PILGRIM (R)
---------------------------
FUNDS FOR SERIOUS INVESTORS
Annual Report
Classes: A, B, C, M and T
June 30, 2000
U.S. EQUITY FUNDS
Pilgrim MagnaCap
Pilgrim LargeCap Leaders
Pilgrim LargeCap Growth
Pilgrim MidCap Value
Pilgrim MidCap Growth
Pilgrim SmallCap Growth
Pilgrim Bank and Thrift
INTERNATIONAL EQUITY FUNDS
Pilgrim Worldwide Growth
Pilgrim International Core Growth
Pilgrim International SmallCap Growth
Pilgrim Emerging Countries
Pilgrim Asia-Pacific Equity
INCOME FUNDS
Pilgrim Government Securities Income
Pilgrim Strategic Income
Pilgrim High Yield
Pilgrim High Yield II
Pilgrim Money Market
EQUITY & INCOME FUNDS
Pilgrim Balanced
Pilgrim Convertible
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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 .............................................. 16
Income Funds ............................................................ 26
Equity & Income Funds ................................................... 36
Index Descriptions ........................................................ 40
Report of Independent Auditors ............................................ 43
Statements of Assets and Liabilities ...................................... 44
Statements of Operations .................................................. 52
Statements of Changes in Net Assets ....................................... 56
Financial Highlights ...................................................... 66
Notes to Financial Statements ............................................. 85
Portfolios of Investments ................................................. 109
Shareholder Meetings ...................................................... 153
Tax Information ........................................................... 154
Primary Institutional Fund ................................................ 156
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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 the Pilgrim Funds. On October
29, 1999 Reliastar Financial Corporation acquired Pilgrim Investments, Inc.
Our fund family now has 41 funds of varying types which provide more core
investment choices for the serious investor. There are seven U.S. Equity Funds,
five International Equity Funds, five Income Funds and two Equity & Income Funds
which are included in this Annual Report. MagnaCap, LargeCap Leaders, MidCap
Value, MidCap Growth, SmallCap Growth, MidCap Value, Bank and Thrift, Government
Securities Income, Strategic Income, High Yield, High Yield II and Balanced
Funds are all managed by seasoned investment professionals at Pilgrim
Investments, Inc. Money Market Fund solely invests all of its assets in Class A
shares of the Primary Reserve Institutional Fund, a series of Reserve
Institutional Trust. On July 31, 2000, Pilgrim Investments, Inc. notified
Nicholas-Applegate Capital Management ("NACM") of its intention to terminate
NACM as sub-advisor to the Convertible fund, LargeCap Growth Fund, Worldwide
Growth Fund, International Core Growth Fund and Emerging Countries Fund
effective September 30, 2000. Beginning October 1, 2000, Pilgrim Investments,
Inc. will advise the Funds directly. International SmallCap Growth Fund
continues to be managed by Nicholas-Applegate Capital Management. Asia-Pacific
Equity Fund is advised by HSBC Asset Management Americas, Inc. and HSBC Asset
Management Hong Kong Limited. Both of these private money managers typically
manage portfolios primarily for high net worth individuals and institutional
investors. 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.(SM)
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim Group, Inc.
July 31, 2000
1
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U.S. Equity
Funds
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Portfolio
PILGRIM MAGNACAP FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Howard N. Kornblue, Senior Vice President and Senior Portfolio
Manager; G. David Underwood, CFA, Vice President and Director of Research;
Robert M. Kloss, Equity Analyst.
Goal: The MagnaCap Fund (the "Fund" or "MagnaCap") seeks growth of capital, with
dividend income as a secondary consideration. As a disciplined investment
philosophy fund, MagnaCap invests in a very select group of companies that have
been able to sustain growth over a 10-year period. In selecting portfolio
securities, companies are generally assessed with reference to the following
criteria as ideal:
* A company must have paid or had the financial capability from its
operations to have paid a dividend in 8 out of the last 10 years.
* A company must have increased its dividend or had the financial capability
from its operations to have increased its dividend at least 100% over the
past 10 years.
* Dividend payout must be less than 65% of current earnings.
* Long-term debt should be no more than 25% of the company's total
capitalization, or a company's bonds must be rated at least A- or A-3.
* The current price should be in the lower half of the stock's price/earnings
ratio range for the past ten years, or the ratio of the price of the
company's stock at the time of purchase to its anticipated future earnings
must be an attractive value in relation to the average for its industry
peer group or that of the S&P 500 Composite Stock Price Index.
Market Overview: Stocks finished the second quarter with losses in all the major
indexes. The S&P 500 Index finished the second quarter down 2.9%, while the Dow
Jones Industrial Average lost 4.3%. After reaching a record on March 10 of
5,049, the Nasdaq Composite Index fell 37% to 3,165 on May 23. Ultimately, the
technology-heavy composite finished at 3,966, down 607, or 13.3%, for the second
quarter. The index had a particularly strong June, increasing 16.6% -- the fifth
best month in the Nasdaq' history. Leading the way higher in the broader market
in the second quarter were drug stocks, and consumer and food stocks. Merger
agreements struck by Bestfoods and Nabisco helped bolster the whole food sector.
The vastly different picture on the technology side of the market also
encompassed telecommunications stocks, with AT&T, Ericsson and Motorola coming
in as some of the biggest decliners. The market focused on earnings. One of the
biggest drivers of the stock market has been corporate earnings
preannouncements. Surprises on the profit front have roiled whole sectors of the
stock market. On June 28 the Federal Reserve Bank decided to hold the line on
interest rates, choosing to pause after raising them six times since last June.
The central bank's decision came amid signs the U.S. economy is slowing. As a
result, the federal funds rate remained at 6.5%, the highest level in nine
years. Over the last year, the Federal Reserve Bank has been boosting interest
rates in an effort to slow the economy and keep inflation from escalating. They
are seeking to achieve a "soft landing" in which growth slows enough to keep
inflation under control but not so much that it threatens the country's record
9.5 year economic expansion.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, declined 0.36%, compared to the Standard & Poor's 500
index, which gained 7.24% for the same period.
Portfolio Specifics: We believe that the Fund's past success can be attributed
to the very explicit investment criteria which normally determine the kinds of
companies that qualify for inclusion in the portfolio. Out of a universe of
approximately 4,000 publicly traded companies, and based upon both in-house and
external research, we aim to select the 60 to 80 equities which we believe will
be most likely to exhibit a high degree of performance. Among the top performing
holdings were Altera (semiconductors), Intel (semiconductors), Alliance Capital
Management (financial services), Hewlett-Packard (computers), and Disney
(entertainment). At the end of June 2000, the top industry groups were
diversified manufacturing, medical products, intergrated oil, telephone, and
computers. The top stock holdings were AFLAC, Johnson & Johnson, McDonalds,
General Electric and Tellabs.
Market Outlook: Going forward, we will continue to employ a "bottom-up" approach
to stock selection, drawing from the pool of companies that come closest to
meeting the Fund's strict investment criteria given market conditions, the
circumstances of the company and the sector within which it falls. The bull
market in U.S. stocks is in its ninth year. It has been firmly based on
extraordinary changes in the economy that have given us the longest economic
expansion in U.S. history. This bull market has been one of the best in U.S.
history and we believe it is likely to continue for several reasons. First, the
economic expansion that has propelled stock prices higher has been one of the
most durable. It has been accompanied by mild inflation, job creation and
high-quality profit growth. Second, the current economic and market cycles have
benefited from several long-term structural changes. This includes a notable
reduction in the government's budget deficit. There has also been a shift to a
more sophisticated, technology driven private sector that has spurred widespread
productivity gains, which offers new opportunities for growth and jobs. Most
bull markets end when stocks are overpriced. However, it has traditionally been
extremely difficult to identify the degree of overpricing at which any
particular bull market will end. We believe stock prices can continue to rise
selectively in 2000 in concert with improvements in corporate earnings and cash
flows. Accordingly, we intend to remain almost fully invested, selecting stocks
on the basis described at the beginning of this paragraph.
2
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Portfolio
Manager's Report PILGRIM MAGNACAP FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------- ---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim MagnaCap Fund
Class A With Sales Charge 10,000 9,912 11,095 1,2006 13,102 15,803 19,170 25,077 30,225 35,039 34,914
Pilgrim MagnaCap Fund
Class A Without Sales Charge 10,000 10,521 11,777 12,744 13,907 16,774 20,348 26,619 32,083 37,192 37,060
S&P 500 Index 10,000 10,739 12,180 13,840 14,035 17,693 22,294 30,029 39,087 47,982 51,458
Average Annual Total Returns for the periods ended June 30, 2000
--------------------------------------------------------------------------
Since Inception Since Inception
of Class A, B and M of Class C
1 Year 5 Years 10 Years 7/17/95 6/1/99
------ ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Including Sales Charge:
Class A (1) -6.09% 15.79% 13.32% -- --
Class B (2) -6.11% -- -- 15.99% --
Class C (3) -2.17% -- -- -- 2.64%
Class M (4) -4.18% -- -- 15.70% --
Excluding Sales Charge:
Class A -0.36% 17.18% 14.00% -- --
Class B -1.11% -- -- 16.22% --
Class C -1.17% -- -- -- 2.64%
Class M -0.71% -- -- 16.54% --
S&P 500 Index 7.24% 23.80% 17.80% 23.43%(5) 12.12%
</TABLE>
Based upon a $10,000 intitial investment, the graph and table above illustrate
the total return of Pilgrim MagnaCap Fund against the Standard & Poor's 500
Composite Stock Price Index. The Index has an inherent performance advantage
over the Fund since it has no cash in its portfolio, imposes no sales charges
and incurs no operating expenses. An investor cannot invest directly in an
index. The Fund's performance is shown both with and without the imposition of
the sales charges.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Reflects deduction of the maximum Class M sales charge of 3.50%.
(5) Since inception performance for the index is shown from 8/01/95.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on pages 40 and 41.
3
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U.S. Equity
Funds
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Portfolio
PILGRIM LARGECAP LEADERS FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: G. David Underwood, CFA, Senior Vice President and Senior
Portfolio Manager; Robert M. Kloss, Equities Research Analyst.
Goal: The LargeCap Leaders Fund (the "Fund" or "LargeCap Leaders") seeks
long-term capital appreciation by investing in a portfolio of stocks of U.S.
companies with market capitalizations over $10 billion and believed to be
leaders in their industry.
Market Overview: During the 12-month period ended June 30, 2000, the U.S. equity
market was characterized by:
* Volatile stock prices.
* Speculative excesses, followed by corrective sell-offs.
* Continued narrowing of both the number of stocks and the number of groups
influencing market performance.
Heightened volatility punctuated the equity markets over the past year.
Sentiment swung from positive to speculative to cautionary following in step
with investors perceptions of economic recovery, expansion and then impending
slowdown. At period end, the major indices appeared to have gone nearly nowhere,
although those of the smaller stocks held on to substantial gains.
Initially, market participants still felt very positive that a global recession
did not develop from earlier economic crises in Asia, Latin America and Europe.
Solid economic growth in the U.S. helped as well. The broad market S&P 500
advanced to a then new high in July 1999, lost it over the subsequent quarter,
and surged in late 1999. It repeated a similar pattern through the first half of
2000. Mid-sized and smaller stocks echoed this pattern, although
mid-capitalization stocks managed to hold more of their gains through June 2000.
Rising interest rates over the past year were a major factor in causing market
volatility. With the world having moved past its post-crisis healing and
economic recovery more sustained, monetary policy shifted toward controlling
inflation. To policymakers, the U.S. economy was vulnerable to inflation. The
Federal Reserve Bank therefore instituted a series of interest rate increases to
tighten monetary policy. Nonetheless, the U.S. economy grew relentlessly but
remained non-inflationary. The markets tended to sell off in anticipation of
each of rate increase. Affected most were stocks of companies more sensitive to
the economy, which investors traded in to and out of. But investors took prices
of technology stocks to extremes in Fourth Quarter, 1999 and again in early
2000, thinking these companies would grow through any downturn. As with any
market euphoria, the corrective phases were sharp. Testimony to the narrowness
of the market, five companies, four of which are technology, were primarily
responsible for the S&P 500 Index's return over the past year.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 3.05% versus -5.12% for the
S&P/BARRA Value Index and 7.24% for the S&P 500 Index.
Portfolio Specifics: Timely sector allocation, a disciplined portfolio
management approach and good stock selection for the produced solid equity
performance in the Fund. The Technology, Healthcare and Retailing sectors had
the most positive influence. Holdings in Texas Instruments, Warner Lambert and
Walgreens appreciated nicely.
Market Outlook: Though still challenged by interest rates, market conditions
should continue to be favorable for equity investment. Growth of corporate
profits remains on track and valuations have become more reasonable.
4
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Portfolio
Manager's Report PILGRIM LARGECAP LEADERS FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8/31/95 6/96 6/97 6/98 6/99 6/30/00
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Pilgrim LargeCap Leaders Fund
Class A With Sales Charge 10,000 11,269 13,888 16,348 19,725 20,326
Pilgrim LargeCap Leaders Fund
Class A Without Sales Charge 10,000 11,956 14,735 17,345 20,928 21,566
S&P 500 Index 10,000 12,165 16,386 21,329 26,183 28,079
S&P Barra/Value Index 10,000 11,962 15,658 19,591 22,832 21,666
</TABLE>
Average Annual Total Returns for
the Periods Ended June 30, 2000
-----------------------------------------------
Since Inception Since Inception
of Class A, B and M of Class C
1 Year 9/1/95 6/17/99
------ ------ -------
Including Sales Charge:
Class A (1) -2.88% 15.78% --
Class B (2) -2.70% 16.10% --
Class C (3) 1.30% -- 4.47%
Class M (4) -1.05% 15.78% --
Excluding Sales Charge:
Class A 3.05% 17.21% --
Class B 2.30% 16.33% --
Class C 2.30% -- 4.47%
Class M 2.54% 16.63% --
S&P 500 Index 7.24% 23.81% 7.24%(5)
S&P/BARRA Value Index -5.12% 17.27%(6) -4.19%
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim LargeCap Leaders Fund against the S&P 500 Index and the
S&P/Barra Value Index. The Indices have an inherent performance advantage over
the Fund since they have no cash in their portfolios, impose no sales charges
and incur no operating expenses. An investor cannot invest directly in an index.
The Fund's performance is shown both with and without the imposition of sales
charges.
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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Reflects deduction of the maximum Class M sales charge of 3.50%.
(5) Since inception performance for the index is shown from 07/01/99.
(6) Since inception performance for the index is shown from 08/31/95.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on pages 40 and 41.
5
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U.S. Equity
Funds
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Portfolio
PILGRIM LARGECAP GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Chief Investment Officer; Andrew B.
Gallagher, Partner, Portfolio Manager; William H. Chenoweth, CFA, Partner,
Portfolio Manager; Kenneth H. Lee, Portfolio Manager; Trisha C. Schuster, CFA,
Portfolio Manager; Evan C. Lundquist, Portfolio Manager; Michael P. Carroll,
Portfolio Manager; Thomas J. Smith, CFA, Investment Analyst; Lianne Nelson,
Investment Analyst.
Goal: The Large Cap Growth Fund (the "Fund" or "Large Cap Growth") seeks to
maximize long-term capital appreciation by investing primarily in stocks from a
universe of US companies with market capitalizations corresponding to the upper
90% of the Russell 1000 Growth Index.
Market Overview: Despite rising interest rates and market volatility, strong
corporate profits and investor confidence in the durability of the economic
expansion propelled US stocks higher during the fiscal year. For the twelve
months ended June 30, 2000, the S&P 500 Index rose 7.2% and the tech-heavy
Nasdaq Composite Index advanced 47.7%.
Most of the market's gains were concentrated in the fourth quarter of 1999 and
the first quarter of 2000 when the S&P 500 Index and Nasdaq increased 17.5% and
66.5%, respectively. Concerns over rising interest rates and the threat of
inflation sent equities lower in the third quarter of 1999. These same factors,
along with worries over lofty valuations among technology stocks, negatively
impacted equity performance in the second quarter of 2000.
In response to booming GDP growth, the Federal Reserve Bank raised short-term
interest rates a total of 1.75% on six separate occasions from June 1999 through
May 2000. Renewed optimism that the Federal Reserve Bank may be close to
completing its round of rate hikes drove equity prices higher in June 2000.
During the month, most US stock indexes posted gains, led by the Nasdaq, which
was up 16.6%.
Growth stocks substantially outperformed value stocks this period, mainly due to
strength in the technology sector. The Russell 1000 Growth Index advanced 25.7%
during the twelve months ended June 30, 2000 while the Russell 1000 Value Index
declined 8.9%. This was a continuation of 1999 when the difference between the
Russell 1000 Growth and Russell 1000 Value indexes was 25.8%--the largest
performance divergence ever recorded for any single calendar year.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 55.35%, significantly
outperforming the Russell 1000 Growth Index, which was up 25.67% for the same
period.
Portfolio Specifics: The Fund's outperformance during the period was primarily
attributable to stock selection in the technology and health technology sectors.
Among the Fund's top-performing holdings were semiconductor equipment
manufacturer Applied Materials, software developer Oracle Corporation,
telecommunications equipment providers Qualcomm and Nokia, and biotechnology
companies Genentech and Amgen. As of June 30, 2000, 54.7% of the Fund's assets
were in technology stocks, comparable to the 55.0% weighting of its Russell 1000
Growth Index benchmark.
Market Outlook: Robust corporate earnings, strong cash flows into mutual funds,
and optimism that the Federal Reserve Bank series of rate increases has started
to cool the overheated US economy provide a positive backdrop for large-cap
growth stocks. In addition, market volatility and the recent technology
correction have created a more discriminating environment-one that is conducive
to our bottom-up, fundamentally driven investment process.
6
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Portfolio
Manager's Report PILGRIM LARGECAP GROWTH FUND
--------------------------------------------------------------------------------
7/21/97 6/98 6/99 6/30/00
------- ---- ---- -------
Pilgrim LargeCap Growth Fund
Class A With Sales Charge 10,000 12,810 21,842 33,919
Pilgrim LargeCap Growth Fund
Class A Without Sales Charge 10,000 13,589 23,170 35,981
Russell 1000 Growth Index 10,000 12,072 15,363 19,306
Average Annual Total Returns for
the periods ended June 30, 2000
--------------------------------
Since Inception
1 Year 7/21/97
------ -------
Including Sales Charge:
Class A (1) 46.42% 51.29%
Class B (2) 50.37% 52.92%
Class C (3) 53.38% 53.37%
Excluding Sales Charge:
Class A 55.35% 54.35%
Class B 55.37% 53.37%
Class C 54.38% 53.37%
Russell 1000 Growth Index 25.67% 25.30%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the Index is shown from 8/1/97.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on pages 40 and 41.
7
<PAGE>
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U.S. Equity
Funds
-----------
Portfolio
PILGRIM MIDCAP VALUE FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: G. David Underwood, CFA, Senior Vice President and Senior
Portfolio Manager; Robert M. Kloss, Equities Research Analyst.*
Goal: The MidCap Value Fund (the "Fund" and "MidCap Value") seeks long-term
capital appreciation by investing in a portfolio of attractively valued stocks
of U.S. companies with market capitalizations between $1.0 billion and $8.0
billion.
Market Overview: During the 12-month period ended June 30, 2000, the U.S.
equity market was characterized by:
* Volatile stock prices.
* Speculative excesses, followed by corrective sell-offs.
* Continued narrowing of both the number of stocks and the number of groups
influencing market performance.
Heightened volatility punctuated the equity markets over the past year.
Sentiment swung from positive to speculative to cautionary following in step
with investors perceptions of economic recovery, expansion and then impending
slowdown. At period end, the major indices appeared to have gone nearly nowhere,
although those of the smaller stocks held on to substantial gains.
Initially, market participants still felt very positive that a recession did not
develop from earlier economic crises in Asia, Latin America and Europe. Solid
growth in the U.S. helped as well. The broad market S&P 500 Index advanced to a
then new high in July 1999, lost it over the subsequent quarter, and surged at
year-end. It repeated the pattern in the first half of 2000. Mid-sized and
smaller stocks echoed this pattern, although mid-capitalization stocks managed
to hold their gains through June 2000.
Rising interest rates over the past year were a major factor in market
volatility. With the world having moved past its post-crisis healing and
economic recovery sustained, monetary policy shifted toward controlling
inflation. The U.S. economy was vulnerable to inflation, leading the Federal
Reserve Bank to institute a series of interest rate increases to tighten
monetary policy. Nonetheless, the U.S. economy grew relentlessly but remained
non-inflationary. The markets tended to sell off in anticipation of each of the
rate increases. Affected most were stocks of companies more sensitive to the
economy, which investors traded in to and out of. But investors took prices of
technology stocks to extremes in Fourth Quarter, 1999 and again in early 2000,
thinking these companies would grow through any downturn. As with any market
euphoria, the corrective phases were sharp. Testimony to the narrowness of the
market, five companies, four of which are technology, were primarily responsible
for the S&P 500 Index's return over the past year.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
exlcuding sales charges, declined 8.05% versus an increase of 12.64% for the
Russell MidCap Index and a decline of 7.91% for the Russell MidCap Value Index.
Portfolio Specifics: The Telecommunications, Consumer Noncyclicals and Health
Care sectors assisted fund performance the most. Holdings in Champion
International, Convergys, Bausch & Lomb andd Republic Services were major
factors.
Market Outlook: Though still challenged by interest rates, market conditions
should continue to be favorable for equity investment. Growth of corporate
profits remains on track and valuations have become more reasonable.
* Effective October 1, 1999 Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Cramer, Rosenthal, McGynn LLC.
8
<PAGE>
Portfolio
Manager's Report PILGRIM MIDCAP VALUE FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8/31/95 6/96 6/97 6/98 6/99 6/30/00
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Pilgrim MidCap Value Fund
Class A With Sales Charge 10,000 11,355 14,068 16,657 16,816 15,462
Pilgrim MidCap Value Fund
Class A Without Sales Charge 10,000 12,048 14,926 17,673 17,841 16,406
Russell MidCap Index 10,000 11,506 14,148 17,685 19,685 22,172
Russell MidCap Value Index 10,000 11,508 14,727 18,519 19,560 18,014
</TABLE>
Average Annual Total Returns for
the Periods Ended June 30, 2000
-----------------------------------------------
Since Inception Since Inception
of Class A, B and M of Class C
1 Year 9/1/95 6/2/99
------ ------ ------
Including Sales Charge:
Class A (1) -13.33% 9.42% --
Class B (2) -13.81% 9.63% --
Class C (3) -9.75% -- -6.07%
Class M (4) -11.70% 9.37% --
Excluding Sales Charge:
Class A -8.05% 10.77% --
Class B -8.81% 9.92% --
Class C -8.75% -- -6.07%
Class M -8.49% 10.17% --
Russell MidCap Index 12.64% 17.91% 15.24%(5)
Russell MidCap Value Index -7.91% 12.95% -6.35%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim MidCap Value Fund against the Russell Midcap Index and
Russell MidCap Value Index. The Indices have an inherent performance advantage
over the Fund since they have no cash in their portfolio, impose no sales
charges and incur no operating expenses. An investor cannot invest directly in
an index. The Fund's performance is shown both with and without the imposition
of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Reflects deduction of the maximum Class M sales charge of 3.50%.
(5) Since inception performance for index is shown from 06/01/99.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. To the extent the Fund invests in medium-sized
companies, it may entail greater price variability than investing in larger
companies.
See accompanying index descriptions on pages 40 and 41.
9
<PAGE>
-----------
U.S. Equity
Funds
-----------
Portfolio
PILGRIM MIDCAP GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Management: Mary Lisanti, Executive Vice President and Portfolio Manager.*
Goal: The MidCap Growth Fund (the "Fund" or "MidCap Growth") seeks long-term
capital appreciation by investing at least 65% of its total assets in equity
securities of medium-sized U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio managers feel have above average prospects
for growth.
Market Overview: The first half of 2000 was a particularly difficult time to
navigate the financial markets, as volatility reached all-time highs for all
major stock indices. Stock performance varied greatly across economic sectors,
as well as across small, mid, and large-cap equities. All of the major indices
reached record highs in the first three months of the year, but they went
through a quick, sharp correction early in the second quarter. Bonds were just
as erratic as the stock market, as investors struggled to analyze the
conflicting influences of the Federal Reserve Bank, the massive repurchase of US
treasury debt, and the highest level of oil prices in a decade. However, the
overriding theme was the Federal Reserve Bank acting to curb the continued
strong growth of the US economy by moving short term interest rates higher.
In the first six months of the year, technology and telecommunications shares
drove the market volatility. After recording spectacular gains in January and
February, these "new economy" stocks corrected quickly as investors sought
protection from a slowing economy and an aggressive Federal Reserve Bank. In
this environment, healthcare stocks provided an excellent defensive investment,
as the managed care and pharmaceutical sectors outperformed the market.
Biotechnology was more volatile than the rest of the healthcare sector, but
these stocks staged a significant rally over the final six weeks of the quarter.
At the same time, energy and utilities provided support to a market that has
become biased against high-growth, high-beta stocks.
Despite the record levels achieved at the outset of the year, 2000 has been a
difficult time for investors. All of the major large cap benchmarks are in
negative territory for the year, with the Dow Jones Industrials Index having the
worst performance, dropping 9.13% through June. After reaching another record in
March, the NASDAQ Composite Index fell into negative territory and has now lost
2.54% in 2000, while the S&P 500 Index has fallen 0.42%. However, small and
mid-cap stocks have been the best performers for the year, with the Russell 2000
Index gaining 3.04% and the S&P Midcap Index jumping 8.98%.
Performance: For the one year ended June 30, the Fund's Class A shares,
excluding sales charges, provided a total return of 77.33% versus 48.60% for the
Russell Midcap Growth Index for the same period.
Portfolio Specifics: The Fund invests in high-growth, high-beta stocks, which
were extremely volatile during the period, but the portfolio has been
diversified substantially since the beginning of the year to reflect our view
that the economy would slow in a rising interest rate environment. While
exposure to technology stocks remains significant, it is clearly more selective,
and the Fund continued to increase weightings in themes such as "Flourishing in
the Managed Care Environment," the "Life Sciences Revolution," and
"Re-Energizing America." We also used the volatility in the market to add to or
enter into new positions in the portfolio.
Some of the individual stocks that were significant contributors to performance
in the first half of 2000 were Brocade Communications, Mercury Interactive,
Siebel Systems and Waters Corp.
Market Outlook: We expect that the Federal Reserve Bank's six rate increases
will slow the US economy, creating a more challenging backdrop for investors in
the remainder of 2000. The market has already started to broaden from the
technology and telecommunications driven market of late 1999 and the first
quarter of this year. However, this broadening will create a "market of stocks"
as opposed to a "stock market," where company performance will vary
significantly within specific industries. Competitive positioning and business
strategies will differentiate companies, as they deal with secular changes such
as globalization and the Internet.
Companies will not be treated equally in the slowing US economy, and the stock
market will do the same, creating significant opportunities for active portfolio
managers to outperform their benchmarks. The ability to identify companies with
consistent earnings growth will be essential to steering through the current
economic environment. By blending bottoms-up research and a top-down thematic
approach, we believe that we will be able to identify stocks that will flourish
in the changing economy. At the same time, we will continue to seek to exploit
the market volatility to our investors' advantage, using weakness to accumulate
or add to positions opportunistically.
----------
* Effective April 1, 2000 Pilgrim Investments, Inc. began providing
investment advisory services directly for the Fund. Prior to that date the
Fund had been sub-advised by Nicholas Applegate Capital Management.
10
<PAGE>
Portfolio
Manager's Report PILGRIM MIDCAP GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim MidCap Growth Fund
Class A With Sales Charge 10,000 10,234 9,429 11,418 14,994 15,822 19,656 24,597 43,616
Pilgrim MidCap Growth Fund
Class A Without Sales Charge 10,000 10,856 10,002 12,112 15,906 16,784 20,851 26,092 46,268
Russell MidCap Growth Index 10,000 10,429 10,646 13,459 16,633 19,560 24,257 29,184 43,366
Average Annual Total Returns for
the Periods Ended June 30, 2000
-------------------------------------------------------------
Since Inception Since Inception
of Class A and C of Class B
1 Year 5 Year 4/19/93 5/31/95
------ ------ ------- -------
Including Sales Charge:
Class A (1) 67.13% 29.20% 22.70% --
Class B (2) 71.28% 29.81% -- 31.08%
Class C (3) 75.18% 29.98% 22.95% --
Excluding Sales Charge:
Class A 77.33% 30.74% 23.71% --
Class B 76.28% 29.95% -- 31.15%
Class C 76.18% 29.98% 22.95% --
Russell MidCap Growth Index 48.60% 26.37% 22.72%(4) 26.99%(5)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim MidCap Growth Fund against the Russell MidCap Growth
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 5/01/93.
(5) Since inception performance for the index is shown form 06/01/95.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. To the extent the Fund invests in mid-size companies,
stocks of mid-size companies may entail greater price variability than those of
larger companies.
See accompanying index descriptions on pages 40 and 41.
11
<PAGE>
-----------
U.S. Equity
Funds
-----------
Portfolio
PILGRIM SMALLCAP GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager.
Goal: The SmallCap Growth Fund (the "Fund" or "SmallCap Growth") seeks maximum
long-term capital appreciation by investing at least 65% of its total assets in
equity securities of small U.S. companies, and at least 75% of its total assets
in common stocks that the portfolio manager feels have above average prospects
for growth.
Market Overview: The first half of 2000 was a particularly difficult time to
navigate the financial markets, as volatility reached all-time highs for all
major stock indices. Stock performance varied greatly across economic sectors,
as well as across small, mid, and large-cap equities. All of the major indices
reached record highs in the first three months of the year, but they went
through a quick, sharp correction early in the second quarter. Bonds were just
as erratic as the stock market, as investors struggled to analyze the
conflicting influences of the Federal Reserve Bank, the massive repurchase of US
treasury debt, and the highest level of oil prices in a decade. However, the
overriding theme was the Federal Reserve Bank acting to curb the continued
strong growth of the US economy by moving short term interest rates higher.
In the first six months of the year, technology and telecommunications shares
drove the market volatility. After recording spectacular gains in January and
February, these "new economy" stocks corrected quickly as investors sought
protection from a slowing economy and an aggressive Federal Reserve Bank. In
this environment, healthcare stocks provided an excellent defensive investment,
as the managed care and pharmaceutical sectors outperformed the market.
Biotechnology was more volatile than the rest of the healthcare sector, but
these stocks staged a significant rally over the final six weeks of the quarter.
At the same time, energy and utilities provided support to a market that has
become biased against high-growth, high-beta stocks.
Despite the record levels achieved at the outset of the year, 2000 has been a
difficult time for investors. All of the major large cap benchmarks are in
negative territory for the year, with the Dow Jones Industrials having the worst
performance, dropping 9.13% through June. After reaching another record in
March, the NASDAQ Composite Index fell into negative territory and has now lost
2.54% in 2000, while the S&P 500 Index has fallen 0.42%. However, small and
mid-cap stocks have been the best performers for the year, with the Russell 2000
Index gaining 3.04% and the S&P Midcap Index jumping 8.98%.
Performance: For the one year ended ended June 30, 2000 the Funds Class A
shares, excluding sales charges, provided a total return of 60.66% versus 28.39%
for the Russell 2000 Growth Index for the same period.
Portfolio Specifics: The Fund invests in high-growth, high-beta stocks, which
were very volatile during the period, but the portfolio has been diversified
substantially since the beginning of the year to reflect our view that the
economy would slow in response to rising interest rates. While our allocation
towards technology stocks remains significant, it is more selective, and the
rest of the Fund has continued to diversify into themes such as "Flourishing in
the Managed Care Environment," the "Life Sciences Revolution," and
"Re-Energizing America." We also used the volatility in the market to add to or
enter into new positions in the portfolio.
Some of the individual stocks that were significant contributors to performance
in the first half of 2000 were Alkermes, Digital Lightwave, Power-One, and
Virata Corp.
Market Outlook: We expect that the Federal Reserve Bank's six rate increases
will slow the US economy, creating a more challenging backdrop for investors in
the remainder of 2000. The market has already started to broaden from the
technology and telecommunications driven market of late 1999 and the first
quarter of this year. However, this broadening will create a "market of stocks"
as opposed to a "stock market," where company performance will vary
significantly within specific industries. Competitive positioning and business
strategies will differentiate companies, as they deal with secular changes such
as globalization and the Internet.
Companies will not be treated equally in the slowing US economy, and the stock
market will do the same, creating significant opportunities for active portfolio
managers to outperform their benchmarks. The ability to identify companies with
consistent earnings growth will be essential to steering through the current
economic environment. By blending bottoms-up research and a top-down thematic
approach, we believe that we will be able to identify stocks that will flourish
in the changing economy. At the same time, we will continue to seek to exploit
the market volatility to our investors' advantage, using weakness to accumulate
or add to positions opportunistically.
