
Class Q 6.47% 21.65%
MSCI EAFE Index 6.05% 10.06%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim International Core Growth Fund against the Morgan Stanley
Capital International Europe, Australia, Far East Index, an unmanaged index of
major overseas markets. The Index has an inherent performance advantage over the
Fund since it has no cash in its portfolio and incurs no operating expenses. An
investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including fluctuation and political risks not found in investments that are
solely domestic.
11
<PAGE>
- -------------
International
Equity Funds
- -------------
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Lawrence S. Speidell, CFA, Partner, Director of
Global/Systematic Portfolio Management and Research; Loretta J. Morris, Partner,
Portfolio Manager; Ernesto Ramos, Ph.D., Senior Portfolio Manager; Melisa
Grigolite, Portfolio Manager.
GOAL: Pilgrim International SmallCap Growth Fund seeks maximum long-term capital
appreciation through investments primarily in small companies located outside
the United States, emphasizing the bottom 75% of publicly-traded companies as
measured by market capitalization in each country.
MARKET OVERVIEW: International small-caps have delivered solid gains in the
second quarter of 1999. The pick-up in economic growth in many countries around
the globe, resurgent consumer demand in developing nations and the recovery in
commodity prices positively impacted returns for international small-caps.
Corporate restructuring was also a major factor that bolstered performance. In
Japan, for example, management teams at smaller-cap companies have embraced
restructuring programs more quickly than those at more established, large-cap
firms. As a result, small-cap stocks in Japan have surged.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 13.18% compared to the Salomon EPAC Extended
Market Index, an unmanaged index comprised of smaller-capitalization companies
in 22 countries excluding Canada and the United States which gained 5.33% for
the same period.
PORTFOLIO SPECIFICS: Stock selection in Japan, Germany and Hong Kong positively
impacted the fund's returns during the period. Stock selection in the
technology, consumer services, retail trade and financial services sectors also
contributed to gains.
As of the end of June, we had a 45% weighting in Europe as we continue to
uncover promising opportunities in the region. We raised our weighting in the
Pacific Rim to 41% as of June 30 from 33% at the end of the first quarter. Our
bottom-up approach to equity investing led us to unearth exciting opportunities
in the region.
In Japan, the fund owns Hikari Tsushin, a major telecommunications subscription
agency. The company benefits from strong cellular phone subscriber growth,
focused product offerings and distribution, as well as dynamic management. In
the United Kingdom, we own ARM Holdings PLC, the fund's top contributor in the
second quarter. The company designs reduced instruction set computing (RISC)
microprocessors. It licenses and sells its technology and products to
semiconductor and electronics manufacturers, including Alcatel, Intel, Lucent,
Samsung, Sony and Texas Instruments.
MARKET OUTLOOK: Despite a lack of widespread recognition, the long-term outlook
for smaller-cap stocks in non-U.S. markets remains favorable. The growing
popularity of national exchanges that list smaller-cap issues, such as Japan's
Jasdaq market, the NOUVEAU MARCHE in France and the NEUER MARKT in Germany, is
seen to provide exciting opportunities for stock pickers. Tighter regulations
and better listing standards for these markets make them ideal places to look
for high-quality stocks.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
12
<PAGE>
- --------------------------------------------------------------------------------
8/31/95 6/96 6/97 6/98 6/30/99
------- ---- ---- ---- -------
Pilgrim Int'l SmallCap Growth
Fund Class Q 10,000 11,496 14,093 18,426 22,672
Salomon EPAC/EMI Index 10,000 11,343 11,483 11,566 11,986
Average Annual Total Returns for
the Periods Ended June 30, 1999
--------------------------------
Since Inception
of Class Q
1 Year 8/31/95
------- ---------------
Class Q 23.04% 23.83%
Salomon EPAC EM Index -0.39% 4.85%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim International SmallCap Growth Fund against the Salomon EPAC
Extended Market Index. The Index has an inherent performance advantage over the
Fund since it has no cash in its portfolio and incurs no operating expenses. An
investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including currency fluctuation and political risks not found in investments that
are solely domestic. In exchange for higher growth potential, stocks of smaller
companies may entail greater price variability than those of larger companies.
The Fund may invest in companies located in countries with emerging securities
markets when the subadviser believes they present attractive investment
opportunities. Risks of foreign investing are generally intensified for
investments in emerging markets.
13
<PAGE>
- -------------
International
Equity Funds
- -------------
Pilgrim
Emerging
Countries Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Lawrence S. Speidell, CFA, Partner, Director of
Global/Systematic Portfolio Management and Research; Pedro V. Marcal, Partner,
Portfolio Manager; Jessica Goncalves, Portfolio Manager; Ernesto Ramos, Ph.D.,
Portfolio Manager; Jon Borchardt, Investment Analyst; Jason Campbell, Investment
Analyst.
GOAL: Pilgrim Emerging Countries Fund seeks maximum long-term capital
appreciation through investments in equity securities of issuers located in
countries with emerging securities markets.
MARKET OVERVIEW: Almost two years following a debilitating financial crisis in
emerging countries, many markets in Asia and Latin America, as well as those in
the Europe, Middle East and Africa (EMEA) region registered gains in the
six-month period ending June 30, 1999. The following factors boosted returns:
* significant economic recoveries in many emerging countries,
* declining interest rates,
* government efforts to implement structural reforms,
* corporate restructuring, and
* recovery in commodity prices.
In Asia, banking sector restructuring has helped accelerate the pace of economic
reform. In Thailand, where the currency crisis of 1997 started, the government
has embarked on a program to recapitalize troubled banks. These banks, which
suffered from a rise in non-performing loans, are in the process of repairing
their depleted capital bases and raising new funds to cover their bad loans.
Another country on the path of economic recovery is South Korea, which continues
to benefit from the government's ongoing implementation of economic reforms.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 24.73% compared to the MSCI Emerging Markets
Free Index, an unmanaged index comprised of companies representative of the
market structure of 22 emerging market countries in Europe, Latin America and
the Pacific Basin, which gained 23.62% for the same period.
PORTFOLIO SPECIFICS: Amid an improving environment for emerging markets, stock
selection, especially in Asia, was the greatest contributor to the fund's gains.
Holdings in Taiwan, South Korea and Singapore were among the best performers
during the period. We significantly increased our weighting in Asia in the
period as we uncovered exciting opportunities on a stock-by-stock basis in the
region. Datacraft Asia of Singapore, an information technology service provider
and the premier systems integrator for Cisco Systems and Ascend Communications,
was one of the fund's top performers.
MARKET OUTLOOK: Although uncertainties in emerging markets remain, such as
political and regulatory issues as well as liquidity problems, long-term
prospects are compelling. These countries exhibit the following attractive
fundamentals:
* important share of world GDP and population,
* competitive labor costs, and
* rising productivity.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
14
<PAGE>
- --------------------------------------------------------------------------------
8/31/95 6/96 6/97 6/98 6/30/99
------- ---- ---- ---- -------
Pilgrim Emerging Countries Class Q 10,000 11,624 15,200 12,351 14,027
MSCI Emerging Markets Index 10,000 10,677 11,808 7,043 8,818
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
1 Year 8/31/95
------ ---------------
Class Q 13.57% 9.24%
MSCI EMF Index 25.20% -3.23%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim Emerging Countries Fund against the Morgan Stanley Capital
International Emerging Markets Free (MSCI EMF) Index. The Index has an inherent
performance advantage over the Fund since it has no cash in its portfolio and
incurs no operating expenses. An investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): International investing does pose special risks,
including currency fluctuation and political risks not found in investments that
are solely domestic. The Fund may invest in companies located in countries with
emerging securities markets when the subadviser believes they present attractive
investment opportunities. Risks of foreign investing are generally intensified
for investments in emerging markets.
15
<PAGE>
- ------
Income
Funds
- ------
Pilgrim
Strategic
Income Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT TEAM: Robert K. Kinsey, Vice President & Senior Portfolio
Manager; Kevin Mathews, Senior Vice President & Senior Portfolio Manager.
GOALS: Pilgrim Strategic Income Fund (the "Fund") seeks maximum total return by
investing primarily in debt securities issued by U.S. and foreign corporations,
as well as U.S. and Foreign governments and their agencies and
instrumentalities, that are rated investment grade by a nationally recognized
statistical rating agency, or of comparable quality if unrated. Up to 40% of the
Fund's assets may be invested in high yield debt securities rated below
investment grade.
MARKET OVERVIEW: Risk aversion has once again crept back into the
investment-grade fixed income markets. From April 1st through June 30th, spreads
widened in the face of monumental new issue supply and broker-dealer hesitancy
to inventory non-government bonds. Renewed troubles in many Latin American debt
markets, coupled with Fed tightening have moved many issues out to or near the
wide levels witnessed in January of this year. Swap spreads, which are seen by
some as a barometer of financial system liquidity, are now posed to match the
levels seen in October, 1998 during the worst of the hedge fund and credit
spread debacle.
The high yield market has continued to experience technical weakness through the
first six months of 1999. Although there was fear in the market of an economic
slowdown and rising interest rates and inflation, high yield bond prices
remained stable to slightly lower. As a result, spreads narrowed to Treasuries
through early May. As the second quarter ended, the market became increasingly
concerned about credit quality and the bias of the Federal Reserve on monetary
policy. High yield bond prices moved lower causing spreads to widen slightly in
late May and June.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares were up 1.16% compared to the Lehman Aggregate Bond Index, an unmanaged
index of fixed income securities, which was down 0.88%.
PORTFOLIO SPECIFICS: The wholesale deterioration in the investment grade fixed
income markets was partially offset by our reduction in Latin American names and
the paring back of Commercial Mortgage-Backed Securities, two sectors that were
subsequently hit very hard. Additions to the portfolio are more tradable, and in
some cases multi-billion dollar, issues in anticipation of the markets
preference for liquidity. The relative value, or cheapness, of the high yield
markets provided an opportunity to increase our allocation from the mid-teens to
about 35%. High yield positions were consolidated as smaller holdings were sold
and exposure was increased to the Telecommunications sector. Finally, we closed
out all non-dollar positions.
MARKET OUTLOOK: The supply avalanche that has blighted the investment grade
market provides an opportunity to add quality names at very cheap levels. Given
that most issuers have decided to complete all their funding needs well before
the fourth quarter and Y2K, spreads should revert to their mean in the near
future. Although repeated Fed tightenings will eventually moderate the economy,
we do not anticipate major profit dislocations.
Although high yield bonds have recovered from the liquidity crunch of the third
quarter of 1998, we believe they continue to trade relatively cheap to
historical averages. Lacking a further dramatic move upward in interest rates or
inflation in the coming year, high yield should provide attractive returns
versus other fixed income asset classes.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
16
<PAGE>
- --------------------------------------------------------------------------------
7/27/98 6/30/99
------- -------
Pilgrim Strategic Income Fund Class Q 10,000 10,254
Lehman Brothers Aggregate Index 10,000 10,283
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
7/27/98
---------------
Class Q 2.54%
Lehman Brothers Aggregate Index 2.83%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim Strategic Income Fund against the Lehman Brothers Aggregate
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio and incurs no operating expenses. An investor
cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Exposure to financial, market and interest rate risks.
High yields reflect the higher credit risks associated with certain lower rated
securities in the fund's portfolio and in some cases, the lower market prices
for those instruments.
17
<PAGE>
- ------
Income
Funds
- ------
Pilgrim
High Yield
Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: Kevin Mathews, Senior Vice President & Senior Portfolio
Manager.
GOALS: Pilgrim High Yield Fund seeks to provide a high level of current income,
with capital appreciation as a secondary objective, by investing in high yield
debt securities.
MARKET OVERVIEW: The 12-month period ending June 30, 1999 began, as one of the
most friendly to high yield bonds that we have seen in several years. Shortly
after the beginning of the period major shocks were sent through the capital
markets giving us some of the widest spreads we have seen since the recession in
1989-1990.
High yield spreads widened as a result of a flight to quality, which took place
in July and August, 1998. This occurred as a result of major dislocations in
foreign markets, primarily based on the fear that the Russian economy might
collapse. These fears, in hindsight, were overblown, but there were major
repercussions in the global bond market.
Credit spreads on high yield bonds widened dramatically to levels not seen since
the 1990 recession. Many market participants were caught off guard as liquidity
was reduced. Leverage employed by certain market participants, particularly
hedge funds, resulted in heavy losses as foreign markets traded off. Many major
banks and brokerage firms had loaned money or actually taken equity positions in
these funds. As losses mounted, the lenders became more conservative. The major
market makers, or dealers, of high yield instruments cut their capital available
for trading operations as part of this push towards conservatism. As a result,
fewer or no bids were available to sellers of bonds, and bond prices dropped.
New issue activity slowed considerably as buyers had less cash to spend. What
looked like a potentially record breaking year for new issues after six months,
turned out to be just an above average year by the end of December, 1998.
As 1999 began, the market stabilized and spreads began to narrow. However,
spreads remained wider than they had been in the first half of 1998. Investors
were now concerned that the Federal Open Market Committee ("FOMC") had changed
its bias from easing monetary policy to a more neutral stance. By the end of our
fiscal year June, 1999, more investors had become concerned that inflation might
pick up. Interest rates had risen significantly from late 1998. On June 30th,
the FOMC raised the Fed Funds rate from 4.75% to 5.00%, tightening monetary
policy.
It now appears that the FOMC is trying to engineer a soft landing by slowing the
economy and keeping inflation under control without driving the country into a
recession. If they successfully engineered another soft landing, as they did
earlier in the decade, it would be positive for high yield issues.
PERFORMANCE: For the period from inception (6/17/99) through June 30, 1999, the
Fund's Class Q shares provided a total return of 0.34% compared to the Lehman
Brothers High Yield Index, an unmanaged index of high yield bonds, which
returned 0.10%, and the First Boston High Yield Index, an unmanaged index of
high yield bonds, which returned 0.32% for the same period.
PORTFOLIO SPECIFICS: It was a difficult environment for high yield bonds the
last 12 months. The Fund was particularly hit hard by exposure to
commodity-based industries such as mining and steel.
Positively impacting performance was our heavy weighting in the communications
sector. This area of the economy continues to grow at rates above the general
growth rate in the United States. The fund also benefited from its core
investment philosophy, which prevented the ownership of foreign and emerging
markets issues. The fund avoided these sectors which underperformed the market
for the period.
MARKET OUTLOOK: Much depends on the actions the FOMC takes in the next several
quarters. We have an economy that is growing, and inflation rates that are
reasonable. If through its control of monetary policy the FOMC can keep a lid on
inflation and continue economic prosperity, it will be positive for high yield
bonds.
18
<PAGE>
- --------------------------------------------------------------------------------
High yield issues are trading relatively cheaply to their historical averages.
This presents what we believe is an opportunity to achieve returns above the
long-term averages for high yield securities on issues purchased in today's
market environment.
6/17/99 6/30/99
------- -------
Pilgrim High Yield Fund Class Q 10,000 10,034
First Boston High Yield Index 10,000 10,032
Average Annual Total Returns for the
Periods Ended June 30, 1999
------------------------------------
Since Inception
6/17/99
---------------
Class Q 0.34%
First Boston High Yield Index 0.32%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim High Yield Fund against the First Boston High Yield Index. The
Index has an inherent performance advantage over the Fund since it has no cash
in its portfolio and incurs no operating expenses. An investor cannot invest
directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Exposure to financial market and interest rate risk.
High Yields reflect the higher credit risks associated with certain lower rated
securities in the fund's portfolio and in some cases, have lower market prices
for those instruments.
19
<PAGE>
- ------
Income
Funds
- ------
Pilgrim
High Yield
Fund II
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: Kevin Mathews, Senior Vice President & Senior Portfolio
Manager.
GOALS: Pilgrim High Yield Fund II seeks to provide a high level of current
income and capital growth by investing in high yield debt securities.
MARKET OVERVIEW: The 12-month period ending June 30, 1999, began as one of the
most friendly to high yield bonds that we have seen in several years. Shortly
after the beginning of the period, major shocks were sent through the capital
markets giving us some of the widest spreads we have seen since the recession in
1989-1990.
High yield spreads widened as a result of a flight to quality, which took place
in July and August, 1998. This occurred as a result of major dislocations in
foreign markets, primarily based on the fear that the Russian economy might
collapse. These fears, in hindsight, were overblown, but there were major
repercussions in the global bond market.
Credit spreads on high yield bonds widened dramatically to levels not seen since
the 1990 recession. Many market participants were caught off guard as liquidity
was reduced. Leverage employed by certain market participants, particularly
hedge funds, resulted in heavy losses as foreign markets traded off. Many major
banks and brokerage firms had loaned money or actually taken equity positions in
these funds. As losses mounted, the lenders became more conservative. The major
market makers, or dealers, of high yield instruments cut their capital available
for trading operations as part of this push towards conservatism. As a result,
fewer or no bids were available to sellers of bonds, and bond prices dropped.
New issue activity slowed considerably as buyers had less cash to spend. What
looked like a potentially record breaking year for new issues after six months,
turned out to be just an above average year by the end of December, 1998.
As 1999 began, the market stabilized and spreads began to narrow. However,
spreads remained wider than they had been in the first half of 1998. Investors
were now concerned that the Federal Open Market Committee ("FOMC") had changed
its bias from easing monetary policy to a more neutral stance. By the end of our
fiscal year June, 1999, more investors had become concerned that inflation might
pick up. Interest rates had risen significantly from late 1998. On June 30th,
the FOMC raised the Fed Funds rate from 4.75% to 5.00%, tightening monetary
policy.
It now appears that the FOMC is trying to engineer a soft landing by slowing the
economy and keeping inflation under control without driving the country into a
recession. If they successfully engineered another soft landing, as they did
earlier in the decade, it would be positive for high yield issues.
PERFORMANCE: During the three-month period ended June 30, 1999*, the Fund's
Class Q shares were up 1.36% compared to the First Boston High Yield Index, an
unmanaged index of high yield bonds, which returned 1.16% for the same period.
PORTFOLIO SPECIFICS: In a tough market for high yield bonds over the last 12
months, the fund has performed well. The growth orientation of the holdings has
helped the fund avoid downgrades and outperform the market.
Helping the fund was a lack of exposure to foreign and emerging markets issues.
These issues were particularly volatile after the Russian economic scare.
Communications and technology issues were heavily weighted and outperformed the
market. Their growth rates continue to exceed the overall growth rates of the
economy.
Lastly, the fund had a heavy exposure to short maturity, yield-to-call bonds.
These are issues that are less sensitive to market price movements because they
are about to be called, or repurchased, by their issuers. These issues helped
performance in what was generally a negative market.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
20
<PAGE>
- --------------------------------------------------------------------------------
MARKET OUTLOOK: Much depends on the actions the FOMC takes in the next several
quarters. We have an economy that is growing, and inflation rates that are
reasonable. If through its control of monetary policy the FOMC can keep a lid on
inflation and continue economic prosperity, it will be positive for high yield
bonds.
High yield issues are trading relatively cheaply to their historical averages.
This presents what we believe is an opportunity to achieve returns above the
long-term averages for high yield securities on issues purchased in today's
market environment.
3/27/98 6/98 6/30/99
------- ---- -------
Pilgrim High Yield II Fund Class Q 10,000 10,185 10,294
Lehman Brothers High Yield Index 10,000 10,111 10,072
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
1 Year 3/27/98
------ ---------------
Class Q 1.08% 2.33%
Lehman High Yield Index -0.38% 0.58%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Lehman High Yield II Fund against the Lehman Brothers Aggregate Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio and incurs no operating expenses. An investor cannot
invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Exposure to financial, market and interest rate risks.
High Yields reflect the higher credit risks associated with certain lower rated
securities in the fund's portfolio and in some cases, the lower market price for
those instruments.
21
<PAGE>
- ------------
Equity &
Income Funds
- ------------
Pilgrim
Balanced
Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT TEAM: G. David Underwood, Vice President & Senior Portfolio
Manager; Kevin Mathews, Senior Vice President & Senior Portfolio Manager; Robert
K. Kinsey, Vice President & Senior Portfolio Manager.
GOALS: Pilgrim Balanced Fund seeks a balance of capital appreciation and current
income by investing in a blended portfolio of equity and debt securities with an
emphasis on overall total return.
EQUITY MARKET OVERVIEW: Investor attention had been on large-capitalization
growth stocks since 1997. Many of these stocks benefited from corporate
restructuring that began in the 1980's. Throughout last year, however, the
largest 50 stocks in the S&P 500 Index, an unmanaged index of the stocks of
approximately 500 large-capitalization U.S. companies, accounted for most of the
index's appreciation as these select few provided a safe haven from fears of
global economic weakness.
Preference shifted by the beginning of the second quarter of 1999, as it became
apparent that growth of the U.S. economy remained strong, and that global
economic conditions were also improving. Investors migrated to more cyclical
stocks, particularly those of the Basic Industries and the Energy sectors, where
depressed commodity prices stood to benefit from rising global economic
activity.
The shifting market preferences in the Spring of 1999 also resulted in broader
participation among market sectors. For example, over the past 12 months, only
the Technology and Communications Services sectors outperformed the S&P 500
Index. During the second quarter however, six of the 11 sectors of the market,
Basic Industries, Capital Goods, Communication Services, Energy, Technology and
Utilities, outperformed the Index. Still, participation among stocks was
relatively narrow, as the 7% gain of the S&P in the quarter was attributed to 70
companies.
BOND MARKET OVERVIEW: Risk aversion has once again crept back into the
investment-grade fixed income markets. From April 1st through June 30th, spreads
widened in the face of monumental new issue supply and broker-dealer hesitancy
to inventory non-government bonds. Renewed troubles in many Latin American debt
markets coupled with Fed tightening have moved many issues out to or near the
wide levels witnessed in January of this year. Swap spreads, which are seen by
some as a barometer of financial system liquidity, are now posed to match the
levels seen in October, 1998 during the worst of the hedge fund and credit
spread debacle.
The high yield market has continued to experience technical weakness through the
first six months of 1999. Although there was fear in the market of an economic
slowdown and rising interest rates and inflation, high yield bond prices
remained stable to slightly lower. As a result, spreads narrowed to Treasuries
through early May. As the second quarter ended, the market became increasingly
concerned about credit quality and the bias of the Federal Reserve on monetary
policy. High yield bond prices moved lower causing spreads to widen slightly in
late May and June.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 1.44%, compared to a composite index,
consisting of 60% S&P 500 Index and 40% Lehman Brothers Government/Corporate
Bond Index, an unmanaged market-weighted index consisting of all public
obligations of the U.S. Government, its agencies and instrumentalities and all
corporation issuers of fixed rate, non-convertible, investment grade U.S. dollar
denominated bonds having maturities of greater than one year, which gained 3.88%
for the same period.
PORTFOLIO SPECIFICS: Appropriate sector allocation and good stock selection,
combined with a disciplined portfolio management approach, led to the Fund's
strong investment performance. The Fund has maintained about 20% in
technology-related industries for much of the past year. Holdings in the stocks
of Sun Microsystems, IBM, Hewlett Packard, Cisco Systems, America Online and
Microsoft performed particularly well. The Fund's holdings in Dupont, Alcoa,
Tyco Industries, Chevron and Schlumberger were equally strong in the most recent
quarter.
As of the end of June, Technology was the largest sector of the Fund, followed
by Consumer Nondurables, Consumer Cyclicals, Retailing and Healthcare.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
22
<PAGE>
- --------------------------------------------------------------------------------
The wholesale deterioration in the investment-grade fixed income markets was
partially offset by our reduction in Latin American names, non-dollar positions,
and Commercial Mortgage-Backed Securities. Additions to the portfolio are more
tradable issues in anticipation of the market's preference for liquidity. The
relative value, or cheapness, of the high yield markets provided an opportunity
to increase our holdings from the mid-teens to nearly 35% of the total bond
allocation.
MARKET OUTLOOK: The market environment still appears favorable for investment in
large-capitalization companies. We expect the equity market to broaden further,
as more groups and more individual stocks participate in the markets advance.
Finally, we still see value in the long-term franchises of the leading companies
in which the fund invests.
The supply avalanche that has blighted the bond market provides an opportunity
to add desirable names at very cheap levels. Given that most issuers have
decided to complete all their 1999 funding needs well before the fourth quarter
and Y2K, spreads should revert to their mean in the near future.
8/31/95 6/96 6/97 6/98 6/30/99
------- ---- ---- ---- -------
Pilgrim Balanced Fund Class Q 10,000 10,922 12,567 15,899 18,478
60% S&P 500 / 40% Aggregate Index 10,000 11,458 13,738 16,960 19,791
Average Annual Total Returns
for the Periods Ended June 30, 1999
-----------------------------------
Since Inception
1 Year 8/31/95
------ ---------------
Class Q 16.22% 17.39%
60% S&P 500/40% Lehman Aggregate 14.92% 19.81%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim Balanced Fund against the 60% S&P 500, 40% Lehman Aggregate
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio and incurs no operating expenses. An investor
cannot invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany debt investments.
23
<PAGE>
- ------------
Equity &
Income Funds
- ------------
Pilgrim
Convertible
Fund
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
MANAGEMENT TEAM: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Douglas G. Forsyth, Portfolio Manager; William L. Stickney,
Portfolio Manager; Michael Carroll, Investment Analyst; Michael Yee, Investment
Analyst.
GOAL: Pilgrim Convertible Fund seeks maximum total return, consisting of capital
appreciation and current income, by investing primarily in convertible
securities.
MARKET OVERVIEW: Strength in the stock market and narrowing credit spreads
continued to help convertible bonds in the second quarter. We viewed the Federal
Reserve Board's decision to raise short-term interest rates by 25 basis points
on the last day of the quarter as a sign of its proactive approach. That move
could keep the economy in a modest growth phase and limit inflation concerns,
both positives for the convertible market. Technology-related issues were among
the best performers during the quarter, especially in June.
PERFORMANCE: For the three-month period ended June 30, 1999*, the Fund's Class Q
shares provided a total return of 6.62% compared to the First Boston Convertible
Index, an unmanaged index representing the universe of convertible securities,
which gained 7.53% for the same period.
PORTFOLIO SPECIFICS: Investor preference for value-oriented stocks and a sharp
selloff among technology issues early in the quarter negatively impacted returns
as the fund retained a significant weighting in technology issues throughout the
period. Issue-specific disappointments, such as energy providers Williams
Companies and Texas Utilities, also weighted on returns.
However, later in the quarter, as technology stocks rebounded, fund returns
outdistanced those of the benchmark. Among the fund's top-performing holdings
late in the quarter were Qualcomm, Analog Devices and LSI Logic. Other strong
performers included Ericsson and Citrix. Select issues in the
commercial/industrial and retail sectors also contributed to gains.
MARKET OUTLOOK: The fund retains its significant weighting in technology issues
and we continue to see signs of promise within this sector, especially among
telecommunications and telecom equipment providers as a result of increasing
demand.
Our bottom-up approach also continues to uncover opportunities in other sectors
such as retail where pockets of strength coexist with issuer-specific
distinctions. Recently, issues such as Ann Taylor, Home Depot and CVS Corp. have
delivered strong gains.
Convertibles remain an attractive asset class for risk-conscious investors who
seek stock market participation with limited downside exposure.
* Effective April 1, 1999, the Fund changed its fiscal year end from March 31
to June 30.
24
<PAGE>
- --------------------------------------------------------------------------------
8/31/95 6/96 6/97 6/98 6/30/99
------- ---- ---- ---- -------
Pilgrim Convertible Fund Class Q 10,000 11,495 14,012 17,127 21,275
First Boston Convertible Index 10,000 11,065 12,739 14,520 16,216
Average Annual Total Returns for
the Periods Ended June 30, 1999
-------------------------------
Since Inception
1 Year 8/31/95
------ ---------------
Class Q 24.23% 21.79%
First Boston Convertible Index 11.68% 13.45%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Pilgrim Convertible Fund against the First Boston Convertible Index.
The Index has an inherent performance advantage over the Fund since it has no
cash in its portfolio and incurs no operating expenses. An investor cannot
invest directly in an index.
Total returns reflect the fact that the Investment Adviser has contractually
agreed to waive or defer its management fee and to pay other 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 letter contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(S): Financial and market risks associated with equity
investing, currency fluctuations, and economic and political risks associated
with investing in a specialized regional Fund. Currency devaluation in any one
country may have a significant effect on the entire region. Increased political
or social unrest in some or all Asian countries could cause further economic and
market uncertainty.
25
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
26
<PAGE>
- -------
Pilgrim
Funds
- ------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
The Pilgrim Funds:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Pilgrim LargeCap Growth Fund, Pilgrim
MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Worldwide Growth Fund,
Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth
Fund, Pilgrim Emerging Countries Fund, Pilgrim Strategic Income Fund, Pilgrim
High Yield Fund, Pilgrim High Yield Fund II, Pilgrim Balanced Fund and Pilgrim
Convertible Fund as of June 30, 1999, and the related statements of operations,
changes in net assets and financial highlights for the three-month period ended
June 30, 1999 except for the Pilgrim High Yield Fund for which we audited the
statement of operations for the year ended June 30, 1999 the statements of
changes for each of the years in the two-year period ended June 30, 1999 and the
financial highlights for the period from June 17, 1999 to June 30, 1999. These
financial statements and financial highlights are the responsibility of the
Company's 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 April 1, 1999 for the Pilgrim LargeCap Growth Fund,
Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Worldwide
Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International
SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim Strategic Income
Fund, Pilgrim High Yield Fund II, Pilgrim Balanced Fund, and Pilgrim Convertible
Fund the statements of operations, changes in net assets, and financial
highlights were audited by other auditors whose report thereon dated May 7, 1999
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. 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 June
30, 1999 by correspondence with the custodians and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as 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 June 30, 1999, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated herein, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
Los Angeles, California
August 20, 1999
27
<PAGE>
- -----------
U.S. Equity
Funds
- ----------
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap MidCap SmallCap
Growth Growth Growth
Fund Fund Fund
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* $ 97,870,110 $278,493,200 $309,561,671
Short-term investments at amortized cost 12,441,000 3,347,000 5,561,000
Cash 11,662 210,301 5,657
Receivables:
Fund shares sold 4,154,475 765,570 427,935
Dividends and interest 37,922 52,011 45,140
Due from affiliate 26,893 68,153 268,220
Investment securities sold 31,151 4,447,146 4,195,380
Prepaid expenses 5,774 19,574 32,211
------------ ------------ ------------
Total Assets 114,578,987 287,402,955 320,097,214
------------ ------------ ------------
LIABILITIES:
Payable for investment securities purchased 11,406,913 6,548,970 2,186,814
Payable for fund shares redeemed 193,181 589,320 1,133,965
Other accrued expenses and liabilities 14,945 129,280 203,713
------------ ------------ ------------
Total Liabilities 11,615,039 7,267,570 3,524,492
------------ ------------ ------------
NET ASSETS $102,963,948 $280,135,385 $316,572,722
============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital $ 79,823,880 $137,864,194 $147,496,284
Undistributed net investment income -- -- --
Accumulated net realized gain on
investments 7,616,785 77,323,000 84,971,279
Net unrealized appreciation of investments 15,523,283 64,948,191 84,105,159
------------ ------------ ------------
Net Assets $102,963,948 $280,135,385 $316,572,722
============ ============ ============
*Cost of securities $ 82,346,827 $213,545,009 $225,456,512
</TABLE>
See Accompanying Notes to Financial Statements
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap MidCap SmallCap
Growth Growth Growth
Fund Fund Fund
---------------- ----------------- --------------
<S> <C> <C> <C>
Class A:
Net Assets $30,107,581 $ 66,586,012 $102,640,911
Shares authorized unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 1,071,853 3,120,150 5,380,592
Net asset value and redemption price per
share $ 28.09 $ 21.34 $ 19.08
Maximum offering price per share(1) $ 29.80 $ 22.64 $ 20.24
Class B:
Net Assets $49,057,385 $ 49,334,533 $ 49,447,954
Shares authorized unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 1,742,728 1,959,417 2,055,763
Net asset value and redemption price per
share(2) $ 28.15 $ 25.18 $ 24.05
Maximum offering price per share $ 28.15 $ 25.18 $ 24.05
Class C:
Net Assets $17,755,047 $144,831,672 $153,470,705
Shares authorized unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 632,420 7,323,780 8,158,235
Net asset value and redemption price per
share(2) $ 28.07 $ 19.78 $ 18.81
Maximum offering price per share $ 28.07 $ 19.78 $ 18.81
Class Q:
Net Assets $ 6,043,935 $ 19,383,168 $ 11,013,152
Shares authorized unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 212,554 719,569 519,825
Net asset value and redemption price per
share(2) $ 28.43 $ 26.94 $ 21.19
Maximum offering price per share $ 28.43 $ 26.94 $ 21.19
</TABLE>
(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 is equal to the net asset value per share less
any applicable contingent deferred sales charge.
29
<PAGE>
- -------------
International
Equity Funds
- -------------
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide International International Emerging
Growth Core Growth SmallCap Countries
Fund Fund Growth Fund Fund
-------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at market value* $202,401,856 $43,435,908 $111,950,014 $ 176,341,560
Short-term investments at amortized cost 14,758,000 -- 5,360,000 7,384,000
Foreign Currency** -- -- 2,580,215 --
Cash -- 1,307,535 225,008 --
Receivables:
Fund shares sold 3,231,038 1,092,349 2,015,853 1,774,077
Dividends and interest 509,397 281,735 226,990 775,276
Due from affiliate 283,144 210,661 104,837 63,772
Investment securities sold 3,029,806 2,611,095 2,462,444 2,495,161
Prepaid expenses 43,356 20,047 46,835 39,507
------------- ------------ ------------- -------------
Total Assets 224,256,597 48,959,330 124,972,196 188,873,353
------------- ------------ ------------- -------------
LIABILITIES:
Payable for investment securities purchased 2,673,655 2,074,806 6,793,906 2,785,288
Payable for fund shares redeemed 152,807 25,916 64,802 637,237
Outstanding credit facility loan -- 226,261 -- --
Payable to custodian 1,027,471 798,448 -- 1,954,963
Other accrued expenses and liabilities 99,880 65,367 57,131 311,666
------------- ------------ ------------- -------------
Total Liabilities 3,953,813 3,190,798 6,915,839 5,689,154
------------- ------------ ------------- -------------
NET ASSETS $220,302,784 $45,768,532 $118,056,357 $ 183,184,199
============= ============ ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $155,670,589 $39,235,943 $ 79,510,671 $ 234,859,979
Undistributed net investment income -- 69,633 -- --
Accumulated net realized gain (loss) on
investments and foreign currency
transactions 31,948,126 1,365,716 11,055,060 (94,604,331)
Net unrealized appreciation of investments
and other assets, liabilities and forward
contracts denominated in foreign
currencies 32,684,069 5,097,240 27,490,626 42,928,551
------------- ------------ ------------- -------------
Net Assets $220,302,784 $45,768,532 $118,056,357 $ 183,184,199
============= ============ ============= =============
*Cost of securities $169,684,025 $38,311,857 $ 84,455,498 $ 133,342,211
**Cost of foreign currency $ -- $ -- $ 2,580,215 $ --
</TABLE>
See Accompanying Notes to Financial Statements
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide International International Emerging
Growth Core Growth SmallCap Countries
Fund Fund Growth Fund Fund
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Class A:
Net Assets $ 66,244,600 $12,408,651 $37,490,363 $53,483,247
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 2,809,668 656,006 1,575,287 3,194,053
Net asset value and redemption price per
share $ 23.58 $ 18.92 $ 23.80 $ 16.74
Maximum offering price per share(1) $ 25.02 $ 20.07 $ 25.25 $ 17.77
Class B:
Net Assets $ 27,938,296 $12,034,346 $19,331,040 $26,341,616
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 1,048,574 630,889 763,313 1,551,677
Net asset value and redemption price per
share(2) $ 26.64 $ 19.08 $ 25.33 $ 16.98
Maximum offering price per share $ 26.64 $ 19.08 $ 25.33 $ 16.98
Class C:
Net Assets $111,250,155 $11,935,774 $18,354,420 $24,229,829
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 4,697,071 623,761 786,424 1,482,037
Net asset value and redemption price per
share(2) $ 23.69 $ 19.14 $ 23.34 $ 16.35
Maximum offering price per share $ 23.69 $ 19.14 $ 23.34 $ 16.35
Class Q:
Net Assets $ 14,869,733 $ 9,389,761 $42,880,534 $79,129,507
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 548,246 478,250 1,704,613 $ 4,601,297
Net asset value and redemption price per
share(2) $ 27.12 $ 19.63 $ 25.16 $ 17.20
Maximum offering price per share $ 27.12 $ 19.63 $ 25.16 $ 17.20
</TABLE>
(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 is equal to the net asset value per share less
any applicable contingent deferred sales charge.