12
<PAGE>
Portfolio
Manager's Report PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/27/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim SmallCap Growth Fund
Class A With Sales Charge 10,000 8,439 10,958 14,810 15,509 17,718 21,287 34,200
Pilgrim SmallCap Growth Fund
Class A Without Sales Charge 10,000 8,952 11,624 15,710 16,452 18,795 22,581 36,279
Russell 2000 Growth Index 10,000 8,991 11,313 14,310 14,969 16,944 18,349 23,558
Average Annual Total Returns for the Periods Ended June 30, 2000
-----------------------------------------------------------------
Since Inception Since Inception
of Class A and C of Class B
1 Year 5 Year 12/27/93 5/31/95
------ ------ -------- -------
Including Sales Charge:
Class A (1) 51.42% 24.08% 20.79% --
Class B (2) 54.68% 24.47% -- 26.12%
Class C (3) 58.67% 24.77% 21.13% --
Excluding Sales Charge:
Class A 60.66% 25.56% 21.89% --
Class B 59.68% 24.64% -- 26.19%
Class C 59.67% 24.77% 21.13% --
Russell 2000 Growth Index 28.39% 15.80% 14.09%(4) 17.05%(5)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim SmallCap Growth Fund against the Russell 2000 Growth
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 1/1/94.
(5) Since inception performance for index is shown from 6/1/95.
Principal Risk Factor(s): In exchange for higher growth potential, stocks of
smaller companies may entail greater price variability than those of larger
companies.
See accompanying index descriptions on pages 40 and 41.
13
<PAGE>
-----------
U.S. Equity
Funds
-----------
Portfolio
PILGRIM BANK AND THRIFT FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Carl Dorf, CFA, Senior Vice President and Senior Portfolio
Manager; Steven L. Rayner, CFA, CPA, Equity Research Analyst; Julia Hamilton,
Junior Research Analyst.
Goal: The Bank and Thrift Fund (the "Fund" or "Bank and Thrift") seeks long-term
capital appreciation with income as a secondary objective. The Fund invests at
least 65% of its total assets in equity securities of national and
state-chartered banks (other than money-center banks), thrifts, or their holding
companies, and in savings accounts of mutual thrifts that may allow the Fund to
participate in stock conversions of the mutual thrift.
Market Overview: Financial stocks continued to underperform the overall market
during the twelve months ended June 30, 2000. This sector has performed poorly
for about two and a half years following five excellent years of performance. On
June 30, 1999 the Federal Reserve Bank increased the Federal Reserve Bank rate
by 25 basis points, beginning a series of six rate increases totaling 1.75%
during this twelve month period, the most recent on May 16, 2000. This
environment of monetary tightening meant financial stocks had to swim against
the current as investors worried about how much the Federal Reserve Bank would
ultimately increase rates and what impact this would have on financial
companies. During this period, financial stocks as a group were largely driven
by changes in inflationary expectations, as the market constantly assessed the
likelihood of further Federal Reserve Bank rate increases. Financial stocks
generally underperformed the broader market on days when economic news hinted at
inflationary pressures due to a stronger economy and outperformed on days when
economic news indicated a weaker economy and subdued inflation. After several
rallies and slides during the year, the financial group peaked in early June,
then sold off and gave back its gains, as credit quality concerns became more
prominent in June when several regional banks pre-announced earnings shortfalls
due to increases in problem loans.
Performance: For the one year ended June 30, 2000 the Fund's Class A shares,
excluding sales charges, declined 22.4%, compared to declines of 22.1% for the
S&P Regional Bank Index and 23.5% for the NASDAQ 100 Financials Index. The
financial sector underperformed the broader market indices during this period as
the Dow Jones Industrials Index declined 3.3% and the S&P 500 Index rose 7.2%.
Portfolio Specifics: Our Fund followed its typical historical pattern of
generally outperforming the bank index during tougher stretches while lagging
somewhat during periods of macro-driven strength in the group. In April, our
performance was helped by three acquisitions of companies we owned in the Fund:
First United Bancshares, BSB Bancorp, and Highland Bancorp. This is the kind of
consolidation activity that we have long been awaiting. We feel that the
relative valuations of potential acquisition candidates among many small and mid
cap banks have not responded to this consolidation news, creating an opportunity
to add to some of our smaller cap holdings at attractive valuations. Credit
quality, particularly in the nationally syndicated loan area, has become a major
concern and has resulted in weakness in the bank group over the last few weeks.
Disappointing results are often preannounced and June saw several high profile
credit quality warnings, starting with Wachovia Bank. We had seen this coming in
their shifting lending mix and approach and therefore did not own Wachovia Bank
in the Fund. Next to preannounce credit problems was Union Bank of California.
We had previously reduced our position due to its large syndicated loan
exposure, but did not sell fully after it declined to levels that made it appear
inexpensive and fully reflective of the risk in its syndicated portfolio. The
third shoe to fall came from Pacific Century Financial, which preannounced
credit problems in syndicated lending as well as Hawaiian commercial real
estate. This one was a surprise since the Hawaiian economy usually lags behind
the rest of the country and appeared to still be in recovery mode. Problems
should not have surfaced here yet. A fourth shoe to drop was provided by First
Union Bank, which announced a restructuring accompanied by a colossal
restructuring charge. While the market had expected a restructuring from First
Union Bank's new CEO, the sheer size of the charge was a surprise, as was the
extent to which management talked down earnings expectations. The Bank also
disclosed information that implied to us a subtle but disturbing deterioration
in credit quality. Fortunately, we sold our position in First Union Bank earlier
this year due to concerns about credit and earnings quality.
We have always emphasized quality in the Fund and are paying even more attention
to it today. Syndicated lending has become the area to watch out for and we are
doing just that by trying to limit our exposure in companies that have large
syndicated portfolios, especially if they are not the lead managers in a large
percentage of their deals. The best value, in our opinion, is still in the
cleaner small-cap names and we are still adding to existing holdings as well as
adding new names in this area. We have become more comfortable with our thrift
holdings since these companies should have less credit risk, are not involved in
syndicated lending, and stand to benefit most directly when the Federal Reserve
Bank tightening is perceived to have ended.
Market Outlook: The relative valuation of financial stocks, and our Fund in
particular, is quite attractive. The bank group trades at about 46% of the P/E
of the S&P 500 Index, and the average bank and thrift in our Fund trades at a
more attractive 38% relative P/E. We believe selectivity within the financial
sector is especially important at this stage. On balance our outlook on the bank
group is neutral. Banks are facing pressure on several fronts, including a
difficulty growing deposits, which has caused margin pressure, and a tougher
credit environment as higher rates put incremental stress on borrowers. But
despite the existence of these pressures, we feel it is too early to know how
much adversity they will cause for the banks. And banks as a group are very
attractively priced relative to the overall market, so in balancing these
factors we come out neutral toward the group. Our biggest concern is whether or
not the Federal Reserve Bank has already gone too far in raising rates and has
set the stage to push us into a recession. If the Federal Reserve Bank is done
or nearly done raising rates, and successfully engineers a soft landing, we
believe banks and financials will be a very good place to be
14
<PAGE>
Portfolio
Manager's Report PILGRIM BANK AND THRIFT FUND
--------------------------------------------------------------------------------
invested. If the economy sees a modest, but not severe slowdown, we think that
relative to the overall market the banks and financials should perform
reasonably well, given their inexpensive valuations. If the economy falls into a
recession, however, we believe credit losses could rise, which would impair
banks' earnings, rendering current estimates too high and causing the group to
perform poorly. While we believe that the overall market would suffer in such an
environment, we would not argue for relative outperformance by the banks. We do
not believe a recession scenario is likely, but we do not have a crystal ball.
For those investors who do not believe a recession is likely and therefore
choose to be invested in the market, we believe the financial sector, and our
fund in particular, offers attractive value.
<TABLE>
<CAPTION>
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Bank And Thrift Fund
Class A With Sales Charge 10,000 10,825 14,669 17,487 18,148 20,430 26,921 43,961 62,603 57,211 44,373
Pilgrim Bank And Thrift Fund
Class A Without Sales Charge 10,000 11,482 15,560 18,549 19,250 21,671 28,556 46,632 66,406 60,686 47,068
S&P 500 Index 10,000 10,739 12,180 13,840 14,035 17,693 22,294 30,029 39,087 47,982 51,458
S&P Major Regional Banks Index 10,000 11,307 15,586 19,614 23,242 22,707 25,532 52,605 71,143 74,280 57,872
Average Annual Returns for the Periods Ended June 30, 2000
-----------------------------------------------------------
Since Inception
of Class B
1 Year 5 Year 10 Year 10/17/97
------ ------ ------- --------
Including Sales Charge:
Class A (1) -26.90% 15.41% 16.07% --
Class B 2) -28.00% -- -- -7.56%
Excluding Sales Charge:
Class A -22.44% 16.78% 16.75% --
Class B -23.00% -- -- -6.75%
S&P 500 Index 7.25% 23.77% 17.76% 20.64%(3)
S&P Major Regional Banks Index -22.09% 17.76% 17.95% -0.33%(3)
NASDAQ 100 Financial Index -23.49% 13.08% N/A -4.10%(3)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim Bank and Thrift Fund against the S&P 500 Index and the
S&P Major Regional Banks Index. In the table, the Fund is also compared to the
NASDAQ 100 Financial Index. This index does not have 10 years of total return
information available. The Indices have an inherent performance advantage over
the Fund since they have no cash in their portfolio, impose no sales charges and
incur no operating expenses. An investor cannot invest directly in an index. The
Fund's performance is shown both with and without the imposition of sales
charges.
Prior to October 20, 1997, the Fund operated as a closed-end investment company.
All performance information prior to this date reflects the historical expense
levels of the Fund as a closed-end investment company without adjustment for the
higher annual expenses of the Fund's Class A shares. Performance would have been
lower if adjusted for these charges and expenses. Ten-year returns assume no
participation in the 1992 rights offering and full participation in the 1993
rights offering, and reflect an additional investment of $3,639 into the fund. A
simultaneous investment of the same amount is included in each index for
comparative reasons.
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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Since inception return from 10/31/97.
Principal Risk Factor(s): Because the Fund's portfolio is concentrated in the
banking and thrift industry, it may be subject to greater risk than a portfolio
that is not concentrated in one industry.
See accompanying index descriptions on pages 40 and 41.
15
<PAGE>
-------------
International
Equity Funds
-------------
Portfolio
PILGRIM WORLDWIDE GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Partner, Chief Investment Officer, Global
Equity Management; Andrew B. Gallagher, Partner, Portfolio Manager; Loretta J.
Morris, Partner, Portfolio Manager; Randall S. Kahn, CFA, Portfolio Manager;
Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio
Management and Research; Pedro V. Marcal, Partner, Portfolio Manager; Ernesto
Ramos, Ph.D., Melisa A. Grigolite, Portfolio Manager.
Goal: The Worldwide Growth Fund (the "Fund" or "Worldwide Growth") seeks to
maximize long-term capital appreciation through investments in growth-oriented
companies around the world, regardless of geographic location.
Market Overview: A number of factors contributed to the positive environment for
global investing during the twelve-month period ended June 30, 2000.
In the US, strong corporate profits and investor confidence in the durability of
the economic expansion sent stocks higher in spite of rising interest rates and
volatility. For the twelve months ended June 30, 2000, the S&P 500 Index rose
7.2% and the tech-heavy Nasdaq Composite Index advanced 47.7%
In response to booming US GDP growth, the Federal Reserve increased short-term
interest rates a total of 1.75% on six separate occasions from June 1999 through
May 2000. Following a spring correction in the technology sector, renewed
optimism that the Federal Reserve Bank may be close to completing its round of
rate hikes drove equity prices higher in June 2000. During the month, most US
stock indexes posted positive returns, led by the Nasdaq, which was up 16.6%.
Amid acceleration in GDP growth in many of its member countries, the European
Central Bank also increased rates a total of 1.75% on five separate occasions
during the fiscal year.
Increased productivity, the technology revolution, and structural reform
propelled international stock markets higher during the twelve-month period,
despite rising rates. The MSCI EAFE Index gained 17.2% in the period, after
advancing 22.2% during the second half of 1999. In the first six months of 2000,
equities overseas moved in tandem with the US market, falling in response to
concerns over higher interest rates, inflation, and high valuations among
technology stocks.
Performance: For the one year ended June 30, 2000 the Fund's Class A shares,
excluding sales charges, provided a total return of 42.43% versus 12.53% for the
MSCI World Index for the same period.
Portfolio Specifics: The Fund's strong performance was largely attributable to
stock selection in the US, although stock selection in Japan, the UK, and Canada
also positively impacted results. Strong domestic performers included computer
hardware manufacturer, Sun Microsystems; systems and business applications
software provider, Oracle Corporation; and Genentech, a biotechnology firm.
Other top-performing holdings were UK-based ARM Holdings, a microprocessor
designer, and Nortel Networks, a Canadian telecommunications company.
During the period, on a stock-specific basis, we significantly increased the
fund's exposure to technology, reflecting our conviction in this sector's
compelling long-term growth potential.
Market Outlook: We remain optimistic in our outlook for global investing as we
continue to identify high-growth companies poised to benefit from positive
change. Favorable themes such as increased international trade, deregulation,
and restructuring should all bode well for the Worldwide Growth Fund.
16
<PAGE>
----------------
Portfolio
Manager's Report
----------------
PILGRIM WORLDWIDE GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Worldwide Growth Fund
Class A With Sales Charge 10,000 9,925 11,071 11,807 14,296 17,279 21,621 29,815 42,464
Pilgrim Worldwide Growth Fund
Class A Without Sales Charge 10,000 10,528 11,744 12,524 15,165 18,329 22,936 31,628 45,045
MSCI World Index 10,000 10,148 11,241 12,501 14,876 18,269 21,459 24,909 28,032
Average Annual Total Returns for the Periods Ended June 30, 2000
----------------------------------------------------------------
Since Inception Since Inception
of Class A and C of Class B
1 Year 5 Year 4/19/93 5/31/95
------ ------ ------- -------
Including Sales Charge:
Class A (1) 34.24% 27.66% 22.24% --
Class B (2) 36.54% 28.27% -- 28.20%
Class C (3) 40.48% 28.37% 22.48% --
Excluding Sales Charge:
Class A 42.43% 29.17% 23.25% --
Class B 41.54% 28.42% -- 28.27%
Class C 41.48% 28.37% 22.48% --
MSCI World Index 12.53% 17.53% 15.47%(4) 17.21%(5)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate 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, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. The Fund's performance is shown both with and without the imposition
of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 05/01/93.
(5) Since inception performance for index is shown from 06/01/95.
Principal Risk Factor(s): International investing does pose special risks,
including currency fluctuation, economic 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 invesment
opportunities. Risks of foreign investing are generally intensified for
investments in emerging markets.
See accompanying index descriptions on pages 40 and 41.
17
<PAGE>
-------------
International
Equity Funds
-------------
PILGRIM INTERNATIONAL Portfolio
CORE GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Chief Investment Officer; Loretta Morris,
Partner, Portfolio Manager; Randall Kahn, CFA, Portfolio Manager; Lawrence S.
Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and
Research; Pedro V. Marcal, Partner, Portfolio Manager; Jason Campbell, Portfolio
Manager; Melisa Grigolite, Portfolio Manager; Jessica Goncalves, Portfolio
Manager; Ernesto Ramos, Portfolio Manager; Christopher Angioletti, Portfolio
Manager; Jon Borchardt, Investment Analyst; John Bracken, Jr., Investment
Analyst; Investment Analyst; Theodora Jamison, Investment Analyst; David Lopez,
Investment Analyst; John Mazur, Investment Analyst; Andrew Parmet, Investment
Analyst; Jacob Pozharny, Investment Analyst; Rolf Schild, Investment Analyst.
Goal: The International Core Growth Fund (the "Fund" or "International Core
Growth") seeks to maximize total return by investing primarily in companies
located outside the United States with market capitalizations corresponding to
the top 75% of publicly traded companies as measured by stock market
capitalizations within each country.
Market Overview: Structural reform, increased productivity, and the technology
revolution were among the many positive factors that sent international stock
markets higher during the fiscal year ended June 30, 2000. The Morgan Stanley
Capital International ("MSCI") EAFE Index advanced 17.2% in the period, after
gaining 22.2% during the second half of 1999. In the first six months of 2000,
equities overseas moved in tandem with the US market, falling in response to
concerns over rising interest rates, inflation, and lofty valuations among
technology stocks.
Investor optimism over a resurgence in economic growth contributed to a 26.5%
advance for Japanese stocks during the period, as measured by the MSCI Japan
Index. However, in the first half of 2000, Japanese equities languished over
concerns about the sustainability of the budding economic recovery. European
stocks produced strong results during the period, particularly bourses in
Finland, Sweden, and France. Equity markets benefited from structural reform,
growth in the technology and telecommunications sectors, and economic expansion.
Amid a pick-up in GDP growth in many countries, the European Central Bank raised
interest rates a total of 1.75% on five separate occasions during the fiscal
year.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 32.83% versus 17.44% for the
MSCI EAFE Index for the same period.
Portfolio Specifics: Stock selection within the technology sector was
responsible for the majority of the Fund's outperformance this period.
Top-performing holdings included telecommunications equipment providers
Ericsson, Nokia, and Nortel Networks, headquartered in Sweden, Finland, and
Canada, respectively. ASM Lithography, a Netherlands-based supplier of
lithography projection systems, and UK-based ARM Holdings, a microprocessor
designer, also contributed to the fund's strong results.
Over the course of the fiscal year, on a stock-by-stock basis, we modestly
increased the Fund's exposure to Europe while paring back holdings in the
Pacific Rim. We significantly increased our exposure to technology stocks,
demonstrating our belief in the sector's long-term growth potential. At the same
time, we trimmed holdings in the manufacturing, building materials, and
commodities industries.
Market Outlook: International markets remain a source of attractive investment
opportunities. In Europe, productivity is rising and the economy is being
transformed by a restructuring wave that stands to boost corporate profits.
Positive factors for Japan include the developing technology industry and rising
corporate confidence, which results in increased capital equipment spending. And
as aging populations in both Europe and Japan plan for retirement, the demand
for equities should strengthen.
In this environment, we are confident that by adhering to our strict investment
philosophy we will be able to continue seeking to identify international
companies with superior growth prospects.
18
<PAGE>
Portfolio PILGRIM INTERNATIONAL
Manager's Report CORE GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2/28/97 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pilgrim International Core Growth Fund
Class A With Sales Charge 10,000 11,222 13,916 14,771 19,579
Pilgrim International Core Growth Fund
Class A Without Sales Charge 10,000 11,904 14,762 15,669 20,769
MSCI EAFE Index 10,000 11,349 12,073 13,030 15,303
Average Annual Total Returns for
the Periods Ended June 30, 2000
--------------------------------
Since Inception
1 Year 2/28/97
------ -------
Including Sales Charge:
Class A (1) 25.19% 27.36%
Class B (2) 26.62% 23.20%
Class C (3) 30.73% 23.59%
Excluding Sales Charge:
Class A 32.83% 24.54%
Class B 31.62% 23.74%
Class C 31.73% 23.59%
MSCI EAFE Index 17.44% 13.61%(4)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim International Core Growth Fund against the Morgan
Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index. The
Index has an inherent performance advantage over the Fund since it has no cash
in its portfolio, imposes no sales charges and incurs no operating expenses. An
investor cannot invest directly in an index. The Fund's performance is shown
both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 03/01/97.
Principal Risk Factor(s): International investing does pose special risks,
including currency fluctuation, economic 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 invesment
opportunities. Risks of foreign investing are generally intensified for
investments in emerging markets.
See accompanying index descriptions on pages 40 and 41.
19
<PAGE>
-------------
International
Equity Funds
-------------
PILGRIM INTERNATIONAL Portfolio
SMALLCAP GROWTH FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Chief Investment Officer; Loretta J.
Morris, Partner, Portfolio Manager; Randall S. Kahn, CFA, Portfolio Manager;
Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio
Management and Research; Pedro V. Marcal, Partner, Portfolio Manager; Ernesto
Ramos, Ph.D., Portfolio Manager; Jason Campbell, Portfolio Manager; Jessica
Goncalves, Portfolio Manager; Melisa Grigolite, Portfolio Manager; Christopher
Angioletti, Portfolio Manager; Jon Borchardt, Investment Analyst; John Bracken,
Jr., Investment Analyst; Investment Analyst; Theodora Jamison, Investment
Analyst; David Lopez, Investment Analyst; John Mazur, Investment Analyst; Andrew
Parmet, Investment Analyst; Jacob Pozharny, Investment Analyst; Rolf Schild,
Investment Analyst.
Goal: The International SmallCap Growth Fund (the "Fund" or "International
SmallCap Growth") seeks to maximize long-term capital appreciation through
investing primarily in companies located outside the United States corresponding
to the lower 25% market capitalization within each country with a maximum market
cap of $5 billion.
Market Overview: International small-cap stocks posted solid gains for the
fiscal year ended June 30, 2000, led by advances in Japan, Italy, France, and
Switzerland. The Morgan Stanley Capital International ("MSCI") EAFE Small Cap
Index advanced 10.7% during the period and was resilient to the spring
correction in technology stocks, outperforming both the S&P 500 Index and the
Russell 2000 Index during the first six months of 2000.
In Japan, the MSCI Japan Small Cap Index advanced 19.2% as the trends of
structural reform, corporate restructuring and consolidation helped smaller
companies flourish.
In Europe, the advent of the Economic Monetary Union (EMU) created a favorable
environment for small companies as EMU fostered heightened competition and an
increased desire to boost efficiency. Small stocks in Europe rose 8.6% during
the period, as measured by the MSCI Europe Small Cap Index.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 82.89% versus 14.54% for the
Salomon EPAC EMI (Europe Pacific Australasia Composite Extended Market Index)
for the same period.
Portfolio Specifics: Technology companies in Japan, the United Kingdom, and
Germany drove the Fund's substantial outperformance during the fiscal year. One
of the Fund's major contributors to performance was ARM Holdings PLC, a United
Kingdom-based designer of reduced instruction set computing (RISC)
microprocessors. Another top performer included Dialog Semiconductor, a German
chip manufacturer supplying the mobile communications industry. Both companies
are involved in computer chips.
Market Outlook: We remain optimistic about the investment potential for
international small cap stocks due to many positive factors, including:
* Continued advances in technology and structural reforms that are reshaping
the world's business landscape and creating opportunities for smaller
companies
The emergence of stock markets such as Neuer Markt in Germany, Nouveau Marche in
France, Mothers Exchange in Japan, and Nasdaq Japan which provide new avenues
for investors to gain access to smaller, high-growth companies outside the
United States.
20
<PAGE>
Portfolio PILGRIM INTERNATIONAL
Manager's Report SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8/31/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Pilgrim International SmallCap Growth Fund
Class A With Sales Charge 10,000 8,815 10,655 13,006 16,935 20,794 38,030
Pilgrim International SmallCap Growth Fund
Class A Without Sales Charge 10,000 9,351 11,303 13,796 17,965 22,058 40,342
Salomon EPAC EM Index 10,000 9,868 11,550 11,693 11,779 12,206 13,981
</TABLE>
Average Annual Total Returns for
the Periods Ended June 30, 2000
----------------------------------------
Since Inception
of Class B
1 Year 5 Year 5/31/95
------ ------ -------
Including Sales Charge:
Class A (1) 72.37% 32.39% 25.75%
Class B (2) 76.63% 33.04% 32.07%
Class C (3) 79.89% 33.14% 26.09%
Excluding Sales Charge:
Class A 82.89% 33.96% 27.03%
Class B 81.63% 33.16% 32.14%
Class C 80.89% 33.14% 26.09%
Salomon EPAC EMI Index 14.54% 7.22% 6.81%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim International SmallCap Growth Fund against the Salomon
EPAC Extended Market (EM) Index. The Index has an inherent performance advantage
over the Fund since it has no cash in its portfolio, imposes no sales charges
and incurs no operating expenses. An investor cannot invest directly in an
index. The Fund's performance is shown both with and without the imposition of
sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 06/01/95
Principal Risk Factor(s): International investing does pose special risks,
including currency fluctuation, economic 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 sub-adviser believes they present
attractive investment opportunities. Risks of foreign investing are generally
intensified for investments in emerging markets.
See accompanying index descriptions on pages 40 and 41.
21
<PAGE>
-------------
International
Equity Funds
-------------
Portfolio
PILGRIM EMERGING COUNTRIES FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Chief Investment Officer; Pedro V. Marcal,
Partner, Portfolio Manager; Ernesto Ramos, Ph.D., Portfolio Manager; Lawrence S.
Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and
Research; Jessica Goncalves, Portfolio Manager; Jason Campbell, Portfolio
Manager; Theodora Jamison, Investment Analyst; John Mazur, Investment Analyst;
Andrew Parmet, Investment Analyst.
Goal: The Emerging Countries Fund (the "Fund" or "Emerging Countries") seeks to
provide long-term capital appreciation through investing in companies of
developing countries around the world.
Market Overview: Stocks in the world's emerging countries trekked higher during
the fiscal year ended June 30, 2000. The MSCI Emerging Markets Free Index
increased 8.8%, largely due to impressive fourth quarter 1999 gains in the
Europe, Middle East, and Africa (EMEA) region and Latin America.
Gains in EMEA markets were attributable to the improvement in macroeconomic
conditions in the region, such as strength in manufacturing output, a massive
decrease in inflation, robust consumption and robust export growth.
The MSCI Turkey Index turned in a stellar performance, up 118.0% for the
12-month period. Returns were driven by many factors, including:
* Strong capital inflows resulting from the country's privatization program
* The Central Bank of Turkey's adoption of a new exchange rate regime in
support of the government's disinflation program
* An upgrade in Turkey's long-term credit rating by Standard & Poor's.
Israel and Russian markets also posted significant gains. The MSCI Israel Index
advanced 60.9%. The election of reform-minded Vladimir Putin as Russia's prime
minister buoyed stocks in the country, as did massive foreign currency reserves,
a revival in domestic industry, and a boom in the price of oil-Russia's chief
export. The MSCI Russia index rose 40.2% for the fiscal year.
The MSCI EMF Latin America Index returned 16.7% in the period amid the continued
strength in the region's economies. Strong fundamentals, such as increases in
commodity prices, exports and industrial production boosted Latin American
economies. Brazil was the region's top-performing market, with the MSCI Brazil
Index advancing 52.2% during the period.
Stocks in emerging Asian countries dipped slightly during the fiscal year as
strength in Indian and Malaysian markets was offset by losses in Indonesia, the
Philippines and Thailand. Nevertheless, Asian markets continued to benefit from
the prevalent themes of strong earnings growth, increased exports to the United
States and improving domestic economies.
Performance: The Fund's Class A shares, excluding sales charges, provided a
total return of 20.49%, substantially outperforming the MSCI EMF Index, which
was up 9.47% for the same period.
Portfolio Specifics: The Fund's relative outperformance was primarily
attributable to stock selection in India and Mexico, as well as being in
Singapore. The Fund's overweighting in technology also contributed to
performance during the period.
Among the fund's best-performing stocks were Infosys Technologies, an Indian IT
consulting and software services firm; SK Telecoms, a provider of cellular
services in South Korea; Brazil's Petrobras, an integrated oil company; and
Dimension Data of South Africa, a systems integrator company;and China Telecom,
a provider of cellular telecommunications to many of China's most economically
developed provinces.
On a bottom-up, fundamental basis, we increased the fund's exposure to the
technology stocks, while paring back holdings in the financial services and
manufacturing sectors.
Market Outlook: We remain enthusiastic about the investment prospects for the
world's emerging markets, particularly within the technology sector. We believe
that technology will be at the core of the improvements in healthcare, education
and business that these developing countries are seeking.
22
<PAGE>
----------------
Portfolio
Manager's Report
----------------
PILGRIM EMERGING COUNTRIES FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
11/28/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Emerging Countries Fund
Class A With Sales Charge 10,000 9,534 11,724 15,260 12,265 13,903 16,751
Pilgrim Emerging Countries Fund
Class A Without Sales Charge 10,000 10,114 12,437 16,187 13,011 14,748 17,770
MSCI EMF Index 10,000 8,896 9,649 10,887 6,632 8,536 9,344
</TABLE>
Average Annual Total Returns for
the Periods Ended June 30, 2000
------------------------------------------------
Since Inception Since Inception
of Class A and C of Class B
1 Year 11/28/94 5/31/95
------ -------- -------
Including Sales Charge:
Class A (1) 13.56% 9.67% --
Class B (2) 14.55% -- 11.23%
Class C (3) 18.63% 9.87% --
Excluding Sales Charge:
Class A 20.49% 10.83% --
Class B 19.55% -- 11.35%
Class C 19.63% 9.87% --
MSCI EMF Index 9.47% -1.21%(4) 1.03%(5)
Based on a initial investment, the graph and table above illustrate 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,
imposes no sales charges and incurs no operating expenses. An investor cannot
invest directly in an index. The Fund's performance is shown both with and
without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 12/01/94.
(5) Since inception performance for index is shown from 06/01/95.
Principal Risk Factor(s): International investing does pose special risks,
including currency fluctuation, economic and political risks not found in
investments that are solely domestic. Risks of foreign investing are generally
intensified for investments in emerging markets.
See accompanying index descriptions on pages 40 and 41.
23
<PAGE>
-------------
International
Equity Funds
-------------
Portfolio
PILGRIM ASIA-PACIFIC EQUITY FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: David Stuart, Regional CIO, Asia Pacific; Man-Wing Chung, CIO,
Asia ex-Japan Equities; Marcus Pakenham, Director; Sam Lau, Director; Richard
Wong, Associate Director; Leilani Lam, Associate Director; Simon Yap, Associate
Director; Seng-Keong Wan, Senior Investment Manager; Vernon Yu, Senior
Investment Manager; Losa Mak, Investment Manager; Krista Yue, Investment
Manager.
Goal: The Asia-Pacific Equity Fund (the "Fund" or "Asia-Pacific Equity") seeks
long-term capital appreciation by investing in equity securities listed on stock
exchanges in the Asia-Pacific region or issued by companies based in this
region.
Market Overview: During the year ended June 30, 2000, rallies in the US and
Nasdaq helped performances of a few equity markets before the millennium.
However, profit taking and concerns on interest rate hikes erased some of the
gains entering into 2000. Hong Kong was the best performer, up 19.4% on the Hang
Seng Index. However, the index registered declines both on a six-month and
quarterly basis on concerns over the valuation of high tech stocks and rising US
interest rates. June saw a rebound as softer economic numbers from the US
prompted hopes of interest rate peaking. Malaysia (+2.8%) posted gains,
initially on MSCI reinclusion but succumbed to profit taking following
downgrades by major brokers after its outperformance. for the one year ended
June 30, 2000, the rest of the Asian market underperformed. Taiwan (-2.4%) eased
on political concerns despite buying from government-related funds. Singapore
DBS50 (-6.0%) fell in the absence of a fresh catalyst for re-rating even as the
country's safe haven status remained intact. Korea (-7.0%) eased predominately
due to redemption-driven selling by investment trust companies. But June saw a
turning in sentiment as both retail and foreign investors stepped up their
buying ahead of the historical summit meeting between North and South Korean
leaders. Indonesia (-22.2%) abated on MSCI-related asset allocation shift,
political uncertainty, religious clashes and a weakening currency. Thailand
(-37.6%) dived on concerns over the slow progress of bad debt restructuring in
the banking sector, announcements of equity capital raising, and increasing
political uncertainties. The better-than-expected corporate earnings and
positive economic numbers (1Q00 GDP +5.2%) were largely ignored. Philippines
(-38.3%) tumbled on disappointing macro picture, faltering public confidence in
President Estrada, the failure to quickly resolve the Sipidan hostage crisis and
the heightened tension between the Muslim extremists and the government.
Performance: For the year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 0.14% compared to 14.40% for
the Morgan Stanley Capital International All Countries Far East Free ex-Japan
Index (the "MSCI"), a performance measurement of Far East markets excluding
Japan.
Portfolio Specifics: The overweight positions in technology issues performed
well until late March as the Nasdaq Index fell significantly. Investors were
concerned about the increasingly high valuation of tech-related counters and
began switching back into "old economy" stocks. Looking ahead, we will increase
exposure to Singapore (valuations improved favorably) and Korea (government
measures averted potential financial systemic risk). We will reduce our
overweight in Taiwan in the absence of fresh catalyst. We are cautious on Hong
Kong based on valuation and interest rate outlook. However, we are turning
bullish on China and will look for value stocks. In terms of stock selection, we
started to look at banks and financials in anticipation of peaking interest
rates in Asia.