31
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic
Income High Yield High Yield
Fund Fund Fund II
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* $ 15,277,591 $ 404,811,521 $ 74,984,519
Short-term investments at amortized cost 1,883,000 4,323,000 4,639,000
Cash 49,096 -- --
Receivables:
Fund shares sold 74,489 1,399,665 179,845
Interest 179,633 9,406,275 1,168,007
Due from affiliate 53,233 41,984 134,231
Investment securities sold 790,641 2,987,778 3,568,801
Prepaid expenses 8,930 89,471 3,647
------------ ------------- ------------
Total Assets 18,316,613 423,059,694 84,678,050
------------ ------------- ------------
LIABILITIES:
Payable for investment securities purchased 1,728,412 1,775,497 3,195,425
Payable for fund shares redeemed 46,602 1,269,071 304,419
Payable to custodian -- 2,059,007 1,700
Other accrued expenses and liabilities 11,275 152,159 652,307
------------ ------------- ------------
Total Liabilities 1,786,289 5,255,734 4,153,851
------------ ------------- ------------
NET ASSETS $ 16,530,324 $ 417,803,960 $ 80,524,199
============ ============= ============
NET ASSETS CONSIST OF:
Paid-in capital $ 17,179,945 $ 468,338,082 $ 86,817,360
Undistributed net investment income (loss) 138,021 -- (193,920)
Accumulated net realized loss on investments and foreign
currency transactions (444,975) (41,190,494) (4,358,980)
Net unrealized depreciation of investments and other
assets, liabilities and forward contracts denominated in
foreign currencies (342,667) (9,343,628) (1,740,261)
------------ ------------- ------------
Net Assets $ 16,530,324 $ 417,803,960 $ 80,524,199
============ ============= ============
*Cost of securities $ 15,619,361 $ 414,155,149 $ 76,724,780
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic
Income High Yield High Yield
Fund Fund Fund II
-------------- ------------- -------------
<S> <C> <C> <C>
Class A:
Net Assets $ 2,735,522 $131,534,749 $16,795,079
Shares authorized unlimited 80,000,000 unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 217,280 22,169,655 1,451,200
Net asset value and redemption price per share $ 12.59 $ 5.93 $ 11.57
Maximum offering price per share(1) $ 13.22 $ 6.23 $ 12.15
Class B:
Net Assets $ 5,657,942 $261,589,029 $41,882,346
Shares authorized unlimited 80,000,000 unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 458,971 44,172,526 3,618,337
Net asset value and redemption price per share(2) $ 12.33 $ 5.92 $ 11.58
Maximum offering price per share $ 12.33 $ 5.92 $ 11.58
Class C:
Net Assets $ 7,965,435 $ 551,266 $18,618,124
Shares authorized unlimited 80,000,000 unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 621,888 93,124 1,608,363
Net asset value and redemption price per share(2) $ 12.81 $ 5.92 $ 11.58
Maximum offering price per share $ 12.81 $ 5.92 $ 11.58
Class M:
Net Assets n/a $ 24,128,886 n/a
Shares authorized n/a 40,000,000 n/a
Par value n/a $ 0.00 n/a
Shares outstanding n/a 4,071,134 n/a
Net asset value and redemption price per share n/a $ 5.93 n/a
Maximum offering price per share(3) n/a $ 6.13 n/a
Class Q:
Net Assets $ 171,425 $ 30 $ 3,228,650
Shares authorized unlimited 80,000,000 unlimited
Par value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 14,299 5 278,622
Net asset value and redemption price per share(2) $ 11.99 $ 5.93 $ 11.59
Maximum offering price per share $ 11.99 $ 5.93 $ 11.59
</TABLE>
(1) Maximum offering price is computed at 100/95.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
(2) Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
(3) Maximum offering price is computed at 100/96.75 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
33
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Convertible
Fund Fund
------------- ---------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* $ 35,015,316 $ 252,424,733
Short-term investments at amortized cost 3,938,000 5,886,000
Cash 116,334 599,397
Receivables:
Fund shares sold 71,661 1,533,006
Dividends and interest 220,872 875,860
Due from affiliate 76,465 61,411
Investment securities sold 2,671,478 3,754,519
Prepaid expenses 2,238 14,973
------------ --------------
Total Assets 42,112,364 265,149,899
------------ --------------
LIABILITIES:
Payable for investment securities purchased 3,695,309 4,965,105
Payable for fund shares redeemed 33,771 661,180
Distributions payable 56,354 366,252
Other accrued expenses and liabilities 30,686 120,052
------------ --------------
Total Liabilities 3,816,120 6,112,589
------------ --------------
NET ASSETS $ 38,296,244 $ 259,037,310
============ ==============
NET ASSETS CONSIST OF:
Paid-in capital $ 29,576,001 $ 173,401,712
Undistributed (overdistributed) net investment income (16,013) 195,337
Accumulated net realized gain on investments and foreign
currency transactions 6,602,814 35,557,539
Net unrealized appreciation of investments and other
assets, liabilities and forward contracts denominated in
foreign currencies 2,133,442 49,882,722
------------ --------------
Net Assets $ 38,296,244 $ 259,037,310
============ ==============
*Cost of securities $ 32,880,976 $ 202,531,965
</TABLE>
See Accompanying Notes to Financial Statements
34
<PAGE>
- --------------------------------------------------------------------------------
Balanced Convertible
Fund Fund
----------- ------------
Class A:
Net Assets $ 9,618,676 $ 73,132,777
Shares authorized unlimited unlimited
Par value $ 0.00 $ 0.00
Shares outstanding 500,291 3,142,135
Net asset value and redemption price per share $ 19.23 $ 23.27
Maximum offering price per share(1) $ 20.40 $ 24.69
Class B:
Net Assets $ 7,157,205 $ 68,091,068
Shares authorized unlimited unlimited
Par value $ 0.00 $ 0.00
Shares outstanding 347,552 2,687,557
Net asset value and redemption price per share(2) $ 20.59 $ 25.34
Maximum offering price per share $ 20.59 $ 25.34
Class C:
Net Assets $21,330,586 $100,276,199
Shares authorized unlimited unlimited
Par value $ 0.00 $ 0.00
Shares outstanding 1,150,957 4,217,155
Net asset value and redemption price per share(2) $ 18.53 $ 23.78
Maximum offering price per share $ 18.53 $ 23.78
Class Q:
Net Assets $ 189,777 $ 17,537,266
Shares authorized unlimited unlimited
Par value $ 0.00 $ 0.00
Shares outstanding 9,967 778,944
Net asset value and redemption price per share(2) $ 19.04 $ 22.51
Maximum offering price per share $ 19.04 $ 22.51
(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 is equal to the net asset value per share less
any applicable contingent deferred sales charge.
35
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap Growth Fund MidCap Growth Fund
---------------------------- -------------------------------
Three Months Year Three Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999 1999 1999
-------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 61,448 $ 88,826 $ 153,517 $ 600,518
Interest 79,876 91,130 38,871 484,431
Securities lending 5,339 48,659 52,785 1,036,944
---------- ----------- ------------- ------------
Total investment income 146,663 228,615 245,173 2,121,893
---------- ----------- ------------- ------------
EXPENSES:
Distribution expenses 124,911 142,925 536,357 2,075,413
Investment management fees 115,161 178,627 549,879 3,049,230
Miscellaneous 45,349 11,689 217,012 56,413
Transfer agent and registrar fees 8,528 34,932 41,000 467,821
Accounting and administration fees 7,025 114,863 36,302 851,750
Shareholder reporting 4,240 5,111 20,874 23,813
Professional fees 4,050 18,724 24,933 231,642
Recordkeeping and pricing fees 2,385 -- 1,500 --
Custodian fees 2,154 21,063 31,490 53,515
Registration and filing fees 800 49,256 5,688 48,494
Shareholder servicing fee 761 -- 814 --
Directors'/trustees fees 400 270 1,883 34,006
Insurance 61 301 484 5,414
Interest and credit facility fee 25 1,336 467 40,120
---------- ----------- ------------- ------------
Total expenses 315,850 579,097 1,468,683 6,937,631
---------- ----------- ------------- ------------
Less:
Waived and reimbursed fees 4,314 154,098 1,010 301,613
Earnings credits 1,050 -- 1,490 --
---------- ----------- ------------- ------------
Net expenses 310,486 424,999 1,466,183 6,636,018
---------- ----------- ------------- ------------
Net investment loss (163,823) (196,384) (1,221,010) (4,514,125)
---------- ----------- ------------- ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain from investments 2,418,689 5,409,155 37,699,336 47,761,620
Net change in unrealized appreciation
(depreciation) of investments 6,320,924 9,499,395 (14,395,996) 8,536,297
---------- ----------- ------------- ------------
Net gain (loss) from investments 8,739,613 14,908,550 23,303,340 56,297,917
---------- ----------- ------------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $8,575,790 $14,712,166 $ 22,082,330 $ 51,783,792
========== =========== ============= ============
</TABLE>
See Accompanying Notes to Financial Statements
36
<PAGE>
- --------------------------------------------------------------------------------
SmallCap Growth Fund
- ----------------------------------
Three Months Year
Ended Ended
June 30, March 31,
1999 1999
- --------------- ----------------
$ 105,554 $ 1,186,130
35,385 385,506
97,226 1,291,855
- ------------- -------------
238,165 2,863,491
- ------------- -------------
562,935 2,534,830
811,208 5,334,833
284,318 98,464
45,500 595,466
40,382 1,061,281
23,840 22,868
40,738 287,926
4,763 --
15,307 47,117
2,280 87,994
608 --
2,254 54,131
561 7,095
619 450,220
- ------------- -------------
1,835,313 10,582,225
- ------------- -------------
29,487 518,164
1,164 --
- ------------- -------------
1,804,662 10,064,061
- ------------- -------------
(1,566,497) (7,200,570)
- ------------- -------------
67,438,450 86,043,833
(18,557,187) (93,770,559)
- ------------- -------------
48,881,263 (7,726,726)
- ------------- -------------
$ 47,314,766 $ (14,927,296)
============= =============
37
<PAGE>
- -------------
International
Equity Funds
- -------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide Growth Fund International Core Growth Fund
-------------------------------- --------------------------------
Three Months Year Three Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999 1999 1999
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 727,739 $ 1,324,136 $ 483,902 $ 1,034,114
Interest 194,543 326,825 20,557 362,746
Securities lending 8,286 190,621 1,684 41,295
----------- ------------ ---------- ------------
Total investment income 930,568 1,841,582 506,143 1,438,155
----------- ------------ ---------- ------------
EXPENSES:
Distribution expenses 371,306 1,107,696 76,659 248,904
Investment management fees 589,768 1,472,492 253,063 1,061,288
Miscellaneous 12,189 42,555 49,135 25,062
Transfer agent and registrar fees 12,500 175,204 12,500 79,193
Accounting and administration fees 57,627 361,838 5,955 222,257
Shareholder reporting 55,123 15,667 12,874 20,270
Professional fees 35,550 95,641 10,393 64,493
Recordkeeping and pricing fees -- -- -- --
Custodian fees 26,557 198,979 15,000 239,497
Registration and filing fees 5,688 57,552 5,688 35,343
Shareholder servicing fee 1,590 -- 414 --
Directors'/trustees fees 915 1,776 245 999
Insurance 371 1,908 280 1,435
Interest and credit facility fee 275 14,192 5,397 3,782
----------- ------------ ---------- ------------
Total expenses 1,169,459 3,545,500 447,603 2,002,523
----------- ------------ ---------- ------------
Less:
Waived and reimbursed fees -- 242,660 11,093 253,811
----------- ------------ ---------- ------------
Net expenses 1,169,459 3,302,840 436,510 1,748,712
----------- ------------ ---------- ------------
Net investment income (loss) (238,891) (1,461,258) 69,633 (310,557)
----------- ------------ ---------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments 5,142,968 34,678,990 4,193,951 793,552
Foreign currency transactions (317,798) (229,650) (280,912) (1,322,452)
Net change in unrealized appreciation
(depreciation) of:
Investments 20,401,318 12,707,158 4,044,999 13,541,108
Translation of other assets, liabilities
and forward contracts
denominated in foreign currencies (33,762) (93,137) (26,811) (28,814)
----------- ------------ ---------- ------------
Net gain (loss) from investments and
foreign currencies 25,192,726 47,063,361 7,931,227 12,983,394
----------- ------------ ---------- ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $24,953,835 $ 45,602,103 $8,000,860 $ 12,672,837
=========== ============ ========== ============
</TABLE>
See Accompanying Notes to Financial Statements
38
<PAGE>
- --------------------------------------------------------------------------------
International SmallCap Growth Fund Emerging Countries Fund
- ----------------------------------- --------------------------------
Three Months Year Three Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999 1999 1999
-------------- -------------- -------------- ---------------
$ 307,757 $ 746,291 $ 1,060,721 $ 4,191,769
50,065 472,518 43,094 797,757
1,407 52,931 9,087 356,077
----------- ----------- ----------- -------------
359,229 1,271,740 1,112,902 5,345,603
----------- ----------- ----------- -------------
177,661 325,037 193,139 867,645
327,972 1,149,529 716,000 3,476,180
3,405 28,547 82,534 64,151
23,000 89,085 12,500 251,494
1,399 244,633 46,621 549,474
11,040 14,023 55,123 78,110
21,932 57,055 36,068 180,178
1,773 -- -- --
3,961 200,220 59,724 940,358
4,041 52,542 6,844 80,376
378 -- 1,353 --
2,979 1,037 1,500 16,070
338 1,530 535 3,720
216 1,894 535 99,031
----------- ----------- ----------- -------------
580,095 2,165,132 1,212,476 6,606,787
----------- ----------- ----------- -------------
3,405 168,199 69,001 816,718
----------- ----------- ----------- -------------
576,690 1,996,933 1,143,475 5,790,069
----------- ----------- ----------- -------------
(217,461) (725,193) (30,573) (444,466)
----------- ----------- ----------- -------------
5,411,890 8,536,211 11,704,157 (82,042,109)
(79,978) (310,687) (465,273) (1,781,198)
11,698,095 14,384,412 51,197,149 10,604,952
(3,890) (26,496) (70,798) (87,082)
----------- ----------- ----------- -------------
17,026,117 22,583,440 62,365,235 (73,305,437)
----------- ----------- ----------- -------------
$16,808,656 $21,858,247 $62,334,662 $ (73,749,903)
=========== =========== =========== =============
39
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Yield
Strategic Income Fund Fund High Yield Fund II
--------------------------- ---------------- ----------------------------
Three Months Year Year Three Months Year
Ended Ended Ended Ended Ended
June 30, March 31, June 30, June 30, March 31,
1999 1999 1999 1999 1999
-------------- ------------ ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 27,553 $ 115,650 $ -- $ -- $ 305,770
Interest 424,413 1,715,145 37,453,697 2,470,108 7,924,233
---------- ---------- ------------- ------------ ------------
Total investment income 451,966 1,830,795 37,453,697 2,470,108 8,230,003
---------- ---------- ------------- ------------ ------------
EXPENSES:
Distribution expenses 29,595 52,773 2,670,572 177,661 558,242
Investment management fees 23,699 124,514 2,176,246 132,246 466,926
Miscellaneous 11,397 37,339 6,671 11,110 12,742
Transfer agent and registrar fees 5,750 25,041 482,786 30,500 55,799
Accounting and administration fees 2,468 106,606 -- 11,486 159,964
Shareholder reporting 4,040 27,433 105,753 11,040 97,053
Professional fees 3,261 4,619 62,216 10,293 39,929
Recordkeeping and pricing fees 281 -- 70,688 1,334 --
Custodian fees 4,989 25,448 74,455 7,377 16,542
Registration and filing fees 8,670 43,712 130,996 12,627 44,673
Shareholder servicing fee 253 -- 30,409 130 --
Directors'/trustees fees 101 328 19,268 410 1,154
Insurance 38 384 16,857 180 1,068
Interest and credit facility fee -- 281 11,124 160 6,001
---------- ---------- ------------- ------------ ------------
Total expenses 94,542 448,478 5,858,041 406,554 1,460,093
---------- ---------- ------------- ------------ ------------
Less:
Waived and reimbursed fees 31,139 232,922 441,770 54,363 318,323
Earnings credits -- -- 44,802 -- --
---------- ---------- ------------- ------------ ------------
Net expenses 63,403 215,556 5,371,469 352,191 1,141,770
---------- ---------- ------------- ------------ ------------
Net investment income 388,563 1,615,239 32,082,228 2,117,917 7,088,233
---------- ---------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments (774,513) 656,976 (39,880,708) (1,651,059) (2,958,000)
Foreign currency transactions 314,909 (326,116) -- -- --
Net change in unrealized appreciation
(depreciation) of:
Investments (71,507) (431,343) (9,008,796) 1,222,666 (2,908,667)
Translation of other assets, liabilities
and forward contracts denominated in
foreign currencies (897) 58,948 -- -- --
---------- ---------- ------------- ------------ ------------
Net loss from investments and foreign
currencies (532,008) (41,535) (48,889,504) (428,393) (5,866,667)
---------- ---------- ------------- ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (143,445) $1,573,704 $ (16,807,276) $ 1,689,524 $ 1,221,566
========== ========== ============= ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
40
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund Convertible Fund
----------------------------- ------------------------------
Three Months Year Three Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999 1999 1999
-------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 120,239 $ 339,694 $ 972,036 $ 3,782,442
Interest 226,383 922,564 1,296,134 5,736,177
Securities lending -- 17,017 -- 105,947
------------ ---------- ------------ -----------
Total investment income 346,622 1,279,275 2,268,170 9,624,566
------------ ---------- ------------ -----------
EXPENSES:
Distribution expenses 77,941 282,974 465,121 1,505,314
Investment management fees 66,601 261,803 438,229 1,997,038
Miscellaneous 40,778 22,064 125,083 43,212
Transfer agent and registrar fees 3,300 54,903 45,500 276,626
Accounting and administration fees 5,259 143,676 31,449 628,160
Shareholder reporting 4,240 2,382 22,592 66,319
Professional fees 4,080 10,621 54,493 157,249
Recordkeeping and pricing fees 1,836 -- 4,085 --
Custodian fees 4,748 24,774 22,555 37,058
Registration and filing fees 800 38,034 4,073 41,995
Shareholder servicing fee 300 -- 564 --
Directors'/trustees fees 230 608 1,153 12,587
Insurance 43 471 347 3,565
Interest and credit facility fee 55 569 303 11,059
------------ ---------- ------------ -----------
Total expenses 210,211 842,879 1,215,547 4,780,182
------------ ---------- ------------ -----------
Less:
Waived and reimbursed fees 12,611 132,033 -- 318,025
Earnings Credit 327 -- 2,258 --
------------ ---------- ------------ -----------
Net expenses 197,273 710,846 1,213,289 4,462,157
------------ ---------- ------------ -----------
Net investment income 149,349 568,429 1,054,881 5,162,409
------------ ---------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from:
Investments 4,451,834 3,902,620 13,167,798 25,488,999
Foreign currency transactions 39,076 (139,042) -- (33,135)
Net change in unrealized appreciation
(depreciation) of:
Investments (4,166,243) 1,149,796 3,899,895 19,262,546
Translation of other assets, liabilities and
forward contracts denominated in foreign
currencies (899) 37,594 (10,046) (119)
------------ ---------- ------------ -----------
Net gain from investments and foreign currencies 323,768 4,950,968 17,057,647 44,718,291
------------ ---------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 473,117 $5,519,397 $ 18,112,528 $49,880,700
============ ========== ============ ===========
</TABLE>
See Accompanying Notes to Financial Statements
41
<PAGE>
- -----------
U.S. Equity
Funds
- -----------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap Growth Fund
-----------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999 1998
-------------- ------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss $ (163,823) $ (196,384) $ (27,991)
Net realized gain from investments 2,418,689 5,409,155 459,203
Net change in unrealized appreciation (depreciation) of
investments 6,320,924 9,499,395 1,684,560
------------ ------------- ------------
Net increase (decrease) in net assets from operations 8,575,790 14,712,166 2,115,772
------------ ------------- ------------
Distributions to shareholders:
>From net investment income:
Retail class -- -- --
Advisory and institutional classes -- -- (443)
>From net realized gains:
Retail class -- (262,973) (5,019)
Advisory and institutional classes -- (41,543) (432,090)
------------ ------------- ------------
Total distributions -- (304,516) (437,552)
------------ ------------- ------------
Capital Share Transactions:
Net proceeds from sale of shares 52,500,065 35,925,823 11,514,888
Shares resulting from dividend reinvestments -- 292,849 113,728
Cost of shares redeemed (3,028,700) (11,532,699) (2,356,437)
Redemption of Class I shares (6,420,194) -- --
------------ ------------- ------------
Net increase (decrease) in net assets resulting from capital
share transactions 43,051,171 24,685,973 9,272,179
------------ ------------- ------------
Net increase (decrease) in net assets 51,626,961 39,093,623 10,950,399
------------ ------------- ------------
Net assets, beginning of period 51,336,987 12,243,364 1,292,965
------------ ------------- ------------
Net assets, end of period $102,963,948 $ 51,336,987 $ 12,243,364
============ ============= ============
Overdistributed net investment income $ -- $ (225,010) $ (28,626)
============ ============= ============
</TABLE>
See Accompanying Notes to Financial Statements
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MidCap Growth Fund SmallCap Growth Fund
- -------------------------------------------------- ---------------------------------------------------------
Three Months Year Year Three Months Year Year
Ended Ended Ended Ended Ended Ended
June 30, March 31, March 31, June 30, March 31, March 31,
1999 1999 1998 1999 1999 1998
- ---------------- -------------- -------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
$ (1,221,010) $ (4,514,125) $ (5,007,955) $ (1,566,497) $ (7,200,570) $ (8,756,479)
37,699,336 47,761,620 71,334,950 67,438,450 86,043,833 52,691,131
(14,395,996) 8,536,297 91,335,002 (18,557,187) (93,770,559) 211,279,518
-------------- -------------- -------------- -------------- ---------------- ----------------
22,082,330 51,783,792 157,661,997 47,314,766 (14,927,296) 255,214,170
-------------- -------------- -------------- -------------- ---------------- ----------------
-- -- -- -- -- --
-- -- -- -- -- --
-- (17,157,024) (66,141,970) -- (43,179,861) (50,664,402)
-- (6,615,537) (33,872,332) -- (10,999,123) (32,278,587)
-------------- -------------- -------------- -------------- ---------------- ----------------
-- (23,772,561) (100,014,302) -- (54,178,984) (82,942,989)
-------------- -------------- -------------- -------------- ---------------- ----------------
14,162,841 158,133,048 331,132,083 17,931,971 972,155,767 2,244,359,148
-- 12,306,426 91,914,967 -- 42,870,637 70,967,518
(21,991,325) (249,866,820) (426,974,305) (33,776,345) (1,191,789,767) (2,236,228,356)
(168,592,944) -- -- (221,318,827) -- --
-------------- -------------- -------------- -------------- ---------------- ----------------
(176,421,428) (79,427,346) (3,927,255) (237,163,201) (176,763,363) 79,098,310
-------------- -------------- -------------- -------------- ---------------- ----------------
(154,339,098) (51,416,115) 53,720,440 (189,848,435) (245,869,643) 251,369,491
-------------- -------------- -------------- -------------- ---------------- ----------------
434,474,483 485,890,598 432,170,158 506,421,157 752,290,800 500,921,309
-------------- -------------- -------------- -------------- ---------------- ----------------
$ 280,135,385 $ 434,474,483 $ 485,890,598 $ 316,572,722 $ 506,421,157 $ 752,290,800
============== ============== ============== ============== ================ ================
$ -- $ (21,862,409) $ (17,348,284) $ -- $ (36,692,610) $ (29,492,040)
============== ============== ============== ============== ================ ================
</TABLE>
43
<PAGE>
- -------------
International
Equity Funds
- -------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide Growth Fund
--------------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999 1998
---------------- ----------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (238,891) $ (1,461,258) $ (1,375,278)
Net realized gain (loss) from investment and
foreign currency transactions 4,825,170 34,449,340 21,743,157
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies 20,367,556 12,614,021 16,567,799
-------------- --------------- ---------------
Net increase (decrease) in net assets from
operations 24,953,835 45,602,103 36,935,678
-------------- --------------- ---------------
Distributions to shareholders:
From net investment income:
Retail class -- (136,708) --
Advisory and institutional classes -- (337,084) --
From net realized gains:
Retail class -- (20,785,812) (17,323,546)
Advisory and institutional classes -- (483,831) (565,515)
-------------- --------------- ---------------
Total distributions -- (21,743,435) (17,889,061)
-------------- --------------- ---------------
Capital Share Transactions:
Net proceeds from sale of shares 53,831,659 242,170,764 172,316,181
Shares resulting from dividend reinvestments -- 5,494,245 15,508,099
Cost of shares redeemed (25,822,612) (168,874,579) (165,123,599)
Redemption of Class I shares (80,662,778) -- --
-------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from capital share transactions (52,653,731) 78,790,430 22,700,681
-------------- --------------- ---------------
Net increase (decrease) in net assets (27,699,896) 102,649,098 41,747,298
-------------- --------------- ---------------
Net assets, beginning of period 248,002,680 145,353,582 103,606,284
-------------- --------------- ---------------
Net assets, end of period $ 220,302,784 $ 248,002,680 $ 145,353,582
============== =============== ===============
Undistributed (overdistributed) net investment
income $ -- $ (7,189,744) $ (5,254,694)
============== =============== ===============
International Core Growth Fund
---------------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999 1998
----------------- ---------------- ----------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 69,633 $ (310,557) $ (105,124)
Net realized gain (loss) from investment and
foreign currency transactions 3,913,039 (528,900) (798,230)
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies 4,018,188 13,512,294 8,937,191
--------------- -------------- --------------
Net increase (decrease) in net assets from
operations 8,000,860 12,672,837 8,033,837
--------------- -------------- --------------
Distributions to shareholders:
>From net investment income:
Retail class -- (205,129) --
Advisory and institutional classes -- (29,622) --
>From net realized gains:
Retail class -- (155,723) (94,711)
Advisory and institutional classes -- (13,021) (1,082,268)
--------------- -------------- --------------
Total distributions -- (403,495) (1,176,979)
--------------- -------------- --------------
Capital Share Transactions:
Net proceeds from sale of shares 35,644,077 173,884,589 82,647,911
Shares resulting from dividend reinvestments -- 228,203 1,116,210
Cost of shares redeemed (47,242,674) (82,311,581) (37,114,176)
Redemption of Class I shares (112,851,333) -- --
--------------- -------------- --------------
Net increase (decrease) in net assets resulting
from capital share transactions (124,449,930) 91,801,211 46,649,945
--------------- -------------- --------------
Net increase (decrease) in net assets (116,449,070) 104,070,553 53,506,803
--------------- -------------- --------------
Net assets, beginning of period 162,217,602 58,147,049 4,640,246
--------------- -------------- --------------
Net assets, end of period $ 45,768,532 $ 162,217,602 $ 58,147,049
=============== ============== ==============
Undistributed (overdistributed) net investment
income $ 69,633 $ (647,924) $ (102,616)
=============== ============== ==============
</TABLE>
See Accompanying Notes to Financial Statements
44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International SmallCap Growth Fund Emerging Countries Fund
- ------------------------------------------------------- --------------------------------------------------------
Three Months Year Year Three Months Year Year
Ended Ended Ended Ended Ended Ended
June 30, March 31, March 31, June 30, March 31, March 31,
1999 1999 1998 1999 1999 1998
- --------------- ----------------- ----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$ (217,461) $ (725,193) $ (535,283) $ (30,573) $ (444,466) $ (106,300)
5,331,912 8,225,524 8,493,580 11,238,884 (83,823,307) (17,633,714)
11,694,205 14,357,916 14,373,569 51,126,351 10,517,870 30,115,298
- ------------- -------------- -------------- -------------- -------------- -------------
16,808,656 21,858,247 22,331,866 62,334,662 (73,749,903) 12,375,284
- ------------- -------------- -------------- -------------- -------------- -------------
-- -- -- -- (105,494) --
-- (76,552) -- -- (676,244) --
-- (2,163,953) (1,578,053) -- (685,405) (7,232,528)
-- (1,836,179) (7,618,866) -- (431,659) (6,750,418)
- ------------- -------------- -------------- -------------- -------------- -------------
-- (4,076,684) (9,196,919) -- (1,898,802) (13,982,946)
- ------------- -------------- -------------- -------------- -------------- -------------
48,190,262 194,823,908 143,928,187 38,136,033 234,887,012 187,435,315
-- 3,425,742 8,031,905 -- 1,499,434 11,972,685
(30,396,046) (142,304,879) (144,992,679) (31,982,656) (160,102,083) (74,429,466)
(73,163,306) -- -- (167,510,018) -- --
- ------------- -------------- -------------- -------------- -------------- -------------
(55,369,090) 55,944,771 6,967,413 (161,356,641) 76,284,363 124,978,534
- ------------- -------------- -------------- -------------- -------------- -------------
(38,560,434) 73,726,334 20,102,360 (99,021,979) 635,658 123,370,872
- ------------- -------------- -------------- -------------- -------------- -------------
156,616,791 82,890,457 62,788,097 282,206,178 281,570,520 158,199,648
- ------------- -------------- -------------- -------------- -------------- -------------
$118,056,357 $ 156,616,791 $ 82,890,457 $ 183,184,199 $ 282,206,178 $ 281,570,520
============= ============== ============== ============== ============== =============
$ -- $ (1,982,021) $ (1,180,276) $ -- $ (2,164,624) $ (938,420)
============= ============== ============== ============== ============== =============
</TABLE>
45
<PAGE>
- ------
Income
Funds
- ------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
--------------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999(1) 1998(1)
--------------- ---------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income $ 388,563 $ 1,615,239 $ 894,810
Net realized gain (loss) from investment and foreign
currency transactions (459,604) 330,860 520,891
Net change in unrealized appreciation (depreciation)
of investments and translation of other assets,
liabilities and forward contracts denominated in
foreign currencies (72,404) (372,395) 245,777
------------- ------------- ------------
Net increase (decrease) in net assets from operations (143,445) 1,573,704 1,661,478
------------- ------------- ------------
Distributions to shareholders:
>From net investment income:
Retail class (187,766) (621,335) n/a
Advisory and Institutional classes (121,982) (934,712) (892,591)
>From net realized gains:
Retail class -- (151,772) n/a
Advisory and Institutional classes -- (442,876) (156,503)
Tax return of capital:
Retail class -- -- --
Advisory and Institutional classes -- -- --
------------- ------------- ------------
Total distributions (309,748) (2,150,695) (1,049,094)
------------- ------------- ------------
Capital Share Transactions:
Net proceeds from sale of shares 24,148,535 30,254,792 4,978,031
Net proceeds from shares issued in merger n/a 10,271,727 n/a
Shares resulting from dividend reinvestmests 108,053 1,714,149 1,048,960
Cost of shares redeemed (25,920,629) (20,857,342) (6,745,829)
Redemption of Class I shares (17,917,765) n/a n/a
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from capital share transactions (19,581,806) 21,383,326 (718,838)
------------- ------------- ------------
Net increase (decrease) in net assets (20,034,999) 20,806,335 (106,454)
------------- ------------- ------------
Net assets, beginning of period 36,565,323 15,758,988 15,865,442
------------- ------------- ------------
Net assets, end of period $ 16,530,324 $ 36,565,323 $ 15,758,988
============= ============= ============
Undistributed (overdistributed) net investment income $ 138,021 $ 59,206 $ 14
============= ============= ============
</TABLE>
(1) Advisory and retail classes commenced operations on 7/27/98.
(2) Commenced operations on 3/27/98.
See Accompanying Notes to Financial Statements
46
<PAGE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Yield Fund High Yield Fund II
- ----------------------------------- -------------------------------------------------
Year Year Three Months Year Period
Ended Ended Ended Ended Ended
June 30, June 30, June 30, March 31, March 31,
1999 1998 1999 1999 1998(2)
- ----------------- --------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>
$ 32,082,228 $ 13,829,456 $ 2,117,917 $ 7,088,233 $ 499,478
(39,880,708) 1,228,407 (1,651,059) (2,958,000) 551,791
(9,008,796) (2,126,621) 1,222,666 (2,908,667) 310,375
-------------- ------------- ------------- ------------- ------------
(16,807,276) 12,931,242 1,689,524 1,221,566 1,361,644
-------------- ------------- ------------- ------------- ------------
(33,382,295) (13,082,949) (1,816,752) (6,010,027) --
-- -- (243,368) (1,342,628) (516,768)
-- -- -- -- --
-- -- -- -- (551,174)
(604,370) -- -- -- --
-- -- -- -- --
-------------- ------------- ------------- ------------- ------------
(33,986,665) (13,082,949) (2,060,120) (7,352,655) (1,067,942)
-------------- ------------- ------------- ------------- ------------
338,787,788 266,689,070 5,060,774 103,808,906 10,731,762
n/a n/a n/a n/a 16,364,513
15,394,375 6,023,875 636,667 3,545,605 237,690
(162,095,950) (81,063,350) (12,563,115) (31,561,090) (2,500,448)
n/a n/a (11,636,641) -- n/a
-------------- ------------- ------------- ------------- ------------
192,086,213 191,649,595 (18,502,315) 75,793,421 24,833,517
-------------- ------------- ------------- ------------- ------------
141,292,272 191,497,888 (18,872,911) 69,662,332 25,127,219
-------------- ------------- ------------- ------------- ------------
276,511,688 85,013,800 99,397,110 29,734,778 4,607,559
-------------- ------------- ------------- ------------- ------------
$ 417,803,960 $ 276,511,688 $ 80,524,199 $ 99,397,110 $29,734,778
============== ============= ============= ============= ============
$ -- $ 1,300,067 $ (193,920) $ (251,717) $ 12,705
============== ============= ============= ============= ============
</TABLE>
47
<PAGE>
- ------------
Equity &
Income Funds
- ------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
-------------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999 1998
---------------- ----------------- --------------
<S> <C> <C> <C>
Increase in net assets from operations:
Net investment income $ 149,349 $ 568,429 $ 289,199
Net realized gain from investment and foreign
currency transactions 4,490,910 3,763,578 5,874,160
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies (4,167,142) 1,187,390 3,137,422
------------ -------------- --------------
Net increase in net assets from operations 473,117 5,519,397 9,300,781
------------ -------------- --------------
Distributions to shareholders:
>From net investment income:
Retail class (96,590) (606,434) (271,011)
Advisory and institutional classes (798) (29,342) (21,242)
>From net realized gains:
Retail class -- (5,988,621) (1,994,836)
Advisory and institutional classes -- (133,020) (70,159)
------------ -------------- --------------
Total distributions (97,388) (6,757,417) (2,357,248)
------------ -------------- --------------
Capital Share Transactions:
Net proceeds from sale of shares 2,993,582 12,882,116 10,301,467
Shares resulting from dividend reinvestments 41,034 5,548,500 2,115,394
Cost of shares redeemed (2,512,012) (12,665,619) (11,292,750)
Redemption of Class I shares n/a n/a n/a
------------ -------------- --------------
Net increase (decrease) in net assets resulting
from capital share transactions 522,604 5,764,997 1,124,111
------------ -------------- --------------
Net increase (decrease) in net assets 898,333 4,526,977 8,067,644
------------ -------------- --------------
Net assets, beginning of period 37,397,911 32,870,934 24,803,290
------------ -------------- --------------
Net assets, end of period $ 38,296,244 $ 37,397,911 $ 32,870,934
============ ============== ==============
Undistributed (overdistributed) net
investment income $ (16,013) $ (67,974) $ (627)
============ ============== ==============
Convertible Fund
--------------------------------------------------
Three Months Year Year
Ended Ended Ended
June 30, March 31, March 31,
1999 1999 1998
---------------- ----------------- ---------------
<S> <C> <C> <C>
Increase in net assets from operations:
Net investment income $ 1,054,881 $ 5,162,409 $ 4,493,508
Net realized gain from investment and foreign
currency transactions 13,167,798 25,455,864 8,251,684
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies 3,889,849 19,262,427 35,936,585
------------- ------------- -------------
Net increase in net assets from operations 18,112,528 49,880,700 48,681,777
------------- ------------- -------------
Distributions to shareholders:
>From net investment income:
Retail class (742,927) (2,822,214) (2,637,986)
Advisory and institutional classes (88,744) (2,357,057) (1,847,791)
>From net realized gains:
Retail class -- (3,158,579) (12,202,405)
Advisory and institutional classes -- (915,964) (2,579,514)
------------- ------------- -------------
Total distributions (831,671) (9,253,814) (19,267,696)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 28,114,039 83,841,725 111,877,548
Shares resulting from dividend reinvestments 465,422 6,950,787 15,169,089
Cost of shares redeemed (13,251,963) (66,351,226) (33,628,541)
Redemption of Class I shares (91,378,691) -- --
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions (76,051,193) 24,441,286 93,418,096
------------- ------------- -------------
Net increase (decrease) in net assets (58,770,336) 65,068,172 122,832,177
------------- ------------- -------------
Net assets, beginning of period 317,807,646 252,739,474 129,907,297
------------- ------------- -------------
Net assets, end of period $ 259,037,310 $ 317,807,646 $ 252,739,474
============= ============= =============
Undistributed (overdistributed) net
investment income $ 195,337 $ (27,873) $ (11,011)
============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
48
<PAGE>
U.S. EQUITY
FUNDS
PILGRIM
LARGECAP
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------
Three Months Year July 21, 1997
Ended Ended to
June 30, March 31, March 31,
1999(b) 1999 1998(a)
-------------- ----------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 25.24 $ 15.66 $ 12.50
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.02) (0.01)
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 3.22 9.87 3.26
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 3.19 9.85 3.25
- ------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- 0.01
- ------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 0.27 0.08
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 28.43 $ 25.24 $ 15.66
============================================================================================================
TOTAL RETURN(C): 12.64% 63.76% 62.47%
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000's) $ 6,044 $ 4,908 $ 799
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net expenses after expense reimbursement(d) 1.23% 1.26% 1.25%
- ------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense reimbursement(d) 1.25% 1.91% 10.45%
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss) after expense reimbursement(d) (0.36)% (0.28)% (0.62)%
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover 27% 253% 306%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on June 21, 1997.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(c) 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.
(d) Annualized
49
<PAGE>
U.S. EQUITY
FUNDS
PILGRIM
MIDCAP
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months June 30,
Ended Year Ended March 31, 1994(b)
June 30, ----------------------------------------------- to March 31,
1999(a) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period 25.14 $ 23.30 $ 18.01 $ 17.99 $ 13.66 $ 12.50
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.12) (0.21) (0.04) (0.07) (0.02)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
on investments 1.86 3.56 7.48 0.32 4.86 1.18
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.80 3.44 7.27 0.28 4.79 1.16
- ------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 1.60 1.98 0.26 0.46 --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.94 $ 25.14 $ 23.30 $ 18.01 $ 17.99 $ 13.66
==================================================================================================================
TOTAL RETURN(C): 7.16% 15.77% 42.00% 1.39% 35.37% 9.28%
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 19,383 $ 14,350 $ 12,204 $ 13,115 $ 4,274 $ 2,121
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net expenses after expense
reimbursement(d) 1.24% 1.23% 1.22% 1.25% 1.23% 1.24%
- ------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 1.25% 1.31% 1.95% 1.84% 2.84% 3.52%
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) after
expense reimbursement(d) (0.95)% (0.71)% (0.97)% (0.69)% (0.57)% (0.33)%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover 55% 154% 200% 153% 114% 98%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Effective May 24, 1999, Pilgrim Investment Inc. became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(b) Commencement of offering shares.
(c) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(d) Annualized
50
<PAGE>
U.S. EQUITY
FUNDS
PILGRIM
SMALLCAP
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(b)
June 30, ---------------------------------------- to March 31,
1999(a) 1999 1998 1997 1996
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.56 $ 19.27 $ 13.19 $ 14.16 $ 12.50
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.15) 0.03 (0.07) (0.03)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss)
on investments 2.69 0.22 6.16 (0.77) 1.69
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.63 0.07 6.19 (0.84) 1.66
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 0.78 0.11 0.13 --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.19 $ 18.56 $ 19.27 $ 13.19 $ 14.16
=======================================================================================================================
TOTAL RETURN(C): 14.17% 0.96% 47.01% (6.03)% 13.28%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 11,013 $ 9,107 $ 12,508 $ 1,013 $ 314
- -----------------------------------------------------------------------------------------------------------------------
Ratio to average net assets,
Net expenses after expense reimbursement(d) 1.45% 1.53% 1.52% 1.51% 1.49%
- -----------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 1.49% 1.63% 2.39% 10.79% 37.86%
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) (1.21)% (0.97)% (1.52)% (1.02)% (1.05)%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 32% 90% 92% 113% 130%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(b) Commencement of offering shares.
(c) 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.
(d) Annualized
51
<PAGE>
INTERNATIONAL
EQUITY FUNDS
PILGRIM
WORLDWIDE
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(b)
June 30, ---------------------------------------- to March 31,
1999(a) 1999 1998 1997 1996
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 24.59 $ 19.63 $ 15.00 $ 13.27 $ 12.50
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01 0.22 (0.11) 0.01 (0.04)
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss)
on investments 2.52 6.15 5.29 1.72 0.81
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.53 6.37 5.18 1.73 0.77
- ------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- 0.15 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 1.26 0.55 -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 27.12 $ 24.59 $ 19.63 $ 15.00 $ 13.27
========================================================================================================================
TOTAL RETURN(C): 10.29% 33.97% 35.11% 12.87% 6.32%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 14,870 $ 7,320 $ 645 $ 642 $ 1
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net expenses after expense reimbursement(d) 1.55% 1.59% 1.61% 1.61% 1.60%
- ------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 1.55% 1.76% 3.75% 34.99% 3,232.53%
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) 0.17% 0.17% (0.47)% (0.91)% (0.50)%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 57% 247% 202% 182% 132%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(b) Commencement of offering shares.
(c) 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.