Market Outlook: The domestic fundamentals within Asia remain positive with
strong economic recovery, rising domestic demand, healthy earnings growth and
reasonable market valuations. On the other hand, we are wary that investors have
recently become a little complacent about interest rates and that global equity
markets can therefore still be negatively surprised by strong US economic data.
If the correction happens, Asian exchanges may take a big hit. Once there are
clearer signals that interest rates are peaking and soft landing is being
achieved, we will turn more constructive on Asian equities with a
bias/preference for the high growth economies/markets.
24
<PAGE>
----------------
Portfolio
Manager's Report
----------------
PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9/1/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pilgrim Asia-Pacific Equity Fund
Class A With Sales Charge 10,000 9,780 10,345 4,221 6,833 6,843
Pilgrim Asia-Pacific Equity Fund
Class A Without Sales Charge 10,000 10,376 10,976 4,479 7,250 7,260
MSCI Far East Free Ex-Japan Index 10,000 11,382 14,501 18,157 18,565 21,238
</TABLE>
Average Annual Total Returns for
the periods ended June 30, 2000
--------------------------------------------
Since Inception
1 year 3 year 9/1/95
------ ------ ------
Including Sales Charge:
Class A (1) -5.62% -14.41% -7.54%
Class B (2) -5.71% -14.53% -7.56%
Class M (3) -3.96% -14.47% -7.65%
Excluding Sales Charge:
Class A 0.14% -12.87% -6.40%
Class B -0.71% -13.66% -7.17%
Class M -0.42% -13.45% -6.97%
MSCI Far East Free Ex-Japan Index 14.40% 13.50% 16.86%
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim Asia-Pacific Equity Fund against the MSCI Far East
Ex-Japan Index. The index has an inherent performance advantage over the Fund
since it has no cash in its portfolio, imposes no sales charge and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of the maximum sales
load.
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 "foward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflect deduction of the Class B deferred sales charge of 5%, 3% and 2%,
respectively, for the 1 year, 3 year and since inception returns.
(3) Reflects deduction of the Class M maximum sales charge of 3.50%
Principal Risk Factor(s): International investing does pose special risks,
including currency fluctuation, economic and political risks not found in
investments that are solely domestic. There are also 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.
See accompanying index descriptions on pages 40 and 41.
25
<PAGE>
------
Income
Funds
------
PILGRIM GOVERNMENT Portfolio
SECURITIES INCOME FUND Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Robert K. Kinsey, Vice President & Senior Portfolio
Manager
Goals: Pilgrim Government Securities Income Fund (the "Fund" or "Government
Securities Income") seeks high current income, consistent with liquidity and
preservation of capital, by investing in securities issued or guaranteed by the
U. S. Government and certain of its agencies and instrumentalities.
Bond Market Overview: The bond market experienced extraordinary bouts of
illiquidity up until the latter part of the second quarter of 2000. While
weakness in the equity market boded well for U. S. Treasuries, most other
government issues were pummelled. However, the successful completion of several
record-breaking multi-billion dollar agency offerings marked a turnaround by
late May. Government sponsored enterprises (GSEs) faced some very rough sledding
early in 2000 as a congressional committee and political pundits questioned the
unique relationship between the Treasury Department, Fannie Mae ("FNMA") and
Freddie Mac ("FHLMC"). However, the successful completion of several
record-breaking new agency issues marked the turnaround in spread product by
late May. Despite numerous Federal Reserve Bank tightenings, Treasuries have
been well bid in the face of government buybacks and signs that the domestic
economy is slowing.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 2.79% compared to the Lehman
Government/Mortgage Index and the Lehman Intermediate Treasury Index which
returned 5.02% and 4.62%, respectively for the same period
Portfolio Specifics: The duration of the Fund remained short of the Lehman
Mortgage Index, yet longer than the Lehman Intermediate Treasury Index in order
to maintain our dividend. The Fund continues to be concentrated in mortgage
backed securities; however, we have added FNMA collateralized by multi-family
properties, bonds, Small Business Administration paper, and bullet agencies at
compelling levels.
Market Outlook: The Fund continues to offer a handsome yield advantage over
Treasuries. Owing to our restrictive guidelines, our ongoing strategy is to
provide the best dividend possible within the context of the market and with
few, if any, negative surprises. We will continue to exploit market
inefficiencies in the multi-family sector of the government market while
avoiding large duration bets.
26
<PAGE>
Portfolio PILGRIM GOVERNMENT
Manager's Report SECURITIES INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Government Securities Income Fund
Class A With Sales Charge 10,000 10,398 11,340 12,453 12,143 13,230 13,672 14,674 15,793 16,092 16,541
Pilgrim Government Securities Income Fund
Class A Without Sales Charge 10,000 10,919 11,907 13,076 12,750 13,892 14,356 15,408 16,584 16,897 17,368
Lehman Brothers Government/Mortgage Index 10,000 11,077 12,595 14,032 13,857 15,534 16,309 17,617 19,444 20,121 21,131
Lehman Brothers Intermediate Treasury Index 10,000 10,893 12,296 13,555 13,520 14,836 15,560 16,626 18,026 18,835 19,705
Average Annual Total Returns for the Periods Ended June 30, 2000
----------------------------------------------------------------
Since Inception Since Inception Since Inception
of Class B and M of Class C of Class T
1 Year 5 Year 10 Year 7/17/95 6/11/99 3/31/00
------ ------ ------- ------- ------- -------
Including Sales Charge:
Class A (1) -2.11% 3.55% 5.16% -- -- --
Class B (2) -2.81% -- -- 3.41% -- --
Class C (3) 1.09% -- -- -- 3.46% --
Class M (4) -1.04% -- -- 3.31% -- --
Class T(5) -- -- -- -- -- -2.76%
Excluding Sales Charge:
Class A 2.79% 4.57% 5.68% -- -- --
Class B 2.12% -- -- 3.73% -- --
Class C 2.09% -- -- -- 3.46% --
Class M 2.28% -- -- 4.01% -- --
Class T -- -- -- -- -- 1.24%
Lehman Brothers Government/Mortgage
Index 5.02% 6.35% 7.77% 6.50%(6) 6.27% 2.12%
Lehman Brothers Intermediate Treasury
Index 4.62% 5.84% 7.17% 5.82% 5.38% 1.82%
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim Government Securities Income Fund against the Lehman
Brothers Government/Mortgage Index and the Lehman Brothers Intermediate Treasury
Index. The Indices have an inherent performance advantage over the Fund since
they have no cash in their portfolios, impose no sales charges and incur no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
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.
(1) Reflects deduction of the maximum Class A sales charge of 4.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Reflects deduction of the maximum Class M sales charge of 3.25%.
(5) Reflects deduction of the Class T deferred Sales charge of 4.00%.
(6) Since inception performance is shown from 7/31/95.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks
and prepayment risk on mortgage-related securities. Fluctuations in the value of
the Fund's shares can be expected in response to changes in interest rates. The
value of an investment in the Fund is not guaranteed and will fluctuate.
See accompanying index descriptions on pages 40 and 41.
27
<PAGE>
------
Income
Funds
------
Portfolio
PILGRIM STRATEGIC INCOME FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Robert Kinsey, Vice President & Senior Portfolio Manager; Kevin
Mathews, Vice President & Senior Portfolio Manager; Charles Ullerich, Vice
President & Portfolio Manager.
Goals: Pilgrim Strategic Income Fund (the "Fund" or "Strategic Income") seeks
maximum total return by investing primarily in debt securities issued by U. S.
and foreign entities, 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 securities rated below
investment grade.
Bond Market Overview: The high quality bond market experienced extraordinary
bouts of illiquidity up until the latter part of the second quarter 2000. While
weakness in the equity market boded well for U. S. Treasuries, a number of
corporate bonds were pummelled by earnings warnings and downgrades. Event risk
returned to the corporate market with a vengeance, raising the ugly specter of
credit-damaging shareholder enhancement programs. Credit-harming mergers and
acquisitions also made headlines. However, the successful completion of several
record-breaking new issues marked the turnaround in spread product by late May.
Agencies faced some very rough sledding early in 2000 as a congressional
committee and political pundits questioned the unique relationship between the
Treasury Department, Fannie Mae (FNMA) and Freddie Mac (FHLMC). Despite numerous
Federal Reserve Bank tightenings, long-term Treasuries have been well bid in the
face of government buybacks and signs that the domestic economy is slowing.
The first half of 2000 was better than the second half of 1999, but not by much.
The negative returns of 1999 were succeeded by flat returns in 2000. High yield
bond prices continued to decline in the first half of 2000, but when combined
with coupon income, total returns on the sector came close to zero.
Federal Open Market Committee (FOMC) policy continued the tightening bias of
1999 with further interest rate increases in the first half of 2000. After
raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second
half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000.
The FOMC continues to be concerned that the domestic economy is growing too
quickly and that the result might be increased inflation. Much of the price
behavior in the high yield market can be directly attributed to participants
fear that the Federal Reserve Bank will over-tighten, pushing the economy into a
recession.
Through the year ended June 30, 2000, the ten-year Treasury yield was basically
unchanged yielding just below 6% at the beginning of the period and just above
6% at the end of the period. High yield bonds, reflecting the increased risk
premium demanded by the market, rose in yield, falling in price over the same
time period. Spreads remained virtually unchanged from the beginning to the end
of the second half of 1999, but widened by 100 to 125 basis points on most of
the major high yield indices in the first half of 2000. This activity reflected
the fear of recession as well as rising default rates, declining recovery rates,
and weak technical conditions resulting from mutual fund net redemptions. Mutual
fund outflows totaled in excess of $6 billion in the first half of 2000,
although trends have been more positive in the latter half with sales outpacing
redemptions.
In the first half of 2000, trends from the second half of 1999 continued as
higher rated issues outperformed lower rated issues. In order of performance for
2000, Double-B issues ranked first followed by Single-B and at the bottom
Triple-C and lower rated issues. These results are to be expected with the
increased level of investor sensitivity to economic conditions. Concerns about
the market did not seem to significantly slow new issuance. First half of 2000
issuances totaled $27 billion, down only marginally from the $35 billion total
from the second half of 1999. This is a positive sign as there is still buyer
demand for quality issues, even in a slow and cautious market.
Performance: For the one year ended June 30, 2000 the Fund's Class A shares,
excluding sales charges, provided a total return of 3.42% compared to the Lehman
Brothers Aggregate Index which returned 4.57% for the same period.
Portfolio Specifics: A significant commitment to U. S. Treasuries on the heels
of the government's buyback announcement boosted returns. Following the
under-performance of corporate bonds in the early part of the year, we added
Lucent, Wal-Mart, and insured Banco Santander paper along with several agency
debentures in May. We maintained our presence in puttable corporates.
The Fund outperformed most of it's peers over the past year due to a large
concentration in the Communications sector. The best performing credits were
those on the leading edge of telecommunication technology including providers of
digital subscriber lines, wireless voice and internet/data connectivity, and
firms that provide access technology for internet data sites. Equally important
has been the avoidance of sectors that have significantly underperformed the
market including Healthcare, Food & Drug, and Retail credits.
Credit quality has played a role in performance the last twelve months. Double-B
issues have significantly outperformed the market while Triple-C's have
underperformed. The Fund's average credit quality weighting of Single-B has
slightly helped the portfolio, providing a return close to the market averages.
Overall, the Fund's management feels the credit quality of the portfolio is good
and positioned for outperformance in the second half of 2000.
Market Outlook: Agency debentures offer excellent relative value especially now
that Congress is unlikely to move against the government sponsored enterprises
anytime soon. Despite the strong rally relative to Treasuries and swaps, we feel
that selective corporate bonds are cheap. We continue to avoid event risk
candidates and long-dated corporate paper, and we focus on larger more liquid
issues. Recent economic data point to a recent Federal Reserve Bank-engineered
slowdown, and the market consensus is for only one more tightening. Consequently
the surprise, non-consensus, outcome
28
<PAGE>
----------------
Portfolio
Manager's Report
----------------
PILGRIM STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
seems to poise the greatest risk to interest rates. Nevertheless, we are
slightly long in duration, but would trim that to neutral if rates rally
significantly.
Our outlook is cautious as we continue to witness an FOMC that has a bias to
tighten monetary policy. The danger of recession is real as the Federal Reserve
Bank typically creates a soft-landing, or a slowing of economic growth and
inflation without a recession, about 50% of the time once they begin tightening.
When they create a recession, the results can be problematic for high yield
bonds. We have also taken note of the increasingly tough stance taken by banks
and other lenders on not being willing to waive convenant violations. This
causes high yield credits to get into trouble faster as there is less
forbearance on the part of senior bank lenders. Finally, the high yield market
itself is less forgiving. Quality names will snap back with the market, marginal
credits will eventually recover if investors wait, but weak issuers are given no
benefit of the doubt. Weak issues can not hide behind general market trends.
Given this, it becomes obvious it is a credit pickers market. Diligence in the
credit review and monitoring process has become key to maintaining returns above
the benchmark averages.
7/27/98 6/99 6/30/00
------ ------ ------
Pilgrim Strategic Income Fund
Class A With Sales Charge 10,000 9,739 10,073
Pilgrim Strategic Income Fund
Class A Without Sales Charge 10,000 10,223 10,574
Lehman Brothers Aggregate Index 10,000 10,293 10,763
Average Annual Total Returns for
the Periods Ended June 30, 2000
------------------------------
Since Inception
1 Year 7/27/98
------ -------
Including Sales Charge:
Class A (1) -1.49% 0.38%
Class B (2) -2.00% 0.64%
Class C (3) 2.02% 2.54%
Excluding Sales Charge:
Class A 3.42% 2.93%
Class B 3.00% 2.53%
Class C 3.02% 2.54%
Lehman Brothers Aggregate Index 4.57% 3.91%(4)
Based on a $10,000 initial investment, the graph and table above illustrate 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, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 4.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 4%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00%.
(4) Since inception performance for index is shown from 08/01/98.
Principal Risk Factor(s): High yield bonds have 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. The Fund's investments in
mortgage-related securities may entail prepayment risk. The Fund may invest up
to 30% of its total assets in securities payable in foreign currencies.
International investing does pose special risks, including currency fluctuation
and political risks not found in domestic investments.
See accompanying index descriptions on pages 40 and 41.
29
<PAGE>
------
Income
Funds
------
Portfolio
PILGRIM HIGH YIELD FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio
Manager, Charles Ullerich, Vice President & Portfolio Manager
Goals: Pilgrim High Yield Fund (the "Fund" or "High Yield") 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 first half of 2000 was better than the second half of 1999,
but not by much. The negative returns of 1999 were succeeded by flat returns in
2000. High yield bond prices continued to decline in the first half of 2000 but,
when combined with coupon income, total returns on the sector came close to
zero.
Federal Open Market Committee (FOMC) policy continued the tightening bias of
1999 with further interest rate increases in the first half of 2000. After
raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second
half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000.
The FOMC continues to be concerned that the domestic economy is growing too
quickly and that the result might be increased inflation. Much of the price
behavior in the high yield market can be directly attributed to participants
fear that the Federal Reserve Bank will over-tighten, pushing the economy into a
recession.
Through the year ended June 30, 2000, the ten-year Treasury yield was basically
unchanged, yielding just below 6% at the beginning of the period and just above
6% at the end of the period. High yield bonds, reflecting the increased risk
premium demanded by the market, rose in yield, falling in price over the same
time period. Spreads remained virtually unchanged from the beginning to the end
of the second half of 1999, but widened by 100 to 125 basis points on most of
the major high yield indices in the first half of 2000. This activity reflected
the fear of recession as well as rising default rates, declining recovery rates,
and weak technical conditions resulting from mutual fund net redemptions. Mutual
fund outflows totaled in excess of $6 billion in the first half of 2000,
although trends have been more positive in the latter half with sales outpacing
redemptions.
In the first half of 2000 trends from the second half of 1999 continued as
higher rated issues outperformed lower rated issues. In order of performance for
2000, Double-B issues ranked first followed by Single-B and at the bottom
Triple-C and lower rated issues. These results are to be expected with the
increased level of investor sensitivity to economic conditions. Concerns about
the market did not seem to significantly slow new issuance. First half of 2000
issuance totaled $27 billion, down only marginally from the $35 billion total
from the second half of 1999. This is a positive sign as there is still buyer
demand for quality issues, even in a slow and cautious market.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, declined 5.20% compared to the Lehman Brothers High
Yield Index, which declined 1.02%, and the First Boston High Yield Index, which
declined 0.40% for the same period.
Portfolio Specifics: The Fund held overweighted positions in the Communications
sector, including the wireless, wireline, and internet subsectors, which helped
performance for the twelve months. Underperforming issues in the Manufacturing
and Electronics sectors adversely impacted returns for the period. Issues that
are $100-200 million in size have become less desirable in the last year as
market participants have defensively sought the biggest and most liquid issues.
The Fund holds many cash pay issues in this size range. Although these issues
have negatively impacted performance, the Fund's management feels the credit
quality of these issues is sound.
Portfolio cash levels have risen recently as we expect the market to provide
attractive buying opportunities in the latter part of the second half of 2000.
Consistent with our goal of managing a stable dividend fund with an emphasis on
domestic cash pay issues, the Fund's management has been taking the opportunity
to consolidate positions. Our avoidance of emerging market and foreign issues,
and equity investments, hurt performance in the last twelve months as these
markets outperformed significantly. Double-B issues have significantly
outperformed the market while Triple-C's have underperformed. The Fund's average
credit quality weighting of Single-B has slightly helped the portfolio,
providing a return close to the market averages.
Market Outlook: Our outlook is cautious as we continue to witness an FOMC that
has a bias to tighten monetary policy. The danger of recession is real as the
Federal Reserve Bank typically creates a soft-landing, or a slowing of economic
growth and inflation without a recession, about 50% of the time once they begin
tightening. When they create a recession, the results can be problematic for
high yield bonds. We have also taken note of the increasingly tough stance taken
by banks and other lenders on not being willing to waive convenant violations.
This causes high yield credits to get into trouble faster as there is less
forbearance on the part of senior bank lenders. Finally, the high yield market
itself is less forgiving. Quality names will snap back with the market, marginal
credits will eventually recover if investors wait, but weak issuers are given no
benefit of the doubt. Weak issues can not hide behind general market trends.
Given this, it becomes obvious it is a credit pickers market. Diligence in the
credit review and monitoring process has become key to maintaining returns above
the benchmark averages.
30
<PAGE>
----------------
Portfolio
Manager's Report
----------------
PILGRIM HIGH YIELD FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim High Yield Fund
Class A With Sales Charge 10,000 10,339 12,733 14,820 15,458 16,947 19,103 22,377 24,998 23,605 22,378
Pilgrim High Yield Fund
Class A Without Sales Charge 10,000 10,852 13,364 15,554 16,224 17,787 20,050 23,487 26,237 24,775 23,487
First Boston High Yield Index 10,000 11,570 14,481 16,937 17,672 19,880 21,862 25,070 27,822 27,585 27,476
Lehman Brothers High Yield Index 10,000 11,432 14,229 16,500 17,084 19,452 21,334 24,296 27,058 26,956 26,680
Average Annual Total Returns for the Periods Ended June 30, 2000
------------------------------------------------------------------------
Since Inception Since Inception
of Class B and M of Class C
1 Year 5 Year 10 Year 7/17/95 5/27/99
------ ------ ------- ------- -------
Including Sales Charge:
Class A (1) -9.70% 4.68% 8.39% -- --
Class B (2) -10.91% -- -- 4.38% --
Class C (3) -6.99% -- -- -- -5.18%
Class M (4) -8.92% -- -- 4.21% --
Excluding Sales Charge:
Class A -5.20% 5.72% 8.91% -- --
Class B -5.91% -- -- 4.66% --
Class C -5.99% -- -- -- -5.18%
Class M -5.86% -- -- -4.91% --
First Boston High Yield Index -0.40% 6.69% 10.64% 6.47%(5) -0.32%
Lehman Brothers High Yield Index -1.02% 6.52% 10.31% 6.37% -1.14%(6)
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim High Yield Fund against the First Boston High Yield
Index and the Lehman Brothers High Yield Index. The Indices have an inherent
performance advantage over the Fund since they have no cash in their portfolio,
impose no sales charges and incur no operating expenses. An investor cannot
invest directly in an index. The Fund's performance is shown both with and
without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 4.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Reflects deduction of the maximum Class M sales charge of 3.25%.
(5) Since inception return from 7/31/95.
(6) Since inception, performance for the index is shown from 6/1/99.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
Higher yields reflect the higher credit risks associated with certain lower
rated securities in the Fund's portfolio, and in some cases, the lower market
prices for those instruments.
See accompanying index descriptions on pages 40 and 41.
31
<PAGE>
------
Income
Funds
------
Portfolio
PILGRIM HIGH YIELD FUND II Manager's Report
--------------------------------------------------------------------------------
Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio
Manager, Charles Ullerich, Vice President & Portfolio Manager
Goals: Pilgrim High Yield Fund II (the "Fund" or "High Yield II") seeks to
provide a high level of current income and capital growth by investing in high
yield debt securities.
Market Overview: The first half of 2000 was better than the second half of 1999,
but not by much. The negative returns of 1999 were succeeded by flat returns in
2000. High yield bond prices continued to decline in the first half of 2000 but
when combined with coupon income, total returns on the sector came close to
zero.
Federal Open Market Committee (FOMC) policy continued the tightening bias of
1999 with further interest rate increases in the first half of 2000. After
raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second
half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000.
The FOMC continues to be concerned that the domestic economy is growing too
quickly and that the result might be increased inflation. Much of the price
behavior in the high yield market can be directly attributed to participants
fear that the Federal Reserve Bank will over-tighten, pushing the economy into a
recession.
Through the year ended June 30, 2000, the ten-year Treasury yield was basically
unchanged yielding just below 6% at the beginning of the period and just above
6% at the end of the period. High yield bonds, reflecting the increased risk
premium demanded by the market, rose in yield, falling in price over the same
time period. Spreads remained virtually unchanged from the beginning to the end
of the second half of 1999, but widened by 100 to 125 basis points on most of
the major high yield indices in the first half of 2000. This activity reflected
the fear of recession as well as rising default rates, declining recovery rates,
and weak technical conditions resulting from mutual fund net redemptions. Mutual
fund outflows totaled in excess of $6 billion in the first half of 2000,
although trends have been more positive in the latter half with sales outpacing
redemptions.
In the first half of 2000 trends from the second half of 1999 continued as
higher rated issues outperformed lower rated issues. In order of performance for
2000, Double-B issues ranked first followed by Single-B and at the bottom
Triple-C and lower rated issues. These results are to be expected with the
increased level of investor sensitivity to economic conditions. Concerns about
the market did not seem to significantly slow new issuance. First half of 2000
issuances totaled $27 billion, down only marginally from the $35 billion total
from the second half of 1999. This is a positive sign as there is still buyer
demand for quality issues, even in a slow and cautious market.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 3.96% compared to the Lehman
Brothers High Yield Index, which declined 1.02%, and the First Boston High Yield
Index, which declined 0.40% for the same period.
Portfolio Specifics: The Fund outperformed due to a large concentration in the
Communications sector. The best performing credits were those on the leading
edge of telecommunication technology including providers of digital subscriber
lines, wireless voice and internet/data connectivity, and firms that provide
access technology for internet data sites. Equally important has been the
avoidance of sectors that have significantly underperformed the market including
Healthcare, Food & Drug, and Retail credits.
Portfolio cash levels have risen recently as we expect the market to provide
attractive buying opportunities in the latter part of the second half of 2000.
We will take the opportunity, early in the second half of 2000, to review our
Telecommunications exposure, possibly looking for a reduction in weighting, and
to consider sectors that have dramatically underperformed the high yield market
during the last 12 to 18 months as possible buy candidates.
Credit quality has played a role in performance the last twelve months. Double-B
issues have significantly outperformed the market while Triple-C's have
underperformed. The Fund's average credit quality weighting of Single-B has
slightly helped the portfolio, providing a return close to the market averages.
Overall, the Fund's management feels the credit quality of the portfolio is good
and positioned for outperformance in the second half of 2000.
Market Outlook: Our outlook is cautious as we continue to witness an FOMC that
has a bias to tighten monetary policy. The danger of recession is real as the
Federal Reserve Bank typically creates a soft-landing, or a slowing of economic
growth and inflation without a recession, about 50% of the time once they begin
tightening. When they create a recession, the results can be problematic for
high yield bonds. We have also taken note of the increasingly tough stance taken
by banks and other lenders on not being willing to waive convenant violations.
This causes high yield credits to get into trouble faster as there is less
forbearance on the part of senior bank lenders. Finally, the high yield market
itself is less forgiving. Quality names will snap back with the market, marginal
credits will eventually recover if investors wait, but weak issuers are given no
benefit of the doubt. Weak issues can not hide behind general market trends.
Given this, it becomes obvious it is a credit pickers market. Diligence in the
credit review and monitoring process has become key to maintaining returns above
the benchmark averages.
32
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----------------
Portfolio
Manager's Report
----------------
PILGRIM HIGH YIELD FUND II
--------------------------------------------------------------------------------
3/27/98 6/98 6/99 6/30/00
------ ------ ------ ------
Pilgrim High Yield Fund II
Class A With Sales Charge 10,000 9,693 9,779 10,193
Pilgrim High Yield Fund II
Class A Without Sales Charge 10,000 10,174 10,265 10,699
Lehman Brothers High Yield Index 10,000 10,110 10,072 9,969
Average Annual Total Returns for
the Periods Ended June 30, 2000
-------------------------------
Since Inception Since Inception
1 Year 3/27/98 3/31/00
------ ------- -------
Including Sales Charge:
Class A (1) -0.18% 0.85% --
Class B (2) -1.72% 1.33% --
Class C (3) 2.28% 2.44% --
Class T (4) -- -- -4.49%
Excluding Sales Charge:
Class A 3.96% 3.03% --
Class B 3.28% 2.44% --
Class C 3.28% 2.44% --
Class T -- -- -0.49%
Lehman Brothers High Yield Index -1.02% -0.14%(5) 1.15%
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of Pilgrim High Yield II Fund against the Lehman Brothers High
Yield Index. The Index has an inherent performance advantage over the Fund since
it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 4.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 4%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
1-year return.
(4) Reflects deduction of the Class T deferred sales charge of 4.00%.
(5) Since inception performance for index is shown from 04/01/98.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
Higher yields reflect the higher credit risks associated with certain lower
rated securities in the Fund's portfolio and in some cases, the lower market
price for those instruments. Up to 35% of total assets may be invested in
foreign securities. International investing does pose special risks, including
currency fluctuation and political risks not found in investments that are
solely domestic. Risks of foreign investing are generally intensified for
investments in emerging markets.
See accompanying index descriptions on pages 40 and 41.
33
<PAGE>
------
Income
Funds
------
Portfolio
PILGRIM MONEY MARKET FUND Manager's Report
--------------------------------------------------------------------------------
Portfolio Management: Robert K. Kinsey, Vice President.
Goals: The Money Market Fund (the "Fund" or "Money Market") seeks to provide as
high a level of current income as is consistent with the preservation of capital
and liquidity by investing all of its assets in the Class A shares of Primary
Institutional Fund, a series of Reserve Institutional Trust, a registered
open-end management company.
Money Market Fund Overview: Sentiment in the money markets shifted dramatically
during the second quarter. Initially, the economy showed little, if any, signs
of a slowdown. As a result, the market expected the Federal Reserve Bank to
raise interest rates at least twice before the end of the summer. We can reach
this conclusion by examining the future market for 30-day federal rates.
Investors were not disappointed. The Federal Reserve Bank made an aggressive
move at the May Federal Open Market Committee meeting by raising the overnight
rate to 6.50%, an increase of 50 basis points. However, as more market friendly
data was reported during June, it appeared that the past six Federal Reserve
Bank tightenings finally were having an impact on an overheated economy. The
Federal Funds futures declined. Now, money market yields are reflecting no
change in Federal Reserve policy. But in recent years, the economy has
experienced a second quarter slowdown only to resume its upward path later in
the year. So, we believe that the Federal Reserve Bank may raise rates one more
time unless solid evidence continues to demonstrate a definite slowdown.
Performance: The Pilgrim Money Market Fund's Class A shares, excluding sales
charges, provided a since inception total return of 3.58% for the period
November 24, 1999 through June 30, 2000. The Fund's Class B and C shares,
excluding sales charges, provided a since inception total return of 3.60% and
3.58%, respectively for the period July 12, 1999 through June 30, 2000.
Portfolio Specifics: The Reserve Institutional Trust - Primary Institutional
Fund's Class A shares had a 30-day current yield of 6.30% as of June 30, 2000
and an average maturity of 54 days.
Market Outlook: Going forward, we are likely to see one additional 25 basis
point increase in the federal funds target.
An investment in the Pilgrim Money Market Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although this Fund seeks to preserve the net asset value at $1.00 per share, it
is possible to lose money by investing in this Fund.
34
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35
<PAGE>
------------
Equity &
Income Funds
------------
Portfolio
PILGRIM BALANCED FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio
Manager; G. David Underwood, Senior Vice President & Senior Portfolio Manager
Robert K. Kinsey, Vice President & Senior Portfolio Manager; Charles Ullerich,
Vice President & Portfolio Manager.
Goals: The Balanced Fund (the "Fund" or "Balanced") 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: During the 12-month period ended June 30, 2000,
heightened volatility punctuated the U.S. equity markets. Sentiment swung from
positive to speculative to cautionary following in step with investors
perceptions of economic recovery, expansion and then impending slowdown. At
period end, the major indices appeared to have gone nearly nowhere, although
those of the smaller stocks held on to substantial gains.
Initially, market participants still felt very positive that a global recession
did not develop from earlier economic crises in Asia, Latin America and Europe.
Solid economic growth in the U.S. helped as well. The broad market S&P 500 Index
first responded by advancing to a then new high in July but surrendered it all
over the subsequent three months, followed by a surge in late 1999. It repeated
a similar pattern through the first half of 2000. Mid-sized and smaller stocks
echoed this pattern, although the mid-capitalization stocks managed to hold on
to more of their gains through June, 2000.
Rising interest rates over the past year were a major factor in causing the
market volatility. Generally, the markets tended to sell off in anticipation of
each of the rate increases. Affected most in the process were stocks of
companies more sensitive to the economy, which investors traded in to and out
of. Technology groups benefited the most. Investors took prices of these stocks
to extremes in the fourth quarter of 1999 and again in early 2000, thinking that
these companies would be insulated from any downturn. As with any market
euphoria, the subsequent corrective phases were sharp. Testimony to the
narrowness of the market, five companies, four of which are technology, were
primarily responsible for the S&P 500 Index's return over the past year.
Bond Market Overview: The high quality bond market experienced extraordinary
bouts of illiquidity up until the latter part of the second quarter of 2000.
While weakness in the equity market boded well for U. S. Treasuries, a number of
corporate bonds were pummelled by earnings warnings and downgrades. However, the
successful completion of several record-breaking new issues marked the
turnaround in spread product by late May. Agencies faced some very rough
sledding early in 2000 as a congressional committee and political pundits
questioned the unique relationship between the Treasury Department and Fannie
Mae (FNMA) and Freddie Mac (FHLMC). Despite numerous Federal Reserve Bank
tightenings, long-term Treasuries have been well bid in the face of government
buybacks and signs that the domestic economy is slowing.
The first half of 2000 was better than the second half of 1999, but not by much.
The negative returns of 1999 were succeeded by flat returns in 2000. High yield
bond prices continued to decline in the first half of 2000 but, when combined
with coupon income, total returns on the sector came close to zero.
Through the year ended June 30, 2000, the ten-year Treasury yield was basically
unchanged, yielding just below 6% at the beginning of the period and just above
6% at the end of the period. High yield bonds, reflecting the increased risk
premium demanded by the market, rose in yield, falling in price over the same
time period. Spreads remained virtually unchanged from the beginning to the end
of the second half of 1999, but widened by 100 to 125 basis points on most of
the major high yield indices in the first half of 2000. This activity reflected
the fear of recession as well as rising default rates, declining recovery rates,
and weak technical conditions resulting from mutual fund net redemptions. Mutual
fund outflows totaled in excess of $6 billion in the first half of 2000,
although trends have been more positive at the end of the half with sales
outpacing redemptions.
In the first half of 2000 trends from the second half of 1999 continued as
higher rated issues outperformed lower rated issues. In order of performance for
2000, Double-B issues ranked first followed by Single-B and at the bottom
Triple-C and lower rated issues. These results are to be expected with the
increased level of investor sensitivity to economic conditions. Concerns about
the market did not seem to significantly slow new issuance. First half of 2000
issuance totaled $27 billion, down only marginally from the $35 billion total
from the second half of 1999. This is a positive sign as there is still buyer
demand for quality issues, even in a slow and cautious market.