(d) Annualized
52
<PAGE>
INTERNATIONAL
EQUITY FUNDS
PILGRIM
INTERNATIONAL CORE
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months February 28,
Ended Year Ended March 31, 1997(a)
June 30, --------------------------- to March 31,
1999(b) 1999 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.36 $ 17.43 $ 12.75 $ 12.50
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04 0.09 (0.04) --
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
on investments 1.23 0.97 4.72 0.25
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 1.27 1.06 4.68 0.25
- ------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- 0.13 -- --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.63 $ 18.36 $ 17.43 $ 12.75
============================================================================================================
TOTAL RETURN(C): 6.92% 6.11% 36.63% 2.00%
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 9,390 $ 11,268 $ 1,719 $ 1
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net expenses after expenses reimbursement(d) 1.54% 1.63% 1.66% 0.00%
- ------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 1.63% 1.87% 3.18% 2,667.07%
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) 0.73% (0.27)% (0.47)% 0.00%
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover 67% 214% 274% 76%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The fund commenced operations on February 28, 1997.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(c) 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.
(d) Annualized
53
<PAGE>
INTERNATIONAL
EQUITY FUNDS
PILGRIM
INTERNATIONAL
SMALLCAP
GROWTH FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(a)
June 30, ----------------------------------------- to March 31,
1999(b) 1999 1998 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.23 $ 19.18 $ 14.01 $ 13.52 $ 12.50
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.02) 0.05 (0.06) 0.01
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments 2.96 3.36 5.12 2.01 1.01
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.93 3.34 5.17 1.95 1.02
- ----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- 0.09 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 0.20 -- 1.46 --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.16 $ 22.23 $ 19.18 $ 14.01 $ 13.52
======================================================================================================================
TOTAL RETURN(c): 13.18% 17.61% 36.90% 15.03% 8.16%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 42,881 $ 32,819 $ 8,810 $ 42 $ 19
- ----------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses after expense reimbursement(d) 1.65% 1.65% 1.66% 1.66% 1.65%
- ----------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 1.67% 1.80% 6.15% 151.33% 531.72%
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) (0.50)% (0.50)% (0.43)% (0.64)% 0.33%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 44% 146% 198% 206% 141%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of offering shares.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(c) 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.
(d) Annualized
54
<PAGE>
INTERNATIONAL
EQUITY FUNDS
PILGRIM
EMERGING
COUNTRIES FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(a)
June 30, --------------------------------------- to March 31,
1999(b) 1999 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.79 $ 17.76 $ 16.47 $ 13.18 $ 12.50
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.01) 0.07 (0.04) 0.01
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss)
on investments 3.45 (3.78) 1.33 3.37 0.67
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $ 3.41 $ (3.79) $ 1.40 $ 3.33 $ 0.68
- --------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- 0.18 -- -- --
- --------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- -- 0.11 0.04 --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.20 $ 13.79 $ 17.76 $ 16.47 $ 13.18
====================================================================================================================
TOTAL RETURN(c): 24.73% (21.42)% 8.60% 25.29% 5.44%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 79,130 $ 53,125 $ 46,711 $ 8,660 $ 350
- --------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses after expense reimbursement(d) 1.90% 1.94% 1.91% 1.91% 1.90%
- --------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
reimbursement(d) 2.43% 2.23% 2.43% 4.20% 44.24%
- --------------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) (1.07)% (0.01)% 1.06% (0.87)% 0.47%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover 67% 213% 243% 176% 118%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of offering shares.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor.
(c) 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.
(d) Annualized
55
<PAGE>
INCOME
FUNDS
PILGRIM
STRATEGIC
INCOME FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months July 27,
Ended 1998(a)
June 30, to March 31,
1999(b) 1999
------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.26 $ 12.43
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.25 0.48
- --------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss) on investments (0.38) (0.04)
- --------------------------------------------------------------------------------------------
Total from investment operations (0.13) 0.44
- --------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.14 0.50
- --------------------------------------------------------------------------------------------
Net realized gains on investments -- 0.11
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.99 $ 12.26
============================================================================================
TOTAL RETURN(C): 1.16% 5.78%
- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 171 $ 314
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
Net expenses, after expense reimbursement(d) 0.71% 0.69%
- --------------------------------------------------------------------------------------------
Gross expenses prior to expense reimbursement(d) 1.37% 1.74%
- --------------------------------------------------------------------------------------------
Net investment income (loss) after expense reimbursement(d) 6.07% 6.03%
- --------------------------------------------------------------------------------------------
Portfolio turnover 69% 274%
- --------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on July 27, 1998.
(b) Effective May 24, 1999, Pilgrim Investment Inc. became the Investment
Manager of the Fund.
(c) 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.
(d) Annualized
56
<PAGE>
INCOME
FUNDS
PILGRIM
HIGH YIELD
FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From June 17
thru June 30,
1999(a)
--------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 5.91
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.2
- ------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss)
on investments --
- ------------------------------------------------------------------------------------------
Total from investment operations 0.02
- ------------------------------------------------------------------------------------------
Less distributions from:
Net investment income --
- ------------------------------------------------------------------------------------------
Realized capital gains --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.93
==========================================================================================
TOTAL RETURN(B): 0.34%
- ------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000's) --
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
Net expenses, after expense reimbursement(c) --
- ------------------------------------------------------------------------------------------
Gross expenses prior to expense reimbursement(c) --
- ------------------------------------------------------------------------------------------
Net investment income (loss) after expense reimbursement --
- ------------------------------------------------------------------------------------------
Portfolio turnover 184%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of offering shares
(b) Total return is calculated assuming reinvestment of all dividends and
capital gains distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(c) Annualized.
57
<PAGE>
INCOME
FUNDS
PILGRIM
HIGH YIELD
FUND II
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Year March 27,
Ended Ended 1998(a)
June 30, March 31, to March 31,
1999(b) 1999 1998
-------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.68 $ 12.72 $ 12.70
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.30 1.16 0.01
- ------------------------------------------------------------------------------------------
Net realized and unrealized gains (loss)
on securities and foreign currency (0.11) (1.01) 0.01
- ------------------------------------------------------------------------------------------
Total from investment operations 0.19 0.15 0.02
- ------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.28 1.19 --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.59 $ 11.68 $ 12.72
==========================================================================================
TOTAL RETURN(C): 1.63% 1.40% 0.16%
- ------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000's) $ 3,229 $ 6,502 $ 567
- ------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses after expense reimbursement(d) 0.90% 0.87% 0.97%
- ------------------------------------------------------------------------------------------
Gross expenses prior to
expense reimbursement(d) 1.17% 1.28% 0.97%
- ------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) 9.88% 10.01% 7.53%
- ------------------------------------------------------------------------------------------
Portfolio turnover 44% 242% 484%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on March 27, 1998.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund.
(c) Total return is calculated assuming reinvestment of all dividends and
capital gains distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(d) Annualized
58
<PAGE>
EQUITY &
INCOME FUNDS
PILGRIM
BALANCED
FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(a) to
June 30, ----------------------------------------- March 31,
1999(b) 1999 1998 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.85 $ 18.48 $ 13.42 $ 12.69 $ 12.50
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.11 0.44 0.30 0.24 0.15
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
on investments 0.16 2.50 5.07 0.73 0.19
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.27 2.94 5.37 0.97 0.34
- ---------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.08 0.50 0.31 0.24 0.15
- ---------------------------------------------------------------------------------------------------------------------
Net realized gains on investments -- 2.07 -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.04 $ 18.85 $ 18.48 $ 13.42 $ 12.69
=====================================================================================================================
TOTAL RETURN(C): 1.44% 17.49% 40.21% 7.60% 2.77%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 190 $ 176 $ 166 $ 73 $ 1
- ---------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses after expense
reimbursement(d) 1.25% 1.25% 1.26% 1.26% 1.25%
- ---------------------------------------------------------------------------------------------------------------------
Gross expenses prior to
expense reimbursement(d) 1.51% 1.63% 11.28% 126.75% 3,094.48%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss)
after expense reimbursement(d) 2.30% 2.41% 4.09% 2.15% 2.16%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 63% 165% 260% 213% 197%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of offering shares.
(b) Effective May 24, 1999, Pilgrim Investment Inc., became the investment
Manager of the Fund.
(c) 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.
(d) Annualized
59
<PAGE>
EQUITY &
INCOME FUNDS
PILGRIM
CONVERTIBLE
FUND
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months August 31,
Ended Year Ended March 31, 1995(b)
June 30, --------------------------------------- to March 31,
1999(a) 1999 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 21.22 $ 18.47 $ 15.19 $ 13.72 $ 12.50
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09 0.43 0.48 0.42 0.17
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
on investments 1.31 3.09 4.19 1.50 1.22
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.40 3.52 4.67 1.92 1.39
- --------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.11 0.46 0.48 0.42 0.17
- --------------------------------------------------------------------------------------------------------------------
Net realized gains on investments gains -- 0.31 0.91 0.03 --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.51 $ 21.22 $ 18.47 $ 15.19 $ 13.72
====================================================================================================================
TOTAL RETURN(C): 6.62% 19.66% 31.54% 14.13% 11.13%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 17,537 $ 8,741 $ 7,080 $ 4,599 $ 1,085
- --------------------------------------------------------------------------------------------------------------------
Ratio to average net assets,
Net expenses after expense reimbursement(d) 1.23% 1.23% 1.22% 1.25% 1.25%
- --------------------------------------------------------------------------------------------------------------------
Gross expenses prior to
expense reimbursement(d) 1.23% 1.35% 2.35% 2.90% 9.21%
- --------------------------------------------------------------------------------------------------------------------
Net investment income
after expense reimbursement(d) 2.04% 2.37% 5.99% 3.29% 3.59%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover 28% 138% 160% 167% 145%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund.
(b) Commencement of offering shares.
(c) 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.
(d) Annualized
60
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
ORGANIZATION. The Pilgrim Funds are comprised of Pilgrim Mutual Funds ("PMF"),
Pilgrim Bank and Thrift Fund, Inc. ("Bank and Thrift Fund"), Pilgrim Investment
Funds, Inc. ("PIF"), Pilgrim Advisory Funds, Inc. ("PAF") and Pilgrim Government
Securities Income Fund ("Government Securities Income Fund") which are each
open-end investment management companies registered under the Investment Company
Act of 1940, as amended.
PMF, formerly Nicholas-Applegate Mutual Funds, is a Delaware business trust
organized in 1992 with eleven separate series (Portfolios). The "Funds" are
Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap
Growth Fund, Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth
Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries
Fund, Pilgrim Strategic Income Fund (formerly High Quality Bond Fund), Pilgrim
High Yield Fund II, Pilgrim Balanced Fund and Pilgrim Convertible Fund. In a
transaction that closed on May 21, 1999, Pilgrim Investments, Inc. became the
Investment Manager and Pilgrim Securities, Inc. became the Distributor of the
Funds in PMF. While Pilgrim Investments, Inc. manages all the portfolios of PMF,
Nicholas-Applegate Capital Management acts as sub-advisor to all the PMF
portfolios with the exception of Strategic Income Fund, High Yield Fund II and
Balanced Fund. During the current period, each PMF Fund listed above changed its
year-end from March 31 to June 30.
Bank and Thrift Fund was organized as a Maryland Corporation in 1986. PIF, a
Maryland Corporation organized in 1969, consists of Pilgrim MagnaCap Fund and
Pilgrim High Yield Fund. PAF, a Maryland Corporation organized in 1995, consists
of Pilgrim MidCap Value Fund, Pilgrim LargeCap Leaders Fund and Pilgrim
Asia-Pacific Equity Fund. Government Securities Income Fund, a California
Corporation organized in 1984, is the single series of Government Securities
Income Fund. The investment objective of each Fund is described in each Fund's
prospectus.
Each Fund offers at least two of the following classes of shares: Class A, Class
B, Class C, Class M and Class Q. This report covers only the Funds that offer
Class Q shares. 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, shareholder servicing and transfer agency fees. Class B shares,
along with their pro rata reinvested dividend shares, automatically convert to
Class A shares approximately eight years after purchase.
REORGANIZATION. 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 7, 1999 and concurrent with the change in investment adviser, the
Institutional Classes of PMF were transferred in a tax free reorganization to
new funds being managed by Nicholas-Applegate Capital Management.
61
<PAGE>
- -------
Pilgrim
Funds
- ------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
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 generally accepted accounting principles 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 of
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 in Pilgrim Strategic Income Fund, Pilgrim
Balanced Fund and Pilgrim High Yield Fund II are valued at bid prices
(Pilgrim High Yield Fund is valued at the mean between the bid and ask
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 are valued at 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. Reported net
realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, 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
62
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
liquid and prices more volatile than those of comparable U.S. companies and
the U.S. Government.
D. FOREIGN CURRENCY TRANSACTIONS. 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 June 30,
1999.
E. Distributions to Shareholders. The Funds record distributions to their
shareholders on ex-date. Each Fund pays dividends, if any, as follows:
ANNUALLY QUARTERLY MONTHLY
-------- --------- -------
LargeCap Growth Balanced Strategic Income
MidCap Growth Convertible High Yield
SmallCap Growth High Yield II
International Core Growth
Worldwide Growth
International SmallCap Growth
Emerging Countries
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 generally accepted accounting
principles. 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, organization costs 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
63
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
distributions of paid-in capital. Accordingly, amounts as of June 30, 1999
have been increased (decreased) through reclassification as follows:
<TABLE>
<CAPTION>
Net unrealized
appreciation
(depreciation) of
Undistrib- Accumulated investments
uted net realized and other
(over- gains (losses) assets, liabilities
distributed) on investments and forward
net and foreign contracts
Paid-in investment currency denominated in
capital income transactions foreign currencies
--------------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
LargeCap
Growth $ 1,557,648 $ 388,833 $ -- $ (1,946,481)
MidCap
Growth 18,371,070 23,083,419 -- (41,454,489)
SmallCap
Growth 22,887,326 38,259,107 -- (61,146,433)
Worldwide
Growth 22,111,341 7,428,635 -- (29,539,976)
International
Core
Growth 20,779,296 647,924 -- (21,427,220)
International
SmallCap
Growth 17,179,005 2,199,482 -- (19,378,487)
Emerging
Countries 51,900,118 2,195,197 -- (54,095,315)
Strategic
Income 25,791 -- -- (25,791)
High Yield (8,393,875) 604,370 7,789,505 --
High Yield II 411,403 -- -- (411,403)
Convertible 19,649,976 -- -- (19,649,976)
</TABLE>
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 as follows at June 30, 1999:
Amount Expiration Dates
------------- ------------------
International Core Growth $ 2,108,292 2005
Emerging Countries 76,846,244 2005
High Yield 9,719,347 2001 to 2002
High Yield II 2,988,771 2007
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 generally
accepted accounting principles. 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. 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. RECLASSIFICATION. Certain prior period amounts in the accompanying
financial statements have been reclassified to conform with current period
presentation.
64
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
J. SECURITIES LENDING. Through May 21, 1999, each Fund in PMF had the option
to temporarily loan securities, up to 30% of its total assets, to brokers,
dealers or other financial institutions in exchange for a negotiated
lender's fee. The borrower fully collateralized the loans with cash,
letters of credit or U.S. Government securities.
NOTE 3 -- INVESTMENT TRANSACTIONS
For the year ended, or three-months ended in the case of the Funds in PMF, June
30, 1999, the cost of purchases and proceeds from the sales of securities,
excluding short-term securities, were as follows:
Purchases Sales
-------------- --------------
LargeCap Growth Fund $ 59,240,108 $ 14,049,122
MidCap Growth Fund 190,599,012 226,978,963
SmallCap Growth Fund 126,366,698 117,938,952
Worldwide Growth Fund 129,408,670 194,489,617
International Core Growth Fund 70,202,039 79,137,314
International SmallCap Growth Fund 57,437,839 51,402,894
Emerging Countries Fund 156,543,654 213,241,407
Strategic Income Fund 17,876,374 16,440,609
High Yield Fund 818,461,416 599,893,081
High Yield Fund II 40,141,518 48,439,924
Balanced Fund 22,463,593 23,173,663
Convertible Fund 76,202,144 64,279,220
NOTE 4 -- INVESTMENTS IN AFFILIATES
Affiliated companies, as defined in Section 2(a)(3) of the Investment Company
Act of 1940, are companies 5% or more of whose outstanding voting shares are
held by a fund. At June 30, 1999, the Funds covered by this report had no
affiliated company holdings.
NOTE 5 -- INVESTMENT MANAGEMENT FEES
Each of the Funds has entered into an Investment Management Agreement with
Pilgrim Investments, Inc. ("the Manager"), a wholly-owned subsidiary of Pilgrim
Group, Inc. ("PGI"). 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 Emerging Countries -- 1.25%; for SmallCap Growth, Worldwide Growth,
International Core Growth and International SmallCap Growth -- 1.00%; for
LargeCap Growth, MidCap Growth, Balanced and Convertible -- 0.75%; for High
Yield and High Yield II -- 0.60%; for Strategic Income -- 0.45%.
For the period from April 1, 1999 to May 21, 1999, the PMF Funds paid
Nicholas-Applegate Capital Management, as Investment Advisor, the same fees as
listed above.
NOTE 6 -- DISTRIBUTION FEES
Each share class of the Funds has adopted a Plan pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plans"), whereby 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 Funds' shares.
Pursuant to the 12b-1 Plans, the Distributor is entitled to payment each month
for actual expenses incurred in the distribution and promotion of each Fund's
shares, including the printing of prospectuses and reports used for sales
purposes, expenses of preparation and printing of sales literature and other
such distribution related expenses, including any distribution or 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 the following annual fees:
Class A Class B Class C Class M Class Q
--------- --------- --------- --------- ---------
LargeCap Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
MidCap Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
SmallCap Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
Worldwide Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
International Core
Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
International SmallCap
Growth Fund 0.35% 1.00% 1.00% n/a 0.25%
Emerging Countries Fund 0.35% 1.00% 1.00% n/a 0.25%
Strategic Income Fund 0.35% 0.75% 0.75% n/a 0.25%
High Yield Fund 0.25% 1.00% 1.00% 0.75% 0.25%
High Yield Fund II 0.35% 1.00% 1.00% n/a 0.25%
Balanced Fund 0.35% 1.00% 1.00% n/a 0.25%
Convertible Fund 0.35% 1.00% 1.00% n/a 0.25%
For the period from April 1, 1999 to May 21, 1999, the PMF Funds paid
Nicholas-Applegate Securities, as distributor of the Funds, the same fees as
listed above.
65
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
For the year ended June 30, 1999 (for the three-months ended June 30, 1999 for
PMF Funds) the Funds paid the following distribution fees by class to the
Distributor.
Class A Class B Class C Class M Class Q
--------- ----------- --------- -------- --------
LargeCap Growth $ 16,385 $ 74,952 $ 30,173 n/a $ 3,401
MidCap Growth 57,410 116,241 352,113 n/a 10,593
SmallCap Growth 82,578 114,383 359,500 n/a 6,474
Worldwide Growth 49,462 54,880 259,213 n/a 7,751
International Core Growth 15,728 28,044 26,291 n/a 6,596
International SmallCap
Growth 40,010 45,143 57,211 n/a 35,297
Emerging Countries 42,322 58,402 52,603 n/a 39,812
Strategic Income 3,488 11,304 14,669 n/a 134
High Yield 299,650 2,198,732 156 172,034 --
High Yield II 17,029 110,446 47,179 n/a 3,007
Balanced 8,383 16,071 53,367 n/a 120
Convertible 59,903 155,368 241,580 n/a 8,270
For the periods ended June 30, 1999, the Distributor has retained $871,391 as
sales charges from the proceeds of Class A Shares sold, $146,773 from the
proceeds of Class B Shares redeemed, $14,263 from the proceeds of Class C Shares
sold, and $42,420 from the proceeds of Class M Shares sold.
NOTE 7 -- SHAREHOLDER SERVICING FEES
Each of the Funds has entered into a Service Agreement with PGI whereby PGI will
act as Shareholder Service Agent for each Fund. The agreement provides that PGI
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 year ended June 30,
1999 are shown in the accompanying Statements of Operations.
At June 30, 1999, the Funds owed the following service fees:
LargeCap Growth $ 481
MidCap Growth 500
SmallCap Growth 304
Worldwide Growth 1,313
International Core Growth 250
International SmallCap Growth 189
Emerging Countries 1,147
Strategic Income 150
High Yield 3,000
High Yield II 65
Balanced 150
Convertible 282
NOTE 8 -- EXPENSE WAIVERS
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
--------- --------- --------- --------- ---------
LargeCap Growth 1.60% 2.25% 2.25% n/a 1.25%
MidCap Growth 1.60% 2.25% 2.25% n/a 1.25%
SmallCap Growth 1.95% 2.60% 2.60% n/a 1.50%
Worldwide Growth 1.85% 2.50% 2.50% n/a 1.60%
International Core
Growth 1.95% 2.60% 2.60% n/a 1.65%
International
SmallCap Growth 1.95% 2.60% 2.60% n/a 1.65%
Emerging Countries 2.25% 2.90% 2.90% n/a 1.90%
Strategic Income 0.95% 1.35% 1.35% n/a 0.85%
High Yield(1) 1.00% 1.75% 1.75% 1.50% 1.00%
High Yield II 1.10% 1.75% 1.75% n/a 1.00%
Balanced 1.60% 2.25% 2.25% n/a 1.25%
Convertible 1.60% 2.25% 2.25% n/a 1.25%
(1) The current limits will continue through December 31, 1999, at which time
they will change to 1.10% for Class A, 1.85% for Class B and C, 1.60% for
Class M and 1.10% for Class Q through at least June 30, 2001.
Amounts receivable from the Investment Manager at June 30, 1999 for expense
waivers are included in Receivables due from affiliate in the accompanying
Statements of Assets and Liabilities.
NOTE 9 -- CREDIT FACILITY
The Funds have a $75 million credit facility available to fund temporary or
emergency borrowings which expires on May 1, 2000. Each Fund pays its pro rata
share of an annual commitment fee plus interest on its specific borrowings. The
average amount outstanding on the credit facility and the average interest rate
charged were $194,746 and 5.3845%, respectively, for the year ended June 30,
1999. As of June 30, 1999, International Core Growth Fund had $226,261
outstanding under the credit facility.
66
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
NOTE 10 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------- --------------------------------------------
3 Months Year July 21, 3 Months Year July 21,
Ended Ended 1997 to Ended Ended 1997 to
June 30, March 31, March 31, June 30, March 31, March 31,
1999 1999 1998 1999 1999 1998
--------------- -------------- -------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
LargeCap Growth Fund
(Number of Shares)
Shares sold 601,704 387,443 314,594 1,006,149 722,166 239,436
Shares issued as reinvestments
of dividends -- 9,412 65 -- 4,145 224
Shares redeemed (28,795) (199,495) (13,075) (63,827) (129,658) (35,907)
----------- ------------ ---------- ------------ ------------ ----------
Net increase in shares outstanding 572,909 197,360 301,584 942,322 596,653 203,753
=========== ============ ========== ============ ============ ==========
LargeCap Growth Fund ($)
Shares sold $16,107,475 $ 7,119,334 $4,334,894 $ 27,013,724 $ 13,914,112 $3,275,198
Shares issued as reinvestments
of dividends -- 159,721 871 -- 70,921 3,000
Shares redeemed (769,089) (3,328,040) (177,917) (1,716,619) (2,523,553) (493,670)
----------- ------------ ---------- ------------ ------------ ----------
Net increase in shares outstanding $15,338,386 $ 3,951,015 $4,157,848 $ 25,297,105 $ 11,461,480 $2,784,528
=========== ============ ========== ============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
------------------------------------------ ----------------------------------------
3 Months Year July 21, 3 Months Year Year
Ended Ended 1997 to Ended Ended Ended
June 30, March 31, March 31, June 30, March 31, March 31,
1999 1999 1998 1999 1999 1998
-------------- -------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
LargeCap Growth Fund (Number of Shares)
Shares sold 322,341 293,854 65,178 27,961 176,779 51,175
Shares issued as reinvestments of dividends -- 1,216 55 -- 1,139 11
Shares redeemed (10,496) (35,900) (3,829) (9,901) (34,429) (181)
---------- ---------- --------- ---------- ---------- --------
Net increase in shares outstanding 311,845 259,170 61,404 18,060 143,489 51,005
========== ========== ========= ========== ========== ========
LargeCap Growth Fund ($)
Shares sold $8,625,780 $5,792,910 $ 890,031 $ 753,086 $3,396,063 $714,785
Shares issued as reinvestments of dividends -- 20,875 742 -- 19,518 153
Shares redeemed (279,527) (642,955) (53,621) (263,465) (600,590) (2,705)
---------- ---------- --------- ---------- ---------- --------
Net increase in shares outstanding $8,346,253 $5,170,830 $ 837,152 $ 489,621 $2,814,991 $712,233
========== ========== ========= ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -----------------------------------
1999 1999 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
MidCap Growth Fund
(Number of Shares)
Shares sold 170,704 5,215,189 12,405,504
Shares issued as reinvestments
of dividends -- 130,197 1,012,862
Shares redeemed (440,581) (6,820,248) (13,082,835)
------------ --------------- ---------------
Net increase (decrease) in
shares outstanding (269,877) (1,474,862) 335,531
============ =============== ===============
MidCap Growth Fund ($)
Shares sold $ 3,480,826 $ 93,222,436 $ 224,326,301
Shares issued as reinvestments
of dividends -- 2,271,935 16,459,004
Shares redeemed (9,018,100) (120,721,071) (237,096,577)
------------ --------------- ---------------
Net increase (decrease) in
shares outstanding $ (5,537,274) $ (25,226,700) $ 3,688,728
============ =============== ===============
<CAPTION>
Class B Shares
--------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ----------------------------------
1999 1999 1998
--------------- ---------------- -----------------
<S> <C> <C> <C>
MidCap Growth Fund
(Number of Shares)
Shares sold 124,529 549,516 1,072,549
Shares issued as reinvestments
of dividends -- 69,791 123,360
Shares redeemed (113,758) (842,979) (799,428)
------------- -------------- --------------
Net increase (decrease) in
shares outstanding 10,771 (223,672) 396,481
============= ============== ==============
MidCap Growth Fund ($)
Shares sold $ 3,003,625 $ 11,154,074 $ 20,188,443
Shares issued as reinvestments
of dividends -- 1,444,672 2,326,535
Shares redeemed (2,758,710) (16,826,911) (15,026,369)
------------- -------------- --------------
Net increase (decrease) in
shares outstanding $ 244,915 $ (4,228,165) $ 7,488,609
============= ============== ==============
</TABLE>
67
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
------------------------------------------------ ---------------------------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
March 31, March 31,
June 30, ------------------------------- June 30, -----------------------------
1999 1999 1998 1999 1999 1998
---------------- --------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
MidCap Growth Fund
(Number of Shares)
Shares sold 127,317 1,185,161 1,750,377 201,861 194,537 170,070
Shares issued as reinvestments
of dividends -- 121,764 2,641,098 -- 37,715 55,785
Shares redeemed (465,369) (3,371,242) (4,220,870) (52,773) (185,074) (430,179)
------------ ------------- ------------- ------------ ------------ ------------
Net increase (decrease) in
shares outstanding (338,052) (2,064,317) 170,605 149,088 47,178 (204,324)
============ ============= ============= ============ ============ ============
MidCap Growth Fund ($)
Shares sold $ 2,416,875 $ 19,063,447 $ 29,917,347 $ 5,261,515 $ 4,134,744 $ 3,584,125
Shares issued as reinvestments
of dividends -- 1,981,095 39,590,055 -- 828,224 1,134,102
Shares redeemed (8,876,675) (52,212,207) (72,773,773) (1,337,840) (3,718,156) (8,868,353)
------------ ------------- ------------- ------------ ------------ ------------
Net increase (decrease) in
shares outstanding $ (6,459,800) $(31,167,665) $ (3,266,371) $ 3,923,675 $ 1,244,812 $ (4,150,126)
============ ============= ============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------------
1999 1999 1998
---------------- ----------------- -------------------
<S> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold 384,655 44,256,415 104,820,578
Shares issued as reinvestments
of dividends -- 919,060 830,976
Shares redeemed (652,027) (49,753,506) (103,463,758)
-------------- --------------- -----------------
Net increase in shares outstanding (267,372) (4,578,031) 2,187,796
============== =============== =================
SmallCap Growth Fund ($)
Shares sold $ 6,777,887 $ 815,912,790 $ 1,931,764,538
Shares issued as reinvestments
of dividends -- 14,800,215 15,132,144
Shares redeemed (11,423,224) (917,280,292) (1,921,657,761)
-------------- --------------- -----------------
Net increase (decrease) in
shares outstanding $ (4,645,337) $ (86,567,287) $ 25,238,921
============== =============== =================
<CAPTION>
Class B Shares
--------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ----------------------------------
1999 1999 1998
--------------- ---------------- -----------------
<S> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold 62,154 1,030,266 1,553,380
Shares issued as reinvestments
of dividends -- 121,247 --
Shares redeemed (144,208) (1,464,484) (909,702)
------------- -------------- --------------
Net increase in shares outstanding (82,054) (312,971) 643,678
============= ============== ==============
SmallCap Growth Fund ($)
Shares sold $ 1,379,964 $ 19,580,720 $ 30,441,105
Shares issued as reinvestments
of dividends -- 2,371,732 --
Shares redeemed (3,209,533) (28,084,966) (17,600,099)
------------- -------------- --------------
Net increase (decrease) in
shares outstanding $ (1,829,569) $ (6,132,514) $ 12,841,006
============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
--------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ---------------------------------
1999 1999 1998
---------------- --------------- -----------------
<S> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold 82,725 1,806,596 4,136,702
Shares issued as reinvestments
of dividends -- 926,112 1,443,201
Shares redeemed (680,850) (6,061,729) (5,945,903)
------------- ------------- ---------------
Net increase in shares outstanding (598,125) (3,329,021) (366,000)
============= ============= ===============
SmallCap Growth Fund ($)
Shares sold $ 1,433,335 $ 29,105,010 $ 72,644,552
Shares issued as reinvestments
of dividends -- 14,800,873 24,837,499
Shares redeemed (11,755,815) (93,185,013) (104,107,897)
------------- ------------- ---------------
Net increase (decrease) in
shares outstanding $ (10,322,480) $(49,279,130) $ (6,625,846)
============= ============= ===============
<CAPTION>
Class Q Shares
------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, --------------------------------
1999 1999 1998
--------------- ---------------- ---------------
<S> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold 421,173 793,286 1,102,868
Shares issued as reinvestments
of dividends -- 18,226 997
Shares redeemed (392,013) (970,001) (531,507)
------------- -------------- -------------
Net increase in shares outstanding 29,160 (158,489) 572,358
============= ============== =============
SmallCap Growth Fund ($)
Shares sold $ 8,340,785 $ 12,725,287 $ 20,108,210
Shares issued as reinvestments
of dividends -- 292,442 17,715
Shares redeemed (7,387,773) (15,962,787) (9,776,365)
------------- -------------- -------------
Net increase (decrease) in
shares outstanding $ 953,012 $ (2,945,058) $ 10,349,560
============= ============== =============
</TABLE>
68
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ---------------------------------
1999 1999 1998
-------------- ----------------- ---------------
<S> <C> <C> <C>
Worldwide Growth Fund
(Number of Shares)
Shares sold 1,172,285 5,575,910 5,937,921
Shares issued as reinvestments
of dividends 86 96,384 213,726
Shares redeemed (660,100) (5,374,372) (5,575,601)
----------- --------------- ---------------
Net increase in shares outstanding 512,271 297,922 576,046
=========== =============== ===============
Worldwide Growth Fund ($)
Shares sold $26,425,907 $ 110,310,826 $ 108,061,899
Shares issued as reinvestments
of dividends -- 1,739,418 3,565,008
Shares redeemed 14,957,153 (107,031,318) (102,391,906)
----------- --------------- ---------------
Net increase in shares outstanding $11,468,754 $ 5,018,926 $ 9,235,001
=========== =============== ===============
<CAPTION>
Class B Shares
-----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Worldwide Growth Fund
(Number of Shares)
Shares sold 353,077 544,757 292,727
Shares issued as reinvestments
of dividends -- 39,170 25,906
Shares redeemed (70,889) (319,228) (187,737)
------------- ------------- -------------
Net increase in shares outstanding 282,188 264,699 130,896
============= ============= =============
Worldwide Growth Fund ($)
Shares sold $ 9,019,106 $ 11,616,885 $ 5,360,286
Shares issued as reinvestments
of dividends -- 799,305 449,135
Shares redeemed (1,811,055) (6,778,733) (3,334,259)
------------- ------------- -------------
Net increase in shares outstanding $ 7,208,051 $ 5,637,457 $ 2,475,162
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ---------------------------------
1999 1999 1998
--------------- ---------------- ----------------
<S> <C> <C> <C>
Worldwide Growth Fund
(Number of Shares)
Shares sold 316,937 1,258,419 435,836
Shares issued as reinvestments
of dividends -- 117,737 663,935
Shares redeemed (195,915) (1,224,596) (833,591)
------------- -------------- --------------
Net increase in shares outstanding 121,022 151,560 266,180
============= ============== ==============
Worldwide Growth Fund ($)
Shares sold $ 7,199,228 $ 23,846,842 $ 7,995,043
Shares issued as reinvestments
of dividends -- 2,145,255 10,934,587
Shares redeemed (4,443,951) (22,854,997) (15,192,388)
------------- -------------- --------------
Net increase in shares outstanding $ 2,755,277 $ 3,137,100 $ 3,737,242
============= ============== ==============
<CAPTION>
Class Q Shares
------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, --------------------------------
1999 1999 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Worldwide Growth Fund
(Number of Shares)
Shares sold 430,631 350,299 88,591
Shares issued as reinvestments
of dividends -- 4,352 1,377
Shares redeemed (180,058) (89,828) (99,927)
------------- ------------- -------------
Net increase in shares outstanding 250,573 264,823 (9,959)
============= ============= =============