Performance: For the one year ended June 30, 2000 the Fund's Class A shares,
excluding sales charges, declined 1.01% compared to the 60% S&P 500 Index 40%
Lehman Aggregate Index which provided a total return of 7.03% for the same
period.
Portfolio Specifics: Appropriate sector allocation, a disciplined portfolio
management approach and good stock selection for the most part produced solid
equity performance in the Fund. During the final quarter of the fiscal year, the
Fund absorbed another balanced fund, the stocks of which had a temporarily
negative impact. The Technology, Healthcare and Retailing sectors had the most
positive influence. Holdings in Texas Instruments, Warner Lambert and Walgreens
appreciated nicely
A significant commitment to U. S. Treasuries on the heels of the government's
buyback announcement boosted the Fund's fixed income returns. Following the
under-performance of corporate bonds in the early part of the year, we added
Lucent, Wal-Mart, Ford, and insured Banco Santander paper along with several
agency debentures in May. We maintained our presence in puttable corporates.
Market Outlook: Though still challenged by interest rates market conditions are
favorable for equity investment. Growth of corporate profits remains on track
and valuations have become more reasonable. Agency debentures offer excellent
relative value especially now that the Congress is unlikely to move against the
government sponsored enterprises anytime soon. Despite the strong rally relative
to Treasuries and swaps, we feel that selective corporate bonds are cheap. We
continue to avoid event risk candidates and long-dated corporate paper, and we
focus on larger more liquid issues. Recent economic data point to a nascent
Federal Reserve Bank engineered slowdown, and the market consensus is for only
one more tightening.
Our outlook is cautious as we continue to witness an Federal Open Market
Committee that has a bias to tighten monetary policy. The danger of recession is
real as the Federal Reserve Bank typically creates a soft-landing, or a slowing
of economic growth and inflation without a recession, about 50% of the time once
they begin tightening. When they create a recession, the results can be
problematic for high yield bonds. Given this it becomes obvious it is a credit
pickers market. Diligence in the credit review and monitoring process has become
key to maintaining returns above the benchmark averages.
36
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----------------
Portfolio
Manager's Report
----------------
PILGRIM BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Balanced Fund Class A With Sales Charge 10,000 10,411 9,697 11,622 13,527 15,381 19,482 22,580 22,353
Pilgrim Balanced Fund Class A Without Sales Charge 10,000 11,044 10,286 12,329 14,350 16,316 20,666 23,953 23,713
60% S&P 500 Index / 40% Lehman Aggregate Index 10,000 10,273 10,336 12,662 15,315 19,772 25,067 29,998 32,108
Average Annual Total Returns for the Periods Ended June 30, 2000
--------------------------------------------------------------
Since Inception Since Inception Since Inception
of Class A and C of Class B of Class T
1 Year 5 Year 4/19/93 5/31/95 3/31/00
------ ------ ------- ------- -------
Including Sales Charge:
Class A (1) -6.70% 12.63% 11.82% -- --
Class B (2) -6.58% -- -- 13.98% --
Class C (3) -2.53% 13.26% 12.06% -- --
Class T (5) -- -- -- -- -8.16%
Excluding Sales Charge:
Class A -1.01% 13.98% 12.74% -- --
Class B -1.58% -- -- 14.09% --
Class C -1.53% 13.26% 12.06% -- --
Class T -- -- -- -- -4.34%
60% S&P 500 Index/40% Lehman
Aggregate Index 7.03% 20.45% 17.68%(4) 20.54% -2.29%
</TABLE>
Based on a $10,000 initial investment, the table above illustrate the total
return of Pilgrim Balanced Fund against the 60% S&P 500 Index, 40% Lehman
Aggregate Index. The Index has an inherent performance advantage over the Fund
since it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
1-year return.
(4) Since inception return from 4/30/93.
(5) Reflects deduction of the Class T deferred sales charge of 4.00%.
Principal Risk Factor(s): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany debt investments. The Fund may invest up to 20% of its total assets in
foreign securities. International investing does pose special risks, including
currency fluctuation, economic and political risks not found in investments that
are solely domestic. Higher yields reflect the higher credit risks associated
with certain lower rated securities in the Fund's portfolio and in some cases,
the lower market prices for those instruments.
See accompanying index descriptions on pages 40 and 41.
37
<PAGE>
------------
Equity &
Income Funds
------------
Portfolio
PILGRIM CONVERTIBLE FUND Manager's Report
--------------------------------------------------------------------------------
Management Team: Catherine Somhegyi, Chief Investment Officer; Douglas G.
Forsyth, CFA, Partner, Portfolio Manager; William L. Stickney, Portfolio
Manager; Michael E. Yee, Portfolio Manager; Justin Kass, Investment Analyst.
Goal: The Convertible Fund (the "Fund" or "Convertible") seeks to maximize total
return by investing primarily in convertible and equity securities of US
companies.
Market Overview: Convertible securities posted significant gains during the
fiscal year ended June 30, 2000, despite the Federal Reserve Bank hiking
interest rates six times from June 1999 through May 2000. The Credit Swisse
First Boston (CSFB) Convertible Index climbed 30.0%, outperforming most major US
equity indexes, including the S&P 500, the Russell Midcap, and the Russell 3000
indices, which advanced 7.2%, 12.6%, and 16.4%, respectively.
Returns on convertible securities were essentially flat in the third quarter of
1999, due to investor concerns over rising interest rates and inflation.
However, convertibles outperformed equities which posted single-digit declines
across the majority of market capitalization segments.
Bouncing back from a lackluster three months, convertible securities closed out
the millennium with their best performance on record. During the fourth quarter
of 1999, the CSFB Convertible Index gained a stunning 28.3%, fueled by returns
in the technology and telecommunications sectors. In fact, technology and
telecommunications dominated the convertible market throughout 1999, in terms of
returns, new issuance, and market composition.
In the first half of 2000, performance of the technology-biased,
equity-sensitive convertible market paralleled that of technology stocks.
Following the first quarter's 6.5% gain, the convertible market declined in
April and May, However, June was an excellent month for convertibles with the
CSFB Index posting a 6.5% increase, led by a rebound in technology issues.
Performance: For the one year ended June 30, 2000, the Fund's Class A shares,
excluding sales charges, provided a total return of 39.88%, substantially
outperforming the CSFB Convertible Index, which was up 30.02% for the same
period.
Portfolio Specifics: A sell-off in Internet-related issues had a minor negative
impact on the fund's relative performance in July, as did a pullback in interest
rate-sensitive telecommunications holdings in April and May.
For the entire period, however, positions in the technology and
telecommunications were major contributors to the fund's strong results.
Top-performing holdings included e-commerce companies Siebel Systems and BEA
Systems, semiconductor firms Atmel and Conexant Systems, data storage solutions
provider Veritas Software, and Vodafone Airtouch, the world's largest mobile
telecommunications company.
Market Outlook: By consistently applying our bottom-up investment approach, we
are optimistic that the convertible market will continue to offer attractive
investment opportunities, driven by:
* Expectations for continued strength in corporate profits
* Signs of moderating US economic growth
* Ongoing technology-based productivity gains that should help restrain labor
costs
* A potential increase in demand for convertible securities as investors seek
equity-like returns with downside protection amid a volatile stock market
environment
38
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----------------
Portfolio
Manager's Report
----------------
PILGRIM CONVERTIBLE FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pilgrim Convertible Fund
Class A With Sales Charge 10,000 10,308 10,743 11,744 14,308 17,368 21,139 26,189 36,650
Pilgrim Convertible Fund
Class A Without Sales Charge 10,000 10,935 11,396 12,458 15,178 18,424 22,425 27,781 38,879
First Boston Convertible Index 10,000 10,272 10,438 12,162 14,080 16,212 18,479 20,639 26,836
Average Annual Total Returns for the Periods Ended June 30, 2000
----------------------------------------------------------------
Since Inception Since Inception
of Class A and C of Class B
1 Year 5 Year 4/19/93 5/31/95
------ ------ ------- -------
Including Sales Charge:
Class A (1) 31.84% 24.08% 19.77% --
Class B (2) 34.21% -- -- 25.25%
Class C (3) 38.24% 24.80% 20.00% --
Excluding Sales Charge:
Class A 39.88% 25.56% 20.75% --
Class B 39.21% -- -- 25.33%
Class C 39.24% 24.80% 20.00% --
First Boston Convertible Index 30.02% 17.13% 11.75%(4) 17.65%
</TABLE>
Based on a $10,000 initial investment, the graph and table above illustrate 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, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment 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 portfolio manager's
views are subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1
year return.
(4) Since inception performance for index is shown from 04/30/93.
Principal Risk Factor(s): The credit standing of the issuer and other factors
may affect the investment value of a convertible security. The market value of
convertible debt securities tends to vary inversely with the level of interest
rates. Lower rated securities may be less liquid than higher quality
investments. This fund also has exposure to financial, market and interest rate
risks. Higher yields reflect the higher credit risks associated with certain
lower rated securities in the Fund's portfolio and in some cases, the lower
market prices for those instruments.
See accompanying index descriptions on pages 40 and 41.
39
<PAGE>
-------
Pilgrim
Funds
-------
INDEX DESCRIPTIONS
--------------------------------------------------------------------------------
The S&P 500 Index is a widely recognized index of 500 common stocks.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry.
The S&P Barra Value Index ia a capitalization-weighted index of all the stocks
in the S&P 500 Index that have low price-to-book ratios
The Russell 1000 Growth Index is an index that measures the performance of those
Russell 1000 Index companies with higher price-to-book ratios and higher
forecasted growth values.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of all
NASDAQ National Market & SmallCap stocks.
The Russell MidCap Index is generally representative of the smallest 800 stocks
in the Russell 1000 Index as ranked by total market capitalization.
The Russell MidCap Value Index measures the performance of the 800 smallest
companies in the Russell 1000 Index with lower price-to-book ratios and lower
forecasted growth values.
The Russell MidCap Growth Index consists of securities with capitalizations
between $450 million and $3.8 billion with greater than average growth
orientation.
The Russell 2000 Growth Index measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values.
The Russell 2000 Index consists of the smallest 2000 companies in the Russell
3000 Index.
The S&P Major Regional Banks Index is a capitalization-weighted index of all
stocks designed to measure performance of the major regional banks sector of the
S&P 500 Index.
The NASDAQ 100 Financial Index is a capitalization-weighted index of the 100
largest financial companies, as well as foreign issues, including American
Depositary Receipts, traded on the NASDAQ National Market System and SmallCap
Market.
The MSCI EAFE Index consists of more than 1,400 securities in the U.S., Europe,
Canada, Australia, New Zealand, and the Far East. It is a generally accepted
index for major overseas markets.
The MSCI Emerging Markets Free (EMF) Index is comprised of companies
representative of the market structure of 22 emerging countries in Europe, Latin
America and the Pacific Rim Basin.
The MSCI World Index consists of more than 1,400 securities located in the U.S.,
Europe, Canada, Australia, New Zealand and the Far East.
The Salomon EPAC Extended Market Index measures the performance of securities of
smaller-capitalized companies in 22 countries excluding the U.S. and Canada.
The Hang Seng Index is a capitalization weighted index of the stocks of leading
Hong Kong corporations.
The MSCI Far East Free ex-Japan Index measures performance of securities listed
on exchanges in the Far East markets excluding Japan.
40
<PAGE>
-------
Pilgrim
Funds
-------
INDEX DESCRIPTIONS (continued)
--------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond Index is an index of fixed income securities.
The Lehman Brothers Government/Mortgage Index measures the performance of U.S.
Government agencies and instrumentalities, as well as mortgage pass-through
instruments issued by FNMA, FHLMC and GNMA.
The Lehman Brothers Intermediate Treasury Index is an index that measures the
performance of U.S. Treasuries with maturities of less than ten years.
The Lehman Brothers High Yield Bond Index is comprised of non-investment grade
bonds with maturities between seven to ten years.
The Credit Suisse First Boston High Yield Index is an index of high yield bonds
rated BB or below.
The Credit Suisse First Boston Convertible Index is an index representing the
universe of convertible securities.
The SET Index is a capitalization-weighted index of all the stocks traded on the
Stock Exchange of Thailand.
All indices are unmanaged.
An investor cannot invest directly in an index.
41
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
42
<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 MagnaCap Fund, Pilgrim LargeCap
Leaders Fund, Pilgrim LargeCap Growth Fund, Pilgrim MidCap Value Fund, Pilgrim
MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Bank and Thrift Fund,
Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim
International SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim
Asia-Pacific Equity Fund, Pilgrim Government Securities Income Fund, Pilgrim
Strategic Income Fund, Pilgrim High Yield Fund, Pilgrim High Yield Fund II,
Pilgrim Money Market Fund, Pilgrim Balanced Fund and Pilgrim Convertible Fund as
of June 30, 2000, and the related statements of operations for the year then
ended, statements of changes in net assets for each of the years in the two-year
period then ended, and financial highlights for the periods indicated herein,
except as described below, for all funds except 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 for which we audited the related statements of changes
in net assets and financial highlights for the year ended June 30, 2000 and the
three-month period ended June 30, 1999, and the Pilgrim Money Market Fund for
which we audited the related statements of operations, changes in net assets and
financial highlights for the period from July 12, 1999 (commencement of
operations) to June 30, 2000. 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 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 required 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, 2000 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, 2000, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated herein, except
as noted above, in conformity with generally accepted accounting principles.
KPMG LLP
Los Angeles, California
August 4, 2000
43
<PAGE>
-----------
U.S. Equity
Funds
-----------
STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap MidCap SmallCap Bank and
MagnaCap Leaders Growth Value Growth Growth Thrift
Fund Fund Fund Fund Fund Fund Fund
------------ ----------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities
at market value* $406,990,017 $36,730,816 $692,005,187 $29,388,822 $540,375,016 $500,804,265 $ 353,366,711
Short-term investments at
amortized cost 13,465,911 2,114,000 15,448,000 3,232,000 5,417,000 13,629,000 3,552,000
Cash 18,204 134,890 48,707 10,210 10,714 10,278 10,717
Receivables:
Fund shares sold 110,400 99,464 4,625,769 6,457 1,823,383 2,650,835 334,937
Dividends and interest 526,663 30,282 68,627 18,894 33,989 55,133 876,810
Investment securities sold -- 164,029 13,331,522 82,197 6,479,797 1,372,829 1,559,651
Other 33,356 20,203 -- -- -- -- --
Prepaid expenses 28,948 26,860 41,055 20,496 35,852 25,396 29,854
------------ ----------- ------------ ----------- ------------ ------------ -------------
Total Assets 421,173,499 39,320,544 725,568,867 32,759,076 554,175,751 518,547,736 359,730,680
LIABILITIES:
Payable for investment securities
purchased 2,212,865 1,335,301 26,495,350 1,173,228 8,988,122 8,143,975 184,271
Payable for fund shares redeemed 555,164 89,266 982,741 83,628 2,948,935 2,089,753 796,715
Payable to affiliate 417,173 45,432 857,695 46,432 670,213 653,383 408,574
Other accrued expenses and
liabilities 320,313 42,559 195,329 40,318 211,888 141,370 411,299
------------ ----------- ------------ ----------- ------------ ------------ -------------
Total Liabilities 3,505,515 1,512,558 28,531,115 1,343,606 12,819,158 11,028,481 1,800,859
------------ ----------- ------------ ----------- ------------ ------------ -------------
NET ASSETS $417,667,984 $37,807,986 $697,037,752 $31,415,470 $541,356,593 $507,519,255 $ 357,929,821
============ =========== ============ =========== ============ ============ =============
NET ASSETS CONSIST OF:
Paid-in capital $286,457,020 $31,399,144 $526,337,994 $28,853,491 $291,047,773 $295,285,132 $ 407,249,948
Undistributed net investment
income 872,876 -- -- -- -- -- 5,574,859
Accumulated net realized gain
on investments 29,968,024 1,746,427 7,618,306 1,920,781 65,413,634 25,892,989 3,133,445
Net unrealized appreciation
(depreciation) of investments 100,370,064 4,662,415 163,081,452 641,198 184,895,186 186,341,134 (58,028,431)
------------ ----------- ------------ ----------- ------------ ------------ -------------
Net Assets $417,667,984 $37,807,986 $697,037,752 $31,415,470 $541,356,593 $507,519,255 $ 357,929,821
============ =========== ============ =========== ============ ============ =============
* Cost of securities $306,619,953 $32,068,401 $528,923,735 $28,747,624 $355,479,830 $314,463,131 $ 411,395,142
</TABLE>
See Accompanying Notes to Financial Statements
44
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap MidCap SmallCap Bank and
MagnaCap Leaders Growth Value Growth Growth Thrift
Fund Fund Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A:
Net Assets $303,863,754 $ 10,023,911 $186,261,267 $ 8,874,538 $155,975,592 $168,239,310 $209,737,553
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited 100,000,000
Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.10
Shares outstanding 19,184,981 631,068 4,319,579 620,787 5,536,240 9,150,735 12,770,498
Net asset value and redemption
price per share $ 15.84 $ 15.88 $ 43.12 $ 14.30 $ 28.17 $ 18.39 $ 16.42
Maximum offering price per
share(1) $ 16.81 $ 16.85 $ 45.75 $ 15.17 $ 29.89 $ 19.51 $ 17.42
Class B:
Net Assets $ 87,166,507 $ 21,543,981 $333,256,132 $ 15,840,407 $116,333,572 $ 97,238,548 $148,192,268
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited 100,000,000
Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.10
Shares outstanding 5,645,177 1,407,914 7,760,157 1,149,578 3,521,132 4,222,869 9,063,708
Net asset value and redemption
price per share(2) $ 15.44 $ 15.30 $ 42.94 $ 13.78 $ 33.04 $ 23.03 $ 16.35
Maximum offering price per
share $ 15.44 $ 15.30 $ 42.94 $ 13.78 $ 33.04 $ 23.03 $ 16.35
Class C:
Net Assets $ 3,660,453 $ 1,363,558 $152,682,354 $ 2,687,960 $249,255,124 $229,472,882 n/a
Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited n/a
Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a
Shares outstanding 237,011 89,006 3,565,404 195,028 9,609,355 12,738,582 n/a
Net asset value and redemption
price per share(2) $ 15.44 $ 15.32 $ 42.82 $ 13.78 $ 25.94 $ 18.01 n/a
Maximum offering price per
share $ 15.44 $ 15.32 $ 42.82 $ 13.78 $ 25.94 $ 18.01 n/a
Class M:
Net Assets $ 13,049,521 $ 4,677,457 n/a $ 3,873,298 n/a n/a n/a
Shares authorized 40,000,000 14,000,000 n/a 14,000,000 n/a n/a n/a
Par Value $ 1.00 $ 0.10 n/a $ 0.00 n/a n/a n/a
Shares outstanding 834,479 301,320 n/a 278,473 n/a n/a n/a
Net asset value and redemption
price per share $ 15.64 $ 15.52 n/a $ 13.91 n/a n/a n/a
Maximum offering price per
share(3) $ 16.21 $ 16.09 n/a $ 14.41 n/a n/a n/a
Class Q:
Net Assets $ 9,927,749 $ 199,079 $ 24,837,999 $ 139,267 $ 19,792,305 $ 12,568,515 n/a
Shares authorized 40,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited n/a
Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a
Shares outstanding 626,744 12,534 568,240 9,749 554,850 614,141 n/a
Net asset value and redemption
price per share $ 15.84 $ 15.88 $ 43.71 $ 14.29 $ 35.67 $ 20.47 n/a
Maximum offering price per
share $ 15.84 $ 15.88 $ 43.71 $ 14.29 $ 35.67 $ 20.47 n/a
</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 may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
45
<PAGE>
-------------
International
Equity Funds
-------------
STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide International International Emerging Asia-Pacific
Growth Core Growth SmallCap Countries Equity
Fund Fund Growth Fund Fund Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at market value* $ 639,095,933 $ 83,328,917 $ 645,227,279 $ 251,751,858 $ 27,574,363
Short-term investments at amortized cost 27,281,000 4,042,000 66,960,000 1,218,000 --
Foreign Currency** 398 157,647 -- 3,713,846 --
Cash 23,559 10,586 10,203 10,779 --
Receivables:
Fund shares sold 4,498,998 727,867 6,256,545 1,950,335 280,549
Dividends and interest 622,494 180,766 419,277 438,193 39,207
Investment securities sold 8,129,229 704,551 7,617,055 6,248,100 288,184
Other -- 167,736 118,941 40,470 --
Prepaid expenses 92,703 17,485 77,753 19,893 15,814
------------- ------------- ------------- ------------- -------------
Total Assets 679,744,314 89,337,555 726,687,053 265,391,474 28,198,117
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 15,496,676 919,194 5,168,931 8,312,796 --
Payable for fund shares redeemed 2,898,211 336,290 1,823,813 1,000,921 134,352
Payable to affiliate 902,056 117,569 889,977 349,236 26,659
Payable to custodian -- -- -- -- 219,881
Estimated tax liability on Indian investments -- -- -- 860,486 --
Other accrued expenses and liabilities 268,101 117,724 385,272 374,076 114,845
------------- ------------- ------------- ------------- -------------
Total Liabilities 19,565,044 1,490,777 8,267,993 10,897,515 495,737
------------- ------------- ------------- ------------- -------------
NET ASSETS $ 660,179,270 $ 87,846,778 $ 718,419,060 $ 254,493,959 $ 27,702,380
============= ============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 518,940,603 $ 72,998,614 $ 570,256,199 $ 253,790,102 $ 48,397,703
Undistributed net investment income (loss) -- -- -- -- --
Accumulated net realized gain (loss) on
investments and foreign currency
transactions (net of foreign tax on the
sale of Indian investments of $0, $0,
$784,263, $4,489,899 and $0,
respectively -- Note 2) 16,761,834 2,514,180 46,827,954 (38,373,471) (23,718,357)
Net unrealized appreciation of investments
and other assets, liabilities and forward
contracts denominated in foreign
currencies (net of estimated tax liability
on Indian investments of $0, $0,
$0, $860,486 and $0, respectively --
Note 2) 124,476,833 12,333,984 101,334,907 39,077,328 3,023,034
------------- ------------- ------------- ------------- -------------
Net Assets $ 660,179,270 $ 87,846,778 $ 718,419,060 $ 254,493,959 $ 27,702,380
============= ============= ============= ============= =============
* Cost of securities $ 514,610,089 $ 70,987,938 $ 543,891,723 $ 211,815,346 $ 24,528,219
** Cost of foreign currency $ 397 $ 154,193 $ -- $ 3,714,465 $ --
</TABLE>
See Accompanying Notes to Financial Statements
46
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide International International Emerging Asia-Pacific
Growth Core Growth SmallCap Countries Equity
Fund Fund Growth Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Class A:
Net Assets $235,341,134 $ 23,002,771 $278,480,376 $ 75,311,162 $ 11,725,688
Shares authorized unlimited unlimited unlimited unlimited 24,000,000
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1.00
Shares outstanding 7,849,453 964,854 6,801,836 3,734,633 1,621,404
Net asset value and redemption
price per share $ 29.98 $ 23.84 $ 40.94 $ 20.17 $ 7.23
Maximum offering price per share(1) $ 31.81 $ 25.29 $ 43.44 $ 21.40 $ 7.67
Class B:
Net Assets $130,988,092 $ 21,542,945 $132,027,810 $ 30,321,732 $ 12,227,613
Shares authorized unlimited unlimited unlimited unlimited 24,000,000
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1.00
Shares outstanding 3,891,880 903,931 3,051,432 1,493,431 1,753,705
Net asset value and redemption
price per share(2) $ 33.66 $ 23.83 $ 43.27 $ 20.30 $ 6.97
Maximum offering price per share $ 33.66 $ 23.83 $ 43.27 $ 20.30 $ 6.97
Class C:
Net Assets $239,432,294 $ 26,734,344 $144,068,173 $ 29,610,258 n/a
Shares authorized unlimited unlimited unlimited unlimited n/a
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a
Shares outstanding 8,001,360 1,117,071 3,627,965 1,513,876 n/a
Net asset value and redemption
price per share(2) $ 29.92 $ 23.93 $ 39.71 $ 19.56 n/a
Maximum offering price per share $ 29.92 $ 23.93 $ 39.71 $ 19.56 n/a
Class M:
Net Assets n/a n/a n/a n/a $ 3,749,079
Shares authorized n/a n/a n/a n/a 12,000,000
Par Value n/a n/a n/a n/a $ 1.00
Shares outstanding n/a n/a n/a n/a 532,713
Net asset value and redemption
price per share n/a n/a n/a n/a $ 7.04
Maximum offering price per share(3) n/a n/a n/a n/a $ 7.30
Class Q:
Net Assets $ 54,417,750 $ 16,566,718 $163,842,701 $119,250,807 n/a
Shares authorized unlimited unlimited unlimited unlimited n/a
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a
Shares outstanding 1,575,894 668,527 3,783,688 5,749,575 n/a
Net asset value and redemption
price per share $ 34.53 $ 24.78 $ 43.30 $ 20.74 n/a
Maximum offering price per share $ 34.53 $ 24.78 $ 43.30 $ 20.74 n/a
</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 may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
47
<PAGE>
------
Income
Funds
------
STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield Money Market
Income Fund Fund Fund Fund II Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at market
value* $ 107,186,754 $ 10,907,360 $ 285,672,209 $ 179,559,343 $ --
Investment in Reserve Institutional
Trust Primary Institutional Fund* -- -- -- -- 100,415,833
Short-term investments at
amortized cost 4,658,000 289,000 13,402,935 21,501,000 --
Cash 576 15,968 17,906 268 --
Receivables:
Fund shares sold 3,569,377 86,185 1,403,965 253,636 1,228,493
Interest 672,660 158,632 9,079,960 4,115,502 17,470
Due from affiliate -- 13,244 -- -- --
Investment securities sold -- 202,924 7,018,324 1,550,278 --
Other 3,936 -- -- 1,624 --
Prepaid expenses 61,933 -- -- 79,905 29,805
Deferred organization costs -- 21,534 27,338 -- --
------------- ------------- ------------- ------------- -------------
Total Assets 116,153,236 11,694,847 316,622,637 207,061,556 101,691,601
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities
purchased -- 250,000 10,993,495 5,350,000 --
Payable for securities sold short
(proceeds of $122,387) -- -- 117,250 -- --
Payable for fund shares redeemed 2,570,991 15,577 796,717 1,115,672 8,276,028
Payable to custodian -- -- -- -- 58
Payable to affiliate 101,915 -- 318,118 199,982 75,291
Distributions payable -- -- -- 1,067,065 318,915
Other accrued expenses and
liabilities 115,198 49,086 249,381 119,786 124,979
------------- ------------- ------------- ------------- -------------
Total Liabilities 2,788,104 314,663 12,474,961 7,852,505 8,795,271
------------- ------------- ------------- ------------- -------------
NET ASSETS $ 113,365,132 $ 11,380,184 $ 304,147,676 $ 199,209,051 $ 92,896,330
============= ============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital $ 122,508,204 $ 12,441,162 $ 412,069,256 $ 235,891,108 $ 92,896,330
Undistributed (overdistributed)
net investment income -- 491,239 -- (256,953) --
Accumulated net realized loss
on investments and foreign
currency transactions (7,375,294) (1,342,971) (66,808,901) (9,557,114) --
Net unrealized depreciation of
investments, securities sold
short, and other assets,
liabilities and forward
contracts denominated in
foreign currencies (1,767,778) (209,246) (41,112,679) (26,867,990) --
------------- ------------- ------------- ------------- -------------
Net Assets $ 113,365,132 $ 11,380,184 $ 304,147,676 $ 199,209,051 $ 92,896,330
============= ============= ============= ============= =============
* Cost of securities $ 108,954,532 $ 11,116,606 $ 326,790,025 $ 206,427,333 $ 100,415,833
</TABLE>
See Accompanying Notes to Financial Statements
48
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield Money Market
Income Fund Fund Fund Fund II Fund
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Class A:
Net Assets $ 54,206,175 $ 2,726,254 $ 85,869,951 $ 34,415,080 $ 75,430,386
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 4,545,302 225,777 17,036,307 3,185,343 75,430,386
Net asset value and redemption
price per share $ 11.93 $ 12.07 $ 5.04 $ 10.80 $ 1.00
Maximum offering price per
share(1) $ 12.52 $ 12.67 $ 5.29 $ 11.34 $ 1.00
Class B:
Net Assets $ 33,692,207 $ 4,460,163 $ 199,617,501 $ 103,246,586 $ 12,035,204
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 2,834,631 377,987 39,688,341 9,547,339 12,035,204
Net asset value and redemption
price per share(2) $ 11.89 $ 11.80 $ 5.03 $ 10.81 $ 1.00
Maximum offering price per
share $ 11.89 $ 11.80 $ 5.03 $ 10.81 $ 1.00
Class C:
Net Assets $ 2,047,497 $ 3,966,076 $ 5,930,334 $ 23,323,984 $ 5,430,740
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 170,455 322,466 1,180,360 2,156,686 5,430,740
Net asset value and redemption
price per share(2) $ 12.01 $ 12.30 $ 5.02 $ 10.81 $ 1.00
Maximum offering price per
share $ 12.01 $ 12.30 $ 5.02 $ 10.81 $ 1.00
Class M:
Net Assets $ 509,983 n/a $ 12,729,862 n/a n/a
Shares authorized 1,000,000,000 n/a 40,000,000 n/a n/a
Par Value $ 0.00 n/a n/a n/a n/a
Shares outstanding 42,790 n/a 2,528,298 n/a n/a
Net asset value and redemption
price per share $ 11.92 n/a $ 5.03 n/a n/a
Maximum offering price per
share(3) $ 12.32 n/a $ 5.20 n/a n/a
Class Q:
Net Assets $ 21,720 $ 227,691 $ 28 $ 6,881,569 n/a
Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited n/a
Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a
Shares outstanding 1,819 19,891 5 635,888 n/a
Net asset value and redemption
price per share $ 11.94 $ 11.45 $ 5.60 $ 10.82 n/a
Maximum offering price per
share $ 11.94 $ 11.45 $ 5.60 $ 10.82 n/a
Class T:
Net Assets $ 22,887,550 n/a n/a $ 31,341,832 n/a
Shares authorized 1,000,000,000 n/a n/a unlimited n/a
Par Value $ 0.00 n/a n/a $ 0.00 n/a
Shares outstanding 1,924,439 n/a n/a 2,899,430 n/a
Net asset value and redemption
price per share(2) $ 11.89 n/a n/a $ 10.81 n/a
Maximum offering price per
share $ 11.89 n/a n/a $ 10.81 n/a
</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 (with the
exception of the Money Market Fund).
(2) Redemption price per share may be reduced for 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.