Worldwide Growth Fund ($)
Shares sold $ 11,187,418 $ 7,773,616 $ 1,508,613
Shares issued as reinvestments
of dividends -- 89,521 23,268
Shares redeemed (4,610,453) (1,884,358) (1,693,395)
------------- ------------- -------------
Net increase in shares outstanding $ 6,576,965 $ 5,978,779 $ (161,514)
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------------------------- ---------------------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
March 31, March 31,
June 30, ------------------------------- June 30, --------------------------
1999 1999 1998 1999 1999 1998
--------------- --------------- --------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
International Core Growth Fund
(Number of Shares)
Shares sold 1,699,541 4,111,884 2,435,374 47,812 317,938 500,774
Shares issued as reinvestments
of dividends -- 5,819 3,344 -- 2,484 2,781
Shares redeemed (2,264,636) (3,641,067) (1,694,382) (33,706) (168,120) (39,156)
------------- ------------- ------------- ---------- ------------ ----------
Net increase in shares outstanding (565,095) 476,636 744,336 14,106 152,302 464,399
============= ============= ============= ========== ============ ==========
International Core Growth Fund ($)
Shares sold $ 30,866,314 $ 72,899,494 $ 38,637,232 $ 888,899 $ 5,553,372 $7,549,895
Shares issued as reinvestments
of dividends -- 109,877 47,981 -- 47,437 40,158
Shares redeemed (41,080,307) (65,603,216) (27,349,807) (610,199) (2,893,130) (593,538)
------------- ------------- ------------- ---------- ------------ ----------
Net increase in shares outstanding $(10,213,993) $ 7,406,155 $ 11,335,406 $ 278,700 $ 2,707,679 $6,996,515
============= ============= ============= ========== ============ ==========
</TABLE>
69
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
-------------------------------------------- --------------------------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
March 31, March 31
June 30, ----------------------------- June 30, ---------------------------
1999 1999 1998 1999 1999 1998
-------------- -------------- -------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
International Core Growth Fund
(Number of Shares)
Shares sold 113,784 455,651 224,635 93,649 581,442 115,512
Shares issued as reinvestments
of dividends -- 1,471 -- -- 1,463 --
Shares redeemed (69,740) (82,349) (23,087) (228,977) (67,954) (16,966)
------------ ------------ ---------- ------------ ------------ ----------
Net increase in shares outstanding 44,044 374,773 201,548 (135,328) 514,951 98,546
============ ============ ========== ============ ============ ==========
International Core Growth Fund ($)
Shares sold $ 2,117,597 $ 7,964,267 $3,488,506 $ 1,771,267 $ 10,297,873 $1,808,824
Shares issued as reinvestments
of dividends -- 28,148 -- -- 31,169 --
Shares redeemed (1,298,517) (1,412,367) (347,719) (4,253,651) (1,185,061) (265,176)
------------ ------------ ---------- ------------ ------------ ----------
Net increase in shares outstanding $ 819,080 $ 6,580,048 $3,140,787 $ (2,482,384) $ 9,143,981 $1,543,648
============ ============ ========== ============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ----------------------------------
1999 1999 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
International SmallCap Growth Fund
(Number of Shares)
Shares sold 1,367,921 4,953,991 6,608,889
Shares issued as reinvestments
of dividends -- 41,096 24,582
Shares redeemed (997,179) (4,370,199) (6,427,019)
-------------- -------------- ---------------
Net increase in shares outstanding 370,742 624,888 206,452
============== ============== ===============
International SmallCap Growth Fund ($)
Shares sold $ 30,182,958 $ 101,529,799 $ 109,494,069
Shares issued as reinvestments
of dividends -- 811,876 383,230
Shares redeemed (22,024,759) (90,418,518) (107,699,737)
-------------- -------------- ---------------
Net increase in shares outstanding $ 8,158,199 $ 11,923,157 $ 2,177,562
============== ============== ===============
<CAPTION>
Class B Shares
-----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
International SmallCap Growth Fund
(Number of Shares)
Shares sold 98,528 574,326 463,887
Shares issued as reinvestments
of dividends -- 21,611 31,709
Shares redeemed (55,682) (472,298) (218,409)
------------- ------------- -------------
Net increase in shares outstanding 42,846 123,639 277,187
============= ============= =============
International SmallCap Growth Fund ($)
Shares sold $ 2,333,350 $ 12,177,504 $ 8,303,957
Shares issued as reinvestments
of dividends -- 452,596 517,182
Shares redeemed (1,302,925) (9,959,007) (3,838,911)
------------- ------------- -------------
Net increase in shares outstanding $ 1,030,425 $ 2,671,093 $ 4,982,228
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
-------------- --------------- ---------------
<S> <C> <C> <C>
International SmallCap Growth Fund
(Number of Shares)
Shares sold 146,271 660,257 440,799
Shares issued as reinvestments
of dividends -- 13,435 23,528
Shares redeemed (34,123) (464,252) (273,436)
---------- ------------- -------------
Net increase in shares outstanding 112,148 209,440 190,891
========== ============= =============
International SmallCap Growth Fund ($)
Shares sold $3,168,229 $ 12,933,840 $ 7,326,296
Shares issued as reinvestments
of dividends -- 258,146 352,544
Shares redeemed (740,072) (9,055,952) (4,516,362)
---------- ------------- -------------
Net increase in shares outstanding $2,428,157 $ 4,136,034 $ 3,162,478
========== ============= =============
<CAPTION>
Class Q Shares
---------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -----------------------------
1999 1999 1998
--------------- ---------------- ------------
<S> <C> <C> <C>
International SmallCap Growth Fund
(Number of Shares)
Shares sold 529,877 1,567,046 458,377
Shares issued as reinvestments
of dividends -- 12,918 --
Shares redeemed (269,090) (563,058) (2,123)
------------- -------------- ----------
Net increase in shares outstanding 260,787 1,016,906 456,254
============= ============== ==========
International SmallCap Growth Fund ($)
Shares sold $ 12,505,725 $ 32,536,160 $8,543,873
Shares issued as reinvestments
of dividends -- 249,737 --
Shares redeemed (6,328,290) (11,408,948) (34,256)
------------- -------------- ----------
Net increase in shares outstanding $ 6,177,435 $ 21,376,949 $8,509,617
============= ============== ==========
</TABLE>
70
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ------------------------------
1999 1999 1998
---------------- ---------------- -------------
<S> <C> <C> <C>
Emerging Countries Fund
(Number of Shares)
Shares sold 1,064,600 3,262,352 3,249,713
Shares issued as reinvestments
of dividends -- 17,479 149,478
Shares redeemed (1,382,928) (3,852,081) (1,564,308)
-------------- -------------- --------------
Net increase in shares outstanding (318,328) (572,250) 1,834,883
============== ============== ==============
Emerging Countries Fund ($)
Shares sold $ 16,015,629 $ 45,426,994 $ 56,508,617
Shares issued as reinvestments
of dividends -- 277,913 2,308,126
Shares redeeme (20,693,691) (51,942,286) (27,275,872)
-------------- -------------- --------------
Net increase (decrease) in
shares outstanding $ (4,678,062) $ (6,237,379) $ 31,540,871
============== ============== ==============
<CAPTION>
Class B Shares
-------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, --------------------------------
1999 1999 1998
---------------- ---------------- ---------------
<S> <C> <C> <C>
Emerging Countries Fund
(Number of Shares)
Shares sold 82,535 382,174 1,214,038
Shares issued as reinvestments
of dividends -- 7,286 101,517
Shares redeemed (168,473) (951,609) (535,990)
------------ -------------- -------------
Net increase in shares outstanding (85,938) (562,149) 779,565
============ ============== =============
Emerging Countries Fund ($)
Shares sold $ 1,322,669 $ 5,698,657 $ 22,259,145
Shares issued as reinvestments
of dividends -- 118,138 1,591,405
Shares redeeme (2,572,889) (12,756,398) (9,195,436)
------------ -------------- -------------
Net increase (decrease) in
shares outstanding $ (1,250,220) $ (6,939,603) $ 14,655,114
============ ============== =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ---------------------------------
1999 1999 1998
--------------- ---------------- ----------------
<S> <C> <C> <C>
Emerging Countries Fund
(Number of Shares)
Shares sold 116,572 521,678 1,150,487
Shares issued as reinvestments
of dividends -- 5,264 139,493
Shares redeemed (99,525) (1,239,995) (859,084)
------------- -------------- --------------
Net increase in shares outstanding 17,047 (713,053) 430,896
============= ============== ==============
Emerging Countries Fund ($)
Shares sold $ 1,744,612 $ 7,326,720 $ 20,756,465
Shares issued as reinvestments
of dividends -- 82,205 2,109,145
Shares redeeme (1,481,896) (16,381,157) (13,967,608)
------------- -------------- --------------
Net increase (decrease) in
shares outstanding $ 262,716 $ (8,972,232) $ 8,898,002
============= ============== ==============
<CAPTION>
Class Q Shares
--------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ----------------------------------
1999 1999 1998
--------------- ---------------- -----------------
<S> <C> <C> <C>
Emerging Countries Fund
(Number of Shares)
Shares sold 1,208,239 4,616,946 2,910,075
Shares issued as reinvestments
of dividends -- 36,438 9,663
Shares redeemed (459,541) (3,431,547) (814,722)
------------- -------------- --------------
Net increase in shares outstanding 748,698 1,221,837 2,105,016
============= ============== ==============
Emerging Countries Fund ($)
Shares sold $ 19,053,123 $ 65,385,070 $ 51,065,387
Shares issued as reinvestments
of dividends -- 593,577 151,971
Shares redeeme (7,234,180) (45,346,860) (13,654,662)
------------- -------------- --------------
Net increase (decrease) in
shares outstanding $ 11,818,943 $ 20,631,787 $ 37,562,696
============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------- ----------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999(1) 1999 1999(1)
--------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Strategic Income Fund
(Number of Shares)
Shares sold 1,744,498 646,153 65,960 595,169
Shares issued in merger -- 175,454 -- 259,694
Shares issued as reinvestment of dividends 1,712 5,664 3,737 12,860
Shares redeemed (1,797,320) (381,014) (137,015) (341,358)
------------- ------------ ------------ ------------
Net increase in shares outstanding (51,110) 446,257 (67,318) 526,365
============= ============ ============ ============
Strategic Income Fund ($)
Shares sold $ 22,358,564 $ 8,383,952 $ 827,887 $ 7,617,290
Shares issued in merger -- 2,260,055 -- 3,265,737
Shares issued as reinvestment of dividends 21,991 73,691 47,004 163,532
Shares redeemed (23,052,137) (4,961,848) (1,710,716) (4,353,363)
------------- ------------ ------------ ------------
Net increase (decrease) in shares
outstanding $ (671,582) $ 5,755,850 $ (835,825) $ 6,693,196
============= ============ ============ ============
</TABLE>
71
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
-------------------------------- ---------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
June 30, March 31, June 30, March 31,
1999 1999(1) 1999 1999(1)
--------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Strategic Income Fund
(Number of Shares)
Shares sold 72,888 533,457 816 1,004
Shares issued in merger -- 342,089 -- 23,390
Shares issued as reinvestment of dividends 2,829 7,510 168 1,220
Shares redeemed (77,064) (262,520) (12,262) (36)
------------ ------------ ---------- --------
Net increase in shares outstanding (1,347) 620,536 (11,278) 25,578
============ ============ ========== ========
Strategic Income Fund ($)
Shares sold $ 952,054 $ 7,079,809 $ 10,030 $ 12,500
Shares issued in merger -- 4,459,907 -- 286,028
Shares issued as reinvestment of dividends 37,021 99,886 2,037 15,045
Shares redeemed (1,006,028) (3,482,921) (151,748) (399)
------------ ------------ ---------- --------
Net increase (decrease) in shares
outstanding $ (16,953) $ 8,156,681 $ (139,681) $313,174
============ ============ ========== ========
</TABLE>
- ----------
(1) Classes commenced operations on 7/27/98.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------- ---------------------------------
Year Ended June 30, Year Ended June 30,
---------------------------------- ---------------------------------
1999 1998 1999 1998
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
High Yield Fund
(Number of Shares)
Shares sold 23,077,399 17,205,462 28,533,861 18,361,132
Shares issued as reinvestment of
dividends 1,012,788 401,106 1,285,173 368,963
Shares redeemed (16,689,544) (8,125,142) (7,951,333) (2,356,559)
--------------- -------------- -------------- --------------
Net increase in shares
outstanding 7,400,643 9,481,426 21,867.701 16,373,535
=============== ============== ============== ==============
High Yield Fund ($)
Shares sold $ 146,786,361 $ 120,395,431 $ 177,876,596 $ 128,294,665
Shares issued as reinvestment of
dividends 6,265,752 2,792,483 7,911,056 2,566,895
Shares redeemed (106,793,532) (56,782,132) (48,182,705) (16,455,583)
--------------- -------------- -------------- --------------
Net increase in shares
outstanding $ 46,258,581 $ 66,405,782 $ 137,604,947 $ 114,405,977
=============== ============== ============== ==============
<CAPTION>
Class C Shares Class M Shares
---------------- --------------------------------
May 27, 1999 Year Ended June 30,
to --------------------------------
June 30, 1999 1999 1998
---------------- --------------- ----------------
<S> <C> <C> <C>
High Yield Fund
(Number of Shares)
Shares sold 93,124 2,189,902 2,577,308
Shares issued as reinvestment of
dividends -- 196,691 95,635
Shares redeemed -- (1,173,862) (1,118,663)
--------- ------------- -------------
Net increase in shares
outstanding 93,124 1,212,731 1,554,280
========= ============= =============
High Yield Fund ($)
Shares sold $549,513 $ 13,575,288 $ 17,998,974
Shares issued as reinvestment of
dividends 58 1,217,509 664,497
Shares redeemed -- (7,119,713) (7,825,635)
--------- ------------- -------------
Net increase in shares
outstanding $549,571 $ 7,673,084 $ 10,837,836
========= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class Q Shares
----------------
June 17, 1999
to
June 30, 1999
----------------
<S> <C>
High Yield Fund
(Number of Shares)
Shares sold 5
Shares issued as reinvestment of dividends --
Shares redeemed --
------
Net increase in shares outstanding 5
======
High Yield Fund ($)
Shares sold $ 30
Shares issued as reinvestment of dividends --
Shares redeemed --
------
Net increase in shares outstanding $ 30
======
</TABLE>
72
<PAGE>
- -------
Pilgrim
Funds
- ------
- ------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------- -------------------------------------------
3 Months Year March 27, 3 Months Year March 27,
Ended Ended 1998 to Ended Ended 1998 to
June 30, March 31, March 31, June 30, March 31, March 31,
1999 1999 1998 1999 1999 1998
-------------- --------------- -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
High Yield Fund II
(Number of Shares)
Shares sold 126,155 2,218,475 173,791 191,304 3,516,788 89,467
Shares issued in merger -- -- 326,993 -- -- 612,536
Shares issued as reinvestments
of dividends 13,470 68,528 -- 20,903 90,997 --
Shares redeemed (175,029) (1,169,064) (132,119) (279,006) (622,273) (2,379)
------------ ------------- ------------ ------------ ------------ ----------
Net increase (decrease) in
shares outstanding (35,404) 1,117,939 368,665 (66,799) 2,985,512 699,624
============ ============= ============ ============ ============ ==========
High Yield Fund II ($)
Shares sold $ 1,487,541 $ 27,084,111 $ 2,188,791 $ 2,244,780 $ 42,704,286 $1,136,299
Shares issued in merger -- -- 4,153,263 -- -- 7,772,553
Shares issued as reinvestments
of dividends 158,555 807,769 -- 246,357 1,044,170 --
Shares redeemed (2,045,836) (14,038,415) (1,658,997) (3,269,300) (7,281,798) (30,039)
------------ ------------- ------------ ------------ ------------ ----------
Net increase in shares outstanding $ (399,740) $ 13,853,465 $ 4,683,057 $ (778,163) $ 36,466,658 $8,878,813
============ ============= ============ ============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------
3 Months Year March 27,
Ended Ended 1998 to
June 30, March 31, March 31,
1999 1999 1998
---------------- --------------- ---------------
<S> <C> <C> <C>
High Yield Fund II
(Number of Shares)
Shares sold 91,597 1,848,332 71,467
Shares issued in merger -- -- 307,307
Shares issued as reinvestments of dividends 11,731 67,635 --
Shares redeemed (310,405) (468,704) (7)
------------ ------------- -----------
Net increase (decrease) in shares
outstanding (207,077) 1,447,263 378,767
============ ============= ===========
High Yield Fund II ($)
Shares sold $ 1,078,810 $ 22,778,726 $ 907,549
Shares issued in merger -- -- 3,900,531
Shares issued as reinvestments of dividends 138,399 775,897 --
Shares redeemed (3,633,914) (5,466,380) (91)
------------ ------------- -----------
Net increase in shares outstanding $ (2,416,705) $ 18,088,243 $4,807,989
============ ============= ===========
<CAPTION>
Class Q Shares
--------------------------------------------
3 Months Year March 27,
Ended Ended 1998 to
June 30, March 31, March 31,
1999 1999 1998
---------------- --------------- -----------
<S> <C> <C> <C>
High Yield Fund II
(Number of Shares)
Shares sold 21,272 668,988 2,205
Shares issued in merger -- -- --
Shares issued as reinvestments of dividends 7,915 23,106 42,382
Shares redeemed (307,466) (179,780) --
------------ ------------- --------
Net increase (decrease) in shares
outstanding (278,279) 512,314 44,587
============ ============= ========
High Yield Fund II ($)
Shares sold $ 249,643 $ 7,770,126 $28,000
Shares issued in merger -- -- --
Shares issued as reinvestments of dividends 93,356 271,659 --
Shares redeemed (3,614,065) (2,101,039) --
------------ ------------- --------
Net increase in shares outstanding $ (3,271,066) $ 5,940,746 $28,000
============ ============= ========
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Balanced Fund
(Number of Shares)
Shares sold 69,501 371,709 305,352
Shares issued as reinvestments of dividends 1,015 68,457 29,098
Shares redeemed (70,425) (281,697) (307,910)
------------- ------------- -------------
Net increase in shares outstanding 91 158,469 26,540
============= ============= =============
Balanced Fund ($)
Shares sold $ 1,354,890 $ 7,068,981 $ 5,582,957
Shares issued as reinvestments of dividends 19,370 1,216,578 526,715
Shares redeemed (1,361,704) (5,289,069) (5,615,525)
------------- ------------- -------------
Net increase (decrease) in
shares outstanding $ 12,556 $ 2,996,490 $ 494,147
============= ============= =============
<CAPTION>
Class B Shares
---------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, ------------------------------
1999 1999 1998
-------------- --------------- --------------
<S> <C> <C> <C>
Balanced Fund
(Number of Shares)
Shares sold 62,785 128,292 101,305
Shares issued as reinvestments of dividends 554 29,941 4,600
Shares redeemed (12,468) (73,515) (37,270)
---------- ------------- ----------
Net increase in shares outstanding 50,871 84,718 68,635
========== ============= ==========
Balanced Fund ($)
Shares sold $1,288,434 $ 2,447,844 $1,865,891
Shares issued as reinvestments of dividends 11,321 566,865 85,892
Shares redeemed (256,849) (1,364,447) (681,006)
---------- ------------- ----------
Net increase (decrease) in
shares outstanding $1,042,906 $ 1,650,262 $1,270,777
========== ============= ==========
</TABLE>
73
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
-------------------------------------------- ----------------------------------
3 Months Year 3 Months Year
Ended Ended Ended Ended
March 31, March 31,
June 30, ----------------------------- June 30, ----------------------
1999 1999 1998 1999 1999 1998
-------------- -------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund
(Number of Shares)
Shares sold 17,557 184,748 145,671 1,351 1,105 3,525
Shares issued as reinvestments of dividends 519 210,474 76,757 42 1,173 128
Shares redeemed (47,391) (259,419) (267,567) (781) (1,882) (106)
---------- ------------ ------------ --------- --------- --------
Net increase in shares outstanding (29,315) 135,803 (45,139) 612 396 3,547
========== ============ ============ ========= ========= ========
Balanced Fund ($)
Shares sold $ 324,318 $ 3,201,753 $ 2,671,793 $ 25,940 $ 19,907 $ 67,581
Shares issued as reinvestments of dividends 9,545 3,603,550 1,410,891 798 20,611 3,310
Shares redeemed (878,533) (4,681,019) (4,877,213) (14,926) (34,726) (9,440)
---------- ------------ ------------ --------- --------- --------
Net increase (decrease) in shares
outstanding $ (544,670) $ 2,124,284 $ (794,529) $ 11,812 $ 5,792 $ 61,451
========== ============ ============ ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, --------------------------------
1999 1999 1998
--------------- ---------------- ---------------
<S> <C> <C> <C>
Convertible Fund
(Number of Shares)
Shares sold 240,854 1,235,038 709,278
Shares issued as reinvestments
of dividends 8,766 84,764 154,229
Shares redeemed (106,071) (795,095) (323,387)
------------- -------------- -------------
Net increase in shares outstanding 143,549 524,707 540,120
============= ============== =============
Convertible Fund ($)
Shares sold $ 5,446,752 $ 22,826,352 $ 12,820,279
Shares issued as reinvestments
of dividends 201,806 1,677,136 2,762,320
Shares redeemed (2,398,688) (14,627,285) (5,890,494)
------------- -------------- -------------
Net increase (decrease) in shares
outstanding $ 3,249,870 $ 9,876,203 $ 9,692,105
============= ============== =============
<CAPTION>
Class B Shares
-----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Convertible Fund
(Number of Shares)
Shares sold 377,405 1,107,458 1,126,063
Shares issued as reinvestments
of dividends 4,334 36,617 50,922
Shares redeemed (155,682) (468,699) (158,706)
------------- ------------- -------------
Net increase in shares outstanding 226,057 675,376 1,018,279
============= ============= =============
Convertible Fund ($)
Shares sold $ 9,316,686 $ 22,988,795 $ 21,634,970
Shares issued as reinvestments
of dividends 108,485 774,835 972,857
Shares redeemed (3,833,777) (9,912,927) (3,026,200)
------------- ------------- -------------
Net increase (decrease) in shares
outstanding $ 5,591,394 $ 13,850,703 $ 19,581,627
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
---------------- ---------------- --------------
<S> <C> <C> <C>
Convertible Fund
(Number of Shares)
Shares sold 204,264 84,820 791,856
Shares issued as reinvestments
of dividends 3,236 110,911 407,608
Shares redeemed (276,138) (881,082) (672,422)
------------ -------------- --------------
Net increase in shares outstanding (68,638) 114,649 527,042
============ ============== ==============
Convertible Fund ($)
Shares sold $ 4,732,365 $ 17,299,957 $ 14,822,064
Shares issued as reinvestments
of dividends 75,700 2,256,244 7,387,102
Shares redeemed (6,363,756) (17,113,435) (12,484,704)
------------ -------------- --------------
Net increase (decrease) in shares
outstanding $ (1,555,691) $ 2,442,766 $ 9,724,462
============ ============== ==============
<CAPTION>
Class Q Shares
----------------------------------------------
3 Months Year
Ended Ended
March 31,
June 30, -------------------------------
1999 1999 1998
-------------- --------------- ---------------
<S> <C> <C> <C>
Convertible Fund
(Number of Shares)
Shares sold 393,267 423,276 111,297
Shares issued as reinvestments
of dividends 3,568 16,065 28,400
Shares redeemed (29,839) (410,737) (59,172)
---------- ------------- -------------
Net increase in shares outstanding 366,996 28,604 80,525
========== ============= =============
Convertible Fund ($)
Shares sold $8,618,236 $ 8,043,910 $ 1,905,912
Shares issued as reinvestments
of dividends 79,431 304,178 490,423
Shares redeemed (655,742) (7,680,884) (1,019,145)
---------- ------------- -------------
Net increase (decrease) in shares
outstanding $8,041,925 $ 667,204 $ 1,377,190
========== ============= =============
</TABLE>
74
<PAGE>
- -------
Pilgrim
Funds
- -------
NOTES TO FINANCIAL STATEMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
NOTE 11 -- CUSTODIAL AGREEMENT
Investors Fiduciary Trust Company ("IFTC") serves as the Funds' custodian and
recordkeeper. Custody fees paid to IFTC are reduced by an earnings credit based
on the cash balances held by IFTC for each of the Funds. For the year ended June
30, 1999, (three months ended June 30, 1999 for the funds in PMF) the Funds
received the following earnings credits:
LargeCap Growth Fund $ 1,050
MidCap Growth Fund 1,490
SmallCap Growth Fund 1,164
Worldwide Growth Fund --
International Core Growth Fund --
International SmallCap Growth Fund --
Emerging Countries Fund --
Strategic Income Fund --
High Yield Fund 44,802
High Yield Fund II --
Balanced Fund 327
Convertible 2,258
NOTE 12 -- SUBSEQUENT EVENTS
Subsequent to June 30, 1999, the following funds declared dividends from net
investment income of:
Per Share Amount Payable Date Record Date
------------------ ---------------- ---------------
High Yield Fund
Class A $0.0500 July 6, 1999 June 30, 1999
Class B $0.0460 July 6, 1999 June 30, 1999
Class C $0.0500 July 6, 1999 June 30, 1999
Class M $0.0480 July 6, 1999 June 30, 1999
Class Q $0.0512 July 6, 1999 June 30, 1999
Class A $0.0500 August 4, 1999 July 30, 1999
Class B $0.0460 August 4, 1999 July 30, 1999
Class C $0.0470 August 4, 1999 July 30, 1999
Class M $0.0470 August 4, 1999 July 30, 1999
Class Q $0.0510 August 4, 1999 July 30, 1999
Strategic Income Fund
Class A $0.0593 July 6, 1999 June 30, 1999
Class B $0.0541 July 6, 1999 June 30, 1999
Class C $0.0541 July 6, 1999 June 30, 1999
Class Q $0.0594 July 6, 1999 June 30, 1999
Class A $0.0673 August 4, 1999 July 30, 1999
Class B $0.0634 August 4, 1999 July 30, 1999
Class C $0.0634 August 4, 1999 July 30, 1999
Class Q $0.0682 August 4, 1999 July 30, 1999
High Yield Fund II (*)
Class A $0.0925 July 1, 1999 Daily
Class B $0.0862 July 1, 1999 Daily
Class C $0.0862 July 1, 1999 Daily
Class Q $0.0935 July 1, 1999 Daily
Class A $0.0908 August 2, 1999 Daily
Class B $0.0854 August 2, 1999 Daily
Class C $0.0854 August 2, 1999 Daily
Class Q $0.0926 August 2, 1999 Daily
- ----------
(*) Per Share Amount Indicates Monthly Cumulative Income.
75
<PAGE>
U.S. Equity
Funds
Pilgrim
LargeCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
COMMON STOCKS: 95.0%
AEROSPACE: 2.7%
38,400 United Technologies $ 2,752,800
------------
AIRLINES: 2.3%
77,300 Southwest Airlines 2,405,963
------------
APPAREL: 2.7%
43,300 Nike, Inc. Class B 2,741,431
------------
BIOTECHNOLOGY: 2.9%
48,400 (a) Amgen, Inc. 2,946,350
------------
BROADCASTING: 11.8%
73,312 (a) AT&T Corp. Liberty Media 2,694,215
78,200 Comcast Corp. 3,005,813
107,900 (a) Infinity Broadcasting Corp. 3,210,024
44,500 Time Warner, Inc. 3,270,750
------------
112,180,802
------------
COMPUTERS: 6.4%
51,200 (a) Cisco Systems 3,302,400
48,100 (a) Sun Microsystems 3,312,888
------------
6,615,288
------------
COMPUTER SOFTWARE & SERVICE: 9.4%
46,600 (a) Computer Sciences 3,224,137
36,300 (a) Microsoft Corp. 3,273,806
86,100 (a) Oracle Corporation 3,196,463
------------
9,694,406
------------
DRUGS/PHARMACEUTICALS: 2.3%
50,600 (a) Forest Laboratories 2,340,250
------------
FINANCIAL: 5.2%
24,159 American Int'l Group 2,828,113
35,000 (a) Goldman Sachs Group 2,528,750
------------
5,356,863
------------
GAMING: 2.8%
59,900 (a) MGM Grand Inc. 2,935,100
------------
INDUSTRIAL: 3.0%
125,900 (a) Republic Services, Inc. $ 3,116,025
------------
INSURANCE: 2.9%
30,300 Cigna Corp. 2,972,600
------------
INTERNET SOFTWARE: 3.0%
57,300 (a) At Home Corp. 3,090,619
------------
MANUFACTURING: 2.9%
32,000 Tyco International Ltd. 3,032,000
------------
OIL & GAS SERVICES: 3.1%
71,500 Halliburton Co. 3,235,375
------------
OIL WELL EQUIPMENT & SERVICES: 3.0%
85,600 Weatherford Int'l 3,135,100
------------
PAPER & RELATED PRODUCTS: 2.2%
44,400 Int'l Paper 2,242,200
------------
PIPELINES: 2.6%
62,700 Williams Cos., Inc. 2,668,669
------------
RETAIL: 4.4%
16,900 Home Depot, Inc. 1,088,994
70,500 Wal-Mart Stores Inc. 3,401,625
------------
4,490,619
------------
TELECOMMUNICATIONS EQUIPMENT: 9.5%
47,925 Lucent Technologies 3,231,942
33,900 Motorola, Inc. 3,212,025
36,200 Nokia Corp. ADR Class A 3,314,563
------------
9,758,530
------------
See Accompanying Notes to Financial Statements
76
<PAGE>
U.S. Equity
Funds
Pilgrim
LargeCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
TELECOMMUNICATIONS: 9.9%
33,500 ALLTEL Corp. $ 2,395,250
45,339 AT&T Corp. 2,530,482
26,700 (a) MCI Worldcom, Inc. 2,302,875
51,300 (a) Sprint Corp. 2,930,513
------------
10,159,120
------------
Total Common Stocks
(Cost $82,346,827) 97,870,110
------------
Total Long-Term Investments
(Cost $82,346,827) 97,870,110
------------
Principal
Amount Value
- ------------- ------------
SHORT-TERM INVESTMENTS: 12.1%
REPURCHASE AGREEMENT: 12.1%
$12,441,000 State Street Bank & Trust
Repurchase
Agreement, 4.70% due 07/01/99
(Collateralized by $12,050,000
U.S. Treasury Notes, 6.875%,
due
05/15/06, Market Value
$12,690,156) $ 12,441,000
------------
Total Short-Term Investments
(Cost $12,441,000) 12,441,000
------------
TOTAL INVESTMENTS
IN SECURITIES
(COST $94,787,827)* 107.1% 110,311,110
OTHER ASSETS AND
LIABILITIES, NET (7.1)% (7,347,162)
------ ------------
NET ASSETS 100.0% $102,963,948
====== ============
(a) Non-income producing security
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 $ 15,706,315
Gross Unrealized Depreciation (183,032)
------------
Net Unrealized Appreciation $ 15,523,283
============
See Accompanying Notes to Financial Statements
77
<PAGE>
U.S. Equity
Funds
Pilgrim
MidCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
COMMON STOCKS: 99.4%
ADVERTISING: 1.5%
14,500 (a) Doubleclick, Inc. $ 1,330,375
36,200 Omnicom Group 2,896,000
------------
4,226,375
------------
AIRLINES: 0.7%
66,400 Southwest Airlines 2,066,700
------------
BIOTECHNOLOGY: 2.0%
29,000 (a) Biogen, Inc. 1,865,063
39,200 (a) Genzyme Corp. --
General Division 1,901,200
13,900 (a) Immunex Corp. 1,771,381
------------
5,537,644
------------
BROADCASTING: 5.4%
1 (a) Clear Channel Communications 11
90,600 (a) Cox Communications, Inc.
Class A 3,335,213
33,100 (a) Hispanic Broadcasting Corp. 2,511,462
38,300 (a) Univision Communications
Class A 2,527,800
115,800 (a) USA Networks, Inc. 4,646,475
59,400 (a) Westwood One, Inc. 2,119,838
------------
15,140,799
------------
CHEMICALS -- SPECIALTY: 0.8%
72,400 (a) Cytec Industries 2,307,750
------------
CIRCUITS: 1.5%
43,500 (a) Analog Devices 2,183,156
27,700 (a) Sanmina Corp. 2,101,738
------------
4,284,894
------------
COMPUTERS: 5.8%
41,800 (a) ASM Lithography Holding N.V. 2,481,875
27,700 (a) Comverse Technology, Inc. 2,091,350
50,100 (a) Extreme Networks, Inc. 2,908,931
54,200 (a) Network Appliance, Inc. 3,028,425
23,100 (a) Rambus, Inc. 2,129,531
40,200 (a) Verisign, Inc. 3,467,250
------------
16,107,362
------------
COMPUTER SERVICES: 1.3%
53,200 (a) Computer Sciences $ 3,680,775
------------
COMPUTER SOFTWARE: 5.4%
73,500 (a) BMC Software 3,969,000
56,700 (a) New Era Of Networks, Inc. 2,491,256
163,000 (a) Novell, Inc. 4,319,500
47,150 (a) Veritas Software Corp. 4,476,303
------------
15,256,059
------------
CONTAINERS - METAL/GLASS: 1.3%
111,000 (a) Owens-Illinois, Inc. 3,628,313
------------
DRUGS/PHARMACEUTICALS: 2.2%
27,600 Allergan, Inc. 3,063,600
65,400 (a) Forest Laboratories, Inc. Class A 3,024,750
------------
6,088,350
------------
ELECTRIC: 2.3%
67,200 (a) AES Corp. 3,906,000
34,900 Montana Power Co. 2,460,450
------------
6,366,450
------------
ELECTRONICS: 10.9%
31,100 (a) Applied Micro Circuits 2,557,975
129,800 (a) Conexant Systems, Inc. 7,536,512
96,800 (a) LSI Logic Corp. 4,464,900
38,500 (a) PMC-Sierra, Inc. 2,269,094
38,200 (a) Teradyne, Inc. 2,740,850
23,200 (a) Uniphase Corp. 3,851,200
40,100 (a) Vitesse Semiconductor Corp. 2,704,244
74,100 (a) Xilinx, Inc. 4,242,225
------------
30,367,000
------------
FIBER OPTICS: 1.8%
96,900 (a) Ciena Corp. 2,925,169
56,800 (a) Metromedia Fiber Network
Class A 2,041,250
------------
4,966,419
------------
See Accompanying Notes to Financial Statements
78
<PAGE>
U.S. Equity
Funds
Pilgrim
MidCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
FINANCIAL SERVICES: 5.0%
45,000 Capital One Financial Corp. $ 2,505,937
33,900 Charles Schwab Corp. 3,724,763
34,800 Donaldson, Lufkin & Jenrette 2,096,700
47,600 (a) E*trade Group, Inc. 1,901,025
74,450 (a) Fiserv, Inc. 2,331,216
56,000 (a) TD Waterhouse Group 1,403,500
------------
13,963,141
------------
HEALTH CARE: 0.7%
24,300 (a) Wellpoint Health Network 2,062,463
------------
INTERNET SOFTWARE: 7.1%
52,800 (a) At Home Corp. Series A 2,847,900
22,500 (a) CMGI, Inc. 2,566,406
24,400 (a) Exodus Communications 2,926,475
48,600 (a) Network Solutions, Inc. 3,845,475
46,600 (a) Northpoint Communications 1,700,900
33,700 (a) Realnetworks, Inc. 2,321,087
32,200 (a) Rythms Netconnections, Inc. 1,879,675
23,800 (a) Vignette Corp. 1,785,000
------------
19,872,918
------------
MEDICAL -- DRUGS: 1.4%
57,100 (a) Medimmune, Inc. 3,868,525
-------------
MEDICAL INFORMATION SYSTEM: 0.7%
67,000 IMS Health, Inc. 2,093,750
------------
MEDICAL PRODUCTS: 2.3%
7,017 (a) Genzyme Surgical Products 30,920
28,800 (a) Minimed, Inc. 2,215,800
51,900 (a) Visx, Inc. 4,109,831
------------
6,356,551
------------
METAL -- ALUMINUM: 0.7%
33,300 Reynolds Metals Co. 1,964,700
------------
OFFICE SUPPLIES & FORMS: 0.7%
32,500 Avery-Dennison Corp. 1,962,188
------------
OIL & GAS: 8.0%
70,800 Apache Corp. $ 2,761,200
59,500 Burlington Resources, Inc. 2,573,375
175,500 Ensco International, Inc. 3,499,031
158,500 (a) Global Industries, Ltd. 2,030,781
157,900 (a) Global Marine, Inc. 2,437,581
119,800 (a) Rowan Companies 2,208,813
102,300 (a) Smith International, Inc. 4,443,656
69,900 (a) Weatherford International, Inc. 2,560,087
------------
22,514,524
------------
OPTICAL SUPPLIES: 1.6%
57,900 Bausch & Lomb, Inc. 4,429,350
------------
OTHER COMMERCIAL SERVICES: 0.9%
60,500 (a) Concord EFS, Inc. 2,559,906
------------
PACKAGING & CONTAINERS: 1.1%
147,700 (a) Smurfit-Stone Container Corp. 3,037,081
------------
PRINTER & RELATED PRODUCTS: 0.9%
36,600 (a) Lexmark International Group, Inc. 2,417,888
------------
RECREATIONAL PRODUCTS: 1.0%
51,000 Harley Davidson, Inc. 2,773,125
------------
RETAIL: 13.6%
66,600 (a) Abercrombie & Fitch Co.
Class A 3,196,800
55,800 (a) American Eagle Outfitters 2,538,900
73,400 (a) Bed Bath & Beyond, Inc. 2,825,900
59,700 (a) Best Buy Company, Inc. 4,029,750
54,400 Circuit City Stores 5,059,200
27,100 (a) Etoys, Inc. 1,104,325
56,175 Intimate Brands, Inc. 2,661,290
26,200 (a) Kohls Corp. 2,022,313
162,200 (a) Pacific Sunwear of California 3,953,625
17,200 (a) Priceline.com, Inc. 1,987,675
163,250 (a) Staples, Inc. 5,050,547
101,900 (a) Starbucks Corp. 3,827,619
------------
38,257,944
------------
See Accompanying Notes to Financial Statements
79
<PAGE>
U.S. Equity
Funds
Pilgrim
MidCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
STEEL -- PRODUCERS: 0.7%
86,300 AK Steel Holding Corp. $ 1,941,750
------------
TELECOMMUNICATIONS: 10.1%
60,500 (a) American Tower Corp. Class A 1,452,000
63,100 (a) Crown Castle International Corp. 1,313,269
65,700 (a) General Instrument Corp. 2,792,250
41,700 (a) Global Telesystems Group, Inc. 3,377,700
36,600 (a) RF Micro Devices, Inc. 2,731,275
60,100 (a) Sprint Corp. -- PCS Group 3,433,212
80,700 (a) Time Warner Telecom Class A 2,340,300
161,600 (a) Voicestream Wireless Corp. 4,595,500
130,400 (a) Winstar Communications, Inc. 6,357,000
------------
28,392,506
------------
Total Common Stocks
(Cost $213,545,009) 278,493,200
------------
Total Long-Term Investments
(Cost $213,545,009) 278,493,200
------------
Principal
Amount Value
- ------------ ------------
SHORT-TERM INVESTMENTS: 1.2%
REPURCHASE AGREEMENT: 1.2%
$3,347,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized by
$3,320,000 U.S. Treasury Notes,
6.375% due 09/30/01, Market
Value $3,414,122) $ 3,347,000
------------
Total Short-Term Investments
(Cost $3,347,000) 3,347,000
------------
TOTAL INVESTMENTS (COST
$216,892,009)* 100.6% 281,840,200
OTHER ASSETS AND
LIABILITIES, NET (0.6)% (1,704,815)
------ ------------
NET ASSETS 100.0% $280,135,385
====== ============
(a) Non-income producing security
* Cost for federal income tax purposes is $217,660,681
Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 69,334,971
Gross Unrealized Depreciation (5,155,452)
------------
Net Unrealized Appreciation $ 64,179,519
============
See Accompanying Notes to Financial Statements
80
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ----------- ------------
COMMON STOCKS: 97.8%
ADVERTISING: 0.5%
11,800 (a) Abacus Direct Corp. $ 1,079,700
30,700 (a) Getty Images, Inc. 579,462
------------
1,659,162
------------
AEROSPACE/DEFENSE: 0.8%
11,500 (a) Aeroflex, Inc. 227,125
24,400 (a) Kellstrom Industries, Inc. 445,300
36,400 (a) L-3 Communications Holdings, Inc. 1,758,575
------------
2,431,000
------------
AIRLINES: 0.4%
10,600 (a) Mesaba Holdings, Inc. 135,150
18,600 (a) Midwest Express Holdings 632,400
25,000 (a) Skywest, Inc. 623,437
------------
1,390,987
------------
AUCTION HOUSE/ART DEALER: 0.3%
27,800 Sotheby's Holdings, Inc. Class A 1,059,875
------------
AUDIO/VIDEO PRODUCTS: 0.3%
22,700 (a) Polycom, Inc. 885,300
------------
BANKS: 0.5%
30,800 Peoples Heritage Financial Group 579,425
33,174 Provident Bankshares Corp. 771,290
6,300 Western Bancorp 274,050
------------
1,624,765
------------
BIOTECHNOLOGY: 0.9%
37,300 (a) IDEC Pharmaceuticals Corp. 2,874,431
------------
BROADCASTING: 2.4%
27,000 (a) Citadel Communications Corp. $ 977,063
18,200 (a) Cumulus Media, Inc. Class A 398,125
37,500 (a) Emmis Communications Corp.
Class A 1,851,562
32,600 (a) Entercom Communications Corp. 1,393,650
27,500 (a) Pegasus Communications Corp. 1,084,531
5,300 (a) Radio One, Inc. 246,450
39,196 (a) Saga Communications, Inc. Class A 730,026
27,900 (a) SBS Broadcasting S.A. 899,775
------------
7,581,182
------------
BUILDING & CONSTRUCTION PRODUCTS - MISC: 0.4%
11,000 Elcor Corp. 480,562
36,300 (a) Dal-Tile International, Inc. 412,913
9,400 (a) Simpson Manufacturing Co., Inc. 446,500
------------
1,339,975
------------
BUILDING - MOBILE HOMES/
MANUFACTURED HOMES: 0.2%
23,700 Winnebago Industries, Inc. 533,250
------------
CHEMICALS: 0.4%
18,300 MacDermid, Inc. 850,950
15,200 Spartech Corp. 480,700
------------
1,331,650
------------
CIRCUITS: 0.7%
30,000 (a) Power Integrations, Inc. 2,193,750
------------
COMMERCIAL SERVICES: 3.9%
2,300 (a) Career Education Corp. 77,769
71,100 (a) Century Business Services, Inc. 1,030,950
11,800 (a) Forrester Research, Inc. 295,000
15,500 Hooper Holmes, Inc. 315,812
18,700 (a) International Telecommunications
Data Systems 299,200
39,700 (a) Korn-Ferry Int'l 674,900
35,000 (a) Lason, Inc. 1,736,875
14,200 (a) National Equipment Services 170,400
34,500 (a) NCO Group, Inc. 1,311,000
2,200 (a) Newgen Results Corp. 26,400
18,200 (a) Nielsen Media Research, Inc. 532,350
See Accompanying Notes to Financial Statements
81
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
59,410 (a) NOVA Corp. $ 1,485,250
45,400 (a) Novacare Employee Services 124,850
18,300 (a) On Assignment, Inc. 478,087
6,300 (a) Personnel Group Of America, Inc. 63,000
26,100 (a) Prepaid Legal Services, Inc. 709,594
18,300 (a) Probusiness Services, Inc. 656,513
13,200 (a) Profit Recovery Group Int'l 624,525
13,700 (a) Quanta Services, Inc. 602,800
9,600 Select Appointments Holdings
ADR 230,400
9,200 Service Corp. Int'l 177,100
38,800 (a) USWeb Corp. 860,875
------------
12,483,650
------------
COMPUTERS: 6.9%
32,000 (a) Affiliated Computer Services, Inc.
Class A 1,620,000
56,050 (a) Apex PC Solutions, Inc. 1,149,025
20,800 (a) Comverse Technology, Inc. 1,570,400
33,500 (a) Electronics For Imaging 1,721,062
19,300 (a) Extreme Networks, Inc. 1,120,606
12,300 Factset Research Systems, Inc. 696,487
5,700 (a) Globix Corp. 251,869
28,850 Henry (Jack) & Associates 1,132,363
6,400 (a) International Integration, Inc. 144,000
6,000 (a) IXL Enterprises, Inc. 161,250
37,400 (a) Mentor Graphics Corp. 479,188
41,200 (a) Network Appliance, Inc. 2,302,050
18,600 (a) Rambus, Inc. 1,714,688
2,500 (a) Redback Networks, Inc. 313,906
48,700 (a) S3, Inc. 442,866
28,500 (a) Sandisk Corp. 1,282,500
41,900 (a) Sequent Computer Systems, Inc. 743,725
32,400 (a) Sykes Enterprises, Inc. 1,081,350
90,700 (a) Whittman-Hart, Inc. 2,879,725
34,500 (a) Xircom, Inc. 1,037,156
------------
21,844,216
------------
COMPUTER SOFTWARE: 8.1%
39,000 (a) Acclaim Entertainment, Inc. 248,625
22,500 (a) Advantage Learning Systems, Inc. 497,812
29,800 (a) AVT Corp. 1,128,675
20,500 (a) BindView Development Corp. 486,875
17,700 (a) Business Objects S.A. ADR 646,050
26,200 (a) Clarify, Inc. $ 1,080,750
9,000 (a) Concur Technologies, Inc. 253,125
7,300 (a) Exchange Applications, Inc. 297,475
35,400 (a) Fundtech, Ltd. 918,188
46,900 (a) Harbinger Corp. 586,250
62,600 (a) ISS Group, Inc. 2,363,150
46,200 (a) Legato Systems, Inc. 2,668,050
36,800 (a) Macromedia, Inc. 1,297,200
110,200 (a) Mercury Interactive Corp. 3,898,325
13,500 (a) National Instruments Corp. 545,062
15,600 (a) New ERA Of Networks, Inc. 685,425
4,800 (a) Onyx Software Corp. 103,800
38,600 (a) Peregrine Systems, Inc. 991,538
60,400 (a) Pinnacle Systems, Inc. 2,030,950
7,100 (a) Razorfish, Inc. 263,144
53,300 Reynolds & Reynolds Class A 1,242,556
8,400 (a) Serena Software, Inc. 112,875
36,200 (a) Symantec Corp. 923,100
27,000 (a) TSI International Software, Ltd. 766,125
12,600 (a) Verity, Inc. 682,762
25,600 (a) Visual Networks, Inc. 819,200
------------
25,537,087
------------
CONSULTING SERVICES: 0.2%
27,000 (a) Superior Consultant Holdings Corp. 666,562
------------
CONSUMER PRODUCTS: 0.3%
22,000 (a) The Scotts Co. 1,047,750
------------
DISTRIBUTION/WHOLESALE: 0.8%
56,800 (a) Brightpoint, Inc. 344,350
33,000 (a) CDW Computer Centers, Inc. 1,452,000
34,125 (a) Insight Enterprises, Inc. 844,594
------------
2,640,944
------------
DRUGS/PHARMACEUTICALS: 5.1%
11,600 (a) Advance Paradigm, Inc. 707,600
28,400 (a) Alkermes, Inc. 656,750
28,100 Alpharma, Inc. 999,306
18,200 (a) Andrx Corp. 1,403,675
50,133 Bindley Western Industries, Inc. 1,156,200
65,300 (a) Biomatrix, Inc. 1,412,112
4,600 (a) ChiRex, Inc. 147,775
See Accompanying Notes to Financial Statements
82
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
27,900 (a) Gilead Sciences, Inc. $ 1,457,775
58,700 Jones Medical Industries, Inc. 2,311,313
59,450 (a) Medicis Pharmaceutical Class A 1,508,544
39,000 (a) Medimmune, Inc. 2,642,250
31,600 (a) NBTY, Inc. 205,400
27,700 (a) Nexstar Pharmaceuticals, Inc. 552,269
20,900 (a) Priority Healthcare Corp. 721,050
19,500 (a) Trimeris, Inc. 282,750
------------
16,164,769
------------
ELECTRONIC COMPONENTS & SEMICONDUCTORS: 12.8%
34,400 (a) Alpha Industries, Inc. 1,638,300
42,100 (a) American Xtal Technology, Inc. 1,002,506
38,800 (a) Applied Micro Circuits Corp. 3,191,300
23,000 (a) Burr-Brown Corp. 842,375
30,800 (a) C-Cube Microsystems, Inc. 975,975
41,000 (a) Credence Systems Corp. 1,522,125
9,000 CTS Corp. 630,000
38,300 (a) Cymer, Inc. 957,500
63,000 (a) Cypress Semiconductor Corp. 1,039,500
27,800 (a) DII Group, Inc. 1,037,287
14,700 (a) Electro Scientific Industries, Inc. 614,184
49,700 (a) Flextronics International, Ltd. 2,758,350
11,800 (a) Genesis Microchip, Inc. 278,775
2,700 (a) Globespan, Inc. 107,325
9,300 (a) HI/FN, Inc. 707,962
38,200 (a) Kulicke & Soffa Industries 1,024,237
33,300 (a) LAM Research Corp. 1,554,694
20,000 (a) Micrel, Inc. 1,480,000
25,700 (a) Microchip Technology, Inc. 1,217,537
22,700 (a) MIPS Technologies, Inc. 1,088,181
14,000 (a) Moog, Inc. Class A 481,250
19,200 (a) Novellus Systems, Inc. 1,310,400
26,400 Optical Coating Laboratory, Inc. 2,207,700
41,000 (a) PMC-Sierra, Inc. 2,416,438
29,100 (a) Qlogic Corp. 3,841,200
31,000 (a) SDL, Inc. 1,582,938
53,150 (a) SLI, Inc. 1,435,050
33,300 (a) Transwitch Corp. 1,577,588
9,000 (a) TriQuint Semiconductor, Inc. 511,313
200 (a) Triumph Group, Inc. 5,100
8,000 (a) Uniphase Corp. 1,328,000
------------
40,365,090
------------
ENGINEERING & CONSTRUCTION: 0.9%
49,250 (a) Dycom Industries, Inc. $ 2,758,000
------------
ENTERTAINMENT: 1.4%
9,700 (a) Championship Auto Racing Teams 290,394
28,100 (a) Cinar Corp. Class B 688,450
13,000 (a) Image Entertainment, Inc. 84,500
17,000 (a) Macrovision Corp. 1,272,875
23,400 (a) SFX Entertainment, Inc. 1,497,600
42,100 (a) Sunterra Corp. 586,769
------------
4,420,588
------------
ENVIRONMENTAL CONTROL: 0.3%
19,600 (a) Casella Waste Systems, Inc. Class A 509,600
33,445 (a) Tetra Tech, Inc. 551,843
------------
1,061,443
------------
FINANCIAL SERVICES: 2.9%
16,000 (a) Affiliated Managers Group 483,000
19,200 American Capital Strategies 350,400
9,600 (a) Coinstar, Inc. 275,400
2,400 (a) E-Loan, Inc. 92,550
18,000 (a) First Sierra Financial, Inc. 450,000
29,100 (a) Hambrecht & Quist, Inc. 1,080,337
55,800 Metris Cos., Inc. 2,273,850
36,500 (a) National Discount Brokers
Group, Inc. 2,117,000
9,400 SEI Investments Co. 829,550
16,600 Southwest Securities Group, Inc. 1,191,050
------------
9,143,137
------------
FOOD & BEVERAGES: 0.7%
12,900 (a) Canandaigua Brands, Inc. Class A 676,444
27,100 (a) Hain Food Group, Inc. 558,937
23,700 (a) Merkert American Corp. 225,150
28,100 Michael Foods, Inc. 660,350
------------
2,120,881
------------
FOOTWEAR & RELATED APPAREL: 0.7%
45,000 K-Swiss, Inc. 2,092,500
18,000 (a) Skechers U.S.A., Inc. 189,000
------------
2,281,500
------------
See Accompanying Notes to Financial Statements
83
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ---------- -----------
HEALTH CARE: 1.5%
97,100 (a) Apria Healthcare Group $ 1,650,700
16,000 (a) Mede America Corp. 604,000
30,600 (a) MedQuist, Inc. 1,338,750
6,200 (a) Novoste Corp. 130,200
18,100 (a) Perclose, Inc. 869,931
-----------
4,593,581
-----------
HOME BUILDING: 0.9%
20,100 (a) Crossmann Communities, Inc. 584,156
26,500 M/I Schottenstein Homes, Inc. 488,594
23,500 MDC Holdings, Inc. 505,250
23,550 (a) National RV Holdings, Inc. 571,087
18,500 Ryland Group, Inc. 549,219
-----------
2,698,306
-----------
HOSPITALS: 0.1%
15,400 (a) Province Healthcare Co. 300,300
-----------
INTERNET: 7.2%
14,800 (a) 24/7 Media, Inc. 569,800
26,800 (a) AboveNet Communications, Inc. 1,082,050
4,700 (a) AppliedTheory Corp. 59,925
12,600 (a) AppNet Systems, Inc. 169,312
5,800 (a) BackWeb Technologies, Ltd. 158,775
19,400 (a) Cdnow, Inc. 341,925
49,800 (a) Concentric Network Corp. 1,979,550
8,200 (a) EarthWeb, Inc. 305,450
32,600 (a) Exodus Communications, Inc. 3,909,962
22,500 (a) F5 Networks, Inc. 922,500
5,700 (a) Fatbrain.com, Inc. 95,475
19,500 (a) Flycast Communications Corp. 372,937
11,600 (a) GoTo.com, Inc. 324,800
4,500 (a) High Speed Access Corp. 115,312
16,200 (a) iMALL, Inc. 309,825
27,700 (a) Infospace.com, Inc. 1,301,900
22,800 (a) InterVU, Inc. 873,525
11,200 (a) Lycos, Inc. 1,029,000
9,000 (a) Mail.com, Inc. 169,312
16,000 (a) MapQuest.com, Inc. 261,000
9,900 (a) NetObjects, Inc. 79,819
20,300 (a) Netopia, Inc. 461,825
3,100 (a) PCOrder.com, Inc. 128,844
6,300 (a) Persistence Software, Inc. $ 85,838
9,700 (a) Proxicom, Inc. 249,169
13,700 (a) RoweCom, Inc. 208,925
2,300 (a) Scient Corp. 109,394
73,000 (a) Security First Technologies Co. 3,294,125
10,800 (a) Software.com, Inc. 250,425
18,600 (a) Sportsline USA, Inc. 667,275
7,200 (a) Stamps.com, Inc. 126,000
1,700 (a) StarMedia Network, Inc. 109,013
27,772 (a) UBID, Inc. 888,715
8,100 (a) USinternetworking, Inc. 340,200
19,000 (a) Verio, Inc. 1,320,500
2,600 (a) VerticalNet, Inc. 272,675
-----------
22,945,077
-----------
LEISURE/GAMING: 0.5%
20,500 (a) American Classic Voyages Co. 492,000
52,700 (a) Family Golf Centers, Inc. 405,131
45,000 (a) Williams Industries, Inc. 765,000
-----------
1,662,131
-----------
MACHINERY: 1.6%
83,765 (a) Motivepower Industires, Inc. 1,486,829
26,700 (a) PRI Automation, Inc. 967,875
22,500 (a) SpeedFam-IPEC, Inc. 361,406
72,100 (a) Terex Corp. 2,194,544
-----------
5,010,654
-----------
MEDICAL PRODUCTS & SERVICES: 2.4%
18,600 (a) Cytyc Corp. 362,700
17,900 (a) Hanger Orthopedic Group, Inc. 253,956
14,200 (a) Laser Vision Centers, Inc. 894,600
47,200 (a) Minimed, Inc. 3,631,450
33,900 (a) Molecular Devices Corp. 1,271,250
5,800 (a) Optimal Robotics Corp. 57,638
18,000 (a) ResMed, Inc. 597,375
13,600 (a) Xomed Surgical Products, Inc. 662,150
-----------
7,731,119
-----------
See Accompanying Notes to Financial Statements
84
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ---------- ----------
MEDICAL SYSTEMS: 1.2%
18,000 (a) Cerner Corp. $ 377,437
27,200 (a) Infocure Corp. 1,439,900
41,050 (a) LCA-Vision, Inc. 382,278
10,800 (a) Mediconsult.com, Inc. 112,725
27,500 (a) TLC The Laser Center, Inc. 1,320,000
----------
3,632,340
----------
METAL FABRICATION/HARDWARE: 0.5%
26,500 (a) Mueller Industries, Inc. 899,344
42,200 (a) Transportation Technologies
Industries, Inc. 559,150
----------
1,458,494
----------
NETWORKING PRODUCTS: 1.6%
73,700 (a) Ancor Communications, Inc. 2,386,037
18,700 (a) Black Box Corp. 937,338
19,319 (a) Cisco Systems, Inc. 1,246,068
10,800 (a) MMC Networks, Inc. 483,300
----------
5,052,743
----------
OIL & GAS SERVICES: 2.9%
9,100 (a) Atwood Oceanics, Inc. 284,375
35,400 (a) Barrett Resources Corp. 1,358,475
37,100 (a) BJ Services Co. 1,092,131
27,100 (a) CAL Dive International, Inc. 809,612
12,000 (a) Dril-Quip 275,250
67,600 (a) Global Industries, Ltd. 866,125
34,400 (a) Marine Drilling Cos., Inc. 470,850
18,600 (a) Nabors Industries, Inc. 454,537
4,437 (a) Pool Energy Services Co. 90,127
78,900 (a) Pride International, Inc. 833,381
20,900 (a) Smith International, Inc. 907,844
10,500 (a) Stone Energy Corp. 444,937
49,400 (a) Tuboscope, Inc. 676,162
19,500 (a) Unit Corp. 158,438
18,600 (a) UTI Energy Corp. 308,063
21,000 (a) Varco International, Inc. 229,688
----------
9,259,995
----------
PIPELINES: 0.1%
22,700 Western Gas Resources, Inc. 363,200
----------
PRINTING -- COMMERCIAL: 1.2%
40,500 (a) Consolidated Graphics, Inc. $2,025,000
112,200 (a) Mail-Well, Inc. 1,816,238
----------
3,841,238
----------
PUBLISHING: 0.5%
27,700 (a) Big Flower Holdings, Inc. 882,938
26,800 (a) Playboy Enterprises, Inc. Class B 711,875
----------
1,594,813
----------
REAL ESTATE INVESTMENT TRUSTS: 0.5%
27,500 Golf Trust Of America, Inc. 672,031
42,825 Kilroy Realty Corp. 1,043,859
----------
1,715,890
----------
RECREATIONAL CENTERS: 0.2%
24,600 (a) Bally Total Fitness Holdings 698,025
----------
RETAIL: 9.1%
38,481 (a) 99 Cents Only Stores 1,921,645
56,200 (a) Ames Department Stores, Inc. 2,564,125
45,200 (a) Ann Taylor Stores Corp. 2,034,000
28,800 (a) Bebe Stores, Inc. 979,200
19,200 (a) Cheap Tickets, Inc. 700,800
39,400 (a) Creative Computers, Inc. 315,200
1,800 (a) Cutter & Buck, Inc. 30,375
32,700 (a) Dave & Buster's, Inc. 948,300
41,250 Ethan Allen Interiors, Inc. 1,557,187
37,900 (a) Foodmaker, Inc. 1,075,412
27,500 (a) Genesco, Inc. 400,469
53,000 (a) Hollywood Entertainment Corp. 1,036,812
18,500 Kenneth Cole Productions, Inc.
Class A 515,687
30,000 (a) Linens 'n Things, Inc. 1,312,500
46,000 (a) Men's Wearhouse, Inc. 1,173,000
64,500 (a) Micro Warehouse, Inc. 1,152,938
42,800 (a) Musicland Stores Corp. 379,850
32,400 (a) O'Reilly Automotive, Inc. 1,632,150
29,850 (a) Pacific Sunwear Of California 727,594
See Accompanying Notes to Financial Statements
85
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------- ------------
48,700 (a) Petsmart, Inc. $ 499,175
36,000 Pier 1 Imports, Inc. 405,000
13,950 (a) Quicksilver, Inc. 363,572
13,500 (a) ShopKo Stores, Inc. 489,375
23,500 (a) Sonic Automotive, Inc. 323,125
51,750 (a) Sonic Corp. 1,688,344
54,160 (a) Sunglass Hut Int'l, Inc. 930,875
23,200 (a) The Timberland Co. Class A 1,579,050
74,400 (a) Trans World Entertainment 837,000
17,600 (a) Whitehall Jewellers, Inc. 469,700
18,600 (a) Williams-Sonoma, Inc. 647,513
------------
28,689,973
------------
SAVINGS & LOANS: 0.9%
19,050 First Washington Bancorp, Inc. 382,191
25,925 MAF Bancorp, Inc. 628,681
45,000 (a) NetB@nk, Inc. 1,710,000
------------
2,720,872
------------
SEISMIC DATA COLLECTOR: 0.2%
1,195 (a) Eagle Geophysical, Inc. 896
18,600 (a) Seitel, Inc. 301,088
18,500 (a) Veritas DGC, Inc. 338,781
------------
640,765
------------
STEEL PIPE & TUBING: 0.0%
5,112 (a) Maverick Tube Corp. 71,249
------------
TELECOMMUNICATIONS: 10.0%
47,000 (a) American Tower Corp. Class A 1,128,000
18,000 (a) Antec Corp. 577,125
8,100 (a) AudioCodes, Ltd. 218,700
14,800 (a) Aware, Inc. 682,650
30,000 (a) CapRock Communications Corp. 1,215,000
3,400 (a) Copper Mountain Networks, Inc. 262,650
4,900 (a) Digital Microwave Corp. 62,475
36,300 (a) DSP Communications, Inc. 1,048,163
6,900 (a) Echostar Communications Corp.
Class A 1,058,719
27,900 (a) Gilat Satellite Networks, Ltd. 1,464,750
79,400 (a) GST Telecommunications, Inc. 1,047,087
27,600 (a) Hyperion Telecommunications, Inc.
Class A 519,225
18,100 (a) ICG Communications, Inc. $ 386,888
14,200 (a) Intermedia Communications, Inc. 426,000
38,450 (a) International Network Services 1,552,419
21,400 (a) Metromedia Fiber Network, Inc. 769,063
9,000 (a) Orckit Communications, Ltd. 222,750
45,000 (a) PairGain Technologies, Inc. 517,500
34,800 (a) Pinnacle Holdings, Inc. 852,600
48,200 (a) Powerwave Technologies, Inc. 1,554,450
36,200 (a) Proxim, Inc. 2,099,600
37,900 (a) RF Micro Devices, Inc. 2,828,287
56,300 (a) TALK.com, Inc. 633,375
28,600 (a) Terayon Corp. 1,598,025
27,200 (a) Tut Systems, Inc. 1,331,100
22,500 (a) US LEC Corp. Class A 506,250
51,400 (a) Viatel, Inc. 2,884,825
42,400 (a) VoiceStream Wireless Corp. 1,205,750
29,100 (a) Western Wireless Corp. Class A 785,700
44,300 (a) Winstar Communications, Inc. 2,159,625
------------
31,598,751
------------
TOYS/GAMES/HOBBIES: 0.5%
48,700 (a) Action Performance Co., Inc. 1,607,100
------------
TRANSPORTATION: 1.4%
15,900 (a) Atlas Air, Inc. 512,775
38,000 Expeditors International, Inc. 1,035,500
13,900 (a) Forward Air Corp. 390,938
25,400 (a) Swift Transportation Co., Inc. 558,800
12,400 USFreightways Corp. 574,275
28,687 Varlen Corp. 1,161,823
------------
4,234,111
------------
Total Common Stocks
(Cost $225,456,512) 309,561,671
------------
WARRANTS: 0.0%
MOTION PICTURES & SERVICES: 0.0%
1,687 (a) Iwerks Entertainment, Inc. --
------------
Total Warrants (Cost $0) --
------------
Total Long-Term Investments
(Cost $225,456,512) 309,561,671
------------
See Accompanying Notes to Financial Statements
86
<PAGE>
U.S. Equity
Funds
Pilgrim
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------------ -------------
SHORT-TERM INVESTMENTS: 1.8%
REPURCHASE AGREEMENT: 1.8%
$5,561,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized
by
$5,520,000 U.S. Treasury
Notes,
6.375% Due 09/30/2001,
Market Value $5,676,492) $ 5,561,000
-------------
Total Short-Term Investments
(Cost $5,561,000) 5,561,000
-------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$231,017,512)* 99.6% 315,122,671
OTHER ASSETS AND
LIABILITIES, NET 0.4% 1,450,051
------ -------------
NET ASSETS 100.0% $ 316,572,722
====== =============
(a) Non-income producing security
ADR -- American Depository Receipt
* Cost for federal income tax purposes is $231,226,894. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 96,254,942
Gross Unrealized Depreciation (12,359,165)
-------------
Net Unrealized Appreciation $ 83,895,777
=============
See Accompanying Notes to Financial Statements
87
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
COMMON STOCKS: 91.8%
AUSTRALIA: 0.7%
COMMERCIAL BANKS -- PACIFIC RIM: 0.4%
29,200 Commonwealth Bank of Australia $ 464,018
53,200 Suncorp-Metway, Ltd. 316,367
----------
780,385
----------
DIVERSIFIED MINERALS: 0.3%
64,500 Broken Hill Proprietary 745,822
----------
TOTAL AUSTRALIA 1,526,207
----------
BELGIUM: 0.8%
CELLULAR TELECOMMUNICATION: 0.2%
7,400 (a) Mobistar S.A. 366,016
----------
DIVERSIFIED FINANCIAL SERVICES: 0.3%
19,200 Fortis 602,442
----------
PHOTO -- EQUIPMENT/SUPPLIES : 0.3%
36,700 (a) AGFA Gevaert N.V. 738,576
----------
TOTAL BELGIUM 1,707,034
----------
BRAZIL: 1.4%
MONEY-CENTER BANKS: 0.4%
74,400 Banco Santander Central 774,321
----------
PAPER & RELATED PRODUCTS: 0.4%
37,700 Aracruz Celulose S.A. ADR 829,400
----------
STEEL -- SPECIALTY: 0.3%
29,397,000 Cia Siderurgica Nacional 769,011
----------
TELEPHONE -- LOCAL: 0.3%
41,300 Tele Norte Leste Participacoes
ADR 766,631
----------
TOTAL BRAZIL 3,139,363
----------
CANADA: 2.8%
CABLE TV: 0.1%
19,800 (a) Rogers Communications Class B 318,529
----------
COMPUTER GRAPHICS: 0.2%
28,400 (a) ATI Technologies, Inc. $ 460,744
----------
MEDICAL -- BIOMEDICAL/GENE: 1.5%
53,400 (a) Amgen, Inc. 3,250,725
----------
MEDICAL LASER SYSTEMS: 0.6%
27,300 (a) The Laser Center 1,310,400
----------
TELECOMMUNICATION EQUIPMENT: 0.4%
9,500 Nortel Networks 824,719
----------
TOTAL CANADA 6,165,117
----------
FINLAND: 3.7%
PAPER & RELATED PRODUCTS: 0.3%
69,200 Stora Enso OYJ-R Shares 741,594
----------
TELECOMMUNICATION EQUIPMENT: 3.0%
71,200 Nokia Corp. ADR 6,519,250
----------
TELEPHONE -- INTEGRATED: 0.4%
39,900 Sonera Group OYJ 871,637
----------
TOTAL FINLAND 8,132,481
----------
FRANCE: 4.1%
BUILDING PRODUCTS: 0.3%
7,100 Lafarge 674,553
----------
COMPUTER SERVICES: 0.7%
9,200 Cap Gemini S.A. 1,444,773
----------
DIVERSIFIED OPERATIONS/COMMERCIAL
SERVICES: 0.4%
10,600 Vivendi (EX -- Generale des Eaux) 857,984
----------
MONEY-CENTER BANKS: 0.3%
9,000 Banque Nationale de Paris 749,343
----------
OIL COMPANY -- INTEGRATED: 0.9%
4,300 Elf Aquitaine 630,522
10,900 (a) Total Fina S.A. 1,405,111
----------
2,035,633
----------
See Accompanying Notes to Financial Statements
88
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
OIL FIELD SERVICES: 0.2%
10,300 Coflexip ADR $ 448,050
----------
RETAIL -- BUILDING PRODUCTS: 0.6%
5,700 Castorama Dubois
Investissements SCA 1,350,920
----------
TELEVISION: 0.7%
6,100 TV Francaise 1,420,578
----------
TOTAL FRANCE 8,981,834
----------
GERMANY: 2.4%
AUTO -- CARS/LIGHT TRUCKS: 0.4%
9,840 DaimlerChrysler AG 858,826
----------
ELECTRIC UTILITIES: 0.4%
16,300 Veba AG 960,750
----------
MACHINERY -- GENERAL INDUSTRY: 0.9%
12,800 Mannesmann AG 1,912,515
----------
MEDICAL PRODUCTS: 0.5%
18,000 Fresenius Medical Care 1,049,822
----------
TELEPHONE -- INTEGRATED: 0.2%
10,600 Deutsche Telekom AG 445,103
----------
TOTAL GERMANY 5,227,016
----------
GREECE 0.3%
BUILDING PRODUCTS -- CEMENT/AGGREGATE: 0.3%
7,000 Titan Cement Co. 643,831
----------
TOTAL GREECE 643,831
----------
HONG KONG: 0.9%
DIVERSIFIED OPERATIONS: 0.2%
203,000 Beijing Enterprises 418,627
----------
REAL ESTATE DEVELOPMENT: 0.7%
289,700 New World Development 868,125
67,000 Sun Hung Kai Properties 610,959
----------
1,479,084
----------
TOTAL HONG KONG 1,897,711
----------
HUNGARY: 0.3%
TELEPHONE -- INTEGRATED: 0.3%
21,100 Matav RT ADR $ 580,250
----------
TOTAL HUNGARY 580,250
----------
INDIA: 0.0%
ELECTRIC -- INTEGRATED: 0.0%
600 BSES Ltd. 2,063
----------
TOTAL INDIA 2,063
----------
INDONESIA: 0.6%
TELECOMMUNICATION SERVICES: 0.4%
1,427,220 PT Telekomunikasi 833,413
----------
258,000 (a) PT Hanjaya Mandala Sampo 595,095
----------
TOTAL INDONESIA 1,428,508
----------
IRELAND: 0.4%
BUILDING & CONSTRUCTION PROJECT --
MISCELLANEOUS: 0.4%
49,500 CRH PLC 877,325
----------
TOTAL IRELAND 877,325
----------
ITALY: 1.5%
COMMERCIAL BANKS -- EUROPE: 0.4%
21,500 Banca Popolare Di Bresci 920,527
----------
LIFE/HEALTH INSURANCE: 0.4%
65,900 Alleanza Assicurazioni SpA 757,159
----------
PUBLISHING -- PERIODICALS: 0.4%
661,800 Seat-Pagine Gialle SpA 903,586
----------
TELEVISION: 0.3%
76,600 Mediaset SpA 680,398
----------
TOTAL ITALY 3,261,670
----------
See Accompanying Notes to Financial Statements
89
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
JAPAN: 9.1%
AUDIO/VIDEO PRODUCTS: 0.4%
7,800 Sony Corp. $ 840,649
-----------
AUTO -- CARS/LIGHT TRUCKS: 0.4%
20,000 Honda Motor Co., Ltd. 847,339
-----------
CELLULAR TELECOMMUNICATION: 0.4%
730 NITT Mobile Communications 988,727
-----------
CHEMICALS -- DIVERSIFIED: 0.4%
29,000 Shin-etsu Chemical Co. 969,980
-----------
COMPUTERS -- INTEGRATED SYSTEMS: 0.6%
64,200 Fujitsu, Ltd. 1,291,052
-----------
COMPUTER SOFTWARE: 0.3%
9,920 Fuji Soft ABC, Inc. 589,867
-----------
COSMETICS & TOILETRIES: 0.5%
42,000 Kao Corp. 1,179,337
-----------
DISTRIBUTION/WHOLESALE: 1.2%
82,000 Mitsui & Co., Ltd. 571,565
10,000 Softbank Corp. 2,024,198
-----------
2,595,763
-----------
ELECTRONIC COMPONENTS -- SEMICONDUCTORS: 0.5%
15,000 Tokyo Electron Ltd. 1,017,054
-----------
ELECTRONIC MEASURE INSTRUMENT: 0.4%
8,300 Advantest Corp. 911,674
-----------
FINANCE -- CONSUMER LOANS: 1.2%
2,520 Shohkoh Fund & Co., Ltd. 1,806,467
7,600 Takefuji Corporation 785,200
-----------
2,591,667
-----------
FORESTRY: 0.4%
168,000 Rengo Company Ltd. 865,772
-----------
MACHINERY -- CONSTRUCTION & MINING: 0.3%
106,000 Komatsu 676,698
-----------
OPTICAL SUPPLIES: 0.3%
10,000 Hoya Corp. $ 564,067
-----------
REAL ESTATE DEVELOPMENT: 0.3%
75,000 Mitsui Fudosan Co., Ltd. 607,012
-----------
RETAIL -- MISCELLANEOUS/DIVERSIFIED: 0.9%
8,300 Ryohin Keikaku Co., Ltd. 2,087,253
-----------
STEEL -- PRODUCERS: 0.3%
302,000 Nippon Steel Corp. 700,847
-----------
TELECOMMUNICATION EQUIPMENT: 0.3%
10,000 Matsushita Communication
Industrial Co., Ltd. 714,374
-----------
TOTAL JAPAN 20,039,132
-----------
MEXICO: 0.6%
BROADCAST SERVICE/PROGRAM: 0.3%
16,800 (a) Grupo Televisa S.A. GDR 752,850
-----------
BUILDING PRODUCT -- CEMENT/AGGREGATE: 0.3%
109,606 Cemex S.A. -- CPO 540,467
3,800 Cemex S.A. 37,567
-----------
578,034
-----------
TOTAL MEXICO 1,330,884
-----------
NETHERLANDS: 3.1%
COMPUTERS -- INTEGRATED SYSTEMS: 1.2%
18,900 (a) ASM Lithography Holding N.V. 1,122,188
17,200 (a) Equant N.V. 1,618,950
-----------
2,741,138
-----------
DIVERSIFIED FINANCIAL SERVICES: 0.1%
2,800 Fortis (NL) N.V. 86,414
-----------
ELECTRONIC COMPONENTS --
SEMICONDUCTORS: 0.7%
20,600 STMicroelectronics N.V. 1,429,125
-----------
MONEY-CENTER BANKS: 0.3%
13,300 ING Groep N.V. 719,512
-----------
See Accompanying Notes to Financial Statements
90
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
OIL COMPANY -- INTEGRATED: 0.3%
10,700 Royal Dutch Petroleum Co. $ 644,675
----------
TELECOMMUNICATION SERVICES: 0.5%
22,000 (a) United Pan-Europe
Communications 1,192,437
----------
TOTAL NETHERLANDS 6,813,301
----------
NEW ZEALAND: 0.1%
PAPER & RELATED PRODUCTS: 0.1%
454,200 Fletcher Challenge Paper 338,815
----------
TOTAL NEW ZEALAND 338,815
----------
SINGAPORE: 0.6%
MONEY-CENTER BANKS: 0.2%
61,000 Overseas-Chinese Bank 508,721
----------
PAPER & RELATED PRODUCTS: 0.2%
50,200 (a) Asia Pulp 7 Paper ADR 483,175
----------
REAL ESTATE DEVELOPMENT: 0.2%
72,000 City Developments, Ltd. 460,915
----------
TOTAL SINGAPORE 1,452,811
----------
SOUTH KOREA: 0.7%
STEEL -- PRODUCERS: 0.3%
23,100 Pohang Iron & Steel Co. ADR 776,738
----------
TELECOMMUNICATION SERVICES: 0.4%
22,000 (a) Korea Telecom ADR 880,000
----------
TOTAL SOUTH KOREA 1,656,738
----------
SPAIN: 0.0%
PAPER & RELATED PRODUCTS: 0.0%
165 (a) Telefonica S.A. ADR 24,234
----------
TOTAL SPAIN 24,234
----------
SWEDEN: 0.4%
PAPER & RELATED PRODUCTS: 0.4%
32,400 Svenska Cellulosa Ab-b S 839,551
----------
TOTAL SWEDEN 839,551
----------
SWITZERLAND: 1.1%
COMMERCIAL BANKS -- EUROPE: 0.3%
250 Julius Baer Holding AG Class B $ 711,738
----------
MONEY-CENTER BANKS: 0.4%
2,600 United Bank Switzerland AG 775,296
----------
TELEPHONE -- INTEGRATED: 0.4%
2,300 Swisscom AG 864,689
----------
TOTAL SWITZERLAND 2,351,723
----------
TAIWAN: 0.6%
ELECTRONIC COMPONENTS --
SEMICONDUCTORS: 0.6%
36,700 (a) Taiwan Semiconductor ADR 1,247,800
----------
TOTAL TAIWAN 1,247,800
----------
THAILAND: 0.4%
COMMERCIAL BANKS -- PACIFIC RIM: 0.3%
187,200 (a) Thai Farmers Bank Public 578,028
----------
FINANCIAL: 0.1%
167,200 (a) Siam Commercial Bank 237,757
----------
TOTAL THAILAND 815,785
----------
UNITED STATES: 48.7%
AREOSPACE/DEFENSE -- EQUIPMENT: 1.7%
51,200 United Technologies 3,670,400
----------
AIRLINES: 1.3%
94,900 Southwest Airlines 2,953,763
----------
ATHLETIC FOOTWEAR: 1.1%
39,000 Nike, Inc. Class B 2,469,188
----------
BROADCAST SERVICE/PROGRAM: 1.7%
103,240 (a) AT&T Corp. Liberty Media 3,794,070
----------
CABLE TV: 1.6%
88,600 Comcast Corp. Class B 3,405,563
----------
CASINO HOTELS: 1.9%
86,300 (a) MGM Grand, Inc. 4,228,700
----------
See Accompanying Notes to Financial Statements
91
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
CELLULAR TELECOMMUNICATION: 1.5%
56,700 (a) Sprint Corp. -- PCS Group $ 3,238,988
------------
COMPUTERS -- MICRO.: 1.4%
43,300 (a) Sun Microsystems, Inc. 2,982,288
------------
COMPUTER SERVICES: 2.4%
35,400 (a) At Home Corp. Series A 1,909,388
50,000 (a) Computer Sciences 3,459,375
------------
5,368,763
------------
COMPUTER SOFTWARE: 2.7%
27,200 (a) Microsoft Corp. 2,453,100
93,600 (a) Oracle Corp. 3,474,900
------------
5,928,000
------------
DIVERSIFIED MANUFACTURING OPERATIONS: 1.9%
45,100 Tyco International, Ltd. 4,273,225
------------
ELECTRONIC COMPONENTS -- MISCELLANEOUS: 0.2%
9,500 (a) Flextronics International, Ltd. 527,250
------------
FINANCE -- INVESTMENT BANKER/BROKER: 1.8%
53,600 (a) Goldman Sachs Group 3,872,600
------------
MEDICAL DRUGS: 1.1%
50,600 (a) Forest Laboratories Class A 2,340,250
------------
MULTI-LINE INSURANCE: 3.1%
28,592 American International Group 3,347,051
39,100 Cigna Corp. 3,479,900
------------
6,826,951
------------
MULTIMEDIA: 1.7%
51,500 Time Warner, Inc. 3,785,250
------------
NETWORKING PRODUCTS: 1.9%
65,200 (a) Cisco Systems, Inc. 4,205,400
------------
NON-HAZARDOUS WASTE DISPOSAL: 1.9%
166,200 (a) Republic Services, Inc. 4,113,450
------------
OIL COMPANY -- EXPLORATION &
PRODUCTION: 0.3%
28,100 (a) Tailsman Energy, Inc. $ 746,406
------------
OIL FIELD MACHINERY & EQUIPMENT: 1.5%
92,600 (a) Weatherford International, Inc. 3,391,475
------------
OIL FIELD SERVICES: 1.9%
73,100 Halliburton Co. 3,307,775
13,600 Schlumberger Ltd. 866,150
------------
4,173,925
------------
PAPER & RELATED PRODUCTS: 1.5%
67,300 International Paper Co. 3,398,650
------------
PIPELINES: 1.3%
70,000 Williams Cos., Inc. 2,979,375
------------
RADIO: 1.5%
113,000 (a) Infinity Broadcasting Corp.