49
<PAGE>
------------
Equity &
Income Funds
------------
STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
Balanced Convertible
Fund Fund
------------ ------------
ASSETS:
Investments in securities at market value* $134,380,839 $463,127,528
Short-term investments at amortized cost 6,624,000 23,043,000
Cash 105,422 10,916
Receivables:
Fund shares sold 56,270 3,434,620
Dividends and interest 1,241,211 2,756,429
Investment securities sold 19,843,094 2,602,778
Other -- --
Prepaid expenses 51,201 45,783
------------ ------------
Total Assets 162,302,037 495,021,054
------------ ------------
LIABILITIES:
Payable for investment securities purchased 20,326,390 10,142,819
Payable for fund shares redeemed 40,139 415,419
Payable to affiliate 128,692 577,098
Other accrued expenses and liabilities 167,522 205,513
------------ ------------
Total Liabilities 20,662,743 11,340,849
------------ ------------
NET ASSETS $141,639,294 $483,680,205
============ ============
NET ASSETS CONSIST OF:
Paid-in capital $126,219,252 $336,593,518
Undistributed net investment income 1,009,916 2,762,398
Accumulated net realized gain on investments
and foreign currency transactions 9,816,187 64,760,961
Net unrealized appreciation (depreciation)
of investments and other assets, liabilities
and forward contracts denominated in foreign
currencies 4,593,939 79,563,328
------------ ------------
Net Assets $141,639,294 $483,680,205
============ ============
* Cost of securities $129,786,900 $383,554,153
See Accompanying Notes to Financial Statements
50
<PAGE>
--------------------------------------------------------------------------------
Balanced Convertible
Fund Fund
------------ ------------
Class A:
Net Assets $ 63,592,296 $131,218,165
Shares authorized unlimited unlimited
Par Value $ 0.00 $ 0.00
Shares outstanding 4,228,007 4,736,872
Net asset value and redemption price per share $ 15.04 $ 27.70
Maximum offering price per share(1) $ 15.96 $ 29.39
Class B:
Net Assets $ 41,026,358 $139,704,256
Shares authorized unlimited unlimited
Par Value $ 0.00 $ 0.00
Shares outstanding 2,549,070 4,626,136
Net asset value and redemption price per share(2) $ 16.09 $ 30.20
Maximum offering price per share $ 16.09 $ 30.20
Class C:
Net Assets $ 25,838,281 $156,592,375
Shares authorized unlimited unlimited
Par Value $ 0.00 $ 0.00
Shares outstanding 1,788,579 5,528,130
Net asset value and redemption price per share(2) $ 14.45 $ 28.33
Maximum offering price per share $ 14.45 $ 28.33
Class Q:
Net Assets $ 229,777 $ 56,165,409
Shares authorized unlimited unlimited
Par Value $ 0.00 $ 0.00
Shares outstanding 15,379 2,091,751
Net asset value and redemption price per share $ 14.94 $ 26.85
Maximum offering price per share $ 14.94 $ 26.85
Class T:
Net Assets $ 10,952,582 n/a
Shares authorized unlimited n/a
Par Value $ 0.00 n/a
Shares outstanding 680,390 n/a
Net asset value and redemption price per share(2) $ 16.10 n/a
Maximum offering price per share $ 16.10 n/a
----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
51
<PAGE>
-----------
U.S. Equity
Funds
-----------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LargeCap LargeCap MidCap
MagnaCap Leaders Growth Value
Fund Fund Fund Fund
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 6,411,880 $ 447,922 $ 979,861 $ 410,689
Interest 1,359,240 110,892 1,001,252 89,322
------------- ------------- ------------- -------------
Total investment income 7,771,120 558,814 1,981,113 500,011
------------- ------------- ------------- -------------
EXPENSES:
Investment management fees 3,251,123 382,174 2,997,541 396,010
Distribution expenses 2,175,698 300,365 3,229,574 292,106
Transfer agent and registrar fees 721,472 95,282 638,226 117,873
Shareholder reporting 146,421 15,238 145,839 16,015
Registration and filing fees 100,509 55,876 87,246 51,863
Recordkeeping and pricing fees 82,218 6,352 66,942 8,653
Professional fees 60,170 5,810 39,618 6,239
Custodian fees 52,887 6,805 45,643 7,779
Shareholder servicing fee 31,735 4,056 27,554 5,230
Directors' fees 29,515 3,311 16,842 3,607
Insurance 21,139 1,899 998 2,452
Miscellaneous 13,160 1,097 7,788 2,341
Interest and credit facility fee 6,126 483 15,244 645
Organization expense -- 27,603 -- 27,602
------------- ------------- ------------- -------------
Total expenses 6,692,173 906,351 7,319,055 938,415
------------- ------------- ------------- -------------
Less:
Waived and reimbursed fees -- 31,375 -- 48,900
Earnings credits 740 548 19,972 1,712
------------- ------------- ------------- -------------
Net expenses 6,691,433 874,428 7,299,083 887,803
------------- ------------- ------------- -------------
Net investment income (loss) 1,079,687 (315,614) (5,317,970) (387,792)
------------- ------------- ------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain from
investments 29,968,024 2,990,062 13,498,698 2,719,300
Net change in unrealized
appreciation (depreciation)
of investments (35,597,984) (1,997,225) 147,558,169 (9,096,135)
------------- ------------- ------------- -------------
Net gain (loss) from investments (5,629,960) 992,837 161,056,867 (6,376,835)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ (4,550,273) $ 677,223 $ 155,738,897 $ (6,764,627)
============= ============= ============= =============
MidCap SmallCap Bank and
Growth Growth Thrift
Fund Fund Fund
------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 240,274 $ 413,944 $ 13,965,652
Interest 831,678 913,329 243,551
------------- ------------- -------------
Total investment income 1,071,952 1,327,273 14,209,203
------------- ------------- -------------
EXPENSES:
Investment management fees 3,101,608 4,206,863 3,609,716
Distribution expenses 3,308,958 3,219,847 2,893,803
Transfer agent and registrar fees 561,763 610,182 1,564,384
Shareholder reporting 172,610 167,232 125,600
Registration and filing fees 82,483 91,096 96,425
Recordkeeping and pricing fees 77,837 81,596 89,510
Professional fees 45,075 56,326 75,093
Custodian fees 54,743 85,460 58,848
Shareholder servicing fee 23,703 25,209 43,262
Directors' fees 16,500 22,000 35,000
Insurance 4,793 5,699 17,558
Miscellaneous 86,883 185,057 16,809
Interest and credit facility fee 3,556 34,152 7,957
Organization expense -- -- --
------------- ------------- -------------
Total expenses 7,540,512 8,790,719 8,633,965
------------- ------------- -------------
Less:
Waived and reimbursed fees 10,354 204,352 --
Earnings credits 5,832 -- --
------------- ------------- -------------
Net expenses 7,524,326 8,586,367 8,633,965
------------- ------------- -------------
Net investment income (loss) (6,452,374) (7,259,094) 5,575,238
------------- ------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain from
investments 85,093,448 85,003,902 3,137,070
Net change in unrealized
appreciation (depreciation)
of investments 119,946,995 102,235,975 (157,531,125)
------------- ------------- -------------
Net gain (loss) from investments 205,040,443 187,239,877 (154,394,055)
------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ 198,588,069 $ 179,980,783 $(148,818,817)
============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
52
<PAGE>
-------------
International
Equity Funds
-------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide International International Emerging Asia-Pacific
Growth Core Growth SmallCap Countries Equity
Fund Fund Growth Fund Fund Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 2,256,981 $ 499,020 $ 1,791,777 $ 1,758,417 $ 429,859
Interest 1,470,882 205,365 2,145,159 283,787 74,595
------------- ------------- ------------- ------------- -------------
Total investment income 3,727,863 704,385 3,936,936 2,042,204 504,454
------------- ------------- ------------- ------------- -------------
EXPENSES:
Investment management fees 4,327,642 698,942 4,285,711 2,773,339 413,123
Distribution expenses 3,131,578 469,453 2,448,107 1,048,773 213,232
Transfer agent and registrar fees 628,483 168,428 561,375 517,621 119,865
Shareholder reporting 160,859 28,436 167,665 81,878 11,979
Registration and filing fees 43,713 78,072 83,587 77,620 36,084
Recordkeeping and pricing fees 76,299 12,186 78,302 40,236 5,738
Professional fees 51,263 11,733 54,085 39,069 4,847
Custodian fees 271,713 182,792 416,042 642,280 126,026
Shareholder servicing fee 24,761 9,609 28,293 14,946 6,210
Directors' fees 18,000 5,000 34,991 15,000 2,183
Insurance 2,281 618 7,472 2,182 2,068
Miscellaneous 126,776 40,471 12,587 23,960 2,043
Interest and credit facility fee 4,496 14,115 23,117 63,592 4,822
Organization expense -- -- -- -- 27,603
------------- ------------- ------------- ------------- -------------
Total expenses 8,867,864 1,719,855 8,201,334 5,340,496 975,823
------------- ------------- ------------- ------------- -------------
Less:
Waived and reimbursed fees -- 212,567 -- 346,154 145,502
------------- ------------- ------------- ------------- -------------
Net expenses 8,867,864 1,507,288 8,201,334 4,994,342 830,321
------------- ------------- ------------- ------------- -------------
Net investment loss (5,140,001) (802,903) (4,264,398) (2,952,138) (325,867)
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments (net of foreign tax on the sale
of Indian investments of $0, $0,
$784,263, $4,489,899 and $0,
respectively -- Note 2) 32,664,018 8,378,791 60,928,025 39,798,714 7,546,867
Foreign currency transactions (1,744,754) (485,310) (2,124,426) (303,058) (47,823)
Net change in unrealized appreciation
(depreciation) of:
Investments (net of change in estimated tax
liability on Indian investments of $0, $0,
$0, $860,486 and $0, respectively --
Note 2) 91,768,013 7,216,928 73,841,040 (3,923,323) (5,418,615)
Translation of other assets, liabilities and
forward contracts denominated in
foreign currencies 24,751 19,816 3,241 72,100 305,601
------------- ------------- ------------- ------------- -------------
Net gain from investments and foreign
currencies 122,712,028 15,130,225 132,647,880 35,644,433 2,386,030
------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 117,572,027 $ 14,327,322 $ 128,383,482 $ 32,692,295 $ 2,060,163
============= ============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
53
<PAGE>
------
Income
Funds
------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield High Yield Money Market
Income Fund Fund Fund Fund II Fund*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ -- $ 65,811 $ 4,556 $ 110,519 $ --
Interest 3,789,634 1,073,053 41,985,263 12,270,565 2,010,152
------------ ------------ ------------ ------------ ------------
Total investment income 3,789,634 1,138,864 41,989,819 12,381,084 2,010,152
------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment management fees 263,407 59,874 2,204,503 634,448 --
Distribution expenses 295,808 87,058 2,810,735 887,809 164,855
Transfer agent and registrar fees 116,224 110,300 512,832 168,720 39,317
Shareholder reporting 39,349 6,894 132,754 48,679 19,525
Registration and filing fees 48,021 76,124 141,878 65,175 32,932
Recordkeeping and pricing fees 8,994 10,474 82,633 23,058 10,937
Professional fees 19,934 4,341 58,764 27,764 13,063
Custodian fees 16,274 6,768 65,868 20,371 7,898
Shareholder servicing fee 2,551 4,683 17,387 5,385 1,739
Directors' fees 2,491 961 23,000 5,957 890
Insurance 1,312 247 17,921 1,844 710
Miscellaneous 5,222 7,570 95,047 9,369 551
Interest and credit facility fee 448 1,218 19,712 6,241 59
Organization expenses -- -- -- -- 115,945
Administrative fee -- -- -- -- 80,974
Merger Fees 32,450 -- -- 77,210 --
------------ ------------ ------------ ------------ ------------
Total expenses 852,485 376,512 6,183,034 1,982,030 489,395
------------ ------------ ------------ ------------ ------------
Less:
Waived and reimbursed fees -- 208,068 423,592 218,609 101,689
Earnings credits 1,131 174 -- -- 844
------------ ------------ ------------ ------------ ------------
Net expenses 851,354 168,270 5,759,442 1,763,421 386,862
------------ ------------ ------------ ------------ ------------
Net investment income 2,938,280 970,594 36,230,377 10,617,663 1,623,290
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss from:
Investments (942,655) (763,126) (25,618,407) (5,014,882) --
Foreign currency transactions -- (1,151) -- -- --
Net change in unrealized appreciation
(depreciation) of:
Investments 192,297 132,524 (31,769,051) (2,564,989) --
Translation of other assets, liabilities
and forward contracts denominated in
foreign currencies -- 897 -- -- --
------------ ------------ ------------ ------------ ------------
Net loss from investments and foreign
currencies (750,358) (630,856) (57,387,458) (7,579,871) --
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,187,922 $ 339,738 $(21,157,081) $ 3,037,792 $ 1,623,290
============ ============ ============ ============ ============
</TABLE>
----------
* Fund commenced operations on July 12, 1999.
See Accompanying Notes to Financial Statements
54
<PAGE>
------------
Equity &
Income Funds
------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Convertible
Fund Fund
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends, net of foreign taxes $ 623,513 $ 3,844,668
Interest 2,269,878 7,216,183
------------- ------------
Total investment income 2,893,391 11,060,851
------------- ------------
EXPENSES:
Investment management fees 476,583 2,652,928
Distribution expenses 475,933 2,697,003
Transfer agent and registrar fees 186,550 444,782
Shareholder reporting 44,134 126,626
Registration and filing fees 13,913 62,729
Recordkeeping and pricing fees 21,505 69,402
Professional fees 38,871 48,814
Custodian fees 14,996 56,900
Shareholder servicing fee 7,816 24,890
Directors' fees 3,180 15,000
Insurance 801 2,892
Miscellaneous 15,536 74,289
Interest and credit facility fee 347 9,316
Merger Fees 29,494 --
------------- ------------
Total expenses 1,329,659 6,285,571
------------- ------------
Less:
Waived and reimbursed fees 179,601 --
Earnings credits 1,211 51,091
------------- ------------
Net expenses 1,148,847 6,234,480
------------- ------------
Net investment income 1,744,544 4,826,371
------------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments 10,482,329 70,655,086
Foreign currency transactions (713) --
Net change in unrealized appreciation (depreciation) of:
Investments (17,791,175) 29,680,606
------------- ------------
Net gain (loss) from investments and foreign currencies (7,309,559) 100,335,692
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,565,015) $105,162,063
============= ============
</TABLE>
See Accompanying Notes to Financial Statements
55
<PAGE>
-----------
U.S. Equity
Funds
-----------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MagnaCap Fund LargeCap Leaders Fund
------------------------------ ------------------------------
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,079,687 $ 1,122,179 $ (315,614) $ (160,435)
Net realized gain from investments 29,968,024 49,186,475 2,990,062 3,547,281
Net change in unrealized appreciation
(depreciation) of investments (35,597,984) 17,754,811 (1,997,225) 1,974,289
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
operations (4,550,273) 68,063,465 677,223 5,361,135
------------- ------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class (1,051,329) (714,666) -- --
Advisory and institutional classes -- -- -- --
From net realized gains:
Retail class (48,878,271) (45,964,037) (4,377,644) (706,104)
Advisory and institutional classes -- -- -- --
------------- ------------- ------------- -------------
Total distributions (49,929,600) (46,678,703) (4,377,644) (706,104)
------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 169,844,202 272,199,176 18,374,425 16,009,174
Shares resulting from dividend reinvestments 45,853,052 37,748,339 4,014,953 647,165
Cost of shares redeemed (245,236,862) (270,865,970) (19,261,366) (11,675,377)
Redemption of Class I shares n/a n/a n/a n/a
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions (29,539,608) 39,081,545 3,128,012 4,980,962
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (84,019,481) 60,466,307 (572,409) 9,635,993
------------- ------------- ------------- -------------
Net assets, beginning of period 501,687,465 441,221,158 38,380,395 28,744,402
------------- ------------- ------------- -------------
Net assets, end of period $ 417,667,984 $ 501,687,465 $ 37,807,986 $ 38,380,395
============= ============= ============= =============
Undistributed net investment income (loss) $ 872,876 $ 536,313 $ -- $ --
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
56
<PAGE>
--------------------------------------------------------------------------------
LargeCap Growth Fund MidCap Value Fund
--------------------------------------------- -----------------------------
Year Three Months Year Year Year
Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30,
2000 1999 1999 2000 1999
------------- ------------- ------------- ------------- -------------
$ (5,317,970) $ (163,823) $ (196,384) $ (387,792) $ (644,817)
13,498,698 2,418,689 5,409,155 2,719,300 426,848
147,558,169 6,320,924 9,499,395 (9,096,135) (1,161,622)
------------- ------------- ------------- ------------- -------------
155,738,897 8,575,790 14,712,166 (6,764,627) (1,379,591)
------------- ------------- ------------- ------------- -------------
-- -- -- -- --
-- -- -- -- --
(2,953,187) -- (262,973) (275,268) (5,331,934)
(132,325) -- (41,543) -- --
------------- ------------- ------------- ------------- -------------
(3,085,512) -- (304,516) (275,268) (5,331,934)
------------- ------------- ------------- ------------- -------------
532,535,020 52,500,065 35,925,823 8,647,560 13,030,899
2,521,879 -- 292,849 249,416 4,471,463
(93,636,480) (3,028,700) (11,532,699) (30,837,351) (31,686,611)
n/a (6,420,194) -- n/a n/a
------------- ------------- ------------- ------------- -------------
441,420,419 43,051,171 24,685,973 (21,940,375) (14,184,249)
------------- ------------- ------------- ------------- -------------
594,073,804 51,626,961 39,093,623 (28,980,270) (20,895,774)
------------- ------------- ------------- ------------- -------------
102,963,948 51,336,987 12,243,364 60,395,740 81,291,514
------------- ------------- ------------- ------------- -------------
$ 697,037,752 $ 102,963,948 $ 51,336,987 $ 31,415,470 $ 60,395,740
============= ============= ============= ============= =============
$ -- $ -- $ (225,010) $ -- $ --
============= ============= ============= ============= =============
57
<PAGE>
-----------
U.S. Equity
Funds
-----------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MidCap Growth Fund SmallCap Growth Fund
--------------------------------------------- -----------------------------------------------
Year Three Months Year Year Three Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (6,452,374) $ (1,221,010) $ (4,514,125) $ (7,259,094) $ (1,566,497) $ (7,200,570)
Net realized gain from
investments 85,093,448 37,699,336 47,761,620 85,003,902 67,438,450 86,043,833
Net change in unrealized
appreciation (depreciation) of
investments 119,946,995 (14,395,996) 8,536,297 102,235,975 (18,557,187) (93,770,559)
------------- ------------- ------------- ------------- ------------- ---------------
Net increase (decrease) in net
assets from operations 198,588,069 22,082,330 51,783,792 179,980,783 47,314,766 (14,927,296)
------------- ------------- ------------- ------------- ------------- ---------------
Distributions to shareholders:
From net investment income:
Retail class -- -- -- -- -- --
Advisory and institutional
classes -- -- -- -- -- --
From net realized gains:
Retail class (85,719,464) -- (17,157,024) (153,334,528) -- (43,179,861)
Advisory and institutional
classes (2,677,684) -- (6,615,537) (5,061,980) -- (10,999,123)
------------- ------------- ------------- ------------- ------------- ---------------
Total distributions (88,397,148) -- (23,772,561) (158,396,508) -- (54,178,984)
------------- ------------- ------------- ------------- ------------- ---------------
Capital Share Transactions:
Net proceeds from sale of shares 353,806,052 14,162,841 158,133,048 364,010,289 17,931,971 972,155,767
Shares resulting from dividend
reinvestments 78,987,177 -- 12,306,426 136,805,877 -- 42,870,637
Cost of shares redeemed (281,762,942) (21,991,325) (249,866,820) (331,453,908) (33,776,345) (1,191,789,767)
Redemption of Class I shares n/a (168,592,944) -- n/a (221,318,827) n/a
------------- ------------- ------------- ------------- ------------- ---------------
Net increase (decrease) in net
assets resulting from capital
share transactions 151,030,287 (176,421,428) (79,427,346) 169,362,258 (237,163,201) (176,763,363)
------------- ------------- ------------- ------------- ------------- ---------------
Net increase (decrease) in net
assets 261,221,208 (154,339,098) (51,416,115) 190,946,533 (189,848,435) (245,869,643)
------------- ------------- ------------- ------------- ------------- ---------------
Net assets, beginning of period 280,135,385 434,474,483 485,890,598 316,572,722 506,421,157 752,290,800
------------- ------------- ------------- ------------- ------------- ---------------
Net assets, end of period $ 541,356,593 $ 280,135,385 $ 434,474,483 $ 507,519,255 $ 316,572,722 $ 506,421,157
============= ============= ============= ============= ============= ===============
Undistributed net investment
income (loss) $ -- $ -- $ (21,862,409) $ -- $ -- $ (36,692,610)
============= ============= ============= ============= ============= ===============
</TABLE>
See Accompanying Notes to Financial Statements
58
<PAGE>
--------------------------------------------------------------------------------
Bank and Thrift Fund
--------------------------------
Year Year
Ended Ended
June 30, June 30,
2000 1999
------------- -------------
$ 5,575,238 $ 6,195,132
3,137,070 86,792,727
(157,531,125) (179,566,903)
------------- -------------
(148,818,817) (86,579,044)
------------- -------------
(3,905,691) (4,375,894)
n/a n/a
(70,854,746) (19,782,011)
n/a n/a
------------- -------------
(74,760,437) (24,157,905)
------------- -------------
63,452,556 306,625,647
58,391,711 15,433,927
(285,960,147) (374,806,089)
n/a n/a
------------- -------------
(164,115,880) (52,746,515)
------------- -------------
(387,695,134) (163,483,464)
------------- -------------
745,624,955 909,108,419
------------- -------------
$ 357,929,821 $ 745,624,955
============= =============
$ 5,574,859 $ 3,311,373
============= =============
59
<PAGE>
-------------
International
Equity Funds
-------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worldwide Growth Fund
-----------------------------------------------
Year Three Months Year
Ended Ended Ended
June 30, June 30, March 31,
2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (5,140,001) $ (238,891) $ (1,461,258)
Net realized gain (loss) from investment
and foreign currency transactions
(net of foreign tax on the sale of Indian
investments -- Note 2) 30,919,264 4,825,170 34,449,340
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies
(net of estimated tax liability on Indian
investments -- Note 2) 91,792,764 20,367,556 12,614,021
------------- ------------- -------------
Net increase in net assets
from operations 117,572,027 24,953,835 45,602,103
------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class -- -- (136,708)
Advisory and institutional classes -- -- (337,084)
From net realized gains:
Retail class (34,175,463) -- (20,785,812)
Advisory and institutional classes (3,489,639) -- (483,831)
------------- ------------- -------------
Total distributions (37,665,102) -- (21,743,435)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 664,789,596 53,831,659 242,170,764
Shares resulting from dividend reinvestments 33,052,649 -- 5,494,245
Cost of shares redeemed (337,872,684) (25,822,612) (168,874,579)
Redemption of Class I shares n/a (80,662,778) --
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 359,969,561 (52,653,731) 78,790,430
------------- ------------- -------------
Net increase (decrease) in net assets 439,876,486 (27,699,896) 102,649,098
------------- ------------- -------------
Net assets, beginning of period 220,302,784 248,002,680 145,353,582
------------- ------------- -------------
Net assets, end of period $ 660,179,270 $ 220,302,784 $ 248,002,680
============= ============= =============
Undistributed net investment income (loss) $ -- $ -- $ (7,189,744)
============= ============= =============
International Core Growth Fund
-----------------------------------------------
Year Three Months Year
Ended Ended Ended
June 30, June 30, March 31,
2000 1999 1999
------------- ------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (802,903) $ 69,633 $ (310,557)
Net realized gain (loss) from investment
and foreign currency transactions
(net of foreign tax on the sale of Indian
investments -- Note 2) 7,893,481 3,913,039 (528,900)
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies
(net of estimated tax liability on Indian
investments -- Note 2) 7,236,744 4,018,188 13,512,294
------------- ------------- -------------
Net increase in net assets
from operations 14,327,322 8,000,860 12,672,837
------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class -- -- (205,129)
Advisory and institutional classes (1,678) -- (29,622)
From net realized gains:
Retail class (2,344,229) -- (155,723)
Advisory and institutional classes (591,813) -- (13,021)
------------- ------------- -------------
Total distributions (2,937,720) -- (403,495)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 192,088,330 35,644,077 173,884,589
Shares resulting from dividend reinvestments 2,747,516 -- 228,203
Cost of shares redeemed (164,147,202) (47,242,674) (82,311,581)
Redemption of Class I shares n/a (112,851,333) --
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 30,688,644 (124,449,930) 91,801,211
------------- ------------- -------------
Net increase (decrease) in net assets 42,078,246 (116,449,070) 104,070,553
------------- ------------- -------------
Net assets, beginning of period 45,768,532 162,217,602 58,147,049
------------- ------------- -------------
Net assets, end of period $ 87,846,778 $ 45,768,532 $ 162,217,602
============= ============= =============
Undistributed net investment income (loss) $ -- $ 69,633 $ (647,924)
============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
60
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International SmallCap Growth Fund Emerging Countries Fund
----------------------------------------------------- -----------------------------------------------------
Year Three Months Year Year Three Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ (4,264,398) $ (217,461) $ (725,193) $ (2,952,138) $ (30,573) $ (444,466)
58,803,599 5,331,912 8,225,524 39,495,656 11,238,884 (83,823,307)
73,844,281 11,694,205 14,357,916 (3,851,223) 51,126,351 10,517,870
--------------- --------------- --------------- --------------- --------------- ---------------
128,383,482 16,808,656 21,858,247 32,692,295 62,334,662 (73,749,903)
--------------- --------------- --------------- --------------- --------------- ---------------
-- -- -- -- -- (105,494)
-- -- (76,552) -- -- (676,244)
(11,843,967) -- (2,163,953) -- -- (685,405)
(5,303,370) -- (1,836,179) -- -- (431,659)
--------------- --------------- --------------- --------------- --------------- ---------------
(17,147,337) -- (4,076,684) -- -- (1,898,802)
--------------- --------------- --------------- --------------- --------------- ---------------
1,305,859,725 48,190,262 194,823,908 250,385,738 38,136,033 234,887,012
15,848,417 -- 3,425,742 -- -- 1,499,434
(832,581,584) (30,396,046) (142,304,879) (211,768,273) (31,982,656) (160,102,083)
n/a (73,163,306) -- n/a (167,510,018) --
--------------- --------------- --------------- --------------- --------------- ---------------
489,126,558 (55,369,090) 55,944,771 38,617,465 (161,356,641) 76,284,363
--------------- --------------- --------------- --------------- --------------- ---------------
600,362,703 (38,560,434) 73,726,334 71,309,760 (99,021,979) 635,658
--------------- --------------- --------------- --------------- --------------- ---------------
118,056,357 156,616,791 82,890,457 183,184,199 282,206,178 281,570,520
--------------- --------------- --------------- --------------- --------------- ---------------
$ 718,419,060 $ 118,056,357 $ 156,616,791 $ 254,493,959 $ 183,184,199 $ 282,206,178
=============== =============== =============== =============== =============== ===============
$ -- $ -- $ (1,982,021) $ -- $ -- $ (2,164,624)
=============== =============== =============== =============== =============== ===============
</TABLE>
61
<PAGE>
-------------
International
Equity Funds
-------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Asia-Pacific Equity Fund
------------------------------
Year Year
Ended Ended
June 30, June 30,
2000 1999
------------- -------------
Increase (decrease) in net assets from
operations:
Net investment loss $ (325,867) $ (83,355)
Net realized gain (loss) from investment and
foreign currency transactions 7,499,044 (6,670,421)
Net change in unrealized appreciation
of investments and translation of other
assets, liabilities and forward contracts
denominated in foreign currencies (5,113,014) 20,223,587
------------- -------------
Net increase in net assets from operations 2,060,163 13,469,811
------------- -------------
Distributions to shareholders:
From net investment income:
Retail class -- --
Advisory and institutional classes n/a n/a
From net realized gains:
Retail class -- --
Advisory and institutional classes n/a n/a
------------- -------------
Total distributions -- --
------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 103,757,205 137,827,549
Shares resulting from dividend reinvestments -- --
Cost of shares redeemed (110,675,525) (143,882,119)
Redemption of Class I shares n/a n/a
------------- -------------
Net decrease in net assets resulting
from capital share transactions (6,918,320) (6,054,570)
------------- -------------
Net increase (decrease) in net assets (4,858,157) 7,415,241
------------- -------------
Net assets, beginning of period 32,560,537 25,145,296
------------- -------------
Net assets, end of period $ 27,702,380 $ 32,560,537
============= =============
Undistributed net investment income (loss) $ -- $ --
============= =============
See Accompanying Notes to Financial Statements
62
<PAGE>
------
Income
Funds
------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Securities Income Fund Strategic Income Fund
----------------------------------------------- ------------------------------
Year Year Year Three Months Year
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, March 31,
2000 1999 2000 1999 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 2,938,280 $ 2,202,024 $ 970,594 $ 388,563 $ 1,615,239
Net realized gain (loss) from investment
and foreign currency transactions (942,655) (852,058) (764,277) (459,604) 330,860
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies 192,297 (887,365) 133,421 (72,404) (372,395)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
operations 2,187,922 462,601 339,738 (143,445) 1,573,704
------------- ------------- ------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class (2,747,609) (2,211,069) (951,573) (187,766) (621,335)
Advisory and institutional classes (51) -- (14,213) (121,982) (934,712)
From net realized gains:
Retail class -- -- -- -- (151,772)
Advisory and institutional classes -- -- -- -- (442,876)
------------- ------------- ------------- ------------- -------------
Total distributions (2,747,660) (2,211,069) (965,786) (309,748) (2,150,695)
------------- ------------- ------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 92,583,796 54,413,622 17,563,244 24,148,535 30,254,792
Net proceeds from shares issued in merger 81,062,688 n/a n/a n/a 10,271,727
Shares resulting from dividend reinvestmests 1,404,424 1,167,365 496,450 108,053 1,714,149
Cost of shares redeemed (95,368,858) (46,715,437) (22,583,786) (25,920,629) (20,857,342)
Redemption of Class I shares n/a n/a n/a (17,917,765) n/a
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 79,682,050 8,865,550 (4,524,092) (19,581,806) 21,383,326
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets 79,122,312 7,117,082 (5,150,140) (20,034,999) 20,806,335
------------- ------------- ------------- ------------- -------------
Net assets, beginning of period 34,242,820 27,125,738 16,530,324 36,565,323 15,758,988
------------- ------------- ------------- ------------- -------------
Net assets, end of period $ 113,365,132 $ 34,242,820 $ 11,380,184 $ 16,530,324 $ 36,565,323
============= ============= ============= ============= =============
Undistributed net investment income $ -- $ -- $ 491,239 $ 138,021 $ 59,206
============= ============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
63
<PAGE>
------
Income
Funds
------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
High Yield Fund
------------------------------
Year Year
Ended Ended
June 30, June 30,
2000 1999
------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income $ 36,230,377 $ 32,082,228
Net realized loss from investment and
foreign currency transactions (25,618,407) (39,880,708)
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies (31,769,051) (9,008,796)
------------- -------------
Net increase (decrease) in net assets from
operations (21,157,081) (16,807,276)
------------- -------------
Distributions to shareholders:
From net investment income:
Retail class (36,230,374) (33,382,295)
Advisory and institutional classes (3) --
Tax return of capital
Retail class (2,218,003) (604,370)
Advisory and institutional classes -- --
------------- -------------
Total distributions (38,448,380) (33,986,665)
------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 169,075,396 338,787,788
Net proceeds from shares issued in merger n/a n/a
Shares resulting from dividend reinvestments 14,545,896 15,394,375
Cost of shares redeemed (237,672,115) (162,095,950)
Redemption of Class I shares n/a n/a
------------- -------------
Net increase (decrease) in net assets
resulting from capital share transactions (54,050,823) 192,086,213
------------- -------------
Net increase (decrease) in net assets (113,656,284) 141,292,272
------------- -------------
Net assets, beginning of period 417,803,960 276,511,688
------------- -------------
Net assets, end of period $ 304,147,676 $ 417,803,960
============= =============
Undistributed (overdistributed) net
investment income $ -- $ --
============= =============
<TABLE>
<CAPTION>
High Yield Fund II Money Market Fund
----------------------------------------------------- ---------------
Year Three Months Year Period*
Ended Ended Ended Ended
June 30, June 30, March 31, June 30,
2000 1999 1999 2000
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 10,617,663 $ 2,117,917 $ 7,088,233 $ 1,623,290
Net realized loss from investment and
foreign currency transactions (5,014,882) (1,651,059) (2,958,000) --
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies (2,564,989) 1,222,666 (2,908,667) --
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from
operations 3,037,792 1,689,524 1,221,566 1,623,290
--------------- --------------- --------------- ---------------
Distributions to shareholders:
From net investment income:
Retail class (10,642,507) (1,816,752) (6,010,027) (1,623,290)
Advisory and institutional classes (408,689) (243,368) (1,342,628) n/a
Tax return of capital
Retail class -- -- -- --
Advisory and institutional classes -- -- -- n/a
--------------- --------------- --------------- ---------------
Total distributions (11,051,196) (2,060,120) (7,352,655) (1,623,290)
--------------- --------------- --------------- ---------------
Capital Share Transactions:
Net proceeds from sale of shares 52,761,331 5,060,774 103,808,906 1,294,364,112
Net proceeds from shares issued in merger 142,232,354 n/a n/a n/a
Shares resulting from dividend reinvestments 4,467,190 636,667 3,545,605 661,338
Cost of shares redeemed (72,762,619) (12,563,115) (31,561,090) (1,202,129,120)
Redemption of Class I shares n/a (11,636,641) -- n/a
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from capital share transactions 126,698,256 (18,502,315) 75,793,421 92,896,330
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets 118,684,852 (18,872,911) 69,662,332 92,896,330
--------------- --------------- --------------- ---------------
Net assets, beginning of period 80,524,199 99,397,110 29,734,778 --
--------------- --------------- --------------- ---------------
Net assets, end of period $ 199,209,051 $ 80,524,199 $ 99,397,110 $ 92,896,330
=============== =============== =============== ===============
Undistributed (overdistributed) net
investment income $ -- $ (193,920) $ (251,717) $ --
=============== =============== =============== ===============
</TABLE>
----------
* Fund commenced operations on July 12, 1999.
See Accompanying Notes to Financial Statements
64
<PAGE>
------------
Equity &
Income Funds
------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
-----------------------------------------------
Year Three Months Year
Ended Ended Ended
June 30, June 30, March 31,
2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 1,744,544 $ 149,349 $ 568,429
Net realized gain from investment and foreign
currency transactions 10,481,616 4,490,910 3,763,578
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies (17,791,175) (4,167,142) 1,187,390
------------- ------------- -------------
Net increase (decrease) in net assets from
operations (5,565,015) 473,117 5,519,397
------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class (788,708) (96,590) (606,434)
Advisory and institutional classes (4,652) (798) (29,342)
From net realized gains:
Retail class (7,318,123) -- (5,988,621)
Advisory and institutional classes (37,408) -- (133,020)
------------- ------------- -------------
Total distributions (8,148,891) (97,388) (6,757,417)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 14,115,466 2,993,582 12,882,116
Net proceeds from shares issued in merger 120,445,073 n/a n/a
Shares resulting from dividend reinvestments 6,982,714 41,034 5,548,500
Cost of shares redeemed (24,486,297) (2,512,012) (12,665,619)
Redemption of Class I shares n/a n/a n/a
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 117,056,956 522,604 5,764,997
------------- ------------- -------------
Net increase (decrease) in net assets 103,343,050 898,333 4,526,977
------------- ------------- -------------
Net assets, beginning of period 38,296,244 37,397,911 32,870,934
------------- ------------- -------------
Net assets, end of period $ 141,639,294 $ 38,296,244 $ 37,397,911
============= ============= =============
Undistributed (overdistributed) net investment
income $ 1,009,916 $ (16,013) $ (67,974)
============= ============= =============
Convertible Fund
-----------------------------------------------
Year Three Months Year
Ended Ended Ended
June 30, June 30, March 31,
2000 1999 1999
------------- ------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income $ 4,826,371 $ 1,054,881 $ 5,162,409
Net realized gain from investment and foreign
currency transactions 70,655,086 13,167,798 25,455,864
Net change in unrealized appreciation
(depreciation) of investments and translation
of other assets, liabilities and forward
contracts denominated in foreign currencies 29,680,606 3,889,849 19,262,427
------------- ------------- -------------
Net increase (decrease) in net assets from
operations 105,162,063 18,112,528 49,880,700
------------- ------------- -------------
Distributions to shareholders:
From net investment income:
Retail class (2,701,792) (742,927) (2,822,214)
Advisory and institutional classes (450,509) (88,744) (2,357,057)
From net realized gains:
Retail class (38,767,375) -- (3,158,579)
Advisory and institutional classes (3,361,906) -- (915,964)
------------- ------------- -------------
Total distributions (45,281,582) (831,671) (9,253,814)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from sale of shares 220,047,461 28,114,039 83,841,725
Net proceeds from shares issued in merger n/a n/a n/a
Shares resulting from dividend reinvestments 38,566,753 465,422 6,950,787
Cost of shares redeemed (93,851,800) (13,251,963) (66,351,226)
Redemption of Class I shares n/a (91,378,691) --
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 164,762,414 (76,051,193) 24,441,286
------------- ------------- -------------
Net increase (decrease) in net assets 224,642,895 (58,770,336) 65,068,172
------------- ------------- -------------
Net assets, beginning of period 259,037,310 317,807,646 252,739,474
------------- ------------- -------------
Net assets, end of period $ 483,680,205 $ 259,037,310 $ 317,807,646
============= ============= =============
Undistributed (overdistributed) net investment
income $ 2,762,398 $ 195,337 $ (27,873)
============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
65
<PAGE>
FINANCIAL
PILGRIM MAGNACAP FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
Year Ended June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.69 17.07 15.92 16.69 14.03
Income from investment operations:
Net investment income (loss) $ 0.07 0.07 0.04 0.10 0.09
Net realized and unrealized gains on
investments $ (0.08) 2.37 3.02 4.16 2.87
Total from investment operations $ (0.01) 2.44 3.06 4.26 2.96
Less distributions from:
Net investment income $ 0.05 0.04 0.06 0.12 0.06
Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.84 17.69 17.07 15.92 16.69
Total Return(2): % (0.36) 15.93 20.53 30.82 21.31
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 303,864 368,508 348,759 290,355 235,393
Ratios to average net assets:
Expenses(3) % 1.29 1.35 1.37 1.46 1.68
Net investment income (loss)(3) % 0.41 0.41 0.29 0.64 0.54
Portfolio turnover rate % 26 48 53 77 15
Class B
------------------------------------------------------
July 17,
1995(1) to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 17.36 16.86 15.81 16.59 14.22
Income from investment operations:
Net investment income (loss) $ (0.05) (0.04) (0.04) -- 0.06
Net realized and unrealized gains on
investments $ (0.08) 2.32 2.97 4.13 2.61
Total from investment operations $ (0.13) 2.28 2.93 4.13 2.67
Less distributions from:
Net investment income $ -- -- 0.03 -- 0.06
Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.44 17.36 16.86 15.81 16.59
Total Return(2): % (1.11) 15.12 19.76 29.92 18.98
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 87,167 116,227 77,787 37,427 10,509
Ratios to average net assets:
Expenses(3) % 1.99 2.05 2.07 2.16 2.38
Net investment income (loss)(3) % (0.29) (0.29) (0.41) (0.04) 0.07
Portfolio turnover rate % 26 48 53 77 15
Class C Class M
-------------------- ---------------------------------------------
Year June 1, July 17,
ended 1999(1) to 1995(1) to
June 30, June 30, Year ended June 30, June 30,
2000 1999 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 17.37 16.69 17.51 16.95 15.87 16.63 14.22
Income from investment operations:
Net investment income (loss) $ (0.10) -- (0.01) (0.01) -- 0.02 0.08
Net realized and unrealized gains on
investments $ (0.04) 0.68 (0.06) 2.35 2.98 4.16 2.63
Total from investment operations $ (0.14) 0.68 (0.07) 2.34 2.98 4.18 2.71
Less distributions from:
Net investment income $ -- -- 0.01 -- 0.05 0.03 0.06
Net realized gains on investments $ 1.79 -- 1.79 1.78 1.85 4.91 0.24
Net asset value, end of period $ 15.44 17.37 15.64 17.51 16.95 15.87 16.63
Total Return(2): % (1.17) 4.07 (0.71) 15.41 20.00 30.26 19.26
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,660 601 13,050 16,351 14,675 6,748 1,961
Ratios to average net assets:
Expenses(3) % 1.99 1.12 1.74 1.80 1.82 1.91 2.13
Net investment income (loss)(3) % (0.29) 0.42 (0.04) (0.04) (0.16) 0.22 0.32
Portfolio turnover rate % 26 48 26 48 53 77 15
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
66
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM LARGECAP LEADERS FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998(2) 1997 1996(1)
---- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.35 14.70 14.17 11.77 10.00
Income from investment operations:
Net investment income (loss) $ (0.04) -- 0.01 0.06 0.07
Net realized and unrealized gains on
investments $ 0.57 3.00 2.30 2.63 1.87
Total from investment operations $ 0.53 3.00 2.31 2.69 1.94
Less distributions from:
Net investment income $ -- -- -- 0.05 0.08
Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period $ 15.88 17.35 14.70 14.17 11.77
Total Return(4): % 3.05 20.66 17.71 23.24 19.56
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 10,024 8,506 7,606 8,961 2,530
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 1.75 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(5) % 1.84 1.98 2.28 2.33 5.44
Net investment income (loss) after
expense reimbursement(5)(6) % (0.27) (0.04) 0.03 0.41 0.65
Portfolio turnover rate % 39 87 78 86 59
Class B
----------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998(2) 1997 1996(1)
---- ---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 16.90 14.44 14.04 11.71 10.00
Income from investment operations:
Net investment income (loss) $ (0.17) (0.09) (0.10) (0.02) 0.06
Net realized and unrealized gains on
investments $ 0.57 2.90 2.28 2.59 1.81
Total from investment operations $ 0.40 2.81 2.18 2.57 1.87
Less distributions from:
Net investment income $ -- -- -- -- 0.07
Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period $ 15.30 16.90 14.44 14.04 11.71
Total Return(4): % 2.30 19.71 16.91 22.23 18.85
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 21,544 24,213 15,605 13,611 1,424
Ratios to average net assets:
Net expenses after expense
reimbursement(5)(6) % 2.50 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(5) % 2.59 2.73 3.03 3.08 5.79
Net investment income (loss) after
expense reimbursement(5)(6) % (1.02) (0.79) (0.72) (0.35) (0.25)
Portfolio turnover rate % 39 87 78 86 59
Class C Class M
-------------------- ------------------------------------------
Year June 17, Sept. 1,
Ended 1999(3) to 1995 to
June 30, June 30, Year Ended June 30, June 30,
2000 1999 2000 1999 1998(2) 1997 1996(1)
---- ---- ---- ---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 16.92 16.54 17.08 14.55 14.10 11.73 10.00
Income from investment operations:
Net investment income (loss) $ (0.06) -- (0.14) (0.09) (0.07) -- 0.06
Net realized and unrealized gains on
investments $ 0.46 0.38 0.58 2.97 2.30 2.62 1.83
Total from investment operations $ 0.40 0.38 0.44 2.88 2.23 2.62 1.89
Less distributions from:
Net investment income $ -- -- -- -- -- 0.01 0.07
Net realized gains on investments $ 2.00 -- 2.00 0.35 1.78 0.24 0.09
Net asset value, end of period $ 15.32 16.92 15.52 17.08 14.55 14.10 11.73
Total Return(4): % 2.30 2.30 2.54 20.04 17.20 22.58 19.06
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 1,364 -- 4,677 5,661 5,533 4,719 1,240
Ratios to average net assets:
Net expenses after expense reimbursement(5)(6) % 2.50 -- 2.25 2.25 2.25 2.25 2.25
Gross expenses prior to expense
reimbursement(5) % 2.59 -- 2.34 2.48 2.78 2.83 5.90
Net investment income (loss) after expense
reimbursement(5)(6) % (1.02) -- (0.77) (0.54) (0.47) (0.10) 0.06
Portfolio turnover rate % 39 87 39 87 78 86 59
</TABLE>
----------
(1) The Fund commenced operations on September 1, 1995.
(2) Effective November 1, 1997, Pilgrim Investments, Inc. assumed the portfolio
investment responsibilities of the Fund from ARK Asset Management Company,
Inc.
(3) Commencement of offering shares.
(4) 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 information for less than one year is not
annualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
67
<PAGE>
FINANCIAL
PILGRIM LARGECAP GROWTH FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
----------------------------------------------
Year Three months Year July 21,
Ended ended ended 1997(1) to
June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998
---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 28.09 24.94 15.73 12.50
Income from investment operations:
Net investment income (loss) $ (0.22) (0.02) (0.08) (0.03)
Net realized and unrealized gains on
investments $ 15.63 3.17 9.77 3.29
Total from investment operations $ 15.41 3.15 9.69 3.26
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.48 0.03
Net asset value, end of period $ 43.12 28.09 24.94 15.73
Total Return(3): % 55.35 12.63 63.06 62.35
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 186,261 30,108 12,445 4,742
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.43 1.59 1.60
Gross expenses prior to expense
reimbursement(4) % 1.36 1.45 2.24 4.70
Net investment income (loss) after
expense reimbursement(4)(5) % (0.87) (0.56) (0.65) (0.87)
Portfolio turnover % 139 27 253 306
Class B
----------------------------------------------
Year Three months Year July 21,
Ended ended ended 1997(1) to
June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998
---- ------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 28.15 25.04 15.64 12.50
Income from investment operations:
Net investment income (loss) $ (0.39) (0.05) (0.08) (0.07)
Net realized and unrealized gains on
investments $ 15.56 3.16 9.71 3.24
Total from investment operations $ 15.17 3.11 9.63 3.17
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.23 0.03
Net asset value, end of period $ 42.94 28.15 25.04 15.64
Total Return(3): % 55.37 12.42 62.28 61.08
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 333,256 49,057 20,039 3,187
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.08 2.24 2.25
Gross expenses prior to expense
reimbursement(4) % 2.01 2.10 2.89 4.78
Net investment income (loss) after
expense reimbursement(4)(5) % (1.52) (1.21) (1.28) (1.36)
Portfolio turnover % 139 27 253 306
Class C
----------------------------------------------
Year Three months Year July 21,
Ended ended ended 1997(1) to
June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998
---- ------- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 28.07 24.97 15.63 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.06) (0.07) (0.05)
Net realized and unrealized gains on
investments $ 15.48 3.16 9.65 3.24
Total from investment operations $ 15.13 3.10 9.58 3.19
Less distributions from:
Net investment income $ -- -- -- --
Net realized gains on investments $ 0.38 -- 0.24 0.06
Net asset value, end of period $ 42.82 28.07 24.97 15.63
Total Return(3): % 54.38 12.41 61.97 61.38
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 152,682 17,755 8,004 960
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.08 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.01 2.10 2.90 7.79
Net investment income (loss) after
expense reimbursement(4)(5) % (1.52) (1.21) (1.26) (1.49)
Portfolio turnover % 139 27 253 306
</TABLE>
----------
(1) The Fund commenced operations on July 21, 1997.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
68
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM MIDCAP VALUE FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996(1)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 15.65 16.79 14.64 11.99 10.00
Income from investment operations:
Net investment income (loss) $ (0.09) (0.09) (0.07) (0.02) 0.13
Net realized and unrealized gains
on investments $ (1.17) 0.12 2.71 2.85 1.91
Total from investment operations $ (1.26) 0.03 2.64 2.83 2.04
Less distributions from:
Net investment income $ -- -- -- 0.07 0.05
Net realized gains on investments $ 0.09 1.17 0.49 0.11 --
Net asset value, end of period $ 14.30 15.65 16.79 14.64 11.99
Total Return(3): % (8.05) 0.95 18.40 23.89 20.48
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 8,875 18,621 27,485 16,985 2,389
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.75 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(4) % 1.88 1.79 1.78 1.94 4.91
Net investment income (loss) after expense
reimbursement(4)(5) % (0.49) (0.48) (0.53) (0.13) 2.00
Portfolio turnover rate % 122 109 85 86 60
Class B Class C
------------------------------------------------ --------------------
Sept. 1, Year June 2,
1995 to Ended 1999 to
Year Ended June 30, June 30, June 30, June 30,
2000 1999 1998 1997 1996(1) 2000 1999(2)
---- ---- ---- ---- -------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 15.21 16.47 14.49 11.94 10.00 15.20 14.84
Income from investment operations:
Net investment income (loss) $ (0.23) (0.21) (0.18) (0.05) 0.07 (0.02) (0.02)
Net realized and unrealized gains
on investments $ (1.11) 0.12 2.65 2.76 1.90 (1.31) 0.38
Total from investment operations $ (1.34) (0.09) 2.47 2.71 1.97 (1.33) 0.36
Less distributions from:
Net investment income $ -- -- -- 0.05 0.03 -- --
Net realized gains on investments $ 0.09 1.17 0.49 0.11 -- 0.09 --
Net asset value, end of period $ 13.78 15.21 16.47 14.49 11.94 13.78 15.20
Total Return(3): % (8.81) 0.21 17.40 22.95 19.80 (8.75) 2.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 15,840 31,223 40,575 23,258 2,123 2,688 47
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.50 2.50 2.50 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 2.63 2.54 2.53 2.69 5.32 2.63 2.54
Net investment income (loss) after expense
reimbursement(4)(5) % (1.24) (1.23) (1.28) (0.90) 1.27 (1.24) (1.23)
Portfolio turnover rate % 122 109 85 86 60 122 109
Class M
------------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996(1)
---- ---- ---- ---- --------
Per Share Operating Performance:
Net asset value, beginning of period $ 15.30 16.52 14.49 11.93 10.00
Income from investment operations:
Net investment income (loss) $ (0.23) (0.17) (0.15) (0.03) 0.06
Net realized and unrealized gains
on investments $ (1.07) 0.12 2.67 2.76 1.91
Total from investment operations $ (1.30) (0.05) 2.52 2.73 1.97
Less distributions from:
Net investment income $ -- -- -- 0.06 0.04
Net realized gains on investments $ 0.09 1.17 0.49 0.11 --
Net asset value, end of period $ 13.91 15.30 16.52 14.49 11.93
Total Return(3): % (8.49) 0.46 17.76 23.21 19.82
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,873 10,504 13,232 8,378 1,731
Ratios to average net assets:
Net expenses after expense reimbursement:(4)(5) % 2.25 2.25 2.25 2.25 2.25
Gross expenses prior to expense
reimbursement:(4) % 2.38 2.29 2.28 2.44 4.72
Net investment income (loss) after expense
reimbursement:(4)(5) % (0.99) (0.98) (1.03) (0.63) 1.16
Portfolio turnover rate % 122 109 85 86 60
</TABLE>
----------
(1) The Fund commenced operations on September 1, 1995.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
69
<PAGE>
FINANCIAL
PILGRIM MIDCAP GROWTH FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 21.34 19.93 18.63 16.80 18.37 13.61
Income from investment operations:
Net investment income (loss) $ (0.22) (0.06) (0.50) (0.14) (0.17) (0.18)
Net realized and unrealized gains on
investments $ 14.08 1.47 3.17 6.50 0.57 4.94
Total from investment operations $ 13.86 1.41 2.67 6.36 0.40 4.76
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 7.03 -- 1.37 4.53 1.97 --
Net asset value, end of period $ 28.17 21.34 19.93 18.63 16.80 18.37
Total Return(3): % 77.33 7.07 15.36 41.81 1.09 35.07
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 155,976 66,586 67,550 90,619 76,108 77,275
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.49 1.56 1.57 1.60 1.58
Gross expenses prior to expense
reimbursement(4) % 1.36 1.50 1.64 1.66 1.56 1.56
Net investment income (loss) after
expense reimbursement(4)(5) % (1.10) (1.20) (1.04) (1.33) (1.05) (0.91)
Portfolio turnover % 148 55 154 200 153 114
Class B
---------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(2) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 25.18 23.54 21.55 16.33 16.25 12.50
Income from investment operations:
Net investment income (loss) $ (0.41) (0.11) (0.42) (0.25) (0.17) (0.09)
Net realized and unrealized gains on
investments $ 16.55 1.75 3.42 6.74 0.25 3.84
Total from investment operations $ 16.14 1.64 3.00 6.49 0.08 3.75
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 8.28 -- 1.01 1.27 -- --
Net asset value, end of period $ 33.04 25.18 23.54 21.55 16.33 16.25
Total Return(3): % 76.28 6.97 14.59 40.84 (0.49) 30.00
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 116,334 49,335 45,876 46,806 29,002 11,186
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.14 2.22 2.22 2.25 2.22
Gross expenses prior to expense
reimbursement(4) % 2.01 2.14 2.29 2.21 2.66 3.39
Net investment income (loss) after
expense reimbursement(4)(5) % (1.75) (1.85) (1.69) (1.99) (1.69) (1.61)
Portfolio turnover % 148 55 154 200 153 114
Class C
------------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 19.78 18.49 17.15 16.48 18.06 13.45
Income from investment operations:
Net investment income (loss) $ (0.38) (0.09) (0.61) (0.28) (0.32) (0.27)
Net realized and unrealized gains on
investments $ 13.04 1.38 2.97 6.26 0.62 4.88
Total from investment operations $ 12.66 1.29 2.36 5.98 0.30 4.61
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 6.50 -- 1.02 5.31 1.88 --
Net asset value, end of period $ 25.94 19.78 18.49 17.15 16.48 18.06
Total Return(3): % 76.18 6.98 14.60 40.95 0.56 34.28
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 249,255 144,832 141,685 166,849 157,501 177,461
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.01 2.14 2.23 2.27 2.14 2.14
Gross expenses prior to expense
reimbursement(4) % 2.01 2.14 2.30 2.33 2.17 2.14
Net investment income (loss) after
expense reimbursement(4)(5) % (1.75) (1.85) (1.70) (2.01) (1.59) (1.47)
Portfolio turnover % 148 55 154 200 153 114
</TABLE>
----------
(1) Effective May 24, 1999, Pilgrim Investment Inc. became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
70
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.08 16.72 19.75 15.15 17.93 13.06
Income from investment operations:
Net investment income (loss) $ (0.20) (0.06) (0.85) (0.08) (0.22) (0.20)
Net realized and unrealized gains
(loss) on investments $ 9.24 2.42 0.69 6.91 (0.66) 5.09
Total from investment operations $ 9.04 2.36 (0.16) 6.83 (0.88) 4.89
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 9.73 -- 2.87 2.23 1.90 0.02
Net asset value, end of period $ 18.39 19.08 16.72 19.75 15.15 17.93
Total Return(3): % 60.66 14.11 0.37 46.32 (6.26) 37.48
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 168,239 102,641 94,428 201,943 121,742 138,155
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.62 1.70 1.85 1.89 1.72 1.74
Gross expenses prior to expense
reimbursement(4) % 1.67 1.74 1.95 1.90 1.72 1.74
Net investment income (loss) after
expense reimbursement(4)(5) % (1.31) (1.46) (1.32) (1.85) (1.26) (1.20)
Portfolio turnover % 127 32 90 92 113 130
Class B
---------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(2) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 24.05 21.12 22.53 15.51 16.69 12.50
Income from investment operations:
Net investment income (loss) $ (0.34) (0.12) (0.53) (0.27) (0.21) (0.14)
Net realized and unrealized gains
(loss) on investments $ 11.56 3.05 0.33 7.29 (0.97) 4.33
Total from investment operations $ 11.22 2.93 (0.20) 7.02 (1.18) 4.19
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 12.24 -- 1.21 -- -- --
Net asset value, end of period $ 23.03 24.05 21.12 22.53 15.51 16.69
Total Return(3): % 59.68 13.87 (0.29) 45.26 (7.07) 33.52
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 97,239 49,448 45,140 55,215 28,030 13,626
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.27 2.35 2.57 2.62 2.61 2.58
Gross expenses prior to expense
reimbursement(4) % 2.32 2.39 2.66 2.63 2.73 3.26
Net investment income (loss) after
expense reimbursement(4)(5) % (1.96) (2.11) (2.03) (2.59) (2.13) (2.09)
Portfolio turnover % 127 32 90 92 113 130
Class C
-----------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 18.81 16.51 18.62 14.69 17.62 12.96
Income from investment operations:
Net investment income (loss) $ (0.30) (0.09) (0.84) (0.38) (0.31) (0.29)
Net realized and unrealized gains on
investments $ 9.07 2.39 0.61 6.84 (0.63) 5.03
Total from investment operations $ 8.77 2.30 (0.23) 6.46 (0.94) 4.74
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 9.57 -- 1.88 2.53 1.99 0.08
Net asset value, end of period $ 18.01 18.81 16.51 18.62 14.69 17.62
Total Return(3): % 59.67 13.93 (0.24) 45.40 (6.81) 37.18
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 229,473 153,471 144,597 225,025 182,907 207,332
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.27 2.35 2.51 2.57 2.35 2.35
Gross expenses prior to expense
reimbursement(4) % 2.32 2.39 2.60 2.59 2.35 2.35
Net investment income (loss) after
expense reimbursement(4)(5) % (1.96) (2.11) (1.97) (2.53) (1.89) (1.81)
Portfolio turnover % 127 32 90 92 113 130
</TABLE>
----------
(1) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized for less periods than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
71
<PAGE>
FINANCIAL
PILGRIM BANK AND THRIFT FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Six
Year Year months Year
Ended ended ended Ended
June 30, June 30, June 30, Year ended December 31, June 30,
2000 1999 1998(3) 1997 1996 1995(1) 2000
---- ---- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 24.38 27.52 25.87 17.84 14.83 10.73 24.21
Income (loss) from investment operations:
Net investment income $ 0.32 0.29 0.11 0.34 0.32 0.31 0.22
Net realized and unrealized gains (loss) on
investments $ (5.30) (2.70) 1.54 10.83 5.18 4.78 (5.32)
Total from investment operations $ (4.98) (2.41) 1.65 11.17 5.50 5.09 (5.10)
Less distributions from:
Net investment income $ 0.25 0.18 -- 0.31 0.35 0.34 0.03
Net realized gains on investments $ 2.73 0.55 -- 2.65 2.14 0.65 2.73
Tax return of capital $ -- -- -- 0.18 -- -- --
Net asset value, end of year $ 16.42 24.38 27.52 25.87 17.84 14.83 16.35
Closing market price, end of year -- -- -- -- 15.75 12.88 --
Total Investment Return At Market Value(4) % -- -- -- -- 43.48 52.81 --
Total Investment Return At Net Asset Value(5) % (22.44) (8.61) 6.38 64.86 41.10 49.69 (23.00)
Ratios/Supplemental Data:
Net assets, end of year ($millions) $ 210 403 549 383 252 210 148
Ratio to average net assets:
Expenses(6) % 1.41 1.39 1.20 1.10 1.01 1.05 2.16
Net investment income(6) % 1.46 1.09 0.94 1.39 1.94 2.37 0.71
Portfolio turnover rate % 10 29 2 22 21 13 10
Class B
----------------------------------
Six
Year months Oct. 20,
ended ended 1997(2) to
June 30, June 30, Dec. 31,
1999 1998(3) 1997
Per Share Operating Performance:
Net asset value, beginning of year $ 27.40 25.85 25.25
Income (loss) from investment operations:
Net investment income $ 0.08 0.01 0.04
Net realized and unrealized gains (loss) on
investments $ (2.66) 1.54 2.92
Total from investment operations $ (2.58) 1.55 2.96
Less distributions from:
Net investment income $ 0.06 -- 0.04
Net realized gains on investments $ 0.55 -- 2.04
Tax return of capital $ -- -- 0.28
Net asset value, end of year $ 24.21 27.40 25.85
Closing market price, end of year -- -- --
Total Investment Return At Market Value(4) % -- -- --
Total Investment Return At Net Asset Value(5) % (9.31) 6.00 11.88
Ratios/Supplemental Data:
Net assets, end of year ($millions) $ 343 360 76
Ratio to average net assets:
Expenses(6) % 2.14 1.95 1.89
Net investment income(6) % 0.34 0.19 0.99
Portfolio turnover rate % 29 2 22
</TABLE>
----------
(1) Pilgrim Investments, Inc., the Fund's Investment Manager, acquired certain
assets of Pilgrim Management Corporation, the Fund's former Investment
Manager, in a transaction that closed on April 7, 1995.
(2) Commencement of offering shares.
(3) Effective June 30, 1998, Bank and Thrift Fund changed its year end to June
30.
(4) Total return was calculated at market value without deduction of sales
commissions and assuming reinvestment of all dividends and distributions
during the period.
(5) Total return is calculated at net asset value without deduction of sales
commissions and assumes reinvestment of all dividends and distributions
during the period. Total investment returns based on net asset value, which
can be higher or lower than market value, may result in substantially
different returns than total return based on market value. For all periods
prior to January 1, 1997, the total returns presented are unaudited.