Class A 3,361,750
------------
RETAIL -- DISCOUNT: 1.5%
67,200 Wal-Mart Stores, Inc. 3,242,400
------------
TELECOMMUNICATION EQUIPMENT: 1.9%
61,875 Lucent Technologies 4,172,695
------------
TELECOMMUNICATION SERVICES: 0.4%
10,600 (a) Global Telesystems Group, Inc. 858,600
------------
TELEPHONE -- INTEGRATED: 1.3%
52,026 AT&T Corp. 2,903,701
------------
TELEPHONE -- LOCAL: 1.6%
48,900 Alltel Corp. 3,496,350
------------
TELEPHONE -- LONG DISTANCE: 1.4%
35,600 (a) MCI Worldcom, Inc. 3,070,500
------------
WIRELESS EQUIPMENT: 1.7%
38,500 Motorola, Inc. 3,647,875
------------
TOTAL UNITED STATES 107,427,801
------------
See Accompanying Notes to Financial Statements
92
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
UNITED KINGDOM: 6.3%
AUTO/TRUCK PARTS & EQUIPMENT: 0.3%
34,500 GKN PLC $ 590,630
------------
BUILDING & CONSTRUCTION -- MISCELLANEOUS: 0.7%
153,200 Barratt Developments PLC 859,756
103,300 Blue Circle 687,601
------------
1,547,357
------------
CABLE TV: 0.2%
108,000 (a) Telewest Communications PLC 481,811
------------
CELLULAR TELECOMMUNICATION: 0.4%
43,908 Vodafone Group PLC 867,976
------------
DIVERSIFIED MANUFACTURING OPERATIONS: 0.7%
68,500 General Electric Company 693,253
196,400 Morgan Crucible 837,481
------------
1,530,734
------------
ELECTRONIC COMPONENTS -- SEMICONDUCTORS: 0.3%
20,160 (a) ARM Holdings PLC ADR 703,080
------------
INVESTMENT COMPANIES -- RESOURCES: 0.3%
12,100 (a) Anglo American PLC 565,472
------------
MEDICAL -- DRUGS: 0.2%
37,300 Smithkline Beecham PLC 484,216
------------
MONEY-CENTER BANKS: 1.6%
58,000 Bank Of Tokyo-Mitsubishi $ 825,321
39,800 Barclays PLC 1,160,076
19,000 HSBC Holdings PLC 693,028
56,800 Standard Chartered PLC 931,211
------------
3,609,636
------------
OIL COMPANY -- INTREGRATED: 0.4%
23,800 BP Amoco PLC 426,208
67,900 Shell Transportation 508,964
------------
935,172
------------
RETAIL -- CONSUMER ELECTRONICS: 0.2%
17,800 Dixons Group PLC 333,352
------------
TELECOMMUNICATION SERVICES: 0.3%
34,700 (a) Colt Telecom Group PLC 728,618
------------
TELEPHONE -- INTEGRATED: 0.3%
40,200 British Telecom PLC 671,736
------------
TOBACCO: 0.4%
97,500 British American Tobacco PLC 909,898
------------
TOTAL UNITED KINGDOM 13,959,688
------------
VENEZUELA: 0.2%
ELECTRIC GENERATION: 0.2%
20,400 La Electricidad de Carac ADR 399,271
------------
TOTAL VENEZUELA 399,271
------------
Total Common Stocks
(Cost $169,684,025) 202,267,944
------------
See Accompanying Notes to Financial Statements
93
<PAGE>
International
Equity Funds
Pilgrim
Worldwide
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ----------- ------------
WARRANTS: 0.1%
SINGAPORE: 0.0%
Principal Amount Paper &
Related Products: 0.0%
10,040 (a) Asia Pulp And Paper Warrants $ 26,355
------------
Total Singapore 26,355
------------
THAILAND: 0.1%
Financial: 0.1%
167,200 (a) Siam Commercial Bank Warrants 107,557
------------
Total Thailand 107,557
------------
Total Warrants (Cost $0) 133,912
------------
Total Long-Term Investments
(Cost $169,684,025) 202,401,856
------------
SHORT-TERM INVESTMENTS: 6.7%
REPURCHASE AGREEMENT: 6.7%
$14,758,000 State Street Bank & Trust
Repurchase Agreement,
4.700% due 07/01/1999
(Collateralized by $11,610,000
U.S. Treasury Bonds, 8.875%
due 08/15/17 Market Value
$15,058,216) $ 14,758,000
------------
Total Short-Term Investments
(Cost $14,758,000) 14,758,000
------------
Total Investments
(Cost $184,442,025)* 98.6% 217,159,856
Other Assets and
Liabilities, Net 1.4% 3,142,928
------ ------------
Net Assets 100.0% $220,302,784
====== ============
(a) Non-income producing security
ADR -- American Depository Receipt
CPO -- Ordinary Participation Certificate
GDR -- Global Depository Receipt
* Cost for federal income tax purposes is $184,667,391. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 34,476,431
Gross Unrealized Depreciation (1,983,966)
------------
Net Unrealized Appreciation $ 32,492,465
============
See Accompanying Notes to Financial Statements
94
<PAGE>
International
Equity Funds
Pilgrim
International Core
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
COMMON STOCKS: 94.9%
AUSTRALIA: 0.7%
OTHER PRODUCTION/MANUFACTURING: 0.7%
26,700 Broken Hill Proprietary Co., Ltd. $ 308,735
----------
BELGIUM: 0.7%
INSURANCE: 0.7%
9,900 Fortis 310,634
----------
BRAZIL: 2.1%
OTHER PRODUCTION/MANUFACTURING: 0.7%
14,400 Aracruz Celulose S.A. ADR 316,800
----------
STEEL: 0.8%
13,768,000 CIA Siderurgica Nacional 351,209
----------
TELEPHONE: 0.7%
16,200 Tele Norte Leste Participacoes
ADR 300,712
----------
TOTAL BRAZIL 968,721
----------
CANADA: 3.9%
CABLE TV: 0.5%
13,100 (a) Rogers Communications Class B 210,744
----------
COMPUTER SERVICES: 0.7%
19,700 (a) ATI Technologies, Inc. 319,601
----------
OIL WELL EQUIPMENT & SERVICE: 0.8%
14,900 (a) Tailsman Energy, Inc. 395,781
----------
SEMICONDUCTORS/ELECTRONIC COMPONENTS: 1.9%
17,900 (a) TLC The Laser Center, Inc. 859,200
----------
TOTAL CANADA 1,785,326
----------
FINLAND: 4.4%
COMMUNICATIONS: 2.2%
11,000 Nokia Corp. ADR 1,007,187
----------
PAPER RELATED PRODUCTS: 1.0%
41,300 Stora Enso OYJ Class R 442,599
----------
TELELCOMMUNICATION SERVICES: 1.2%
25,000 Sonera Group OYJ $ 546,139
----------
TOTAL FINLAND 1,995,925
----------
FRANCE: 8.7%
BUILDING PRODUCTS: 0.7%
3,400 Lafarge S.A. 323,025
----------
COMPUTER SOFTWARE & SERVICE: 1.5%
4,300 Cap Gemini S.A. 675,274
----------
ENERGY: 1.3%
4,600 (a) Total Fina S.A. 592,983
----------
ENTERTAINMENT/BROADCASTING: 1.5%
2,900 Societe Television Francaise 675,357
----------
HOME PRODUCTS: 1.1%
2,200 Castorama Dubois 521,408
----------
OIL COMPANY -- INTEGRATED: 0.6%
1,900 Elf Aquitaine S.A. 278,603
----------
OIL WELL EQUIPMENT & SERVICE: 0.5%
4,900 Coflexip S.A. ADR 213,150
----------
OTHER PRODUCTION/MANUFACTURING: 0.5%
1,800 Sidel S.A. 218,682
----------
UTILITIES: 1.0%
5,700 Vivendi 461,369
----------
TOTAL FRANCE 3,959,851
----------
GERMANY: 6.3%
AUTOMOTIVE: 1.1%
5,700 DaimlerChrysler AG 497,491
----------
ELECTRIC -- UTILITY: 1.0%
7,900 Veba AG 465,640
----------
INDUSTRIAL EQUIPMENT: 1.8%
5,600 Mannesmann AG 836,725
----------
See Accompanying Notes to Financial Statements
95
<PAGE>
International
Equity Funds
Pilgrim
International Core
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
MEDICAL: 1.2%
9,600 Fresenius Medical Care AG $ 559,905
----------
PHOTO-EQUIPMENT/SUPPLIES: 0.8%
17,300 (a) Agfa Gevaert N.V. 348,157
----------
TELEPHONE: 0.4%
4,600 Deutsche Telekom AG 193,158
----------
TOTAL GERMANY 2,901,076
----------
GREECE: 0.6%
OTHER PRODUCTION/MANUFACTURING: 0.6%
2,900 Titan Cement Co. S.A. 266,730
----------
HONG KONG: 2.4%
FINANCIAL: 0.8%
10,100 HSBC Holdings PLC 368,399
----------
PROPERTIES: 1.6%
138,100 New World Development Co. Ltd. 413,835
37,000 Sun Hung Kai Properties Ltd. 337,396
----------
751,231
----------
TOTAL HONG KONG 1,119,630
----------
HUNGARY: 0.5%
TELEPHONE: 0.5%
8,700 Matav RT ADR 239,250
----------
INDONESIA: 2.2%
COMMUNICATIONS: 1.3%
991,440 PT Telekomunikasi Indonesia 578,943
----------
TOBACCO PRODUCTS: 0.9%
178,000 (a) PT Hanjaya Mandala Sampoerna 410,569
----------
TOTAL INDONESIA 989,512
----------
IRELAND: 0.9%
INDUSTRIAL ENGINEERING/CONSTRUCTION: 0.9%
22,900 CRH PLC 405,874
----------
ITALY: 3.3%
BANKS: 0.9%
10,000 BIPOP SPA $ 428,152
----------
BROADCASTING: 0.8%
39,800 Mediaset SPA 353,523
----------
INSURANCE BROKERAGE: 0.7%
27,900 Alleanza Assicurazioni SPA 320,557
----------
PUBLISHING: 0.9%
301,305 Seat-Pagine Gialle SPA 411,386
----------
TOTAL ITALY 1,513,618
----------
JAPAN: 21.3%
AUTOMOBILES: 0.7%
8,000 Honda Motor Co., Ltd. 338,935
----------
CHEMICALS: 1.0%
13,000 Shin-Etsu Chemical Co., Ltd. 434,818
----------
COMPUTER SERVICES: 1.5%
33,200 Fujitsu, Ltd. 667,647
----------
CONSTRUCTION MACHINERY: 0.7%
53,000 Komatsu, Ltd. 338,349
----------
CONSUMER DURABLES: 0.8%
3,600 Sony Corp. 387,992
----------
CONSUMER ELECTRICALS: 0.7%
6,000 Hoya Corp. 338,440
----------
FINANCIAL: 0.7%
3,000 Takefuji Corp. 309,948
----------
MONEY CENTER BANKS: 0.7%
22,000 Bank Of Tokyo-Mitsubishi, Ltd. 313,053
----------
OTHER FINANCIAL SERVICES: 1.8%
1,170 Shohkoh Fund & Co., Ltd. 838,717
----------
See Accompanying Notes to Financial Statements
96
<PAGE>
International
Equity Funds
Pilgrim
International Core
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
OTHER PRODUCTION/MANUFACTURING: 2.1%
23,000 Kao Corp. $ 645,827
63,000 Rengo Co., Ltd. 324,664
----------
970,491
----------
OTHER RETAIL TRADE: 2.5%
35,000 Mitsui Fudosan Co., Ltd. 283,272
3,400 Ryohin Keikaku Co., Ltd. 855,019
----------
1,138,291
----------
PHOTO-EQUIPMENT/SUPPLIES: 0.8%
25,000 Olympus Optical Co., Ltd. 369,369
----------
PUBLISHING: 2.2%
4,900 Softbank Corp. 991,857
----------
SEMICONDUCTORS/ELECTRONIC COMPONENTS:
2.0%
4,500 Advantest Corp. 494,281
6,000 Tokyo Electron, Ltd. 406,822
----------
901,103
----------
SOFTWARE: 0.6%
4,400 Fuji Soft ABC, Inc. 261,634
----------
STEEL: 0.7%
138,000 Nippon Steel Corp. 320,254
----------
TELECOMMUNICATION SERVICES: 1.0%
340 NITT Mobile
Communications Network,
Inc. 460,503
----------
WHOLESALE DISTRIBUTION:
0.8%
50,000 Mitsui & Co., Ltd. 348,516
----------
TOTAL JAPAN 9,729,917
----------
MEXICO: 1.3%
BROADCASTING: 0.7%
7,000 (a) Grupo Televisa S.A. GDR 313,688
----------
OTHER PRODUCTION/MANUFACTURING: 0.6%
57,009 Cemex S.A. 281,111
----------
TOTAL MEXICO 594,799
----------
NETHERLANDS: 7.5%
ELECTRONIC COMPONENTS --
SEMICONDUCTORS: 1.7%
11,200 STMicroelectronics N.V. $ 777,000
----------
MONEY-CENTER BANKS: 0.9%
7,500 ING Groep N.V. 405,740
----------
OIL & GAS: 1.0%
7,700 Royal Dutch Petroleum Co. 463,925
----------
TELECOMMUNICATION SERVICES: 3.9%
9,300 (a) ASM Lithography Holdings N.V. 552,187
6,700 (a) Equant N.V. 630,637
11,000 (a) United Pan-Europe
Communications N.V. 596,218
----------
1,779,042
----------
TOTAL NETHERLANDS 3,425,707
----------
NEW ZEALAND: 0.6%
PAPER & PAPER PRODUCTS: 0.6%
353,300 Fletcher Challenge Paper 263,548
----------
SINGAPORE: 2.2%
DEFENSE: 0.4%
187,800 Singapore Technology
Engineering, Ltd. 212,870
----------
FINANCIAL: 0.8%
44,000 Overseas-Chinese Banking Corp. 366,947
----------
OTHER PRODUCTION/MANUFACTURING: 0.5%
22,700 (a) Asia Pulp & Paper ADR 218,488
----------
PROPERTIES: 0.5%
38,200 City Developments, Ltd. 244,541
----------
TOTAL SINGAPORE 1,042,846
----------
See Accompanying Notes to Financial Statements
97
<PAGE>
International
Equity Funds
Pilgrim
International Core
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
SOUTH AFRICA: 0.8%
INVESTMENT COMPANIES: 0.8%
8,100 (a) Anglo American PLC $ 378,539
----------
SOUTH KOREA: 1.3%
MINES & MINERALS: 0.6%
8,500 Pohang Iron & Steel Co. Ltd. ADR 285,813
----------
TELECOMMUNICATION SERVICES: 0.7%
7,600 (a) Korea Telecom Corp. ADR 304,000
----------
TOTAL SOUTH KOREA 589,813
----------
SPAIN: 1.0%
COMMUNICATIONS: 0.1%
204 (a) Telefonica S.A. 30,014
----------
MONEY-CENTER BANKS: 0.9%
39,800 Banco Santander Central Hispano
S.A. 414,220
----------
TOTAL SPAIN 444,234
----------
SWEDEN: 1.1%
PRODUCTION/MANUFACTURING: 1.1%
18,600 Svenska Cellulosa AB 481,965
----------
SWITZERLAND: 2.7%
MONEY-CENTER BANKS: 1.7%
150 Julius Baer Holding AG Class B 427,043
1,200 UBS AG 357,829
----------
784,872
----------
TELEPHONE: 1.0%
1,200 Swisscom AG 451,142
----------
TOTAL SWITZERLAND 1,236,014
----------
TAIWAN: 1.0%
ELECTRONIC COMPONENTS --
SEMICONDUCTORS: 1.0%
14,000 (a) Taiwan Semiconductor ADR 476,000
----------
THAILAND: 0.6%
FINANCIAL: 0.6%
90,000 (a) Thai Farmers Bank Public Co.,
Ltd. $ 277,898
----------
UNITED KINGDOM: 13.9%
AUTOMOTIVE EQUIPMENT: 0.9%
23,900 GKN PLC 409,161
----------
CABLE TV: 0.7%
74,600 (a) Telewest Communications PLC 332,807
----------
COMPUTER SYSTEMS/SOFTWARE: 0.7%
10,400 (a) Eidos PLC 341,826
----------
CONSUMER ELECTRICALS: 0.4%
8,990 Dixons Group PLC 168,362
----------
DRUGS/PHARMACEUTICALS: 0.6%
21,800 Smithkline Beecham PLC 283,000
----------
INDUSTRIAL ENGINEERING/CONSTRUCTION: 0.9%
71,200 Barratt Developments PLC 399,573
----------
INTEGRATED OIL COMPANIES: 0.4%
11,100 BP Amoco PLC 198,778
----------
MONEY-CENTER BANKS: 1.1%
17,800 Barclays PLC 518,828
----------
OIL & GAS: 0.8%
48,600 Shell Transport & Trading Co. 364,295
----------
PRODUCTION/MANUFACTURING: 1.6%
43,000 Blue Circle Industries PLC 286,223
78,400 Morgan Crucible Co. PLC 334,310
26,300 Standard Chartered PLC 431,177
----------
1,051,710
----------
SEMICONDUCTORS/ELECTRONIC COMPONENTS: 1.3%
27,700 (a) ARM Holdings PLC $ 318,327
27,400 General Electric Co. PLC 277,301
----------
595,628
----------
See Accompanying Notes to Financial Statements
98
<PAGE>
International
Equity Funds
Pilgrim
International Core
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------- -----------
TELECOMMUNICATION SERVICES: 1.6%
19,214 Vodafone Group PLC 379,824
16,900 (a) Colt Telecom Group PLC 354,860
-----------
734,684
-----------
TELEPHONE: 0.9%
23,500 British Telecom PLC 392,681
-----------
TOBACCO PRODUCTS: 1.3%
63,800 British American Tobacco 595,400
-----------
TOTAL UNITED KINGDOM 6,386,733
-----------
UNITED STATES: 2.9%
OIL WELL EQUIPMENT & SERVICE: 0.9%
6,200 Schlumberger, Ltd. 394,863
-----------
PRODUCTION/MANUFACTURING: 0.8%
6,400 (a) Flextronics Int'l., Ltd. 355,200
-----------
TELECOMMUNICATION SERVICES: 1.2%
7,100 (a) Global Telesystems Group, Inc. 575,100
-----------
TOTAL UNITED STATES 1,325,163
-----------
Total Common Stocks
(Cost $38,311,857) 43,418,058
-----------
WARRANTS: 0.0%
SINGAPORE: 0.0%
PAPER AND RELATED PRODUCTS: 0.0%
6,800 (a) Asia Pulp & Paper Warrants $ 17,850
-----------
Total Warrants (Cost $0) 17,850
-----------
Total Long-Term Investments
(Cost $38,311,857) 43,435,908
-----------
TOTAL INVESTMENTS IN
SECURITIES (COST
$38,311,857)* 94.9% 43,435,908
OTHER ASSETS AND
LIABILITIES, NET 5.1% 2,332,624
------ -----------
NET ASSETS 100.0% $45,768,532
====== ===========
(a) Non-income producing security
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
* Cost for federal income tax purposes is $38,446,332. Net
unrealized appreciation consists of:
Gross Unrealized Appreciation $ 6,160,725
Gross Unrealized Depreciation (1,171,149)
-----------
Net Unrealized Appreciation $ 4,989,576
===========
See Accompanying Notes to Financial Statements
99
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
COMMON STOCKS: 93.1%
AUSTRALIA: 2.7%
COMPUTER SOFTWARE: 0.7%
369,000 (a) Solution 6 Holdings, Ltd. $ 853,359
-----------
DIVERSIFIED MANUFACTURERS OPERATIONS: 0.4%
131,400 Pacifica Group, Ltd. 538,300
-----------
OIL COMPANY -- EXPLORE & PRODUCTION: 0.8%
136,400 Woodside Petroleum, Ltd. 921,992
-----------
TELECOMMUNICATION SERVICES: 0.8%
308,800 (a) AAPT, Ltd. 958,986
-----------
TOTAL AUSTRALIA 3,272,637
-----------
BELGIUM: 1.0%
CELLULAR TELECOMMUNICATIONS: 0.4%
8,600 (a) Mobistar SA 425,370
-----------
TELECOMMUNICATION SERVICES: 0.6%
6,200 Telinfo NV 700,211
-----------
TOTAL BELGIUM 1,125,581
-----------
BRAZIL: 0.3%
TELEPHONE -- LOCAL: 0.3%
28,862 (a) Telec Do Rio Janeiro 318,330
-----------
CANADA: 2.7%
COMMUNICATIONS SOFTWARE: 1.0%
61,100 (a) Research In Motion 1,228,151
-----------
OIL COMPANY -- EXPLORE & PRODUCTION: 0.8%
181,000 (a) Encal Energy, Ltd. 892,626
-----------
OTHER PRODUCTION/MANUFACTURING: 0.9%
24,600 (a) Celestica, Inc. 1,065,763
-----------
TOTAL CANADA 3,186,540
-----------
DENMARK: 0.6%
OTHER COMMERCIAL SERVICES: 0.6%
13,700 (a) ISS Int'l Service System Class B $ 730,844
-----------
FINLAND: 9.3%
ELECTRONIC COMPONENTS --
SEMICONDUCTOR: 0.5%
45,000 (a) Perlos OYJ 658,458
-----------
FRANCE: 9.3%
ADVERTISING SALES: 0.9%
4,984 Havas Advertising 1,072,861
-----------
APPAREL MANUFACTURERS: 0.9%
10,700 Hermes Int'l 1,068,953
-----------
BUILDING & CONSTRUCTION --
MISCELLANEOUS: 1.0%
4,400 Bouygues 1,162,059
-----------
ENGINEERING/RESEARCH &
DEVELOPMENT SERVICES: 1.1%
5,200 Altran Technologies SA 1,371,735
-----------
21,300 (a) Infogrames Entertainment 1,371,787
-----------
MACHINERY: 1.2%
38,500 (a) Neopost SA 892,627
4,600 Sidel 558,854
-----------
1,451,481
-----------
METAL PROCESSORS & FABRICA: 1.0%
27,000 Pechiney SA-A SHS 1,159,627
-----------
OIL-FIELD SERVICES: 0.6%
17,700 Coflexip ADR 769,950
-----------
RETAIL -- BUILDING PRODUCTS: 0.7%
3,300 Castorama Dubois Investisse 782,111
-----------
RETAIL -- MAJOR DEPARTMENT STORE: 0.7%
6,000 Galeries Lafayette 793,240
-----------
TOTAL FRANCE 11,003,804
-----------
See Accompanying Notes to Financial Statements
100
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
GERMANY: 13.4%
APPLICATIONS SOFTWARE: 0.6%
4,300 (a) Ixos Software AG $ 735,535
-----------
AUDIO/VIDEO PRODUCTS: 0.6%
10,000 (a) Edel Music AG 752,229
-----------
BROADCAST SERVICE/PROGRAM: 4.5%
2,000 EM.TV & Merchandising AG 2,905,869
32,800 (a) Kinowelt Medien AG 2,450,410
-----------
5,356,279
-----------
BUILDING PRODUCT -- CEMENT: 0.4%
6,100 Heideleberger Zement AG 493,431
-----------
CABLE TV: 1.3%
34,000 (a) Primacom AG 1,559,071
-----------
ELECTRONIC COMPONENTS -- SEMICONDUCTOR: 1.2%
17,400 Aixtron 1,434,386
-----------
FINANCE: 1.1%
16,300 (a) Consors Discount-Broker AG 1,242,929
-----------
FOOD BAKING: 1.9%
54,080 Kamps AG 2,173,343
-----------
RETAIL -- VISION SERVICE CENTER: 1.3%
40,500 Fielmann AG 1,477,356
-----------
TELECOMMUNICATION SERVICES: 0.5%
17,600 (a) Telegate AG 602,113
-----------
TOTAL GERMANY 15,826,672
-----------
GREECE: 0.4%
BUILDING PRODUCT -- CEMENT: 0.4%
5,100 Titan Cement Co. 469,077
-----------
COMPUTER SERVICES: 0.0%
2,100 Intrasoft S.A. 56,513
-----------
TOTAL GREECE 525,590
-----------
HONG KONG: 4.2%
BANKS: 0.8%
237,000 Dah Sing Financial $ 902,645
-----------
COMPUTERS -- MICRO: 1.1%
1,350,000 Legend Holdings, Ltd. 1,296,287
-----------
ELECTRONIC COMPONENTS: 1.1%
315,000 Johnson Electric Holdings 1,299,187
-----------
PAINT & RELATED PRODUCTS: 0.7%
966,000 China Merchants Holdings
Int'l 846,637
-----------
RETAIL -- JEWELRY: 0.5%
883,700 Dickson Concepts Int'l 626,439
-----------
TOTAL HONG KONG 4,971,195
-----------
INDIA: 0.9%
COMPUTER SOFTWARE: 0.9%
13,200 Infosys Technologies ADR 1,103,454
-----------
INDONESIA: 1.0%
BANKS: 0.5%
8,878,500 (a) PT Lippo Bank TBK 259,226
5,327,000 (a) PT Bank Universal 291,624
-----------
550,850
-----------
BUILDING -- RESIDENTIAL/COMMERCIAL: 0.5%
3,661,500 (a) PT Jaya Real Property 574,615
-----------
TOTAL INDONESIA 1,125,465
-----------
ITALY: 1.1%
MOTORCYCLE/MOTOR SCOOTER: 0.4%
166,100 (a) Ducati Motor Holding SPA 434,741
-----------
PUBLISHING: 0.7%
100,600 Class Editori SPA 803,390
-----------
TOTAL ITALY 1,238,131
-----------
See Accompanying Notes to Financial Statements
101
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
JAPAN: 26.5%
APPAREL MANUFACTURERS: 1.4%
22,000 World Co., Ltd. $ 1,598,877
-----------
AUDIO/VIDEO PRODUCTS: 1.0%
20,300 Sony Chemicals Corp. 1,151,761
-----------
AUTO -- CARS/LIGHT TRUCKS: 0.9%
144,000 Fuji Heavy Industries, Ltd. 1,110,757
-----------
COMMERCIAL SERVICES: 3.3%
2,900 Bellsystem 24, Inc. 1,184,333
10,200 Benesse Corp. 1,107,734
8,300 Nichii Gakkan Co. 904,819
21,000 Toyo Information Systems 690,259
-----------
3,887,145
-----------
COMPUTERS -- MICRO: 0.9%
46,200 Japan Business Computer Co. 1,102,680
-----------
COMPUTER SOFTWARE: 3.1%
20,600 Nippon System Development 1,224,925
15,000 Trans Cosmos 1,090,143
8,200 Trend Micro, Inc. 1,381,509
-----------
3,696,577
-----------
COSMETICS & TOILETRIES: 1.2%
8,000 Fancl Corporation 1,453,524
-----------
ELECTRONIC COMPONENTS --
SEMICONDUCTOR: 0.7%
12,300 Tokyo Seimitsu Co., Ltd. 783,194
-----------
ELECTRONIC CONNECTORS: 0.6%
7,100 Hirose Electric Co., Ltd. 736,474
-----------
ELECTRONIC PARTS DISTRIBUTION: 0.6%
15,000 Kuroda Electric Co., Ltd. 755,668
-----------
FINANCE: 1.8%
17,240 Aiful Corp. 2,110,062
-----------
MACHINERY: 1.8%
106,000 Hitachi Construction Machine $ 766,866
8,600 Nidec Corp. 1,293,356
-----------
2,060,222
-----------
MEDICAL: 0.8%
64,000 Kuraya Corp. 946,112
-----------
RETAIL -- APPAREL/SHOE: 1.0%
11,000 Fast Retailing Co., Ltd. 1,180,989
-----------
RETAIL -- CONSUMER ELECTRONIC 1.9%
67,700 Kojima Co., Ltd. 2,253,219
-----------
6,500 Otsuka Kagu, Ltd. 1,175,620
-----------
RETAIL -- MISCELLANEOUS/DIVERSIFIED: 2.7%
47,600 Homac Corp. 1,198,992
8,100 Ryohin Keikaku Co., Ltd. 2,036,958
-----------
3,235,950
-----------
TELECOMMUNICATION EQUIPMENT: 1.7%
6,600 Hikari Tsushin, Inc. 2,038,568
-----------
TOTAL JAPAN 31,277,399
-----------
MEXICO: 1.7%
FINANCE: 0.7%
551,000 (a) Grupo Financiero 807,197
-----------
MUSIC/CLUBS: 1.0%
168,784 (a) Corp. Interamericana de
Entretenmiento S.A. Class L 492,735
202,138 (a) Corp. Interamericana de
Entretenmiento S.A. Class B 658,772
-----------
1,151,507
-----------
TOTAL MEXICO 1,958,704
-----------
NETHERLANDS: 2.7%
HUMAN RESOURCES: 0.7%
32,700 Unique International NV 796,904
-----------
MUSIC/CLUBS: 0.4%
17,300 Endemol Entertainment Holdings 508,955
-----------
See Accompanying Notes to Financial Statements
102
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ----------
STEEL -- PRODUCERS: 0.5%
50,300 Ispat Int'l NV $ 556,444
----------
TELECOMMUNICATION SERVICES: 1.1%
23,900 (a) United Pan-Europe
Communications 1,295,420
----------
TOTAL NETHERLANDS 3,157,723
----------
NEW ZEALAND: 0.7%
CASINO HOTELS: 0.4%
218,900 Sky City, Ltd. 466,710
----------
DIVERSIFIED OPERATIONS: 0.3%
1,129,200 (a) Brierley Investments, Ltd. 316,624
----------
TOTAL ZEALAND 783,334
----------
NORWAY: 1.6%
RECYCLING: 0.7%
23,100 Tomra Systems ASA 868,846
----------
RETAIL -- CONSUMER ELECTRONIC: 0.9%
81,900 Elkjop ASA 1,092,728
----------
TOTAL NORWAY 1,961,574
----------
PORTUGAL: 0.2%
RETAIL -- RESTAURANTS: 0.2%
4,130 Ibersol SGPS SA 276,624
----------
SINGAPORE: 3.6%
ELECTRONIC COMPONENTS -- MISCELLANEOUS: 1.5%
310,000 JIT Holdings, Ltd. 564,398
155,000 Venture Manufacturing, Ltd. 1,192,518
----------
1,756,916
----------
PAPER & RELATED PRODUCTS: 0.5%
58,300 (a) Asia Pulp 7 Paper ADR 561,137
----------
TELECOMMUNICATION EQUIPMENT: 1.6%
424,900 Datacraft Asia, Ltd. 1,852,564
----------
TOTAL SINGAPORE 4,170,617
----------
SPAIN: 1.9%
ADVERTISING SALES: 0.5%
30,000 (a) Telefonica Publicidad E
Informacion S.A. $ 598,176
----------
BEVERAGES -- WINES/SPIRITS: 0.7%
25,600 (a) Baron De Ley S.A. 881,076
----------
INVESTMENT COMPANIES: 0.7%
60,500 (a) NH Hoteles S.A. 774,290
----------
TOTAL SPAIN 2,253,542
----------
SWEDEN: 1.5%
MEDICAL: 0.4%
72,100 (a) Orticus AB Class B 399,128
TELEVISION: 1.1%
61,900 (a) Modern Times Group Class B 1,345,137
----------
TOTAL SWEDEN 1,744,265
----------
SWITZERLAND: 2.1%
BANKS: 0.6%
260 Julius Baer Holding AG Class B 740,208
----------
ELECTRONIC PARTS DISTRIBUTION: 0.7%
220 (a) Kudelski SA-Bearer 784,679
----------
MEDICAL: 0.8%
3,120 (a) Synthes-Stratec 990,508
----------
TOTAL SWITZERLAND 2,515,395
----------
THAILAND: 0.5%
BANKS: 0.5%
196,400 (a) Thai Farmers Bank
Public Co., Ltd. 606,436
----------
UNITED STATES: 2.9%
COMPUTER SOFTWARE: 0.8%
24,800 (a) Business Objects SA ADR 905,200
----------
MEDICAL: 0.7%
17,000 (a) The Laser Center 816,000
----------
See Accompanying Notes to Financial Statements
103
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
OIL-FIELD SERVICES: 0.7%
54,700 (a) Petroleum Geo-Services ADR $ 813,663
------------
TELECOMMUNICATION SERVICES: 0.7%
11,100 (a) Global Telesystems Group, Inc. 899,100
------------
TOTAL UNITED STATES 3,433,963
------------
UNITED KINGDOM: 8.5%
BUILDING -- RESIDENTIAL/COMMERCIAL: 1.1%
414,300 Beaser Group PLC 1,299,674
------------
BUILDING PRODUCTS -- WOOD: 0.7%
74,100 Travis Perkins PLC 803,077
------------
DIVERSIFIED OPERATIONS: 1.5%
207,600 Morgan Crucible Co. PLC 885,240
110,500 BBA Group PLC 846,574
------------
1,731,814
------------
ELECTRONIC COMPONENTS --
SEMICONDUCTOR: 0.7%
22,500 (a) Arm Holdings PLC 258,569
18,000 (a) Arm Holdings PLC ADR 627,750
------------
886,319
------------
ENTERTAINMENT SOFTWARE: 0.8%
29,000 (a) Eidos PLC 953,170
------------
MEDICAL: 0.9%
78,074 (a) Powderject Pharmaceuticals PLC 1,027,683
------------
OIL COMPANY -- EXPLORE & PRODUCTION: 0.4%
74,100 Enterprise Oil PLC 480,094
------------
PUBLISHING: 0.8%
134,200 (a) Future Network PLC 893,811
------------
RADIO: 0.8%
69,100 Capital Radio PLC 914,460
------------
RETAIL APPAREL/SHOE: 0.1%
42,100 New Look Group PLC $ 136,051
------------
RETAIL -- CONSUMER ELECTRONIC: 0.2%
15,600 Dixons Group PLC 292,151
------------
TRANSPORTATION -- SERVICES: 0.5%
42,100 Go Ahead Group PLC 544,205
------------
TOTAL UNITED KINGDOM 9,962,509
------------
VENEZUELA: 0.6%
ELECTRIC-GENERATION: 0.4%
24,000 La Electricidad De Carac ADR 469,730
------------
STEEL -- PRODUCERS: 0.2%
4,866,113 Siderurgica Venez Sivensa
Class A 208,691
------------
TOTAL VENEZUELA 678,421
------------
Total Common Stock
(Cost $82,455,498) 109,867,207
------------
CORPORATE BONDS: 1.7%
TAIWAN: 0.8%
ELECTRONIC COMPONENTS --
SEMICONDUCTOR: 0.8%
900,000 ASE Test, Ltd.
1.000% due 7/01/04 903,960
------------
UNITED STATES: 0.9%
ELECTRONIC COMPONENTS: 0.9%
1,100,000 Natsteel Electronics, Ltd.
1.500% due 6/30/04 1,135,750
------------
Total Corporate Bonds
(Cost $2,000,000) 2,039,710
------------
See Accompanying Notes to Financial Statements
104
<PAGE>
International
Equity Funds
Pilgrim
International
SmallCap
Growth Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
WARRANTS AND RIGHTS: 0.0%
FRANCE: 0.0%
Building & Construction --
Miscellaneous: 0.0%
400 Bouygues Rights $ 12,489
INDONESIA: 0.0%
Banks: 0.0%
19,177,200 (a) PT Lippo Bank Rights 0
------------
SINGAPORE: 0.0%
Paper & Related Products: 0.0%
11,660 (a) Aisa Pulp And Paper Warrants 30,608
------------
Total Warrants (Cost $0) 43,097
------------
Total Long-Term Investments
(Cost $84,455,498) 111,950,014
------------
Principal
Amount Value
- ------------ ------------
SHORT-TERM INVESTMENTS: 4.6%
REPURCHASE AGREEMENT: 4.6%
$5,360,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized
by
$5,005,000 U.S. Treasury
Bonds,
6.875% Market Value
$5,467,963, Due 08/15/25) $ 5,360,000
------------
Total Short-Term Investments
(Cost $5,360,000) 5,360,000
------------
TOTAL INVESTMENTS IN
SECURITIES
(COST $89,815,498)* 99.4% 117,310,014
OTHER ASSETS AND
LIABILITIES, NET 0.6% 746,343
----- ------------
NET ASSETS 100.0% $118,056,357
===== ============
(a) Non-income producing security
ADR -- American Depository Receipt
* Cost for federal income tax purposes is $89,889,999. Net
unrealized appreciation consists of:
Gross Unrealized Appreciation $ 30,989,391
Gross Unrealized Depreciation (3,569,376)
------------
Net Unrealized Appreciation $ 27,420,015
============
See Accompanying Notes to Financial Statements
105
<PAGE>
International
Equity Funds
Pilgrim
Emerging
Countries Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
COMMON STOCK: 96.0%
ARGENTINA: 0.9%
CONSTRUCTION: 0.1%
54,140 Corcemar SA $ 256,117
-----------
INTEGRATED OIL COMPANIES: 0.8%
262,400 Perez Companc SA-B 1,509,004
-----------
TOTAL ARGENTINA 1,765,121
-----------
BRAZIL: 8.5%
BANKS: 1.5%
31,897,000 Banco Estado de Sao Paolo 1,362,117
62,940 Unibanco Sponsored GDR 1,514,494
-----------
2,876,611
-----------
ELECTRICAL EQUIPMENT: 0.9%
80,353,900 Centrais Eletricas Bras 1,622,531
-----------
INTEGRATED OIL COMPANIES: 1.0%
11,837,400 Petroleo Brasileiro S.A. 1,841,225
-----------
PAPER & RELATED PRODUCTS: 1.0%
80,400 Aracruz Celulose SA ADR 1,768,800
-----------
STEEL: 0.5%
32,122,000 Cia Siderurgica Nacional 840,296
-----------
TELECOMMUNICATION SERVICES: 2.6%
21,800 Tele Centro Sul Participacoes
ADR 1,209,900
104,600 Tele Norte Leste Participacoes 1,941,638
73,300 (a) Telesp Participacoes S.A. ADR 1,676,737
48 (a) Tele Centro Oeste Celular
Participacoes S.A. ADR 189
-----------
4,828,464
-----------
UTILITIES: 1.0%
40,098,842 (a) Eletropaulo Metropolitan 1,791,747
-----------
TOTAL BRAZIL 15,569,674
-----------
COLOMBIA: 0.1%
BANKS: 0.1%
269,200 Bancolombia S.A. $ 202,735
-----------
CZECH REPUBLIC: 2.3%
BANKS: 1.2%
350,900 (a) Komercni Banka AS GDR 2,206,319
-----------
TELECOMMUNICATIONS: 0.4%
48,900 (a) Spt Telecom GDR 792,180
-----------
TELECOMMUNICATION SERVICES: 0.7%
36,480 (a) Ceske Radiokomunikace GDR 1,258,560
-----------
TOTAL CZECH REPUBLIC 4,257,059
-----------
EGYPT: 1.2%
BREWERY: 0.5%
33,500 (a) Al-Ahram Beverages GDR 933,501
-----------
RECREATION: 0.1%
42,843 (a) OPTD/Egypt 249,935
-----------
TELECOMMUNICATIONS: 0.6%
50,300 (a) Mobinil-Egyptian Mobile 1,079,868
-----------
TOTAL EGYPT 2,263,304
-----------
GREECE: 3.9%
BANKS: 1.9%
21,800 Alpha Credit Bank 1,403,552
13,800 Commercial Bank Of Greece 985,871
17,960 National Bank Of Greece S.A. 1,173,409
-----------
3,562,832
-----------
CONSTRUCTION: 1.3%
26,200 Titan Cement Co. 2,409,768
-----------
FOOD: 0.1%
6,455 Chipita 168,284
-----------
HOSPITALS: 0.1%
5,780 Athens Medical Care S.A. 143,904
-----------
See Accompanying Notes to Financial Statements
106
<PAGE>
International
Equity Funds
Pilgrim
Emerging
Countries Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
TELECOMMUNICATIONS EQUIPMENT: 0.5%
13,220 Intracom S.A. $ 851,145
-----------
TOTAL GREECE 7,135,933
-----------
HONG KONG: 1.1%
TELECOMMUNICATIONS: 1.1%
743,400 (a) China Telecom Ltd. 2,064,814
-----------
HUNGARY: 2.4%
DRUGS/PHARMACEUTICALS: 1.1%
45,900 Gedeon Richter Common 1,992,313
-----------
INTEGRATED OIL COMPANIES: 0.6%
47,400 Mol Magyar Olaj-Es Gazipari 1,141,815
-----------
TELECOMMUNICATIONS: 0.7%
42,550 Matav Rt ADR 1,170,125
-----------
TOTAL HUNGARY 4,304,253
-----------
INDIA: 6.5%
AUTOMOBILES: 0.2%
12,000 Punjab Tractors, Ltd. 366,528
-----------
BANKS: 0.0%
100 Oriental Bank Of Commerce 82
-----------
DIVERSIFIED OPERATIONS: 2.1%
71,400 (a) Hindustan Lever, Ltd. 3,917,289
-----------
SOFTWARE: 4.2%
47,900 Infosys Technologies, Ltd. 4,004,199
76,750 NIIT, Ltd. 3,596,851
-----------
7,601,050
-----------
TOTAL INDIA 11,884,949
-----------
INDONESIA: 2.5%
OIL & GAS: 0.6%
92,700 (a) Gulf Indonesia Resources, Ltd. 1,066,050
-----------
PAPER & RELATED PRODUCTS: 0.6%
2,224,500 (a) PT Indah Kiat Pulp & Paper 1,039,182
-----------
TELECOMMUNICATIONS: 0.6%
1,779,300 PT Telekomunikasi $ 1,039,007
-----------
TOBACCO PRODUCTS: 0.7%
512,000 PT Gudang Garam 1,397,723
-----------
Total Indonesia 4,541,962
-----------
ISRAEL: 1.5%
BANKS: 0.7%
475,900 Bank Hapoalim, Ltd. 1,220,719
-----------
TELECOMMUNICATION SERVICES: 0.8%
379,100 (a) Bezeq Israel: Telecommunication
Corp. 1,526,365
-----------
TOTAL ISRAEL 2,747,084
-----------
MEXICO: 13.5%
BEVERAGES: 0.5%
45,900 (a) Coca-Cola Femsa S.A. ADR 889,312
-----------
BROADCASTING: 2.4%
5,000 (a) Grupo Televisa S.A. 111,996
94,100 (a) Grupo Televisa S.A. GDR 4,216,856
-----------
4,328,852
-----------
CONSTRUCTION: 1.7%
626,522 Cemex S.A. 3,089,379
-----------
DIVERSIFIED OPERATIONS: 1.5%
585,100 (a) Grupo Carso S.A. 2,714,317
-----------
ENTERTAINMENT: 2.7%
476,000 (a) Corp. Interamericana de
Entretenmiento S.A. Class L 1,389,597
1,098,430 (a) Corp. Interamericana de
Entretenmiento S.A. Class B 3,579,809
-----------
4,969,406
-----------
PAPER & RELATED PRODUCTS: 1.0%
432,000 Kimberly-Clark de Mexico S.A.
Class A 1,779,363
-----------
See Accompanying Notes to Financial Statements
107
<PAGE>
International
Equity Funds
Pilgrim
Emerging
Countries Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------- -----------
TELECOMMUNICATION SERVICES: 3.7%
375,900 (a) Grupo Carso Global Telecom
S.A. $ 2,382,296
55,500 Telefonos De Mexico 4,485,094
-----------
6,867,390
-----------
TOTAL MEXICO 24,638,019
-----------
PAKISTAN: 0.0%
OIL & GAS: 0.0%
1,098 Pakistan State Oil Co., Ltd. 1,970
-----------
PERU: 0.3%
CONSTRUCTION: 0.0%
3,302 Cementos Lima S.A. 51,035
1 Cementos Lima ADR 8
-----------
51,043
-----------
MACHINERY: 0.3%
715,985 Ferreyros S.A. 470,591
-----------
TOTAL PERU 521,634
-----------
PHILIPPINES: 1.4%
BANKS: 0.7%
145,180 Bank of Philippine Islands 518,909
77,400 Metropolitan Bank & Trust 772,983
-----------
1,291,892
-----------
CONSTRUCTION: 0.5%
3,586,000 (a) Benpres Holdings Corp. 848,200
-----------
REAL ESTATE DEVELOPMENT: 0.2%
1,818,600 SM Prime Holdings, Inc. 411,037
-----------
TOTAL PHILIPPINES 2,551,129
-----------
POLAND: 1.8%
ELECTRIC PRODUCTS: 0.8%
110,300 Elektrim S.A. 1,559,060
-----------
SOFTWARE: 0.5%
23,800 Softbank S.A. GDR 825,008
-----------
TELECOMMUNICATIONS: 0.5%
132,700 Telekomunikacja Polska GDR $ 930,134
-----------
TOTAL POLAND 3,314,202
-----------
PORTUGAL: 0.0%
RESTAURANTS: 0.0%
782 Ibersol SGPS S.A. 52,378
-----------
RUSSIA: 2.4%
INTEGRATED OIL COMPANIES: 1.8%
81,300 Lukoil Holding ADR 3,219,480
-----------
OIL & GAS: 0.6%
137,000 Surgutneftegaz ADR 1,087,095
-----------
TOTAL RUSSIA 4,306,575
-----------
SINGAPORE: 5.2%
ELECTRIC PRODUCTS: 1.1%
253,700 Venture Manufacturing, Ltd. 1,951,882
-----------
PAPER & RELATED PRODUCTS: 0.5%
89,800 (a) Asia Pulp & Paper ADR 864,325
-----------
REAL ESTATE DEVELOPMENT: 1.4%
845,000 (a) Allgreen Properties 913,138
1,324,000 Wing Tai Holdings 1,749,574
-----------
2,662,712
-----------
TELECOMMUNICATIONS EQUIPMENT: 2.2%
929,100 Datacraft Asia, Ltd. 4,050,876
-----------
TOTAL SINGAPORE 9,529,795
-----------
SOUTH AFRICA: 5.1%
BREWERY: 0.4%
94,847 South African Breweries PLC 823,629
-----------
COMPUTERS: 0.7%
278,417 (a) Dimension Data Holdings, Ltd. 1,231,923
-----------
DIVERSIFIED MINERALS: 1.4%
748,400 (a) Billiton PLC 2,610,258
-----------
See Accompanying Notes to Financial Statements
108
<PAGE>
International
Equity Funds
Pilgrim
Emerging
Countries Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ -----------
INVESTMENT COMPANIES: 1.7%
34,700 (c) Anglo American PLC $ 1,621,643
32,700 Investec Group, Ltd. 1,371,024
-----------
2,992,667
-----------
JEWELRY: 0.9%
72,000 De Beers Centenary Link 1,725,351
-----------
Total South Africa 9,383,828
-----------
SOUTH KOREA: 15.4%
BANKS: 2.8%
50,700 Hana Bank 744,622
34,280 (a) Housing & Commercial Bank
Korea 1,080,968
131,890 Shinhan Bank 1,481,270
83,200 (a) Shinhan Bank GDR 1,851,200
-----------
5,158,060
-----------
CHEMICALS: 0.7%
49,380 LG Chemical 1,343,819
-----------
ELECTRICAL EQUIPMENT: 0.9%
58,800 LG Electronics 1,625,572
-----------
ELECTRIC PRODUCTS: 5.0%
159,230 (a) Samsung Corp. 3,741,733
48,721 Samsung Electronics Co. 5,345,630
-----------
9,087,363
-----------
STEEL: 1.6%
86,800 Pohang Iron & Steel Co. ADR 2,918,650
-----------
TELECOMMUNICATION SERVICES: 2.0%
53,300 (a) Korea Telecom Corp. ADR 2,132,000
21,590 Korea Telecom Corp. 1,432,494
-----------
3,564,494
-----------
UTILITIES: 2.4%
73,300 Korea Electric Power Corp. 3,045,987
68,000 Korea Electric Power Corp. ADR 1,394,000
-----------
4,439,987
-----------
TOTAL SOUTH KOREA 28,137,945
-----------
SRI LANKA: 0.3%
DIVERSIFIED OPERATIONS: 0.3%
237,600 John Keels Holdings, Ltd. $ 518,038
-----------
TAIWAN: 7.3%
COMPUTERS: 1.9%
890,000 Compal Electronics 3,499,381
-----------
ELECTRIC PRODUCTS: 1.6%
267,000 (a) Asustek Computer, Inc. 3,008,916
-----------
INSURANCE: 0.7%
371,000 Cathay Life Insurance 1,332,384
-----------
SEMICONDUCTORS/ELECTRONIC COMPONENTS: 3.1%
259,000 (a) Hon Hai Precision Industry 2,341,424
94,900 (a) Taiwan Semiconductor ADR 3,226,600
-----------
5,568,024
-----------
TOTAL TAIWAN 13,408,705
-----------
THAILAND: 6.0%
BANKS: 6.0%
1,495,000 (a) Bangkok Bank 5,588,028
603,900 (a) Siam Commercial Bank 858,742
1,494,700 (a) Thai Farmers Bank Public 4,615,271
-----------
11,062,041
-----------
TURKEY: 2.2%
BANKS: 1.2%
63,448,000 Akbank TAS 931,792
91,891,800 Yapi Ve Kredi Bankasi 1,327,948
-----------
2,259,740
-----------
FOOD: 0.5%
779,300 Migros Turk TAS 969,256
-----------
INSURANCE: 0.5%
31,137,200 Aksigorta 866,746
-----------
TOTAL TURKEY 4,095,742
-----------
See Accompanying Notes to Financial Statements
109
<PAGE>
International
Equity Funds
Pilgrim
Emerging
Countries Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
U.S.A.: 2.0%
BROADCASTING: 1.1%
77,100 (a) MIH, Ltd. $ 2,043,150
------------
METAL: 0.9%
88,600 Freeport-McMoran Copper
Class B 1,589,263
------------
TOTAL U.S.A. 3,632,413
------------
UNITED KINGDOM: 0.8%
BANKS: 0.8%
37,200 (a) HSBC Holdings PLC 1,356,877
------------
TOTAL UNITED KINGDOM 1,356,877
------------
VENEZUELA: 1.4%
UTILITIES: 1.4%
128,150 La Electricidad De Carac ADR 2,508,165
------------
Total Common Stock
(Cost $133,162,446) 175,756,344
------------
PREFERRED STOCK: 0.1%
COLOMBIA: 0.1%
BANKS: 0.1%
114,000 Bancolombia S.A. 149,593
------------
(Cost $179,765)
Number of
Warrants Value
- ----------- ------------
WARRANTS: 0.2%
SINGAPORE: 0.0%
PAPER & RELATED PRODUCTS: 0.0%
17,960 (a) Asia Pulp & Paper Warrants $ 47,145
------------
THAILAND: 0.2%
BANKS: 0.2%
603,900 (a) Siam Commercial Bank Warrants 388,478
------------
Total Warrants (Cost $0) 435,623
------------
Total Long-Term Investments
(Cost $133,342,211) 176,341,560
------------
Principal
Amount Value
- ------------ ------------
SHORT-TERM INVESTMENTS: 4.0%
REPURCHASE AGREEMENT: 4.0%
$7,384,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized by
$6,895,000 U.S. Treasury Bonds,
6.875% Market Value
$7,532,787, Due 08/15/25) $ 7,384,000
------------
Total Short-Term Investments
(Cost $7,384,000) 7,384,000
------------
TOTAL INVESTMENTS IN
SECURITIES
(COST $140,726,211)* 100.3% 183,725,560
OTHER ASSETS AND
LIABILITIES, NET (0.3%) (541,361)
------ ------------
NET ASSETS 100.0% $183,184,199
====== ============
(a) Non-income producing security
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
* Cost for federal income tax purposes is $141,337,902 Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 45,142,788
Gross Unrealized Depreciation (2,755,130)
------------
Net Unrealized Appreciation $ 42,387,658
============
See Accompanying Notes to Financial Statements
110
<PAGE>
Income
Funds
Pilgrim
Strategic
Income Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
CORPORATE BONDS: 43.0%
AEROSPACE/DEFENSE: 1.0%
$230,000 Rockwell Int'l Corp., 5.200%, due
01/15/98 $ 156,809
-----------
APPAREL: 1.4%
240,000 (a) Jones Apparel, 6.250%, due
10/01/01 234,708
-----------
BROADCASTING: 1.8%
50,000 CD Radio, Inc., Step-Up, due
12/01/07 25,438
125,200 (a) Echostar DBS Corp., 9.375%, due
02/01/09 127,704
110,000 News America Holdings, 8.875%,
due 04/26/23 121,474
35,000 Source Media, Inc., 12.000%, due
11/01/04 27,825
-----------
302,441
-----------
COMMUNICATIONS: 1.6%
500,000 Rhythms Netconnections,
Step-Up, due 05/15/08 267,500
-----------
COMMUNICATIONS -- COMPETITIVE LOCAL
EXCHANGE CARRIER: 3.3%
500,000 ICG Services, Inc., Step-Up, due
02/15/08 315,000
250,000 MGC Communications, Inc.,
13.000%, due 10/01/04 229,374
-----------
544,374
-----------
COMMUNICATIONS -- INTERNET
SERVICE PROVIDER: 0.6%
100,000 Global Telesystems Group, Inc.,
9.875%, due 02/15/05 99,749
-----------
COMMUNICATIONS -- TELECOMMUNICATIONS: 1.8%
500,000 Pinnacle Holdings, Inc., Step-Up,
due 03/15/08 295,000
-----------
COMPUTERS: 0.8%
50,000 Apple Computer, Inc., 6.500%,
due 02/15/04 $ 46,375
80,000 Unisys Corp., 12.000%, due
04/15/03 87,200
-----------
133,575
-----------
COMPUTER SOFTWARE: 1.0%
$170,000 Computer Associates Int'l,
6.375%, due 04/15/05 161,403
-----------
DIVERSIFIED FINANCIAL SERVICES: 1.6%
5,000 Amresco, Inc., 9.875%, due
03/15/05 4,050
190,000 AON Capital Trust A, 8.205%,
due 01/01/27 202,360
50,000 Countrywide Capital III, 8.050%,
due 06/15/27 50,070
-----------
256,480
-----------
ENTERTAINMENT & LEISURE: 2.1%
100,000 Ascent Entertainment Group,
Step-Up, due 12/15/04 70,875
35,000 Bally Total Fitness Holdings,
9.875%, due 10/15/07 33,863
250,000 (a) Hollywood Entertainment,
10.625%, due 08/15/04 246,250
-----------
350,988
-----------
GAMING & LOTTERY: 1.5%
250,000 (a) Majestic Star Casino, LLC,
10.875%, due 07/01/06 248,125
-----------
HEALTH CARE: 2.0%
130,000 Abbey Healthcare Group,
9.500%, due 11/01/02 130,000
250,000 Global Health Sciences, 11.000%,
due 05/01/08 192,500
-----------
322,500
-----------
See Accompanying Notes to Financial Statements
111
<PAGE>
Income
Funds
Pilgrim
Strategic
Income Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
HOME BUILDING, BUILDING MATERIALS: 1.7%
$115,000 Lennar Corp., 7.625%, due
03/01/09 $ 108,299
160,000 McDermott, Inc., 9.375%, due
03/15/02 166,626
-----------
274,925
-----------
INSURANCE: 2.2%
290,000 Liberty Financial Co., 7.625%,
due 11/15/28 284,658
75,000 (a) Lumbermens Mutual Casualty,
8.300%, due 12/01/37 72,606
-----------
357,264
-----------
INTERNATIONAL BANKS: 0.4%
70,000 Korea Development Bank,
7.375%, due 09/17/04 67,984
-----------
MEDICAL SUPPLIES/EQUIPMENT: 1.1%
195,000 Guidant Corp., 6.150%, due
02/15/06 180,443
-----------
METALS: 1.6%
90,000 (a) Codelco, Inc., 7.375%, due
05/01/09 85,248
202,995 Scotia Pacific Co. LLC, 6.550%
due 01/20/07 186,713
-----------
271,961
-----------
OIL: 4.5%
60,000 (a) Cerro Negro Finance, Ltd.,
7.330%, due 12/01/09 49,189
145,000 Conoco, Inc., 6.950%, due
04/15/29 135,435
100,000 Deeptech Int'l, Inc., 12.000%,
due 12/15/00 106,750
185,000 PDVSA Finance, Ltd., 6.800%,
due 11/15/08 154,257
75,000 PDVSA Finance, Ltd., 7.500%,
due 11/15/28 54,619
90,000 (a) Pemex Finance, Ltd., 9.150%,
due 11/15/18 84,600
180,000 (b) Pemex Finance, Ltd., 6.300%,
due 05/15/10 172,800
-----------
757,650
-----------
REAL ESTATE INVESTMENT TRUST: 0.3%
$ 50,000 Equity Office Properties, 7.500%,
due 04/19/29 $ 45,917
-----------
RENTAL AUTO/EQUIPMENT: 0.2%
30,000 United Rentals, Inc., 6.875%, due
08/15/28 30,375
-----------
RETAIL: 1.1%
130,000 Kmart Corp., 6.780%, due
08/02/1999 130,057
50,000 Musicland Stores Corp., 9.875%,
due 03/15/08 50,313
-----------
180,370
-----------
SHIPPING: 0.7%
115,000 Sea Containers, 12.500%, due
12/01/04 123,769
-----------
TELECOMMUNICATIONS: 3.2%
130,000 International Cabletel, Inc.,
Step-Up, due 04/15/05 124,800
120,000 MCI Worldcom, Inc., 6.950%,
due 08/15/28 113,754
250,000 Winstar Communications, Inc.,
15.000%, due 03/01/07 287,500
-----------
526,054
-----------
TELECOMMUNICATIONS EQUIPMENT: 0.4%
130,000 Covad Communications Group,
Step-Up, due 03/15/08 70,688
-----------
TRANSPORTATION -- AIR FREIGHT: 0.4%
80,000 Federal Express Corp., 7.600%,
due 07/01/97 73,521
-----------
See Accompanying Notes to Financial Statements
112
<PAGE>
Income
Funds
Pilgrim
Strategic
Income Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
TRANSPORTATION (AIR, BUS, RAIL): 2.7%
$ 80,000 Atlas Air, Inc., 9.375%, due
11/15/06 $ 78,200
165,000 Continental Airlines, Inc.,
6.320%, due 11/01/08 152,128
210,000 Continental Airlines, Inc.,
6.545%, due 02/02/19 197,996
30,000 Trans World Airlines, 11.375%,
due 03/01/06 15,375
-----------
443,699
-----------
UTILITIES: 2.0%
100,000 (b) East Coast Power LLC, 7.536%,
due 06/30/17 95,954
120,000 Empresa Nacional de Electricidad,
8.125%, due 02/01/97 96,775
20,000 Enersis S.A., 6.600%, due
12/01/26 18,706
40,000 Enersis S.A., 7.400%, due
12/01/16 34,375
90,000 United Utilities PLC, 6.875%, due
08/15/28 80,112
-----------
325,922
-----------
Total Corporate Bonds
(Cost $7,412,379) 7,104,194
-----------
U.S. TREASURY OBLIGATIONS: 9.2%
U.S. TREASURY BONDS: 9.2%
1,200,000 U.S. Treasury Bonds, 4.750%, due
02/15/04 1,154,625
400,000 U.S. Treasury Bonds, 5.500%, due
08/15/28 366,248
-----------
Total U.S. Treasury Obligations
(Cost $1,505,487) 1,520,873
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 4.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION: 2.5%
205,120 5.500%, due 01/01/14 194,285
105,322 5.500%, due 02/01/14 99,758
27,573 9.000%, due 06/01/06 28,797
65,760 9.500%, due 11/01/05 69,273
23,546 10.000%, due 10/01/03 24,849
-----------
416,962
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 1.5%
$110,507 6.500%, due 02/01/09 $ 109,402
34,707 9.500%, due 05/01/07 36,561
32,760 9.500%, due 06/01/05 34,510
29,658 9.500%, due 07/01/06 31,243
28,997 10.000%, due 10/01/05 30,737
-----------
242,453
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION: 0.0%
3,772 8.500%, due 02/15/21 3,982
1,326 11.500%, due 02/15/12 1,488
501 11.500%, due 02/15/13 551
1,682 11.500%, due 07/15/13 1,886
-----------
7,907
-----------
Total U.S. Government Agency
Obligations (Cost $674,930) 667,322
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS
AND ASSET-BACKED SECURITIES: 21.9%
MORTGAGE -- COMMERCIAL: 15.9%
210,000 Allied Capital Commercial
Mortgage 1998 1 C, 6.710%,
due 12/25/04 208,021
196,134 Asset Securitization Corp. 1996
D2 A1, 6.920%, due 02/14/29 197,398
260,000 Commercial Mortgage Asset Trust
1999 C1 A2, 6.585%, due
07/17/08 252,591
109,336 DLJ Mortgage Acceptance Corp.
1998 A A2, 6.588%, due
05/28/28 107,918
390,000 DLJ Commercial Mortgage Corp.
1998 CF2 A1B, 6.24%, due
11/12/31 372,202
140,000 GMAC Commercial Mortgage
Securities, Inc. 1998 C2 A2,
6.420%, due 08/15/08 135,407
240,000 GS Mortgage Securities Corp.
1998 GLII A2, 6.562%, due
04/13/31 233,658
360,000 JP Morgan Commercial Mortgage
1998 C6 A2, 6.533%, due
01/15/30 354,177
See Accompanying Notes to Financial Statements
113
<PAGE>
Income
Funds
Pilgrim
Strategic
Income Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
$270,000 JP Morgan Commercial
Mortgage 1999 C7 A2,
6.507%, due 10/15/35 $ 267,047
145,184 Morgan Capital Funding, Inc.
1998 MC3 A1, 6.001%, due
11/18/31 140,810
210,000 Morgan Stanley Capital I 1998
XL2 A2, 6.170%, due
10/03/08 202,361
160,000 Nomura Asset Securities Corp.
1998 D6 A1B, 6.590%, due
03/17/28 155,614
-----------
2,627,204
-----------
MORTGAGE -- RESIDENTIAL: 5.5%
170,000 Amresco Residential Securities
1996 3 A5, 7.550%, due
02/25/23 171,963
210,000 Amresco Residential Securities
1997 3 A9, 6.960%, due
03/25/27 210,707
440,000 Bankboston Home Equity Loan
Trust 1998 2 A4, 6.110%,
due 09/25/13 433,992
100,000 Saxon Asset Securities Trust
1999 1 AF3, 6.170%, due
08/25/21 98,838
-----------
915,500
-----------
UTILITIES: 0.5%
90,000 Comed Transitional Funding
Trust 1998 1 A7, 5.740%,
12/25/10 83,035
-----------
Total CMO's and Asset-Backed
Securities (Cost $3,750,348) 3,625,739
-----------
Market
Shares Value
- ----------- -----------
PREFERRED STOCK: 0.1%
TELECOMMUNICATIONS: 0.1%
100 IXC Communications, Inc. $ 9,625
-----------
Total Preferred Stock
(Cost $10,000) 9,625
-----------
MUTUAL FUNDS: 14.2%
INVESTMENT COMPANIES: 14.2%
74,000 Blackrock 2001 Term Trust $ 666,000
74,900 Blackrock Strategic Term Trust 683,463
106,000 (b) Pilgrim Prime Rate Trust 1,000,375
-----------
Total Mutual Funds
(Cost $2,266,217) 2,349,838
-----------
Total Long-Term Investments
(Cost $15,619,361) 15,277,591
-----------
See Accompanying Notes to Financial Statements
114
<PAGE>
Income
Funds
Pilgrim
Strategic
Income Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------------ -----------
SHORT-TERM INVESTMENTS: 11.4%
Repurchase Agreement: 11.4%
$1,883,000 State Street Bank & Trust
Repurchase Agreement,
4.700% due 07/01/1999
(Collaterized by $1,870,000 U.S.
Treasury Notes, 6.375%
due 09/30/2001, Market
Value $1,923,015) $ 1,883,000
-----------
Total Short-Term Investments
(Cost $1,883,000) 1,883,000
-----------
Total Investments (Cost
$17,502,361)* 103.8% 17,160,591
Other Assets and
Liabilities, Net (3.8)% (630,267)
------ -----------
Net Assets 100.0% $16,530,324
====== ===========
(a) 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.
(b) Related party
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 147,916
Gross Unrealized Depreciation (489,686)
-----------
Net Unrealized Appreciation $ (341,770)
===========
See Accompanying Notes to Financial Statements
115
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
CORPORATE BONDS: 96.7%
AUTOMOTIVE: 2.4%
$7,500,000 JH Heafner Co., 10.000%, due
05/15/08 $ 7,696,875
2,000,000 (b) JH Heafner, 10.000%, due
11/01/08 2,052,500
-----------
9,749,375
-----------
BROADCASTING: 1.7%
7,000,000 Pegasus Communications,
9.75%, due 12/01/06 7,201,250
-----------
BUSINESS SERVICES: 2.5%
6,000,000 CEX Holdings, Inc., 9.625%, due
06/01/08 5,640,000
5,000,000 (b) Group Maintenance America,
9.75%, due 1/15/09 4,950,000
-----------
10,590,000
-----------
COMMUNICATIONS: 14.2%
2,000,000 (b) Caprock Communications,
11.50%, due 05/01/09 2,030,000
6,000,000 CCPR Services, Inc., 10.000%,
due 02/01/07 6,645,000
8,000,000 (b) Charter Communications
Holdings, 8.625%, due
04/01/09 7,700,000
5,000,000 Covad Communications Group,
12.50%, due 02/15/09 4,825,000
3,000,000 (b) Exodus Communications,
11.25%, due 07/01/08 3,127,500
7,500,000 Globix Corp., 13.000%, due
05/01/05 7,143,750
5,000,000 (b) Hyperion Telecom, 12.000%,
due 11/01/07 5,075,000
3,000,000 Logix Communications, 12.25%,
due 06/15/08 2,823,750
6,000,000 MGC Communications, Inc.,
13.000%, due 10/01/04 5,520,000
8,000,000 Nextlink Communications,
10.75%, due 06/01/09 8,220,000
6,000,000 Teligent, Inc., 11.50%, due
12/01/07 6,165,000
-----------
59,275,000
-----------
COMPUTER SOFTWARE & SERVICE: 2.0%
$9,000,000 Merisel, Inc., 12.50%, due
12/31/04 $ 8,291,250
-----------
CONSTRUCTION: 0.2%
995,000 Kevco, Inc., 10.375%, due
12/01/07 701,475
-----------
CONSUMER PRODUCTS: 1.2%
6,000,000 Drypers Corp., 10.25%,due
06/15/07 4,815,000
-----------
DEFENSE: 1.0%
4,000,000 (b) Fairchild Corp., 10.75%, due
04/15/09 3,940,000
-----------
DIVERSIFIED CONGLOMERATE: 1.2%
5,000,000 Jordan Industries, 10.375%,
08/01/07 5,062,500
-----------
ELECTRONICS -- DEFENSE: 1.2%
5,000,000 (b) Amkor Technologies, Inc.,
9.250%, due 05/01/06 4,868,750
-----------
ELECTRONICS -- SEMICONDUCTORS: 1.8%
5,000,000 BGF Industries, 10.250%, due
1/15/09 4,575,000
3,000,000 (b) Fairchild Semiconductor,
10.375%, due 10/01/07 2,977,500
-----------
7,552,500
-----------
FOODS: 3.1%
8,000,000 Imperial Holly Corp., 9.75%, due
12/15/07 7,920,000
5,000,000 (b) Luigino's, Inc., 10.000%, due
02/01/06 5,012,500
-----------
12,932,500
-----------
See Accompanying Notes to Financial Statements
116
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- -----------
GAMING: 6.5%
$10,000,000 Alliance Gaming Corp.,
10.000%, due 08/01/07 $ 7,800,000
2,000,000 Hard Rock Hotel, 9.25%, due
04/01/05 1,900,000
6,000,000 Hollywood Park, Inc., 9.25%,
due 02/15/07 5,940,000
4,000,000 (b) International Game Technology,
8.375%, due 05/15/09 3,920,000
7,500,000 (b) Majestic Star Casino LLC,
10.875%, due 07/01/06 7,462,500
-----------
27,022,500
-----------
HEALTH CARE: 1.1%
6,000,000 Global Health Sciences,
11.000%, due 05/01/08 4,650,000
-----------
HOUSEWARES: 0.8%
4,000,000 Albecca, Inc., 10.750%, due
08/15/08 3,360,000
-----------
INDUSTRIAL: 7.4%
4,000,000 Aqua Chem, Inc., 11.250%,
due 07/01/08 2,960,000
7,000,000 Falcon Holdings Group LP,
8.375%, due 04/15/10 6,930,000
6,000,000 (b) Juno Lighting, Inc., 11.875%,
due 07/01/09 6,060,000
5,000,000 Norton McNaughton, Inc.,
12.50%, due 06/01/05 4,250,000
6,600,000 Packaged Ice, Inc., 9.75%, due
02/01/05 6,608,250
4,000,000 Transportation Manufacturing
Operations, 11.25%, due
05/01/09 4,000,000
-----------
30,808,250
-----------
LEASING: 2.0%
9,000,000 (b) Budget Group, Inc., 9.125%,
due 04/01/06 8,437,500
-----------
LEISURE: 2.8%
$5,000,000 Bally Total Fitness Holdings,
9.875%, due 10/15/07 $ 4,850,000
4,000,000 Bell Sports, Inc., 11.000%, due
08/15/08 4,035,000
3,000,000 Epic Resorts LLC/CAP,
13.000%, due 06/15/05 2,782,500
-----------
11,667,500
-----------
MACHINERY & EQUIPMENT: 1.9%
8,000,000 United Rentals, Inc., 8.80%,
due 08/15/08 7,870,000
-----------
MANUFACTURING: 0.7%
5,000,000 Paragon Holdings, 9.625%, due
04/01/08 2,975,000
-----------
MEDIA & ENTERTAINMENT: 10.0%
5,000,000 (b) Carmike Cinemas, 9.375%, due
02/01/09 4,900,000
4,000,000 (b) Classic Cable, Inc., 9.875%,
due 08/01/08 4,180,000
6,000,000 Coaxial Communications,
10.000%, due 08/15/06 6,270,000
5,000,000 (b) Echostar DBS Corp., 9.375%,
due 02/01/09 5,112,500
6,750,000 (b) Hollywood Entertainment,
10.625%, due 08/15/04 6,665,625
10,000,000 Regal Cinemas, 9.50%, due
06/01/08 9,375,000
5,000,000 Star Choice Communications,
13.000%, due 12/15/05 5,100,000
-----------
41,603,125
-----------
MINES & MINERALS: 1.6%
6,000,000 Anker Coal Group, 9.750%,
due 10/01/07 2,932,500
5,000,000 Lodestar Holdings, Inc.,
11.50%, due 05/15/05 3,893,750
-----------
6,826,250
-----------
PACKAGING PRODUCTS: 1.2%
5,000,000 (b) Russell-Stanley, 10.875%, due
02/15/09 4,887,500
-----------
See Accompanying Notes to Financial Statements
117
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------- ------------
PAPER AND FOREST PRODUCTS: 2.4%
$10,000,000 Stone Container Corp., 12.25%,
due 04/01/02 $ 10,037,500
------------
PHARMACEUTICALS: 2.7%
6,000,000 Biovail Corp. Int'l., 10.875%,
due 11/15/05 6,157,500
5,000,000 King Pharmaceuticals, Inc.,
10.75%, due 02/15/09 5,175,000
------------
11,332,500
------------
PLASTIC PRODUCTS: 1.5%
7,000,000 Moll Industries, 10.50%, due
07/01/08 6,335,000
------------
PUBLISHING: 1.4%
6,000,000 Primark Corp., 9.25%, due
12/15/08 5,902,500
------------
RESTAURANTS: 0.9%
4,000,000 (b) Avado Brands, Inc., 11.75%,
due 06/15/09 3,970,000
------------
RETAIL: 13.6%
6,000,000 Advance Stores Co., 10.250%,
due 04/15/08 5,775,000
5,000,000 (b) Ames Dept. Stores, 10.000%,
due 04/15/06 4,900,000
8,000,000 Big 5 Corp., 10.875%, due
11/15/07 8,270,000
5,000,000 Cluett American Corp.,
10.125%, due 05/15/08 3,750,000
8,000,000 CSK Auto, Inc., 11.000%, due
11/01/06 8,390,000
5,000,000 (b) Jo-Ann Stores, 10.375%, due
05/01/07 4,912,500
6,000,000 Sonic Automotive, Inc.,
11.000%, due 08/01/08 5,940,000
3,500,000 Specialty Retail, 8.500%, due
07/15/05 2,555,000
5,000,000 Tuesday Morning, 11.000%,
due 12/15/07 5,306,250
8,000,000 United Auto Group, 11.000%,
due 7/15/07 7,140,000
------------
56,938,750
------------
STEEL: 0.6%
3,000,000 Schuff Steel Co., 10.500%, due
06/01/08 $ 2,790,000
------------
TECHNOLOGY: 2.8%
$5,000,000 Metromedia Fiber Network,
10.000%, due 11/15/08 5,150,000
7,000,000 (b) Rhythms Netconnections, Inc.,
12.750%, due 04/15/09 6,597,500
------------
11,747,500
------------
TRANSPORTATION: 2.3%
5,000,000 Amtran Inc., 9.625%, due
12/15/05 4,875,000
5,000,000 Atlas Air, Inc., 9.250%, due
04/15/08 4,812,500
------------
9,687,500
------------
Total Corporate Bonds
(Cost $413,957,541) 403,828,475
------------
Market
Shares Value
- ------------- ------------
WARRANTS: 0.2%
COMMUNICATIONS: 0.2%
5,500 (a) Bell Technology Group $ 495,000
10,780 (a) MGC Communication Warrants 279,606
------------
774,606
------------
LEISURE: 0.0%
3,000 (a) Epic Resorts Warrants --
------------
MEDIA & ENTERTAINMENT: 0.0%
115,800 (a) Star Choice Communications
Warrants 208,440
------------
Total Warrants
(Cost $197,608) 983,046
------------
Total Long Term Investments
(Cost $414,155,149) 404,811,521
------------
See Accompanying Notes to Financial Statements
118
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- ------------
SHORT-TERM INVESTMENTS: 1.0%
COMMERCIAL PAPER: 1.0%
$4,323,000 Gillette, 5.65%, due 07/01/99 $ 4,323,000
------------
Total Short-Term Investments
(Cost $4,323,000) 4,323,000
------------
TOTAL INVESTMENTS
IN SECURITIES
(COST $418,478,149)* 97.9% 409,134,521
OTHER ASSETS AND
LIABILITIES, NET 2.1% 8,669,439
----- ------------
NET ASSETS 100.0% $417,803,960
===== ============
(a) Non-income producing security.
(b) 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 418,996,899. Net unrealized
Depreciation consists of:
Gross Unrealized Appreciation $ 4,398,975
Gross Unrealized Depreciation (14,261,353)
------------
Net Unrealized Depreciation $ (9,862,378)
============
See Accompanying Notes to Financial Statements
119
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Principal Value
- ------------ ------------
CORPORATE BONDS: 89.8%
APPAREL: 2.5%
2,000,000 (b) Supreme Int'l Corp., 12.250%,
due 04/01/06 $ 2,030,000
------------
BROADCASTING: 5.7%
1,780,000 CD Radio, Inc., 0.000%,
Step-Up, due 12/01/07 905,574
450,000 (b) Echostar DBS Corp., 9.375%,
due 02/01/09 459,000
1,110,000 Pegasus Communications Corp.,
9.625%, due 10/15/05 1,087,800
1,225,000 Source Media, Inc., 12.000%,
due 11/01/04 973,875
1,340,000 Telewest PLC, 0.000%, Step-Up,
due 10/01/07 1,194,274
------------
4,620,523
------------
COMMUNICATIONS -- COMPETITIVE LOCAL
EXCHANGE CARRIER: 13.0%
1,870,000 Colt Telecom Group PLC,
0.000%, Step-Up, due
12/15/06 1,573,137
1,780,000 Completel Europe N.V., 0.000%,
Step-Up, due 02/15/09 970,260
3,000,000 ICG Services, 0.000%, Step-Up,
due 02/15/08 1,890,000
2,000,000 Metromedia Fiber, 10.000%,
due 11/15/08 2,055,000
1,500,000 MGC Communications, Inc.,
13.000%, due 10/01/04 1,376,250
2,230,000 Winstar Communication, Inc.,
0.000%, Step-Up, due
03/01/07 2,564,500
------------
10,429,147
------------
COMMUNICATIONS -- GENERAL: 2.7%
2,320,000 Covad Communications Group,
0.000%, Step-Up, due
03/15/08 1,261,500
1,340,000 United Int'l Holdings, 0.000%,
Step-Up, due 02/15/08 887,750
------------
2,149,250
------------
COMMUNICATIONS -- INTERNET
SERVICE PROVIDER: 3.1%
1,535,000 Global Telesystems Group,
9.875%, due 02/15/05 $ 1,531,163
1,020,000 Globix Corp., 13.000%, due
05/01/05 969,000
------------
2,500,163
------------
COMMUNICATIONS -- LONG DISTANCE: 5.0%
2,000,000 ITC Deltacom, 9.75%, due
11/15/08 2,060,000
1,960,000 Viatel, Inc. 11.250%, due
04/15/08 1,969,800
------------
4,029,800
------------
COMMUNICATIONS -- TELECOMMUNICATIONS: 8.0%
1,250,000 International Cabletel, Inc.,
0.000%, Step-Up, due
04/15/05 1,200,000
980,000 Northeast Optic Network,
12.500%, due 08/15/08 1,011,850
3,000,000 Pinnacle Holdings, 0.000%,
Step-Up, due 03/15/08 1,770,000
1,110,000 Powertel, Inc., 0.000%,
Step-Up, due 02/01/06 931,012
3,000,000 Rhythms Netconnections,
0.000%, Step-Up, due
05/15/08 1,556,250
------------
6,469,112
------------
COMMUNICATIONS -- WIRELESS: 1.8%
1,340,000 Nextel Communications, Inc.,
0.000%, Step-Up, due
09/15/07 979,875
915,000 Telesystem Int'l Wireless,
0.000%, Step-Up, due
06/30/07 483,806
------------
1,463,681
------------
COMPUTERS: 5.3%
1,780,000 Apple Computer, Inc., 6.500%,
due 02/15/04 1,650,950
940,000 Unisys Corp., 12.000%, due
04/15/03 1,024,600
1,405,000 Unisys Corp., 11.750%, due
10/15/04 1,566,575
------------
4,242,125
------------
See Accompanying Notes to Financial Statements
120
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Principal Value
- ------------ ------------
DIVERSIFIED FINANCIAL SERVICES: 5.8%
890,000 Amresco, Inc., 8.750%, due
07/01/99 $ 887,774
1,780,000 Coinstar, Inc., 0.000%, Step-Up,
due 10/01/06 1,755,525
2,270,000 Resource America, Inc., 12.000%,
due 08/01/04 2,043,000
------------
4,686,299
------------
ELECTRONICS: 2.4%
2,000,000 Amkor Technology, Inc., 9.250%,
due 05/01/06 1,942,500
------------
ENTERTAINMENT AND LEISURE: 7.4%
1,878,000 Ascent Entertainment Group,
0.000%, Step-Up, due 12/15/04 1,331,032
1,290,000 Bally Total Fitness Holdings,
9.875%, due 10/15/07 1,248,075
2,000,000 (b) Hollywood Entertainment,
10.625%, due 08/15/04 1,970,000
1,470,000 SFX Entertainment, 9.125%, due
02/01/08 1,436,924
------------
5,986,031
------------
FOOD, BEVERGE & TOBACCO: 1.9%
1,560,000 (b) Triarc Consumer Products Group,
Inc., 10.250%, due 02/15/09 1,505,400
------------
GAMING AND LOTTERY: 2.5%
2,000,000 (b) Majestic Star Casino Llc.,
10.875%, due 07/01/06 1,985,000
------------
HEALTHCARE: 3.6%
1,780,000 Abbey Healthcare Group, Inc.,
9.500%, due 11/01/02 1,780,000
1,000,000 Global Health Sciences, Inc.,
11.000%, due 05/01/08 770,000
317,000 Twin Laboratories, 10.250%, due
05/15/06 336,812
------------
2,886,812
------------
HOME BUILDING: 2.4%
750,000 Kevco, Inc., 10.375%, due
12/01/07 $ 525,000
1,340,000 McDermott, Inc., 9.375%, due
03/15/02 1,398,960
------------
1,923,960
------------
PRINTING/PUBLISHING: 2.1%
1,780,000 Big Flower Press Holdings,
8.625%, due 12/01/08 1,650,950
------------
RENTAL EQUIPMENT: 1.4%
1,110,000 United Rentals, Inc., 9.500%, due
06/01/08 1,123,875
------------
RESTAURANTS: 1.3%
1,050,000 Foodmaker, Inc., 8.375%, due
04/15/08 1,029,000
------------
RETAIL: 3.7%
1,109,000 Michaels Stores, Inc., 10.875%,
due 06/15/06 1,189,402
890,000 Musicland Stores Corp., 9.875%,
due 03/15/08 895,562
862,000 Tuesday Morning Corp., 11.000%,
due 12/15/07 912,642
------------
2,997,606
------------
SHIPPING: 2.0%
1,495,000 Sea Containers, 12.500%, due
12/01/04 1,608,993
------------
TRANSPORTATION: 6.2%
1,340,000 Atlas Air, Inc., 9.375%, due
11/15/06 1,309,850
1,340,000 Atlas Air, Inc., 9.250%, due
04/15/08 1,286,400
1,340,000 Trans World Airlines, 11.375%,
due 03/01/06 456,125
890,000 Trans World Airlines, 11.500%,
due 12/15/04 745,375
890,000 Trans World Airlines, 12.000%,
due 04/1/02 1,232,800
------------
5,030,550
------------
Total Corporate Bonds
(Cost $74,279,542) 72,290,777
------------
See Accompanying Notes to Financial Statements
121
<PAGE>
Income
Funds
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
COMMON STOCK: 0.2%
Communications -- Long Distance:
3,288 Viatel, Inc. $ 184,533
------------
(Cost $2,330)
Total Common Stock 184,533
------------
PREFERRED STOCK: 2.9%
Broadcasting: 1.8%
12,545 Capstar $ 1,477,173
------------
Internet: 1.1%
9,250 Concentric Network 13.5% 888,036
------------
Total Preferred Stock
(Cost $2,442,908) 2,365,209
------------
Number of Market
Warrants Value
- ------------ ------------
WARRANTS: 0.2%
Computers: 0.2%
1,600 (a) Bell Technology Group $ 144,000
------------
Cost ($0)
Total Warrants 144,000
------------
Total Long-Term Investments
(Cost $76,724,780) $ 74,984,519
------------
Principal
Amount Value
- ------------ ------------
SHORT-TERM INVESTMENTS: 5.8%
Repurchase Agreement: 5.8%
$4,639,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized
by
$4,605,000 U.S. Treasury
Notes,
6.375% Market Value
$4,735,552, Due 09/30/2001) $ 4,639,000
------------
Total Short-Term Investments
(Cost $4,639,000) $ 4,639,000
------------
Total Investments in
Securities (Cost
$81,363,780)* 98.9% $ 79,623,519
Other Assets and
Liabilities, Net 1.1% 900,680
------ ------------
Net Assets 100.0% $ 80,524,199
====== ============
(a) Non-income producing security
(b) 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.