(6) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
72
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM WORLDWIDE GROWTH FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.58 21.39 19.33 16.88 16.57 14.29
Income from investment operations:
Net investment income (loss) $ (0.15) -- (0.02) 0.04 (0.16) (0.07)
Net realized and unrealized gains
(loss) on investments $ 9.62 2.19 5.78 5.33 2.20 2.86
Total from investment operations $ 9.47 2.19 5.76 5.37 2.04 2.79
Less distributions from:
Net investment income $ -- -- 0.06 -- -- 0.12
Net realized gains on investments $ 3.07 -- 3.64 2.92 1.73 0.39
Net asset value, end of period $ 29.98 23.58 21.39 19.33 16.88 16.57
Total Return(3): % 42.43 10.24 33.56 34.55 12.51 19.79
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 235,341 66,245 49,134 38,647 24,022 23,481
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.67 1.75 1.86 1.86 1.85 1.85
Gross expenses prior to expense
reimbursement(4) % 1.67 1.75 2.02 2.21 2.17 2.17
Net investment income (loss) after
expense reimbursement(4)(5) % (0.79) (0.03) (0.62) (0.69) (0.93) (0.35)
Portfolio turnover % 169 57 247 202 182 132
Class B
---------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(2) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 26.64 24.21 20.10 16.02 14.34 12.50
Income from investment operations:
Net investment income (loss) $ (0.28) (0.03) (0.08) (0.17) (0.14) (0.05)
Net realized and unrealized gains
(loss) on investments $ 10.76 2.46 6.25 5.44 1.82 1.89
Total from investment operations $ 10.48 2.43 6.17 5.27 1.68 1.84
Less distributions from:
Net investment income $ -- -- 0.01 -- -- --
Net realized gains on investments $ 3.46 -- 2.05 1.19 -- --
Net asset value, end of period $ 33.66 26.64 24.21 20.10 16.02 14.34
Total Return(3): % 41.54 10.04 32.74 34.03 11.72 14.72
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 130,988 27,938 18,556 10,083 5,942 1,972
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 2.32 2.40 2.67 2.70 4.81 9.50
Net investment income (loss) after
expense reimbursement(4)(5) % (1.44) (0.68) (1.31) (1.37) (1.62) (1.28)
Portfolio turnover % 169 57 247 202 182 132
Class C
--------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 23.69 21.52 19.05 16.92 16.76 14.44
Income from investment operations:
Net investment income (loss) $ (0.33) (0.04) (0.20) (0.19) (0.28) (0.21)
Net realized and unrealized gains
(loss) on investments $ 9.65 2.21 5.83 5.41 2.23 2.92
Total from investment operations $ 9.32 2.17 5.63 5.22 1.95 2.71
Less distributions from:
Net investment income $ -- -- 0.01 -- -- 0.01
Net realized gains on investments $ 3.09 -- 3.15 3.09 1.79 0.38
Net asset value, end of period $ 29.92 23.69 21.52 19.05 16.92 16.76
Total Return(3): % 41.48 10.08 32.73 33.72 11.81 18.95
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 239,432 111,250 98,470 84,292 70,345 71,155
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.32 2.40 2.51 2.51 2.50 2.50
Gross expenses prior to expense
reimbursement(4) % 2.32 2.40 2.67 2.77 2.61 2.57
Net investment income (loss) after
expense reimbursement(4)(5) % (1.44) (0.68) (1.28) (1.34) (1.57) (0.99)
Portfolio turnover % 169 57 247 202 182 132
</TABLE>
----------
(1) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
73
<PAGE>
FINANCIAL
PILGRIM INTERNATIONAL CORE GROWTH FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Three
Year months February 28,
Ended ended 1997(1) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(2) 1999 1998 1997
---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.92 17.71 17.01 12.73 12.50
Income from investment operations:
Net investment income (loss) $ (0.17) 0.04 (0.01) (0.02) --
Net realized and unrealized gains on
investments $ 6.25 1.17 1.02 4.56 0.23
Total from investment operations $ 6.08 1.21 1.01 4.54 0.23
Less distributions from:
Net investment income $ -- -- 0.18 -- --
Net realized gains on investments $ 1.16 -- 0.13 0.26 --
Net asset value, end of period $ 23.84 18.92 17.71 17.01 12.73
Total Return(3): % 32.83 6.83 5.90 36.10 1.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 23,003 12,409 21,627 12,664 2
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.85 1.77 1.89 1.96 1.95
Gross expenses prior to expense
reimbursement(4) % 2.16 1.86 2.13 3.02 4,579.78
Net investment income (loss) after
expense reimbursement(4)(5) % (0.83) 0.50 (0.51) (0.45) 0.00
Portfolio turnover % 200 67 214 274 76
Class B
-------------------------------------------------------
Three
Year months February 28,
Ended ended 1997(1) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(2) 1999 1998 1997
---- ------- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 19.08 17.89 17.10 12.68 12.50
Income from investment operations:
Net investment income (loss) $ (0.30) -- (0.16) (0.11) --
Net realized and unrealized gains on
investments $ 6.21 1.19 1.05 4.66 0.18
Total from investment operations $ 5.91 1.19 0.89 4.55 0.18
Less distributions from:
Net investment income $ -- -- 0.03 -- --
Net realized gains on investments $ 1.16 -- 0.07 0.13 --
Net asset value, end of period $ 23.83 19.08 17.89 17.10 12.68
Total Return(3): % 31.62 6.65 5.24 35.31 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 21,543 12,034 11,033 7,942 1
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.50 2.36 2.53 2.61 2.59
Gross expenses prior to expense
reimbursement(4) % 2.81 2.45 2.77 3.04 16,000.25
Net investment income (loss) after
expense reimbursement(4)(5) % (1.48) (0.09) (1.13) (1.32) 0.00
Portfolio turnover % 200 67 214 274 76
Class C
-------------------------------------------------------
Three
Year months February 28,
Ended ended 1997(1) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(2) 1999 1998 1997
---- ------- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 19.14 17.94 17.16 12.68 12.50
Income from investment operations:
Net investment income (loss) $ (0.27) -- (0.05) (0.07) --
Net realized and unrealized gains
on investments $ 6.22 1.20 0.94 4.55 0.18
Total from investment operations $ 5.95 1.20 0.89 4.48 0.18
Less distributions from:
Net investment income $ -- -- 0.11 -- --
Net realized gains on investments $ 1.16 -- -- -- --
Net asset value, end of period $ 23.93 19.14 17.94 17.16 12.68
Total Return(3): % 31.73 6.69 5.22 35.25 1.44
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 26,734 11,936 10,400 3,517 43
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.50 2.36 2.55 2.61 2.41
Gross expenses prior to expense
reimbursement(4) % 2.81 2.45 2.79 5.10 25.55
Net investment income (loss) after
expense reimbursement(4)(5) % (1.48) (0.09) (1.19) (1.27) (0.07)
Portfolio turnover % 200 67 214 274 76
</TABLE>
----------
(1) The Fund commenced operations on February 28, 1997.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
74
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.80 21.03 19.29 14.92 13.15 11.51
Income from investment operations:
Net investment income (loss) $ (0.18) (0.03) 0.02 (0.15) 0.04 (0.02)
Net realized and unrealized gains on
investments $ 19.38 2.80 3.21 5.36 1.88 1.79
Total from investment operations $ 19.20 2.77 3.23 5.21 1.92 1.77
Less distributions from:
Net investment income $ -- -- -- -- 0.01 0.13
Net realized gains on investments $ 2.06 -- 1.49 0.84 0.14 --
Net asset value, end of period $ 40.94 23.80 21.03 19.29 14.92 13.15
Total Return(3): % 82.89 13.17 17.26 36.31 14.67 15.46
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 278,480 37,490 25,336 11,183 5,569 1,056
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.67 1.84 1.94 1.96 1.95 1.95
Gross expenses prior to expense
reimbursement(4) % 1.67 1.86 2.08 2.75 3.76 10.06
Net investment income (loss) after
expense reimbursement(4)(5) % (0.76) (0.69) (0.82) (1.56) (1.05) (0.27)
Portfolio turnover % 164 44 146 198 206 141
Class B
---------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(1) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 25.33 22.43 20.16 15.89 13.96 12.50
Income from investment operations:
Net investment income (loss) $ (0.37) (0.07) (0.20) (0.15) (0.15) (0.02)
Net realized and unrealized gains on
investments $ 20.50 2.97 3.46 5.56 2.09 1.48
Total from investment operations $ 20.13 2.90 3.26 5.41 1.94 1.46
Less distributions from:
Net investment income $ -- -- -- -- 0.01 --
Net realized gains on investments $ 2.19 -- 0.99 1.14 -- --
Net asset value, end of period $ 43.27 25.33 22.43 20.16 15.89 13.96
Total Return(3): % 81.63 12.93 16.55 35.73 13.96 11.68
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 132,028 19,331 16,158 12,033 5,080 1,487
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(4) % 2.32 2.51 2.73 2.98 4.89 16.15
Net investment income (loss) after
expense reimbursement(4)(5) % (1.41) (1.34) (1.45) (2.20) (1.66) (0.64)
Portfolio turnover % 164 44 146 198 206 141
Class C
------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 23.34 20.60 18.53 14.87 13.05 11.32
Income from investment operations:
Net investment income (loss) $ (0.31) (0.06) (0.10) (0.11) (0.16) 0.01
Net realized and unrealized gains on
investments $ 18.69 2.80 3.09 5.09 1.98 1.72
Total from investment operations $ 18.38 2.74 2.99 4.98 1.82 1.73
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ 2.01 -- 0.92 1.32 -- --
Net asset value, end of period $ 39.71 23.34 20.60 18.53 14.87 13.05
Total Return(3): % 80.89 13.31 16.55 35.63 13.98 15.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 144,068 18,354 13,226 8,014 3,592 933
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.32 2.49 2.59 2.61 2.60 2.60
Gross expenses prior to expense
reimbursement(4) % 2.32 2.51 2.73 3.38 3.95 16.15
Net investment income (loss) after
expense reimbursement(4)(5) % (1.41) (1.34) (1.45) (2.18) (1.67) (1.02)
Portfolio turnover % 164 44 146 198 206 141
</TABLE>
----------
(1) Commencement of share offerings.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
75
<PAGE>
FINANCIAL
PILGRIM EMERGING COUNTRIES FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00
Income from investment operations:
Net investment income (loss) $ (0.20) (0.05) (0.06) 0.03 (0.06) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.63 3.36 (3.81) 1.22 3.51 3.15
Total from investment operations $ 3.43 3.31 (3.87) 1.25 3.45 3.11
Less distributions from:
Net investment income $ -- -- 0.02 -- -- 0.02
Net realized gains on investments $ -- -- 0.07 1.06 0.28 0.06
Net asset value, end of period $ 20.17 16.74 13.43 17.39 17.20 14.03
Total Return(3): % 20.49 24.65 (22.23) 8.06 24.79 28.43
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,311 53,483 47,180 71,014 38,688 4,718
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.19 2.13 2.27 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.34 2.66 2.56 2.48 3.08 6.72
Net investment income (loss) after
expense reimbursement(4)(5) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35)
Portfolio turnover % 211 67 213 243 176 118
Class B
------------------------------------------------------------
Three
Year months May 31,
Ended ended 1995(1) to
June 30, June 30, Year Ended March 31, March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.98 13.64 17.64 17.29 14.02 12.50
Income from investment operations:
Net investment income (loss) $ (0.35) (0.07) (0.22) (0.07) (0.11) (0.04)
Net realized and unrealized gains
(loss) on investments $ 3.67 3.41 (3.70) 1.26 3.47 1.56
Total from investment operations $ 3.32 3.34 (3.92) 1.19 3.36 1.52
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.84 0.09 --
Net asset value, end of period $ 20.30 16.98 13.64 17.64 17.29 14.02
Total Return(3): % 19.55 24.49 (22.23) 7.47 24.00 12.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 30,322 26,342 22,338 38,796 24,558 3,557
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.91 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.20 3.06 3.66 7.58
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.80) (0.20) (1.77) (1.05)
Portfolio turnover % 211 67 213 243 176 118
Class C
-----------------------------------------------------------
Three
Year months
Ended ended
June 30, June 30, Year Ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79
Income from investment operations:
Net investment income (loss) $ (0.32) (0.07) (0.27) (0.12) (0.10) (0.05)
Net realized and unrealized gains
(loss) on investments $ 3.53 3.28 (3.49) 1.26 3.37 2.97
Total from investment operations $ 3.21 3.21 (3.76) 1.14 3.27 2.92
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.08 0.97 0.17 --
Net asset value, end of period $ 19.56 16.35 13.14 16.98 16.81 13.71
Total Return(3): % 19.63 24.43 (22.21) 7.47 23.94 27.30
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 29,610 24,230 19,246 36,986 29,376 4,345
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.84 2.75 2.90 2.91 2.90 2.90
Gross expenses prior to expense
reimbursement(4) % 2.99 3.28 3.19 3.09 3.12 6.23
Net investment income (loss) after
expense reimbursement(4)(5) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06)
Portfolio turnover % 211 67 213 243 176 118
</TABLE>
----------
(1) Commencement of offering shares.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
76
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM ASIA-PACIFIC EQUITY FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
--------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996(1)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 7.22 4.46 10.93 10.35 10.00
Income from investment operations:
Net investment income (loss) $ (0.05) -- 0.03 0.02 0.03
Net realized and unrealized gain (loss) on
investments $ 0.06 2.76 (6.50) 0.58 0.34
Total from investment operations $ 0.01 2.76 (6.47) 0.60 0.37
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.02
Tax return of capital $ -- -- -- 0.02 --
Net asset value, end of period $ 7.23 7.22 4.46 10.93 10.35
Total Return(2): % 0.14 61.88 (59.29) 5.78 3.76
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 11,726 14,417 11,796 32,485 18,371
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.11 2.00 2.00 2.00 2.00
Gross expenses prior to expense
reimbursement(3) % 2.55 2.98 2.80 2.54 3.47
Net investment income (loss) after expense
reimbursement(3)(4) % (0.56) 0.01 0.38 0.00 0.33
Portfolio turnover rate % 138 111 81 38 15
Class B
--------------------------------------------
Sept. 1,
1995 to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996(1)
---- ---- ---- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 7.02 4.37 10.83 10.31 10.00
Income from investment operations:
Net investment income (loss) $ (0.11) (0.04) (0.03) (0.07) (0.01)
Net realized and unrealized gain (loss) on
investments $ 0.06 2.69 (6.43) 0.59 0.32
Total from investment operations $ (0.05) 2.65 (6.46) 0.52 0.31
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- --
Tax return of capital $ -- -- -- -- --
Net asset value, end of period $ 6.97 7.02 4.37 10.83 10.31
Total Return(2): % (0.71) 60.64 (59.65) 5.04 3.19
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 12,228 12,959 9,084 30,169 17,789
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.86 2.75 2.75 2.75 2.75
Gross expenses prior to expense
reimbursement(3) % 3.30 3.73 3.55 3.29 4.10
Net investment income (loss) after expense
reimbursement(3)(4) % (1.31) (0.74) (0.39) (0.79) (0.38)
Portfolio turnover rate % 138 111 81 38 15
Class M
---------------------------------------------
Sept. 1,
Year Ended June 30, 1995 to
2000 1999 1998 1997 June 30,
---- ---- ---- ---- --------
Per Share Operating Performance:
Net asset value, beginning of period $ 7.07 4.40 10.86 10.32 10.00
Income from investment operations:
Net investment income (loss) $ (0.11) (0.02) -- (0.05) --
Net realized and unrealized gain (loss)
on investments $ 0.08 2.69 (6.46) 0.59 0.33
Total from investment operations $ (0.03) 2.67 (6.46) 0.54 0.33
Less distributions from:
Net investment income $ -- -- -- -- --
In excess of net investment income $ -- -- -- -- 0.01
Tax return of capital $ -- -- -- -- --
Net asset value, end of period $ 7.04 7.07 4.40 10.86 10.32
Total Return(2): % (0.42) 60.68 (59.48) 5.26 3.32
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,749 5,184 4,265 11,155 6,476
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.61 2.50 2.50 2.50 2.50
Gross expenses prior to expense
reimbursement(3) % 3.05 3.48 3.30 3.04 3.88
Net investment income (loss) after expense
reimbursement(3)(4) % (1.06) (0.49) (0.07) (0.55) (0.16)
Portfolio turnover rate % 138 111 81 38 15
</TABLE>
----------
(1) The Fund commenced operations on September 1, 1995.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
77
<PAGE>
FINANCIAL
PILGRIM GOVERNMENT SECURITIES INCOME FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
Year Ended June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.35 12.88 12.71 12.59 12.97
Income (loss) from investment operations:
Net investment income $ 0.75 0.76 0.64 0.69 0.75
Net realized and unrealized gain (loss) on
investments $ (0.43) (0.52) 0.30 0.20 (0.32)
Total from investment operations $ 0.32 0.24 0.94 0.89 0.43
Less distributions from:
Net investment income $ 0.74 0.77 0.77 0.73 0.75
Tax return of capital $ -- -- -- 0.04 0.06
Total distributions $ 0.74 0.77 0.77 0.77 0.81
Net asset value, end of period $ 11.93 12.35 12.88 12.71 12.59
Total Return(2): % 2.79 1.89 7.63 7.33 3.34
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 54,206 21,060 23,682 29,900 38,753
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.35 1.40 1.50 1.42 1.51
Gross expenses prior to expense
reimbursement(3) % 1.35 1.40 1.58 1.42 1.57
Net investment income after expense
reimbursement(3)(4) % 5.87 6.05 5.13 5.78 5.64
Portfolio turnover rate % 44 58 134 172 170
Class B
-------------------------------------------------------
July 17,
1995(1) to
Year Ended June 30, June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 12.30 12.84 12.68 12.59 12.95
Income (loss) from investment operations:
Net investment income $ 0.67 0.69 0.60 0.67 0.66
Net realized and unrealized gain (loss) on
investments $ (0.42) (0.54) 0.24 0.11 (0.37)
Total from investment operations $ 0.25 0.15 0.84 0.78 0.29
Less distributions from:
Net investment income $ 0.66 0.69 0.68 0.69 0.65
Tax return of capital $ -- -- -- -- --
Total distributions $ 0.66 0.69 0.68 0.69 0.65
Net asset value, end of period $ 11.89 12.30 12.84 12.68 12.59
Total Return(2): % 2.12 1.09 6.78 6.38 2.25
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 33,692 12,426 3,220 1,534 73
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.10 2.15 2.25 2.17 2.26
Gross expenses prior to expense
reimbursement(3) % 2.10 2.15 2.29 2.17 2.41
Net investment income after expense
reimbursement(3)(4) % 5.12 5.30 4.24 4.92 4.98
Portfolio turnover rate % 44 58 134 172 170
Class C Class T
-------------------- -----------
Year June 11, April 5,(1)
Ended 1999(1) to to
June 30, June 30, June 30,
2000 1999 2000
---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 12.43 12.24 11.80
Income (loss) from investment operations:
Net investment income $ 0.68 2.05 0.17
Net realized and unrealized gain (loss)
on investments $ (0.44) (1.86) 0.03
Total from investment operations $ 0.24 0.19 0.20
Less distributions from:
Net investment income $ 0.66 -- 0.11
Tax return of capital $ -- -- --
Total distributions 0.66 -- 0.11
Net asset value, end of period $ 12.01 12.43 11.89
Total Return(2) % 2.09 1.55 1.24
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 2,047 7 22,888
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 2.10 2.15 1.75
Gross expenses prior to expense
reimbursement(3) % 2.10 2.15 1.75
Net investment income after expense
reimbursement(3)(4) % 5.12 5.30 5.47
Portfolio turnover rate % 44 58 44
Class M
-----------------------------------------------------
Year July 17,
Ended 1995(1) to
June 30, Year Ended June 30, June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 12.34 12.88 12.72 12.59 12.95
Income (loss) from investment operations:
Net investment income $ 0.59 0.69 0.64 0.70 0.68
Net realized and unrealized gain (loss)
on investments $ (0.32) (0.52) 0.23 0.14 (0.36)
Total from investment operations $ 0.27 0.17 0.87 0.84 0.32
Less distributions from:
Net investment income $ 0.69 0.71 0.71 0.70 0.68
Tax return of capital $ -- -- -- 0.01 --
Total distributions 0.69 0.71 0.71 0.71 0.68
Net asset value, end of period $ 11.92 12.34 12.88 12.72 12.59
Total Return(2) % 2.28 1.31 7.02 6.88 2.52
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 510 751 224 61 24
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.85 1.90 2.00 1.92 2.01
Gross expenses prior to expense
reimbursement(3) % 1.85 1.90 2.05 1.92 2.16
Net investment income after expense
reimbursement(3)(4) % 5.37 5.57 4.29 5.25 5.73
Portfolio turnover rate % 44 58 134 172 170
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
78
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A Class B
--------------------------------- -------------------------------
Three Three
Year months July 27, Year months July 27,
Ended ended 1998(1) to Ended ended 1998(1) to
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999(2) 1999 2000 1999(2) 1999
---- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.59 12.89 13.08 12.33 12.61 12.78
Income from investment operations:
Net investment income $ 0.92 0.26 0.53 0.88 0.18 0.45
Net realized and unrealized
gains (loss) on investments $ (0.52) (0.42) (0.08) (0.53) (0.33) (0.05)
Total from investment operations $ 0.40 (0.16) 0.45 0.35 (0.15) 0.40
Less distributions from:
Net investment income $ 0.92 0.14 0.53 0.88 0.13 0.46
Net realized gains on investments $ -- -- 0.11 -- -- 0.11
Net asset value, end of period $ 12.07 12.59 12.89 11.80 12.33 12.61
Total Return(3): % 3.42 (1.23) 5.60 3.00 (1.20) 5.17
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 2,726 2,736 5,751 4,460 5,658 6,637
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 0.96 0.90 0.96 1.36 1.29 1.37
Gross expenses prior to expense
reimbursement(4) % 2.64 1.56 1.98 3.04 1.95 2.42
Net investment income (loss)
after expense reimbursement(4)(5) % 7.69 5.88 5.81 7.29 5.49 5.35
Portfolio turnover % 168 69 274 168 69 274
</TABLE>
Class C
---------------------------------
Three
Year months July 27,
Ended ended 1998(1) to
Juned 30, June 30, March 31,
2000 1999(2) 1999
---- ------- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 12.81 13.10 13.27
Income from investment operations:
Net investment income $ 0.87 0.19 0.48
Net realized and unrealized
gains (loss) on investments $ (0.51) (0.35) (0.06)
Total from investment operations $ 0.36 (0.16) 0.42
Less distributions from:
Net investment income $ 0.87 0.13 0.48
Net realized gains on investments $ -- -- 0.11
Net asset value, end of period $ 12.30 12.81 13.10
Total Return(3): % 3.02 (1.21) 5.19
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 3,966 7,965 8,128
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.36 1.29 1.36
Gross expenses prior to expense
reimbursement(4) % 3.04 1.95 2.41
Net investment income (loss)
after expense reimbursement(4)(5) % 7.29 5.49 5.36
Portfolio turnover % 168 69 274
----------
(1) The Fund commenced operations on July 27, 1998.
(2) Effective May 24, 1999, Pilgrim Investment, Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total returns are not annualized for periods of less than one year and do
not reflect the impact of sales charges.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
79
<PAGE>
FINANCIAL
HIGHLIGHTS
PILGRIM HIGH YIELD FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Year ended June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 5.93 6.94 6.80 6.36 6.15
Income (loss) from investment
operations:
Net investment income $ 0.56 0.58 0.61 0.61 0.59
Net realized and unrealized gain (loss)
on investments $ (0.85) (0.96) 0.16 0.43 0.16
Total from investment operations $ (0.29) (0.38) 0.77 1.04 0.75
Less distributions from:
Net investment income $ 0.57 0.62 0.63 0.60 0.54
Tax return of capital $ 0.03 0.01 -- -- --
Total distributions $ 0.60 0.63 0.63 0.60 0.54
Net asset value, end of period $ 5.04 5.93 6.94 6.80 6.36
Total Return(2): % (5.20) (5.57) 11.71 17.14 12.72
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 85,870 131,535 102,424 35,940 18,691
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.05 1.00 1.00 1.00 1.00
Gross expenses prior to expense
reimbursement(3) % 1.17 1.12 1.17 1.42 2.19
Net investment income after expense
reimbursement(3)(4) % 10.41 9.32 9.05 9.54 9.46
Portfolio turnover rate % 89 184 209 394 399
Class B
-------------------------------------------------------
Year ended June 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 5.92 6.92 6.78 6.36 6.20
Income (loss) from investment
operations:
Net investment income $ 0.53 0.53 0.58 0.57 0.48
Net realized and unrealized gain (loss)
on investments $ (0.86) (0.96) 0.14 0.41 0.14
Total from investment operations $ (0.33) (0.43) 0.72 0.98 0.62
Less distributions from:
Net investment income $ 0.53 0.56 0.58 0.56 0.46
Tax return of capital $ 0.03 0.01 -- -- --
Total distributions $ 0.56
Net asset value, end of period $ 5.03 5.92 6.92 6.78 6.36
Total Return(2): % (5.91) (6.23) 10.90 16.04 10.37
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 199,618 261,589 154,303 40,225 2,374
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.80 1.75 1.75 1.75 1.75
Gross expenses prior to expense
reimbursement(3) % 1.92 1.87 1.92 2.17 2.94
Net investment income after expense
reimbursement(3)(4) % 9.66 8.57 8.30 8.64 9.02
Portfolio turnover rate % 89 184 209 394 339
Class C Class M
---------------------- ------------------------------------------------------
Year May 27, Year July 17,
Ended 1999(1) to Ended 1995(1) to
June 30, June 30, June 30, Year ended June 30, June 30,
2000 1999 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 5.92 5.91 5.93 6.92 6.78 6.36 6.20
Income (loss) from investment
operations:
Net investment income $ 0.57 0.05 0.52 0.55 0.59 0.58 0.50
Net realized and unrealized gain (loss)
on investments $ (0.90) 0.01 (0.85) (0.95) 0.14 0.41 0.14
Total from investment operations $ (0.33) 0.06 (0.33) (0.40) 0.73 0.99 0.64
Less distributions from:
Net investment income $ 0.57 0.05 0.54 0.58 0.59 0.57 0.48
Tax return of capital $ -- -- 0.03 0.01 -- -- --
Total distributions 0.57 0.57
Net asset value, end of period $ 5.02 5.92 5.03 5.93 6.92 6.78 6.36
Total Return(2): % (5.99) 0.34 (5.86) (5.85) 11.16 16.29 10.69
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 5,930 551 12,730 24,129 19,785 8,848 1,243
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.80 1.75 1.55 1.50 1.50 1.50 1.50
Gross expenses prior to expense
reimbursement(3) % 1.92 1.87 1.67 1.62 1.67 1.92 2.69
Net investment income after expense
reimbursement(3)(4) % 9.66 8.57 9.91 8.82 8.55 8.93 9.41
Portfolio turnover rate % 89 184 89 184 209 394 339
</TABLE>
----------
(1) Commencement of offering shares.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
80
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM HIGH YIELD FUND II
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------
Three
Year months Year March 27,
ended ended ended 1998 to
June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998(1)
---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 11.57 11.66 12.72 12.70
Income from investment operations:
Net investment income $ 1.18 0.28 1.12 0.01
Net realized and unrealized gains
(loss) on investments $ (0.75) (0.09) (1.00) 0.01
Total from investment operations $ 0.43 0.19 0.12 0.02
Less distributions from:
Net investment income $ 1.20 0.28 1.18 --
Net asset value, end of period $ 10.80 11.57 11.66 12.72
Total Return(3): % 3.96 1.60 1.13 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 34,416 16,795 17,327 4,690
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.18 1.10 1.12 1.06
Gross expenses prior to expense
reimbursement(4) % 1.37 1.37 1.53 1.06
Net investment income (loss) after
expense reimbursement(4)(5) % 10.63 9.68 9.44 7.22
Portfolio turnover % 113 44 242 484
Class B
---------------------------------------------
Three
Year months Year March 27,
ended ended ended 1998 to
June 30, June 30, March 31, March 31,
2000 1999(2) 1999 1998(1)
---- ------- ---- -------
Per Share Operating Performance:
Net asset value, beginning of period $ 11.58 11.66 12.71 12.69
Income from investment operations:
Net investment income $ 1.11 0.27 1.04 0.01
Net realized and unrealized gains (loss)
on investments $ (0.75) (0.09) (0.99) 0.01
Total from investment operations $ 0.36 0.18 0.05 0.02
Less distributions from:
Net investment income $ 1.13 0.26 1.10 --
Net asset value, end of period $ 10.81 11.58 11.66 12.71
Total Return(3): % 3.28 1.53 0.55 0.16
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 103,246 41,882 42,960 8,892
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.83 1.75 1.77 1.69
Gross expenses prior to expense
reimbursement(4) % 2.02 2.02 2.18 1.69
Net investment income (loss) after
expense reimbursement(4)(5) % 9.98 9.03 8.84 6.61
Portfolio turnover % 113 44 242 484
Class C Class T
--------------------------------------------- -----------
Three
Year months Year March 27, March 31,
ended ended ended 1998 to 2000(6) to
June 30, June 30, March 31, March 31, June 30,
2000 1999(2) 1999 1998(1) 2000
---- ------- ---- ------- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 11.58 11.66 12.71 12.69 11.07
Income from investment operations:
Net investment income (loss) $ 1.10 0.27 1.04 0.01 0.29
Net realized and unrealized gains (loss)
on investments $ (0.74) (0.09) (0.99) 0.01 (0.25)
Total from investment operations $ 0.36 0.18 0.05 0.02 0.04
Less distributions from:
Net investment income $ 1.13 0.26 1.10 -- 0.30
Net asset value, end of period $ 10.81 11.58 11.66 12.71 10.81
Total Return(3): % 3.28 1.53 0.55 0.16 (0.49)
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 23,324 18,618 21,290 4,815 31,342
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.83 1.75 1.77 1.66 1.48
Gross expenses prior to expense
reimbursement(4) % 2.02 2.02 2.18 1.66 1.67
Net investment income (loss) after
expense reimbursement(4)(5) % 9.98 9.03 8.79 6.91 10.33
Portfolio turnover % 113 44 242 484 113
</TABLE>
----------
(1) The Fund commenced operations on March 27, 1998.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has voluntarily agreed to limit expenses, excluding,
interest, taxes, brokerage and extraordinary expenses.
(6) Commencement of offering of shares.
See Accompanying Notes to Financial Statements
81
<PAGE>
FINANCIAL
PILGRIM MONEY MARKET FUND HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
Period Period Period
ended ended ended
June 30, June 30, June 30,
2000(1) 2000(2) 2000(2)
------- ------- -------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 1.00 1.00
Income from investment operations:
Net investment income $ 0.02 0.03 0.02
Net realized and unrealized gains
(loss) on investments $ -- -- --
Total from investment operations $ 0.02 0.03 0.02
Less distributions from:
Net investment income $ 0.02 0.03 0.02
Net realized gains on investments $ -- -- --
Net asset value, end of period $ 1.00 1.00 1.00
Total Return(3): % 3.58 3.60 3.58
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 75,430 12,035 5,431
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.85 1.60 1.60
Gross expenses prior to expense reimbursement(4) % 2.28 3.03 3.03
Net investment income (loss) after expense
reimbursement(4)(5) % 5.18 3.96 3.96
</TABLE>
----------
(1) Commenced operations on November 24, 1999.
(2) Commenced operations on July 12, 1999.
(3) Total returns are not annualized for periods of less than one year and do
not reflect the impact of sales charges.
(4) Annualized for periods less than one year.
(5) The investment manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
82
<PAGE>
FINANCIAL
HIGHLIGHTS PILGRIM BALANCED FUND
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Three
Year months
ended ended
June 30, June 30, Year ended March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.23 19.03 19.53 15.54 16.16 13.74
Income from investment operations:
Net investment income $ 0.51 0.10 0.36 0.26 0.32 0.34
Net realized and unrealized gains on
investments $ (0.60) 0.17 2.58 5.70 0.84 2.42
Total from investment operations $ (0.09) 0.27 2.94 5.96 1.16 2.76
Less distributions from:
Net investment income $ 0.39 0.07 0.43 0.27 0.32 0.34
Net realized gains on investments $ 3.71 -- 3.01 1.70 1.46 --
Net asset value, end of period $ 15.04 19.23 19.03 19.53 15.54 16.16
Total Return(3): % (1.01) 1.42 17.10 39.34 6.74 20.16
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 63,592 9,619 9,519 6,675 4,898 5,902
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.40 1.49 1.59 1.61 1.60 1.60
Gross expenses prior to expense
reimbursement(4) % 1.61 1.75 1.97 2.56 3.00 3.30
Net investment income (loss) after
expense reimbursement(4)(5) % 3.26 2.06 2.08 3.58 1.87 2.16
Portfolio turnover % 173 63 165 260 213 197
Class B
----------------------------------------------------------------
Three
Year months May 31,
ended ended 1995(1) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(2) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 20.59 20.38 20.07 14.88 14.18 12.50
Income from investment operations:
Net investment income $ 0.44 0.07 0.28 0.15 0.17 0.12
Net realized and unrealized gains on
investments $ (0.64) 0.18 2.74 5.58 0.70 1.68
Total from investment operations $ (0.20) 0.25 3.02 5.73 0.87 1.80
Less distributions from:
Net investment income $ 0.33 0.04 0.31 0.15 0.17 0.12
Net realized gains on investments $ 3.97 -- 2.40 0.39 -- --
Net asset value, end of period $ 16.09 20.59 20.38 20.07 14.88 14.18
Total Return(3): % (1.58) 1.24 16.49 38.79 6.10 14.45
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 41,026 7,157 6,048 4,254 2,133 673
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.05 2.14 2.24 2.26 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.26 2.40 2.62 2.71 6.44 13.05
Net investment income (loss) after
expense reimbursement(4)(5) % 2.61 1.41 1.43 2.99 1.25 1.38
Portfolio turnover % 173 63 165 260 213 197
Class C Class T
------------------------------------------------------ ----------
Three
Year months March 31,
ended ended 2000(1) to
June 30, June 30, Year ended March 31, June 30,
2000 1999(2) 1999 1998 1997 1996 2000
---- ------- ---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 18.53 18.35 19.90 15.59 16.20 13.76 16.83
Income from investment operations:
Net investment income $ 0.45 0.06 0.26 0.15 0.21 0.24 0.09
Net realized and unrealized gains
on investments $ (0.62) 0.16 2.52 5.71 0.85 2.44 (0.82)
Total from investment operations $ (0.17) 0.22 2.78 5.86 1.06 2.68 (0.73)
Less distributions from:
Net investment income $ 0.34 0.04 0.28 0.15 0.21 0.24 --
Net realized gains on investments $ 3.57 -- 4.05 1.40 1.46 -- --
Net asset value, end of period $ 14.45 18.53 18.35 19.90 15.59 16.20 16.10
Total Return(3): % (1.53) 1.21 16.34 38.35 6.05 19.58 (4.34)
Ratio/Supplemental Data:
Net assets, end of period (in thousands) $ 25,838 21,331 21,655 20,784 16,990 16,586 10,953
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.05 2.14 2.23 2.26 2.25 2.25 1.70
Gross expenses prior to expense
reimbursement(4) % 2.26 2.40 2.61 2.68 2.83 3.01 1.91
Net investment income (loss) after
expense reimbursement(4)(5) % 2.61 1.41 1.43 2.93 1.23 1.53 2.96
Portfolio turnover % 173 63 165 260 213 197 173
</TABLE>
----------
(1) Commencement of offering of shares.
(2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
83
<PAGE>
FINANCIAL
PILGRIM CONVERTIBLE FUND HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
Three
Year months
ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 23.27 21.92 19.12 16.59 15.68 12.86
Income from investment operations:
Net investment income (loss) $ 0.42 0.10 0.40 0.44 0.47 0.48
Net realized and unrealized gains
(loss) on investments $ 8.02 1.35 3.17 4.49 1.64 2.82
Total from investment operations $ 8.44 1.45 3.57 4.93 2.11 3.30
Less distributions from:
Net investment income $ 0.32 0.10 0.41 0.44 0.48 0.48
Net realized gains on investments $ 3.69 -- 0.36 1.96 0.72 --
Net asset value, end of period $ 27.70 23.27 21.92 19.12 16.59 15.68
Total Return(3): % 39.88 6.62 19.17 31.04 13.73 26.00
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 131,218 73,133 65,742 47,290 32,082 31,712
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.35 1.45 1.53 1.57 1.60 1.60
Gross expenses prior to expense
reimbursement(4) % 1.35 2.10 1.65 1.74 1.75 1.76
Net investment income (loss) after
expense reimbursement(4)(5) % 1.78 1.82 2.08 5.64 2.83 3.29
Portfolio turnover % 129 28 138 160 167 145
Class B
-------------------------------------------------------------------
Three
Year months May 31,
ended ended 1995(2) to
June 30, June 30, Year ended March 31, March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 25.34 23.86 20.56 16.60 14.96 12.50
Income from investment operations:
Net investment income (loss) $ 0.29 0.07 0.29 0.32 0.31 0.24
Net realized and unrealized gains
(loss) on investments $ 8.77 1.47 3.47 4.65 1.64 2.46
Total from investment operations $ 9.06 1.54 3.76 4.97 1.95 2.70
Less distributions from:
Net investment income $ 0.19 0.06 0.27 0.32 0.31 0.24
Net realized gains on investments $ 4.01 -- 0.19 0.69 -- --
Net asset value, end of period $ 30.20 25.34 23.86 20.56 16.60 14.96
Total Return(3): % 39.21 6.47 18.52 30.51 13.01 21.72
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 139,704 68,091 58,736 36,725 12,740 2,125
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.00 2.10 2.30 2.33 3.19 7.08
Net investment income (loss) after
expense reimbursement(4)(5) % 1.13 1.17 1.44 5.04 2.29 2.59
Portfolio turnover % 129 28 138 160 167 145
Class C
-----------------------------------------------------------------
Three
Year months
ended ended
June 30, June 30, Year ended March 31,
2000 1999(1) 1999 1998 1997 1996
---- ------- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of period $ 23.78 22.40 19.55 17.05 15.89 13.03
Income from investment operations:
Net investment income (loss) $ 0.28 0.07 0.28 0.34 0.37 0.40
Net realized and unrealized gains
(loss) on investments $ 8.22 1.37 3.25 4.60 1.66 2.86
Total from investment operations $ 8.50 1.44 3.53 4.94 2.03 3.26
Less distributions from:
Net investment income $ 0.19 0.06 0.25 0.34 0.37 0.40
Net realized gains on
investments $ 3.76 -- 0.43 2.10 0.50 --
Net asset value, end of period $ 28.33 23.78 22.40 19.55 17.05 15.89
Total Return(3): % 39.24 6.45 18.45 30.22 12.91 25.24
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 156,592 100,276 95,998 81,561 62,143 58,997
Ratio to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25
Gross expenses prior to expense
reimbursement(4) % 2.00 2.10 2.30 2.31 2.29 2.28
Net investment income (loss) after
expense reimbursement(4)(5) % 1.13 1.17 1.44 4.99 2.18 2.64
Portfolio turnover % 129 28 138 160 167 145
</TABLE>
----------
(1) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment
Manager of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Commencement of offering shares.