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 $ 1,036,861
Gross Unrealized Depreciation (2,777,122)
------------
Net Unrealized Appreciation $ (1,740,261)
============
See Accompanying Notes to Financial Statements
122
<PAGE>
Equity &
Income Funds
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------- ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 5.5%
FINANCIAL: 5.5%
$ 574,053 FHLMC E00659, 6.000%, due
04/01/14 $ 554,495
1,172,113 FHLMC E74572, 5.500%, due
01/01/14 1,110,202
240,000 FHR 2102 Pe, 6.500%, due
12/15/28 229,274
230,000 FHR 2127 Td, 6.000%, due
12/15/28 227,270
------------
Total U.S. Government
Agency Obligations:
(Cost $2,197,083) 2,121,241
------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET-BACKED SECURITIES: 5.9%
FINANCIAL: 5.9%
170,000 Amres 1997-3 A9, 6.960%, due
03/25/27 170,572
170,000 ASC 1996-D3 A1C, 7.400%, due
10/13/26 174,060
70,000 Comed 1998-1 A7, 5.740%, due
12/25/10 64,583
241,757 CRIIMI Mae 1998-1 A1, 5.697%,
due 10/20/01 230,861
170,000 CRIIMI Mae 98-C1 CL A2,
7.000%, due 03/02/11 150,238
260,000 DLJCM 1998-CF2 A1B, 6.240%,
due 11/12/31 248,135
160,000 GS Mortgage Securities, 6.562%,
due 04/13/31 155,772
276,098 MSC 1997-XL1 A1, 6.590%, due
10/03/30 277,072
150,000 MSC 1998-XL2, 6.170%, due
10/03/08 144,544
165,000 NASC 1998-D6 A1B, 6.590%,
due 03/17/28 160,477
125,000 Residential Asset Securities,
6.415%, due 07/25/29 121,869
240,000 SAST 1999-2 AF4, 6.445%, due
08/25/26 235,214
124,731 SLCMT 1997-C1, 6.875%, due
07/25/04 125,505
------------
Total CMOs and Asset-Backed
Securities: (Cost $2,354,459) 2,258,902
------------
Market
Shares Value
- ------------ ------------
COMMON STOCKS: 47.5%
AUTOMOTIVE: 1.4%
2,900 DaimlerChrysler $ 257,738
4,900 Ford Motor Co. 276,544
------------
534,282
------------
BANKS: 0.7%
3,100 Chase Manhattan Corp. 268,538
------------
BEVERAGES: 2.1%
3,500 Anheuser Busch Co. 248,281
4,200
Coca-Cola 262,500
7,400 Pepsico, Inc. 286,288
------------
797,069
------------
BROADCASTING: 0.8%
7,800 Comcast Corp. 299,812
------------
CHEMICALS: 0.8%
4,300 Dupont 293,743
------------
COMMUNICATIONS: 2.6%
2,400 Ameritech Corp. 176,400
5,200 AT&T Corp. 290,225
2,800 (c) MCI Worldcom, Inc. 241,500
3,100 Nokia Corp. ADR 283,843
------------
991,968
------------
COMPUTERS: 3.7%
4,300 (c) Cisco Systems 277,350
12,400 Compaq Computer 293,725
7,000 (c) Dell Computer Corp. 259,000
3,100 Hewlett Packard 311,550
2,100 International Business Machines 271,425
------------
1,413,050
------------
COMPUTER SOFTWARE & SERVICE: 2.2%
2,600 (c) America Online, Inc. 287,300
3,100 (c) Microsoft Corp. 279,581
4,000 (c) Sun Microsystems 275,500
------------
842,381
------------
See Accompanying Notes to Financial Statements
123
<PAGE>
Equity &
Income Funds
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
CONSUMER DURABLES: 0.7%
2,500 Sony Corp. ADR $ 275,937
------------
CONSUMER PRODUCTS: 2.8%
2,800 Colgate-Palmolive Company 276,500
6,200 Gillette 254,200
3,000 Procter & Gamble 267,750
6,800 Unilever PLC ADR 253,300
------------
1,051,750
------------
DEFENSE: 0.7%
6,900 Lockheed Martin Corp. 257,025
------------
DIVERSIFIED CONGLOMERATE: 0.5%
2,200 Tyco Int'l, Ltd. 208,450
------------
DRUGSTORES: 0.7%
9,100 Walgreen Co. 267,313
------------
ELECTRICAL EQUIPMENT: 0.8%
2,600 General Electric 293,800
------------
ELECTRONICS -- SEMICONDUCTORS: 0.7%
4,600 Intel Corp. 273,700
------------
ENERGY: 0.7%
4,800 Duke Power Co. 261,000
------------
ENTERTAINMENT: 0.7%
3,800 Time Warner, Inc. 279,300
------------
FINANCIAL: 3.7%
2,300 American Express 299,287
2,446 American Int'l Group 286,335
5,700 Citigroup, Inc. 270,750
4,200 FNMA 287,175
4,800 FHLMC 278,400
------------
1,421,947
------------
FOOD STORES: 0.7%
5,700 (c) Safeway, Inc. 282,150
------------
FOODS: 0.7%
11,900 Sara Lee $ 269,982
------------
INSURANCE: 0.7%
7,900 Allstate Corp. 283,413
------------
MARINE: 0.7%
5,500 Carnival Corp. 266,750
------------
MEDICAL: 0.7%
3,900 Novartis AG ADR 284,735
------------
METALS & MINERALS: 0.7%
4,000 Alcoa, Inc. 247,500
------------
NATURAL GAS PIPELINE: 0.8%
3,700 Enron 302,475
------------
OIL & GAS: 2.2%
2,800 Chevron Corp. 266,525
3,600 Exxon Corp. 277,650
5,100 Royal Dutch Petroleum Company 307,275
------------
851,450
------------
OIL WELL EQUIPMENT & SERVICE: 0.7%
4,300 Schlumberger, Ltd. 273,855
------------
PHARMACEUTICALS: 4.5%
5,800 Abbott Laboratories 263,900
3,700 Bristol-Myers Squibb Co. 260,619
2,900 Johnson & Johnson 284,200
4,100 Merck & Co. 303,400
2,700 Pfizer 296,325
4,500 Warner Lambert Co. 312,188
------------
1,720,632
------------
PUBLISHING: 0.7%
3,900 Gannett Co. 278,363
------------
RESTAURANT: 0.7%
6,400 McDonalds Corp. 264,400
------------
See Accompanying Notes to Financial Statements
124
<PAGE>
Equity &
Income Funds
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
RETAIL: 3.7%
3,700 (c) Costco Companies, Inc. $ 296,231
4,300 Home Depot, Inc. 277,081
5,600 Sears, Roebuck and Company 250,250
5,550 The Gap, Inc. 279,581
6,300 Wal-Mart Stores, Inc. 303,975
------------
1,407,118
------------
TECHNOLOGY: 0.7%
4,000 Lucent Technologies 269,750
------------
TOBACCO PRODUCTS: 0.6%
6,100 Philip Morris Companies, Inc. 245,143
------------
TRANSPORATION: 0.7%
5,100 (c) FDX Corp. 276,675
------------
UTILITIES: 1.7%
4,200 Bell Atlantic Corp. 274,575
2,100 SBC Communications 121,800
10,200 Southern Co. 270,300
------------
666,675
------------
Total Common Stocks:
(Cost $15,628,444) 18,222,131
------------
Principal Market
Amount Value
- ------------ ------------
CORPORATE BONDS: 15.4%
AEROSPACE: 0.4%
$200,000 Rockwell Int'l Corp.; 5.200%, due
01/15/98 $ 136,356
------------
AIRLINES: 0.5%
$100,000 Atlas Air, Inc., 9.375%, due
11/15/06 97,750
66,884 (a) Continental Airlines, Inc.,
6.465%, due 10/15/04 64,995
50,000 Trans World Airlines, 11.375%,
due 03/01/06 25,625
------------
188,370
------------
BROADCASTING: 0.4%
95,000 News America Holdings, 8.875%,
due 04/26/23 $ 104,909
75,000 Source Media, Inc., 12.000%, due
11/01/04 59,625
------------
164,534
------------
BUSINESS SERVICES: 0.4%
150,000 Unisys Corp., 12.000%, due
04/15/03 163,500
------------
COMMUNICATIONS: 4.2%
100,000 Covad Communications Group,
0.000%, due 03/15/08 54,375
50,000 Global Telesystems Group,
9.875%, due 02/15/05 49,875
500,000 ICG Services, 0.000%, due
2/15/08 315,000
100,000 International Cabletel, 0.000%,
due 04/15/05 96,000
250,000 (a) MGC Communications, Inc.,
13.000%, due 10/01/04 229,375
250,000 Motorola, Inc., 5.220%, due
10/01/97 169,352
500,000 Pinnacle Holdings, 0.000%, due
03/15/08 295,000
250,000 Winstar Communications, Inc.,
0.000%, due 03/01/07 287,500
100,000 Worldcom, Inc., 6.950%, due
08/15/28 94,795
------------
1,591,272
------------
COMPUTER SOFTWARE & SERVICE: 0.7%
500,000 Rhythms Netconnections,
0.000%, due 05/15/08 267,500
------------
CONSTRUCTION: 0.3%
100,000 McDermott, Inc., 9.375%, due
03/15/02 104,141
------------
FINANCIAL: 0.8%
$ 20,000 Amresco, Inc., 9.875%, due
03/15/05 16,200
160,000 Merrill Lynch, 6.875%, due
11/15/18 150,051
150,000 Resource America, Inc., 12.000%,
due 08/01/04 135,000
------------
301,251
------------
See Accompanying Notes to Financial Statements
125
<PAGE>
Equity &
Income Funds
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------ ------------
GAMING: 0.6%
250,000 (a) Majestic Star Casino LLC,
10.875%, due 07/01/06 $ 248,125
------------
INSURANCE: 0.6%
110,000 Allmerica Financial Corp.,
7.625%, due 10/15/25 108,333
50,000 Liberty Financial, 7.625%, due
11/15/28 49,079
75,000 (a) Liberty Mutual Insurance,
7.697%, due 10/15/97 68,841
------------
226,253
------------
INVESTMENT COMPANIES: 0.5%
207,917 (a) Dryden Investor, 7.157%, due
07/23/08 196,577
------------
LEISURE: 0.2%
75,000 Bally Total Fitness Holdings,
9.875%, due 10/15/07 72,563
------------
MACHINERY & EQUIPMENT: 0.1%
50,000 United Rentals, 9.500%, due
06/01/08 50,625
------------
MEDIA & ENTERTAINMENT: 1.0%
50,000 Ascent Entertainment, 0.000%,
due 12/15/04 35,437
100,000 (a) Echostar DBS Corp., 9.375%, due
02/01/09 102,000
250,000 (a) Hollywood Entertainment,
10.625%, due 08/15/04 246,250
------------
383,687
------------
MEDICAL: 0.3%
$100,000 Abbey Healthcare, 9.500%, due
11/01/02 100,000
------------
OIL & GAS: 0.6%
100,000 (a) Deeptech Int'l, 12.000%, due
12/15/00 106,750
110,000 Union Oil Co. of California,
7.500%, due 02/15/29 108,139
------------
214,889
------------
PHARMACEUTICALS: 0.5%
250,000 Global Health, 11.000%, due
05/01/08 $ 192,500
------------
PRINTING: 0.5%
200,000 Donnelley & Sons, 6.625%, due
04/15/29 181,379
------------
REAL ESTATE & FINANCIAL SERVICES: 0.1%
40,000 Equity Office, 7.500%, due
04/19/29 36,733
------------
REGIONAL BANKS: 0.5%
200,000 Amsouth Bank, 6.450%, due
02/01/08 189,748
------------
RETAIL: 0.6%
100,000 Kmart Corp., 6.780%, due
08/02/99 100,044
160,000 (a) Lowes Companies, 6.500%, due
03/15/29 142,688
------------
242,732
------------
SHIPPING: 0.3%
100,000 Sea Containers, 12.500%, due
12/01/04 107,625
------------
TECHNOLOGY: 0.2%
90,000 WMX Technologies, 7.100%, due
08/01/26 91,763
------------
TRANSPORTATION: 1.1%
139,959 Federal Express, 6.720%, due
01/15/22 133,130
300,000 (a) Railcar Leasing, 7.125%, due
01/15/13 304,281
------------
437,411
------------
Total Corporate Bonds:
(Cost $6,129,219) 5,889,534
------------
See Accompanying Notes to Financial Statements
126
<PAGE>
Equity &
Income Funds
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------ ------------
FOREIGN CORPORATE BONDS: 2.6%
FINANCIAL: 2.6%
$150,000 Abbey National PLC, 6.700%,
due 06/29/49 $ 139,841
160,000 Amvescap PLC, 6.375%, due
05/15/03 157,501
125,000 Bank of Scotland, 7.000%, due
11/29/49 119,276
100,000 (a) Cerro Negro Finance, 7.330%,
due 12/01/09 81,981
50,000 Endesa-Chile, 8.125%, due
02/01/97 40,323
125,000 (a) Inversiones CMPC, 7.375%, due
06/15/05 117,051
110,000 PDVSA Finance, Ltd., 7.500%,
due 11/15/28 80,108
30,000 (a) Pemex Finance, Ltd., 6.300%,
due 05/15/10 28,800
55,000 (a) Pemex Finance, Ltd., 9.150%,
due 11/15/18 51,700
200,000 United Utilities PLC, 6.875%, due
08/15/28 177,091
------------
Total Foreign Corporate Bonds:
(Cost $1,094,285) 993,672
------------
Market
Shares Value
- ------------ ------------
MUTUAL FUNDS: 7.7%
INVESTMENT TRUSTS: 7.7%
60,000 Blackrock 2001 Term Trust $ 540,000
65,800 Blackrock Strategic Term Trust 600,425
190,000 (b) Pilgrim Prime Rate Trust 1,793,125
------------
Total Mutual Funds: (Cost
$2,864,610) 2,933,550
------------
PREFERRED STOCK: 0.1%
COMMUNICATIONS: 0.1%
309 IXC Communications 29,708
------------
Total Preferred Stock: (Cost
$30,636) 29,708
------------
Principal Market
Amount Value
- ------------ ------------
U.S. TREASURY OBLIGATIONS: 6.7%
U.S. TREASURY BONDS: 2.4%
$1,000,000 U.S. Treasury Bonds, 5.500% due
08/15/2028 $ 915,620
------------
U.S. TREASURY NOTES: 4.3%
300,000 U.S. Treasury CPI Note, 3.625%
due 01/15/2008 291,468
200,000 U.S. Treasury, 4.750% due
02/15/2004 192,438
1,170,000 U.S. Treasury Note, 5.750% due
08/15/2003 1,167,052
------------
1,650,958
------------
Total U.S. Treasury Obligations:
(Cost $2,582,240) 2,566,578
------------
Total Long-Term Investments
(Cost $32,880,976) 35,015,316
------------
Principal
Amount Value
- -------------- ------------
SHORT-TERM INVESTMENTS: 10.3%
REPURCHASE AGREEMENT: 10.3%
$3,938,000 State Street Bank & Trust
Repurchase Agreement, 4.700%
due 07/01/1999 (Collateralized
by $3,910,000 U.S. Treasury
Notes, 6.375% due 09/30/01,
Market Value $4,020,849) $ 3,938,000
------------
Total Short-term Investments
(Cost $3,938,000) 3,938,000
------------
TOTAL INVESTMENTS
IN SECURITIES
(COST $36,818,976)* 101.7% 38,953,316
OTHER ASSETS AND
LIABILITIES, NET (1.7)% (657,072)
------ ------------
NET ASSETS 100.0% $ 38,296,244
====== ============
(a) 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.
(b) Related party
(c) Non-income producing security
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 3,027,526
Gross Unrealized Depreciation (883,186)
------------
Net Unrealized Appreciation $ 2,134,340
============
See Accompanying Notes to Financial Statements
127
<PAGE>
Equity &
Income Funds
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999
- --------------------------------------------------------------------------------
Market
Shares Value
- ------------ ------------
CONVERTIBLE PREFERRED STOCK: 37.7%
ADVERTISING: 0.7%
66,460 Snyder Communications, Inc.,
6.500%, (STRYPES) $ 1,898,264
------------
BROADCASTING: 5.5%
12,800 Chancellor Media Corp., $3.00 1,409,600
31,350 CSC Holdings, Inc. I 8.500% 3,385,800
30,610 (b) Evergreen Media Corp., $3.00 3,370,926
40,650 Mediaone Group, Inc., 4.50% 6,089,878
------------
14,256,204
------------
COMMUNICATIONS: 4.4%
26,632 Airtouch Communications, Inc.,
C 4.250% 3,933,214
62,700 Global Telesystems Group, Inc.,
5.750%, due 07/01/10 4,138,200
18,169 Winstar Communications, Inc.
A 6.000% 960,659
42,780 Winstar Communications, Inc.
D 7.000% 2,395,699
------------
11,427,772
------------
CONTAINERS: 1.2%
49,440 Sealed Air Corp., A $2 3,090,000
------------
COSMETICS: 1.1%
28,850 Estee Lauder TRT II 6.250%,
(ACES) 2,719,112
------------
ELECTRIC: 3.5%
35,050 Houston Industries, Inc.,
7.000% (ACES) 4,179,712
86,350 Texas Utilities Co., 9.250%
(PRIDES) 4,749,250
------------
8,928,962
------------
ELECTRONICS/MUSIC CHAINS: 1.6%
105,045 Apache Corp., 6.500% 4,096,755
------------
FINANCIAL PRODUCTS/SERVICES: 14.4%
44,000 Big Flower Trust, 6.000% $ 2,560,250
29,055 CVS Auto Exchange Trust,
6.000% 2,647,637
41,500 Finova Finance Trust, 2.750% 2,863,500
60,490 K Mart Financing I, 7.750% 3,538,665
29,350 Merrill Lynch & Co. CIBER,
7.875% (STRYPES) 1,232,700
25,265 Morgan Stanley Group, Inc.,
6.000%, (CSCO) 2,916,528
497,117 (a) Morgan Stanley Group, Inc.
WCOM Reset 6.000% (PERQS) 4,411,913
35,600 Protective Life Capital Trust II,
6.500% (PRIDES) 2,064,800
27,800 Qualcomm Financial Trust,
5.750% 5,615,600
65,900 Qwest Trends Trust, 5.750% 3,805,725
44,550 (b) United Globalcom, 7.000% 2,238,638
21,450 United Rentals, Trust I, 6.500% 992,063
52,750 (b) United Rentals, Trust I, 6.500%
(QUIPS) 2,400,125
------------
37,288,144
------------
HOME BUILDING: 0.3%
96,200 Kaufman & Broad Homes, 8.250%
(PRIDES) 781,625
------------
INSURANCE: 1.3%
36,300 American General Corp.,
6.000% (MIPS) 3,394,050
------------
INTERNET: 0.7%
39,700 Psinet, Inc. C, 6.750% 1,915,525
------------
OIL & GAS: 2.5%
75,947 EVI, Inc., 5.000% 3,009,400
17,400 Williams Cos., Inc., $3.50 3,490,875
------------
6,500,275
------------
See Accompanying Notes to Financial Statements
128
<PAGE>
Equity &
Income Funds
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Shares Value
- ----------- ------------
TELECOMMUNICATIONS EQUIPMENT: 0.5%
154,820 Ericcson Telephone Co.,
4.250% $ 1,344,999
------------
Total Convertible Preferred
Stock (Cost $77,864,870) 97,641,687
------------
Market
Principal Value
- ------------- ------------
CONVERTIBLE CORPORATE BONDS: 56.8%
ADVERTISING: 3.2%
$1,230,000 Interpublic Group, Inc. 1.87%,
due 06/01/06 $ 1,122,375
568,000 (b) Omnicom Group, Inc., 4.250%,
due 01/03/07 1,455,500
3,443,000 Omnicom Group, Inc., 2.250%,
due 01/06/13 5,680,950
------------
8,258,825
------------
AEROSPACE: 0.4%
1,292,000 Kellstrom Industries, Inc.,
5.500%, due 06/15/03 1,086,895
------------
BROADCASTING: 2.5%
1,245,000 (b) Cbs Radio, Inc., 7.000%,
due 06/30/11 1,992,000
3,569,000 Clear Channel
Communications, 2.625%,
due 04/01/03 4,523,708
------------
6,515,708
------------
COMMERCIAL SERVICES: 0.9%
2,227,000 Quintiles Transnational,
4.250%, due 05/31/00 2,471,970
------------
COMMUNICATIONS: 3.3%
950,000 Global Telesystems Group, Inc.,
5.750%, due 07/01/10 1,501,000
1,900,000 (b) Nextel Communications,
4.750%, due 07/01/07 2,306,125
2,910,000 (b) NTL, Inc., 7.000%, due
12/15/08 4,761,488
------------
8,568,613
------------
COMPUTER SYSTEMS: 6.0% $
1,823,000 (b) Affiliated Computer Services,
Inc., 4.000%, due 03/15/05 $ 2,388,130
550,000 Affiliated Computer Services,
Inc., 4.000%, due 03/15/05 720,500
45,000 Comverse Technology, Inc.,
4.500%, due 07/01/05 86,344
3,520,000 (b) Comverse Technology, Inc.,
4.500%, due 07/01/05 6,754,000
676,000 (b) EMC Corp., 3.250%,
due 03/15/02 3,358,030
2,035,000 (b) Sanmina Corp., 4.250%,
due 05/01/04 2,281,744
------------
15,588,748
------------
DATA PROCESSING: 1.6%
3,652,000 (a) Automatic Data Processing,
0.000%, due 02/20/12 4,062,850
------------
DRUGS: 1.6%
1,258,000 Alpharma, Inc., 5.750%,
due 04/01/05 1,750,193
1,695,000 (b) Alpharma, Inc., 5.750%,
due 04/01/05 2,358,169
------------
4,108,362
------------
ELECTRIC: 2.2%
9,535,000 (a)(b)Solectron Corp., 0.000%, due
01/27/19 5,589,894
------------
ELECTRONICS -- SEMICONDUCTORS: 2.1%
3,355,000 (b) LSI Logic Corp., A 4.250%, due
03/15/04 5,514,781
------------
FINANCIAL PRODUCTS/SERVICES: 6.5%
2,700,000 American Express Credit,
1.25%, due 02/19/03 3,280,500
3,290,000 Merrill Lynch & Co., 1.000%,
due 02/08/06 3,055,588
3,751,000 (a) Mutual Risk Management
0.000%, due 10/30/15 2,677,276
3,992,000 (b) Swiss Life Financial, Ltd.,
2.000%, due 05/20/03 4,081,820
5,800,000 Xerox Credit Corp., 0.570%,
due 04/21/18 3,712,000
------------
16,807,184
------------
See Accompanying Notes to Financial Statements
129
<PAGE>
Equity &
Income Funds
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Principal Value
- ------------ ------------
HOME BUILDING: 0.9%
5,262,000 (a) Lennar Corp., 0.000%, due
07/29/18 $ 2,315,280
------------
INTERNET: 2.4%
2,476,000 (b) At Home Corp., 0.525%,
due 12/28/18 1,999,370
1,580,000 (b) Exodus Communications, Inc.,
5.000%, due 03/15/06 4,119,850
------------
6,119,220
------------
MANUFACTURING: 1.7%
1,763,000 (a) ADT Operations, 0.000%, due
07/06/10 4,409,704
------------
MEDICAL: 0.8%
3,086,000 (a) Wellpoint Health Network,
0.000%, due 07/02/19 2,173,701
------------
OIL & GAS: 3.3%
5,226,000 Diamond Offshore Drilling,
3.750%, due 02/15/07 5,180,272
3,190,000 Pennzenergy Co., 4.900%, due
08/15/08 3,289,688
------------
8,469,960
------------
POLLUTION CONTROL: 1.9%
3,638,000 Waste Management, Inc.,
4.000%, due 02/01/02 4,861,278
------------
PRINTING: 1.9%
1,577,000 Mail-Well, Inc., 5.000%,
due 11/01/02 1,716,959
3,387,000 World Color Press, 6.000%,
due 10/01/07 3,217,650
------------
4,934,609
------------
RETAIL: 7.7%
3,445,000 Action Performance Cos.,
4.750%, due 04/01/05 $ 3,182,319
5,452,000 Ann Taylor Stores Corp.,
0.550%, due 06/18/19 3,387,055
1,356,000 (a)(b)Costco Cos., Inc., 0.000%, due
08/19/17 1,240,740
3,963,000 (a) Costco Cos., Inc., 0.000%, due
08/19/17 3,626,145
1,512,000 Home Depot, Inc., 3.250%,
due 10/01/01 4,210,920
4,985,000 (a) Office Depot, Inc. 0.000%, due
11/01/08 4,255,944
------------
19,903,123
------------
RETIREMENT/AGED CARE: 1.1%
2,724,000 Sunrise Assisted Living, Inc.,
5.500%, due 06/15/02 3,003,210
------------
SOFTWARE: 3.4%
11,690,000 (a)(b)Citrix Systems, 0.000%,
due 03/22/19 5,362,788
1,501,000 (b) Veritas Software Corp., 5.250%,
due 11/01/04 3,525,474
------------
8,888,262
------------
UTILITIES: 1.4%
2,878,000 AES Corp., 4.500%,
due 08/15/05 3,572,313
------------
Total Convertible Corporate
Bonds (Cost $119,390,151) 147,224,490
------------
See Accompanying Notes to Financial Statements
130
<PAGE>
Equity &
Income Funds
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 1999 (Continued)
- --------------------------------------------------------------------------------
Market
Principal Value
- ------------ ------------
COMMON STOCK: 2.9%
Communications: 0.0%
671 (a) Winstar Communications, Inc. $ 32,711
------------
Electronics -- Semiconductors: 2.0%
104,239 (a) Analog Devices 5,231,495
------------
Real Estate Investment Trust: 0.5%
57,700 Reckson Associates Realty
Corp. 1,355,950
------------
Telecommunication Equipment: 0.4%
39,100 (a) American Tower Corp. Cl-A 938,400
------------
Total Common Stock
(Cost $5,276,945) 7,558,556
------------
Total Long Term
(Cost $202,531,965) 252,424,733
------------
Principal
Amount Value
- ------------ ------------
SHORT-TERM INVESTMENTS: 2.3%
Repurchase Agreement: 2.3%
$5,886,000 State Street Bank & Trust
Repurchase Agreement, 4.70%
due 07/01/99 (Collateralized by
$5,840,000 U.S. Treasury Notes,
6.375% Market Value
$6,005,564,
Due 09/30/2001) $ 5,886,000
------------
Total Short-Term Investments
(Cost $5,886,000) 5,886,000
------------
Total Investments in
Securities
(Cost $208,417,965)* 99.7% 258,310,733
Other Assets and
Liabilities, Net 0.3% 726,577
------ ------------
Net Assets 100.0% $259,037,310
====== ============
(a) Non-income producing security
(b) 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.
ADR -- American Depository Receipt
* Cost for federal income tax purposes is $208,813,924. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 53,098,494
Gross Unrealized Depreciation (3,601,685)
------------
Net Unrealized Appreciation $ 49,496,809
============
See Accompanying Notes to Financial Statements
131
<PAGE>
- -------
Pilgrim
Funds
- -------
SHAREHOLDER MEETINGS
- --------------------------------------------------------------------------------
I. A special meeting of the shareholders of the Pilgrim Mutual Funds was held
in San Diego, California on May 21, 1999. A brief description of each
matter voted upon as well as the results are outlined below:
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
------------- --------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1. Election of Trustees to serve until the election and qualification of their
successors
Name
- -------------------
Mary A. Baldwin 142,656,284 5,492,427 -- -- 148,148,711
John P. Burke 142,910,944 5,237,767 -- -- 148,148,711
Al Burton 142,686,102 5,462,609 -- -- 148,148,711
Jock Patton 146,257,855 1,890,856 -- -- 148,148,711
Robert W. Stallings 142,889,767 5,258,944 -- -- 148,148,711
Walter E. Auch 146,286,795 1,861,916 -- -- 148,148,711
</TABLE>
2. Approval of the selection of independent public accountants, Ernst & Young
LLP, for the fiscal year ended March 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C>
Fund
- -----------------------------
Balanced 1,775,452 39,467 32,767 -- 1,847,686
Convertible 12,390,054 50,773 152,858 -- 12,593,685
Emerging Countries 18,202,157 66,891 112,520 -- 18,381,568
HighYield II 7,222,342 67,000 102,560 -- 7,391,902
International Core Growth 5,921,752 145,354 45,735 -- 6,112,841
International SmallCap Growth 5,440,252 11,810 112,544 -- 5,564,606
LargeCap Growth 1,670,484 12,065 11,958 -- 1,694,507
MidCap Growth 18,091,525 184,077 680,310 -- 18,955,912
SmallCap Growth 27,265,012 205,624 395,187 -- 27,865,823
Strategic Income 2,429,498 18,810 21,542 -- 2,469,850
Worldwide Growth 8,259,863 113,503 126,242 -- 8,499,608
</TABLE>
3. Approval of the management agreement between Pilgrim Funds and Pilgrim
Investments, Inc.
<TABLE>
<S> <C> <C> <C> <C> <C>
Fund
- -----------------------------
Balanced 1,724,922 69,197 53,560 -- 1,847,679
Convertible 11,925,087 390,937 277,651 -- 12,593,675
Emerging Countries 14,679,359 3,466,754 235,459 -- 18,381,572
HighYield II 6,997,077 201,141 193,684 -- 7,391,902
International Core Growth 6,011,603 43,556 57,679 -- 6,112,838
International SmallCap Growth 5,416,005 19,714 128,885 -- 5,564,604
LargeCap Growth 1,637,066 37,995 19,438 -- 1,694,499
MidCap Growth 17,399,176 356,229 1,200,558 -- 18,955,963
SmallCap Growth 26,580,695 489,278 795,898 -- 27,865,871
Strategic Income 2,413,718 30,346 25,784 -- 2,469,848
Worldwide Growth 8,016,843 172,784 310,007 -- 8,499,634
</TABLE>
4. Approval of sub-advisory agreement between Pilgrim Investments, Inc. and
Nicholas Applegate Capital Management Agreement for the following funds:
<TABLE>
<S> <C> <C> <C> <C> <C>
Fund
- -----------------------------
Convertible 11,881,969 404,451 307,260 -- 12,593,680
Emerging Countries 14,668,964 3,465,840 246,766 -- 18,381,570
International Core Growth 6,016,601 39,673 56,563 -- 6,112,837
International SmallCap Growth 5,408,685 20,368 135,551 -- 5,564,604
Large CapGrowth 1,632,310 39,175 23,015 -- 1,694,500
Mid CapGrowth 17,375,689 361,784 1,218,438 -- 18,955,911
SmallCap Growth 26,565,372 542,162 758,312 -- 27,865,846
Worldwide Growth 7,966,581 190,087 342,966 -- 8,499,634
</TABLE>
132
<PAGE>
- -------
Pilgrim
Funds
- -------
SHAREHOLDER MEETINGS
- --------------------------------------------------------------------------------
5. Approval of the amendment to the fundamental investment limitations
clarifying that the limitation on illiquid securities does not apply to
Rule 144A securities for the following portfolios
<TABLE>
<S> <C> <C> <C> <C> <C>
Fund
- -----------------------------
Convertible 8,098,874 195,909 206,348 -- 8,501,131
International Core Growth 4,628,549 48,996 47,941 -- 4,725,486
International SmallCap Growth 3,707,654 14,140 66,523 -- 3,788,317
SmallCap Growth 17,124,787 257,981 387,981 -- 17,770,749
Strategic Income 1,721,000 7,635 21,594 -- 1,750,229
</TABLE>
6. Approval of new service and distribution plans
<TABLE>
<CAPTION>
Fund
- ------------------------------
<S> <C> <C> <C> <C> <C>
Balanced
Class A 424,753 16,042 12,447 -- 453,242
Class B 205,340 5,120 4,295 -- 214,755
Class C 1,047,244 45,830 38,907 -- 1,131,981
Convertible
Class A 2,297,425 258,379 63,771 -- 2,619,575
Class B 1,970,605 19,061 68,503 -- 2,058,169
Class C 3,678,151 95,077 188,623 -- 3,961,851
Class Q 339,300 5,004 14,860 -- 359,164
Emerging Countries
Class A 2,837,973 50,000 43,523 -- 2,931,496
Class B 1,343,800 30,548 45,597 -- 1,419,945
Class C 1,306,349 47,346 36,308 -- 1,390,003
Class Q 3,685,020 48,123 56,269 -- 3,789,412
HighYield II
Class A 1,278,375 29,389 43,932 -- 1,351,696
Class B 3,155,671 104,933 125,952 -- 3,386,556
Class C 1,584,800 68,571 20,498 -- 1,673,869
Class Q 529,782 6,302 6,399 -- 542,483
International Core Growth
Class A 1,101,628 9,805 22,268 -- 1,133,701
Class B 518,291 13,744 18,367 -- 550,402
Class C 427,818 2,373 13,012 -- 443,203
Class Q 496,622 8,277 8,862 -- 513,761
International SmallCap Growth
Class A 837,076 6,900 30,391 -- 874,367
Class B 530,487 8,663 20,044 -- 559,194
Class C 459,255 8,683 25,257 -- 493,195
Class Q 792,942 27,567 67,101 -- 887,610
LargeCap Growth
Class A 397,890 8,715 1,114 -- 407,719
Class B 551,217 23,490 3,782 -- 578,489
Class C 208,760 223 9,940 -- 218,923
Class Q 180,398 2,944 728 -- 184,070
Mid CapGrowth
Class A 2,932,467 72,134 214,096 -- 3,218,697
Class B 1,666,642 30,211 45,823 -- 1,742,676
Class C 6,924,685 268,357 422,590 -- 7,615,632
SmallCap Growth
Class A 5,098,049 178,504 163,603 -- 5,440,156
Class B 1,830,396 62,814 70,012 -- 1,963,222
Class C 8,164,624 347,361 547,240 -- 9,059,225
Class Q 154,069 851 73,868 -- 228,788
Strategic Income
Class A 204,164 23,918 --
Class B 446,757 6,539 7,307 -- 460,603
</TABLE>
133
<PAGE>
- -------
Pilgrim
Funds
- -------
SHAREHOLDER MEETINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund
- -----------------
<S> <C> <C> <C> <C> <C>
Class C 567,256 1,342 17,084 -- 585,682
Class Q 22,735 -- 2,715 -- 25,450
Worldwide Growth
Class A 1,820,194 60,109 60,258 -- 1,940,561
Class B 537,916 42,375 18,507 -- 598,798
Class C 3,999,494 115,185 252,536 -- 4,367,215
Class Q 261,776 4,526 7,407 -- 273,709
</TABLE>
II. A special meeting of the shareholders of the Pilgrim Mutual Funds was held
in San Diego, California on June 16, 1999. A brief description of each
matter voted upon as well as the results are outlined below:
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
------------ --------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1. Approval of the amendment to the fundamental investment limitations
clarifying that the limitation on illiquid securities does not apply to
Rule 144A securities for the following portfolios:
Fund
- ------------------
Balanced 1,034,476 35,130 869,345 -- 1,938,951
Emerging Countries 11,057,506 3,506,867 5,360,674 -- 19,925,047
HighYield II 4,375,962 130,989 2,969,212 -- 7,476,163
LargeCap Growth 1,009,247 32,611 681,635 -- 1,723,493
MidCap Growth 11,318,739 212,183 7,777,138 -- 19,308,060
Worldwide Growth 4,574,898 130,029 3,892,008 -- 8,596,935
2. Approval of new service and distribution plans
Fund
- ------------------
Balanced Class Q 5,616 3,611 -- -- 9,227
</TABLE>
III. A special meeting of the shareholders of the Pilgrim Mutual Funds was held
in San Diego, California on June 29, 1999. A brief description of each
matter voted upon as well as the results are outlined below:
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
----------- --------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1. Approval of new service and distribution plans
Fund
- ---------------------
MidCap Growth Class Q 511,952 21,510 29,954 -- 563,416
</TABLE>
134
<PAGE>
- -------
Pilgrim
Funds
- -------
OTHER INFORMATION
- --------------------------------------------------------------------------------
Change in Auditors
At a meeting held on May 24, 1999, the Board of Trustees of Pilgrim Mutual Funds
(the "Trust"), as well as the Trustees who were members of the Trust's Audit
Committee, selected KPMG LLP to act as the independent auditors of the Trust in
place of Ernst & Young LLP for the fiscal year ended June 30, 1999. Ernst &
Young formally resigned as independent auditors for the Trust on July 13, 1999.
Ernst & Young's report on Pilgrim Mutual Funds' financial statements for any of
the prior two fiscal years did not contain an adverse opinion or disclaimer and
was not qualified or modified as to uncertainty, audit scope, or accounting
principles. During Pilgrim Mutual Funds' two prior fiscal years, there were no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.
135
<PAGE>
- -------
Pilgrim
Funds
- -------
TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
Dividends paid during the tax year ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Type Per Share Amount
------ ------------------
<S> <C> <C>
High Yield Fund
Class A NII $0.6244
Class B NII $0.5722
Class C NII $0.0498
Class M NII $0.5868
Pilgrim High Yield Fund II
Class A NII $0.2775
Class B NII $0.2586
Class C NII $0.2586
Class Q NII $0.2805
Pilgrim Strategic Income Fund
Class A NII $0.1432
Class B NII $0.1312
Class C NII $0.1340
Class Q NII $0.1401
Pilgrim Balanced Fund
Class A NII $0.0691
Class B NII $0.0421
Class C NII $0.0414
Class Q NII $0.0804
Type Per Share Amount
------ ------------------
<S> <C> <C>
Pilgrim Convertible Fund
Class A NII $0.0994
Class B NII $0.0624
Class C NII $0.0630
Class Q NII $0.1143
</TABLE>
NII -- Net investment income
Corporate shareholders are generally entitled to take the dividend received
deduction on the portion of a Funds' dividend distribution that qualifies under
tax law. The percentage of fiscal year 1999 net investment income dividends that
qualify for the corporate dividend received deduction is 3.88%, for the
Strategic Income Fund.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investments in the Funds. In January 2000,
shareholders, excluding corporate shareholders, will receive an IRS Form 1099
DIV regarding the federal tax status of the dividends and distributions received
by you in calendar 1999.
136
<PAGE>
Investment Manager
PILGRIM INVESTMENTS, INC.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Distributor
PILGRIM SECURITIES, INC.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Shareholder Servicing Agent
PILGRIM GROUP, INC.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Transfer Agent
DST SYSTEMS, INC.
P.O. Box 419368
Kansas City, Missouri 64141-6368
Custodian
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania
Kansas City, Missouri 64105
Legal Counsel
DECHERT PRICE & RHOADS
1775 Eye Street, N.W.
Washington, D.C. 20006
Independent Auditors
KPMG LLP
725 South Figueroa Street
Los Angeles, California 90017
Prospectuses containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling PILGRIM SECURITIES, INC.
DISTRIBUTOR AT 1-800-334-3444. Please read the prospectuses carefully before you
invest or send money.
PFANNQ0699-083099