(3) 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.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses.
See Accompanying Notes to Financial Statements
84
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000
--------------------------------------------------------------------------------
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 is a Delaware business trust organized in 1992 with twelve 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 Money Market Fund,
Pilgrim Balanced Fund and Pilgrim Convertible Fund. 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.
The Money Market Fund seeks to achieve its investment objective by investing all
its assets in Class A shares of the Primary Reserve Institutional Fund, a series
of Reserve Institutional Trust, a registered open end investment company. The
Primary Reserve Institutional Fund declares dividends of its net investment
income daily, which the Money Market Fund records as dividend income. In
addition, the Money Market Fund incurs its own expenses. The financial
statements of the Primary Reserve Institutional Fund are included in this report
and should be read in conjunction with the financial statements of the Money
Market Fund.
Each Fund offers at least two of the following classes of shares: Class A, Class
B, Class C, Class M, Class Q and Class T. The separate classes of shares differ
principally in the applicable sales charges (if any), distribution fees,
shareholder servicing fees and transfer agency fees. Shareholders of each class
also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are determined separately for each
class based on income and expenses allocable to each class. Realized gains are
allocated to each class pro rata based on the net assets of each class on the
date of distribution. No class has preferential dividend rights. Differences in
per share dividend rates generally result from the relative weighting of pro
rata income and realized gain allocations and from differences in separate class
expenses, including distribution, and shareholder servicing fees. Class B
shares, along with their pro rata reinvested dividend shares, automatically
convert to Class A shares approximately eight years after purchase.
Reorganizations. Before a shareholder approved reorganization effective July 24,
1998, the funds comprising PMF invested all of their assets in corresponding
portfolios of Nicholas-Applegate Investment Trust, an arrangement known as a
"master/feeder" structure. Upon the reorganization, the Institutional Portfolio
series of the Trust were renamed Funds and were authorized to issue multiple
classes of shares, and their outstanding shares were classified as Class I
shares. At the same time, the A, B, C and Advisory Portfolios of the Trust
transferred their assets to the corresponding Funds, and their shareholders
received Class A, B, C and Q shares of the Funds on a tax-free basis. Effective
May 7, 1999 and concurrent with the change in investment adviser, from Nicholas
Applegate Capital Management to Pilgrim Investments, Inc. the Institutional
Classes of PMF were transferred in a tax free reorganization to new funds being
managed by Nicholas-Applegate Capital Management.
85
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
On November 16, 1999 the Boards of Trustees and Directors of the following funds
approved a plan of reorganization for the transfer of assets and liabilities of
the following:
* Pilgrim Government Securities Fund into the Pilgrim Government Securities
Income Fund
* Pilgrim High Yield III Fund into the Pilgrim High Yield II Fund, and
* Pilgrim Income & Growth Fund and Pilgrim Balance Sheet Opportunities Fund
into the Pilgrim Balanced Fund
This plan of reorganization was subsequently approved by shareholders on March
20, 2000 and effective on March 31, 2000 the transfer of all assets and
liabilites between the respective Funds was accomplished through a tax free
exchange of shares.
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 or
NASDAQ for which there has been no sale and securities traded in the
over-the-counter-market are valued at the mean between the last reported
bid and ask prices. All investments quoted in foreign currencies will be
valued daily in U.S. dollars on the basis of the foreign currency exchange
rates prevailing at the time such valuation is determined by each Fund's
custodian. Debt securities in Pilgrim Strategic Income Fund, Pilgrim
Balanced Fund and Pilgrim High Yield Fund II are valued at bid prices,
(Pilgrim High Yield Fund, including securities sold short, 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. For securities
which are subject to foreign withholding tax upon disposition, liabilities
86
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
are recorded on the statement of assets and liabilities for the estimated
tax withholding based on the securities current market value. Upon
disposition, realized gains or losses on such securities are recorded net
of foreign withholding tax.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and
the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate. Foreign
security and currency transactions may involve certain considerations and
risks not typically associated with investing in U.S. companies and the
U.S. Government. These risks include but are not limited to re-evaluation
of currencies and future adverse political and economic developments which
could cause securities and their markets to be less liquid and prices more
volatile than those of comparable U.S. companies and the U.S. Government.
D. Foreign Currency Transactions. 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,
2000.
E. Distributions to Shareholders. The Funds record distributions to their
shareholders on ex-date. Each Fund pays dividends, if any, as follows:
Annually Semi-Annually Quarterly Monthly
-------- ------------- --------- -------
LargeCap MagnaCap Balanced Strategic
Leaders Convertible Income
LargeCap Government
Growth Securities
MidCap Income
Value High Yield
MidCap High
Growth Yield II
SmallCap Money
Growth Market
Bank and
Thrift
International
Core
Growth
Worldwide
Growth
Asia-Pacific
Equity
International
SmallCap
Growth
Emerging
Countries
87
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Pilgrim High Yield II and Pilgrim Money Market declare and go ex-dividend
daily and pay dividends monthly. 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 distributions of paid-in capital. Accordingly, amounts as of
June 30, 2000 have been increased (decreased) through reclassification as
follows:
Accumlated
net realized
gains (losses)
Undistributed on investments
(overdistributed) and foreign
Paid-in net investment currency
capital income transactions
------- ------ ------------
MagnaCap $ -- $ 308,205 $ (308,205)
LargeCap Leaders (46,906) 315,614 (268,708)
LargeCap Growth 5,093,695 5,317,970 (10,411,665)
MidCap Value (387,792) 387,792 --
MidCap Growth 2,153,292 6,452,374 (8,605,666)
SmallCap Growth (21,573,410) 7,259,094 14,314,316
Bank and Thrift 268,616 593,939 (862,555)
Worldwide Growth 3,300,453 5,140,001 (8,440,454)
International Core
Growth 3,074,027 734,948 (3,808,975)
International SmallCap
Growth 1,618,970 4,264,398 (5,883,368)
Emerging Countries (19,687,342) 2,952,138 16,735,204
Asia-Pacific Equity (382,312) 325,059 57,253
Government Securities
Income (4,350) (190,620) 194,970
Strategic Income (214,691) 348,410 (133,719)
High Yield (2,218,003) 2,218,003 --
High Yield II (187,248) 282,299 (95,051)
Balanced (162,033) (13,137) 175,170
Convertible (1,570,609) 892,991 677,618
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, 2000:
Amount Expiration Dates
------ ----------------
Emerging Countries $37,330,830 2006
Asia-Pacific Equity 23,348,395 2007
Government Securities Income 7,375,294 2000 to 2007
Strategic Income 812,559 2006 to 2007
High Yield 50,313,971 2001 to 2008
High Yield II 9,557,114 2006 to 2008
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
88
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
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. Deferred Organization Expenses. Expenses incurred in connection with the
organization and registration of the LargeCap Leaders Fund, MidCap Value
Fund and Asia-Pacific Equity Fund under the Investment Company Act of 1940
and the Securities Act of 1933 are being amortized by each Fund equally
over a period of five years from the date of commencement of its
operations.
Certain registration costs incurred in the organization of Pilgrim Money
Market Fund were capitalized and are being amortized over a period of one
year.
J. Securities Lending. Each Fund had the option to temporarily loan 33 1/3% of
its total assets to brokers, dealers or other financial institutions in
exchange for a negotiated lender's fee. The borrower is required to fully
collateralize the loans with cash, letters of credit or U.S. Government
securities.
NOTE 3 -- INVESTMENT TRANSACTIONS
For the year ended June 30, 2000, the cost of purchases and proceeds from the
sales of securities, excluding short-term securities, were as follows:
Purchases Sales
--------- -----
MagnaCap Fund $ 112,268,474 $160,191,540
LargeCap Leaders Fund 14,013,272 15,181,906
LargeCap Growth Fund 974,359,094 541,278,929
MidCap Value Fund 47,166,393 69,863,247
MidCap Growth 649,865,512 593,010,815
SmallCap Growth Fund 515,442,043 511,413,629
Bank and Thrift Fund 50,180,900 280,638,858
Worldwide Growth Fund 1,010,948,365 698,234,369
Purchases Sales
--------- -----
International Core Growth Fund 155,980,822 131,692,882
International SmallCap Growth Fund 1,038,731,310 641,090,983
Emerging Countries Fund 481,141,840 446,788,856
Asia-Pacific Equity Fund 43,034,483 47,833,797
Government Securities Income Fund 21,100,781 21,382,264
Strategic Income Fund 20,800,382 24,567,555
High Yield Fund 308,052,953 370,094,465
High Yield Fund II 109,070,769 132,645,553
Balanced Fund 100,067,105 113,315,133
Convertible Fund 542,878,886 433,560,409
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, 2000, Bank and Thrift Fund has the following
holdings in affiliated companies:
Acquisition Shares Market % of
Date Held Cost Value Net Assets
---- ---- ---- ----- ----------
21st Century November 177,000 1,330,875 885,000 0.25%
Holding 5, 1998
Company
International November 375,000 3,281,089 2,039,062 0.57%
Aircraft 5, 1997 to
Investors April 15,
1999
Southwest March 16, 200,000 4,875,938 3,225,000 0.90%
Bancorp. 1999 to
March 17,
1999
During the year ended June 30, 2000 the Fund received $22,000 in dividend income
from Southwest Bancorp. There was no other dividend income from affiliates
during the period.
NOTE 5 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE 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 and Asia-Pacific Equity -- 1.25%; for LargeCap Leaders,
MidCap Value and SmallCap Growth -- 1.00%; for Worldwide Growth,
89
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
International Core Growth and International SmallCap Growth -- 1.00% for the
first $500 million, 0.90% of the next $500 million and 0.85% in excess of $1.0
billion; for LargeCap Growth, MidCap Growth, Balanced and Convertible -- 0.75%
for the first $500 million, 0.675% of the next $500 million and 0.65% in excess
of $1.0 billion; for High Yield and High Yield II -- 0.60%; for Strategic Income
-- 0.45% for the first $500 million, 0.40% of the next $250 million and 0.35% in
excess of $750 million; for MagnaCap -- 1.00% for the first $30 million, 0.75%
of the next $220 million, 0.625% of the next $250 million and 0.50% in excess of
$500 million; for Bank and Thrift -- 1.00% for the first $30 million, 0.75% of
the next $95 million and 0.70% in excess of $125 million; for Government
Securities Income -- 0.50% for the first $500 million, 0.45% of the next $500
million and 0.40% in excess of $1.0 billion.
The manager does not charge a management fee for Money Market Fund since the
Fund invests solely in another open-end regulated investment company. However,
the Fund pays the manager an administrative fee of 0.25% computed daily and
payable monthly based on average daily net assets.
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:
<TABLE>
<CAPTION>
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
MagnaCap 0.30% 1.00% 1.00% 0.75% 0.25% N/A
LargeCap Leaders 0.25 1.00 1.00 0.75 0.25 N/A
LargeCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
MidCap Value 0.25 1.00 1.00 0.75 0.25 N/A
MidCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
SmallCap Growth 0.35 1.00 1.00 N/A 0.25 N/A
Bank and Thrift 0.25 1.00 N/A N/A N/A N/A
Worldwide Growth 0.35 1.00 1.00 N/A 0.25 N/A
International Core
Growth 0.35 1.00 1.00 N/A 0.25 N/A
International SmallCap
Growth 0.35 1.00 1.00 N/A 0.25 N/A
Emerging Countries 0.35 1.00 1.00 N/A 0.25 N/A
Asia-Pacific Equity 0.25 1.00 N/A 0.75 N/A N/A
Government Securities
Income 0.25 1.00 1.00 0.75 0.25 0.65%
Strategic Income 0.35 0.75 0.75 N/A 0.25 N/A
High Yield 0.25 1.00 1.00 0.75 0.25 N/A
High Yield II 0.35 1.00 1.00 N/A 0.25 0.65
Money Market 0.25 1.00 1.00 N/A N/A N/A
Balanced 0.35 1.00 1.00 N/A 0.25 0.75
Convertible 0.35 1.00 1.00 N/A 0.25 N/A
</TABLE>
For the year ended June 30, 2000 the Funds paid the following distribution fees
by class to the Distributor.
<TABLE>
<CAPTION>
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
MagnaCap $994,817 $1,030,869 $ 26,458 108,690 $ 14,864 N/A
LargeCap Leaders 22,870 230,542 7,964 38,910 79 N/A
LargeCap Growth 375,756 1,990,735 824,123 N/A 38,960 N/A
MidCap Value 29,081 210,118 4,057 48,713 137 N/A
MidCap Growth 389,998 822,217 2,056,051 N/A 40,692 N/A
SmallCap Growth 488,534 727,465 1,977,269 N/A 26,579 N/A
Bank and Thrift 688,835 2,204,968 N/A N/A N/A N/A
Worldwide Growth 515,322 770,751 1,751,460 N/A 94,045 N/A
International
Core Growth 65,630 173,309 194,645 N/A 35,869 N/A
International SmallCap
Growth 559,207 796,853 798,961 N/A 293,086 N/A
Emerging Countries 226,595 295,635 276,850 N/A 249,693 N/A
Asia-Pacific Equity 34,682 138,885 N/A 39,665 N/A N/A
Government Securities
Income 69,487 173,703 8,927 4,908 5 38,778
Strategic Income 10,355 37,680 38,579 N/A 444 N/A
High Yield 272,149 2,354,893 42,730 140,963 -- N/A
High Yield II 60,360 570,886 193,491 N/A 9,563 53,509
Money Market 57,425 78,467 28,963 N/A N/A N/A
Balanced 81,266 162,089 210,792 N/A 495 21,291
Convertible 317,132 1,028,519 1,267,593 N/A 83,759 N/A
</TABLE>
For the year ended June 30, 2000, the Distributor has retained $1,608,367 as
sales charges from the proceeds of Class A Shares sold, $405,740 from the
proceeds of Class C Shares redeemed, and $11,385 from the proceeds of Class M
Shares sold.
90
<PAGE>
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Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
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,
2000 are shown in the accompanying Statements of Operations.
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:
<TABLE>
<CAPTION>
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
LargeCap Leaders 1.75% 2.50% 2.50% 2.25% 1.75% N/A
LargeCap Growth 1.60 2.25 2.25 N/A 1.25 N/A
MidCap Value 1.75 2.50 2.50 2.25 1.75 N/A
MidCap Growth 1.60 2.25 2.25 N/A 1.25 N/A
SmallCap Growth 1.95 2.60 2.60 N/A 1.50 N/A
Worldwide Growth 1.85 2.50 2.50 N/A 1.60 N/A
International Core
Growth 1.95 2.60 2.60 N/A 1.65 N/A
International
SmallCap Growth 1.95 2.60 2.60 N/A 1.65 N/A
Emerging Countries 2.25 2.90 2.90 N/A 1.90 N/A
Asia-Pacific Equity 2.00 2.75 N/A 2.50 N/A N/A
Government
Securities Income (1) (1) (1) (1) (1) (1)
Strategic Income 0.95 1.35 1.35 N/A 0.85 N/A
High Yield 1.10 1.85 1.85 1.60 1.10 N/A
High Yield II 1.10 1.75 1.75 N/A 1.00 1.40%
Money Market 1.50 2.25 2.25 N/A N/A N/A
Balanced 1.60 2.25 2.25 N/A 1.25 1.75
Convertible 1.60 2.25 2.25 N/A 1.25 N/A
</TABLE>
----------
(1) The Investment Manager has agreed to reimburse the Government Securities
Income Fund for all gross operating expenses and costs of the Fund,
excluding any interest, taxes, brokerage commissions, amortization of
organizational expenses, extraordinary expenses, and distribution fees in
excess of 0.25% which exceed 1.50% of the Fund's daily average net assets
on the first $40 million of net assets and 1.00% of average daily net
assets in excess of $40 million for any one fiscal year. The expense
limitations cannot be changed without shareholder approval.
NOTE 9 -- CREDIT FACILITY
The Funds have a $75 million credit facility available to fund temporary or
emergency borrowings which expires on August 31, 2000. Each Fund pays its pro
rata share of an annual commitment fee plus interest on its specific borrowings.
As of June 30, 2000 there was no balance outstanding under the credit facility.
91
<PAGE>
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Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
NOTE 10 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------ ----------------------------
Year Ended June 30, Year Ended June 30,
------------------------------ ----------------------------
2000 1999 2000 1999
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
MagnaCap Fund
(Number of Shares)
Shares sold 8,302,663 13,502,711 1,126,639 2,873,334
Shares issued as
reinvestments of dividends 2,042,086 1,828,625 670,172 516,048
Shares redeemed (11,985,501) (14,934,578) (2,847,837) (1,307,942)
------------- ------------- ------------ ------------
Net increase (decrease)
in shares outstanding (1,640,752) 396,758 (1,051,026) 2,081,440
============= ============= ============ ============
MagnaCap Fund ($)
Shares sold $ 134,588,976 $ 222,180,950 $ 18,234,831 $ 46,072,779
Shares issued as
reinvestments of dividends 33,390,241 28,388,968 10,716,050 7,888,183
Shares redeemed (193,866,999) (246,413,983) (44,525,122) (20,667,305)
------------- ------------- ------------ ------------
Net increase (decrease)
in shares outstanding $ (25,887,782) $ 4,155,935 $(15,574,241) $ 33,293,657
============= ============= ============ ============
Class C Shares Class M Shares Class Q Shares
----------------------------- ----------------------------- --------------
Year June 1, 1999 Year Ended June 30, Nov. 22, 1999
Ended to ----------------------------- to
June 30, 2000 June 30, 1999 2000 1999 June 30, 2000
------------- ------------- ----------- ----------- --------------
MagnaCap Fund
(Number of Shares)
Shares sold 355,043 34,608 71,735 210,689 627,893
Shares issued as
reinvestments of dividends 13,431 -- 94,820 95,725 --
Shares redeemed (166,071) -- (265,773) (238,673) (1,149)
----------- -------- ----------- ----------- -----------
Net increase (decrease)
in shares outstanding 202,403 34,608 (99,218) 67,741 626,744
=========== ======== =========== =========== ===========
MagnaCap Fund ($)
Shares sold $ 5,649,398 $588,611 $ 1,164,803 $ 3,356,295 $10,206,194
Shares issued as
reinvestments of dividends 214,760 -- 1,532,001 1,471,188 --
Shares redeemed (2,597,664) -- (4,228,665) (3,784,141) (18,412)
----------- -------- ----------- ----------- -----------
Net increase (decrease)
in shares outstanding $ 3,266,494 $588,611 $(1,531,861) $ 1,043,342 $10,187,782
=========== ======== =========== =========== ===========
Class A Shares Class B Shares
---------------------------- ------------------------------
Year Ended June 30, Year Ended June 30,
---------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ------------ ------------
LargeCap Leaders Fund
(Number of Shares)
Shares sold 301,942 251,465 559,630 735,637
Shares issued as reinvestment
of dividends 58,405 9,173 160,941 24,514
Shares redeemed (219,637) (287,552) (745,133) (408,748)
----------- ----------- ------------ ------------
Net increase (decrease) in
shares outstanding 140,710 (26,914) (24,562) 351,403
=========== =========== ============ ============
LargeCap Leaders Fund ($)
Shares sold $ 4,943,290 $ 3,946,541 $ 8,870,343 $ 11,541,367
Shares issued as reinvestment
of dividends 929,814 146,637 2,481,716 384,368
Shares redeemed (3,554,645) (4,313,891) (11,733,890) (6,043,904)
----------- ----------- ------------ ------------
Net increase (decrease) in
shares outstanding $ 2,318,459 $ (220,713) $ (381,831) $ 5,881,831
=========== =========== ============ ============
Class C Shares Class M Shares
----------------------------- ------------------------------
Year June 17, 1999 Year Ended June 30,
Ended to ------------------------------
June 30, 2000 June 30, 1999 2000 1999
------------- ------------- ------------ ------------
LargeCap Leaders Fund
(Number of Shares)
Shares sold 226,352 2 47,521 32,969
Shares issued as reinvestment
of dividends 664 -- 38,024 7,380
Shares redeemed (138,012) -- (115,601) (89,184)
----------- ----------- ------------ ------------
Net increase (decrease) in
shares outstanding 89,004 2 (30,056) (48,835)
=========== =========== ============ ============
LargeCap Leaders Fund ($)
Shares sold $ 3,583,768 $ 30 $ 764,132 $ 521,236
Shares issued as reinvestment
of dividends 10,256 -- 593,167 116,160
Shares redeemed (2,131,218) -- (1,833,459) (1,317,582)
----------- ----------- ------------ ------------
Net increase (decrease) in
shares outstanding $ 1,462,806 $ 30 $ (476,160) $ (680,186)
=========== =========== ============ ============
</TABLE>
92
<PAGE>
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Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Class Q Shares
--------------
Year
Ended
June 30, 2000
-------------
LargeCap Leaders Fund
(Number of Shares)
Shares sold 13,049
Shares issued as reinvestments of dividends --
Shares redeemed (515)
---------
Net increase in shares outstanding 12,534
=========
LargeCap Leaders Fund ($)
Shares sold $ 212,892
Shares issued as reinvestment of dividends --
Shares redeemed (8,154)
---------
Net increase in shares outstanding $ 204,738
=========
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------------ ------------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LargeCap Growth Fund
(Number of Shares)
Shares sold 4,427,459 601,704 387,443 6,775,370 1,006,149 722,166
Shares issued as reinvestments
of dividends 21,754 -- 9,412 38,999 -- 4,145
Shares redeemed (1,201,487) (28,795) (199,495) (796,940) (63,827) (129,658)
------------- ------------ ----------- ------------- ------------ ------------
Net increase in shares
outstanding 3,247,726 572,909 197,360 6,017,429 942,322 596,653
============= ============ =========== ============= ============ ============
LargeCap Growth Fund ($)
Shares sold $ 159,716,404 $ 16,107,475 $ 7,119,334 $ 236,388,229 $ 27,013,724 $ 13,914,112
Shares issued as reinvestments
of dividends 708,311 -- 159,721 1,276,968 -- 70,921
Shares redeemed (45,373,374) (769,089) (3,328,040) (30,088,529) (1,716,619) (2,523,553)
------------- ------------ ----------- ------------- ------------ ------------
Net increase in shares
outstanding $ 115,051,341 $ 15,338,386 $ 3,951,015 $ 207,576,668 $ 25,297,105 $ 11,461,480
============= ============ =========== ============= ============ ============
Class C Shares Class Q Shares
------------------------------------------------ ------------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ----------- ------------- ------------ ------------
LargeCap Growth Fund
(Number of Shares)
Shares sold 3,308,222 322,341 293,854 424,166 27,961 176,779
Shares issued as reinvestments
of dividends 13,490 -- 1,216 2,730 -- 1,139
Shares redeemed (388,728) (10,496) (35,900) (71,210) (9,901) (34,429)
------------- ------------ ----------- ------------- ------------ ------------
Net increase in shares
outstanding 2,932,984 311,845 259,170 355,686 18,060 143,489
============= ============ =========== ============= ============ ============
LargeCap Growth Fund ($)
Shares sold $ 120,907,907 $ 8,625,780 $ 5,792,910 $ 15,522,480 $ 753,086 $ 3,396,063
Shares issued as reinvestments
of dividends 443,449 -- 20,875 93,151 -- 19,518
Shares redeemed (15,356,494) (279,527) (642,955) (2,818,083) (263,465) (600,590)
------------- ------------ ----------- ------------- ------------ ------------
Net increase in shares
outstanding $ 105,994,862 $ 8,346,253 $ 5,170,830 $ 12,797,548 $ 489,621 $ 2,814,991
============= ============ =========== ============= ============ ============
</TABLE>
93
<PAGE>
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Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
---------------------------- ----------------------------- ----------------------------
Year Ended June 30, Year Ended June 30, Year June 2, 1999
---------------------------- ----------------------------- Ended to
2000 1999 2000 1999 June 30, 2000 June 30, 1999
----------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MidCap Value Fund
(Number of Shares)
Shares sold 162,042 289,831 196,849 418,549 197,031 3,437
Shares issued as reinvestment
of dividends 5,045 97,756 10,124 163,266 50 --
Shares redeemed (736,267) (834,562) (1,110,013) (992,708) (5,154) (336)
----------- ------------ ------------ ------------ ----------- --------
Net increase (decrease) in
shares outstanding (569,180) (446,975) 903,040 (410,893) 191,927 3,101
=========== ============ ============ ============ =========== ========
MidCap Value Fund ($)
Shares sold $ 2,287,701 $ 4,389,745 $ 2,617,803 $ 6,191,601 $ 2,726,555 $ 51,058
Shares issued as reinvestment
of dividends 69,464 1,381,287 135,051 2,251,448 671 --
Shares redeemed (9,944,036) (12,572,823) (14,482,052) (14,198,024) (67,227) (5,064)
----------- ------------ ------------ ------------ ----------- --------
Net increase (decrease) in
shares outstanding $(7,586,871) $ (6,801,791) $(11,729,198) $ (5,754,975) $ 2,659,999 $ 45,994
=========== ============ ============ ============ =========== ========
</TABLE>
Class M Shares Class Q
-------------------------- ----------
Year Ended June 30, Year Ended
-------------------------- June 30,
2000 1999 2000
----------- ----------- ----------
MidCap Value Fund
(Number of Shares)
Shares sold 65,235 162,221 9,749
Shares issued as reinvestment
of dividends 3,293 60,558 --
Shares redeemed (476,778) (336,945) --
----------- ----------- -------
Net increase (decrease) in
shares outstanding (408,250) (114,166) 9,749
=========== =========== =======
MidCap Value Fund ($)
Shares sold $ 881,691 $ 2,398,495 133,810
Shares issued as reinvestment
of dividends 44,230 838,728 --
Shares redeemed (6,344,036) (4,910,700) --
----------- ----------- -------
Net increase (decrease) in
shares outstanding $(5,418,115) $(1,673,477) 133,810
=========== =========== =======
94
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ----------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
MidCap Growth Fund
(Number of Shares)
Shares sold 9,111,415 170,704 5,215,189 1,509,894 124,529 549,516
Shares issued as reinvestments
of dividends 974,160 -- 130,197 643,222 -- 69,791
Shares redeemed (7,669,485) (440,581) (6,820,248) (591,401) (113,758) (842,979)
------------- ----------- ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 2,416,090 (269,877) (1,474,862) 1,561,715 10,771 (223,672)
============= =========== ============= ============ =========== ============
MidCap Growth Fund ($)
Shares sold $ 250,678,628 $ 3,480,826 $ 93,222,436 $ 49,598,444 $ 3,003,625 $ 11,154,074
Shares issued as reinvestments
of dividends 19,950,802 -- 2,271,935 15,501,828 -- 1,444,672
Shares redeemed (210,070,998) (9,018,100) (120,721,071) (18,149,395) (2,758,710) (16,826,911)
------------- ----------- ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 60,558,432 $(5,537,274) $ (25,226,700) $ 46,950,877 $ 244,915 $ (4,228,165)
============= =========== ============= ============ =========== ============
Class C Shares Class Q Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ----------- ------------- ------------ ----------- ------------
MidCap Growth Fund
(Number of Shares)
Shares sold 1,413,615 127,317 1,185,161 428,283 201,861 194,537
Shares issued as reinvestments
of dividends 2,159,370 -- 121,764 102,573 -- 37,715
Shares redeemed (1,287,410) (465,369) (3,371,242) (695,575) (52,773) (185,074)
------------- ----------- ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 2,285,575 (338,052) (2,064,317) (164,719) 149,088 47,178
============= =========== ============= ============ =========== ============
MidCap Growth Fund ($)
Shares sold $ 37,423,320 $ 2,416,875 $ 19,063,447 $ 16,105,660 $ 5,261,515 $ 4,134,744
Shares issued as reinvestments
of dividends 40,876,879 -- 1,981,095 2,657,668 -- 828,224
Shares redeemed (31,578,669) (8,876,675) (52,212,207) (21,963,880) (1,337,840) (3,718,156)
------------- ----------- ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 46,721,530 $(6,459,800) $ (31,167,665) $ (3,200,552) $ 3,923,675 $ 1,244,812
============= =========== ============= ============ =========== ============
</TABLE>
95
<PAGE>
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Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SmallCap Growth Fund
(Number of Shares)
Shares sold 15,288,354 384,655 44,256,415 1,419,656 62,154 1,030,266
Shares issued as reinvestments
of dividends 3,070,550 -- 919,060 1,314,209 -- 121,247
Shares redeemed (14,588,761) (652,027) (49,753,506) (566,759) (144,208) (1,464,484)
------------- ------------ ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 3,770,143 (267,372) (4,578,031) 2,167,106 (82,054) (312,971)
============= ============ ============= ============ =========== ============
SmallCap Growth Fund ($)
Shares sold $ 278,913,445 $ 6,777,887 $ 815,912,790 $ 34,348,864 $ 1,379,964 $ 19,580,720
Shares issued as reinvestments
of dividends 44,737,909 -- 14,800,215 23,529,097 -- 2,371,732
Shares redeemed (268,674,614) (11,423,224) (917,280,292) (13,214,538) (3,209,533) (28,084,966)
------------- ------------ ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 54,976,740 $ (4,645,337) $ (86,567,287) $ 44,663,423 $ 1,829,569 $ (6,132,514)
============= ============ ============= ============ =========== ============
Class C Shares Class Q Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------ ----------- ------------
SmallCap Growth Fund
(Number of Shares)
Shares sold 1,763,791 82,725 1,806,596 752,728 421,173 793,286
Shares issued as reinvestments
of dividends 4,523,712 -- 926,112 226,472 -- 18,226
Shares redeemed (1,707,156) (680,850) (6,061,729) (884,884) (392,013) (970,001)
------------- ------------ ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 4,580,347 (598,125) (3,329,021) 94,316 29,160 (158,489)
============= ============ ============= ============ =========== ============
SmallCap Growth Fund ($)
Shares sold $ 33,117,558 $ 1,433,335 $ 29,105,010 $ 17,630,422 $ 8,340,785 $ 12,725,287
Shares issued as reinvestments
of dividends 64,870,028 -- 14,800,873 3,668,843 -- 292,442
Shares redeemed (30,746,993) (11,755,815) (93,185,013) (18,817,763) (7,387,773) (15,962,787)
------------- ------------ ------------- ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 67,240,594 $(10,322,480) $ (49,279,130) 2,481,502 $ 953,012 $ (2,945,058)
============= ============ ============= ============ =========== ============
</TABLE>
96
<PAGE>
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Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------- -------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Bank and Thrift Fund
(Number of Shares)
Shares sold 1,975,881 6,842,658 1,559,910 5,775,191
Shares issued as
reinvestment of
dividends 1,461,633 387,793 1,522,102 277,033
Shares redeemed (7,193,492) (10,663,118) (8,173,159) (5,028,917)
------------- ------------- ------------- -------------
Net increase (decrease) in
shares outstanding (3,755,978) (3,432,667) (5,091,147) 1,023,307
============= ============= ============= =============
Bank and Thrift Fund ($)
Shares sold $ 35,003,161 $ 167,184,964 $ 28,449,395 $ 139,440,683
Shares issued as
reinvestment of
dividends 28,604,164 9,012,306 29,787,547 6,421,621
Shares redeemed (135,339,454) (257,239,846) (150,620,693) (117,566,243)
------------- ------------- ------------- -------------
Net increase (decrease) in
shares outstanding $ (71,732,129) $ (81,042,576) $ (92,383,751) $ 28,296,061
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------- --------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Growth Fund
(Number of Shares)
Shares sold 14,001,807 1,172,285 5,575,910 2,987,911 353,077 544,757
Shares issued as reinvestments
of dividends 422,437 86 96,384 192,099 -- 39,170
Shares redeemed (9,384,459) (660,100) (5,374,372) (336,704) (70,889) (319,228)
------------- ------------ ------------- ------------ ------------ ------------
Net increase in shares
outstanding 5,039,785 512,271 297,922 2,843,306 282,188 264,699
============= ============ ============= ============ ============ ============
Worldwide Growth Fund ($)
Shares sold $ 404,667,268 $ 26,425,907 $ 110,310,826 $ 95,993,252 $ 9,019,106 $ 11,616,885
Shares issued as reinvestments
of dividends 10,797,545 -- 1,739,418 5,534,613 -- 799,305
Shares redeemed (273,872,546) 14,957,153 (107,031,318) (10,888,095) (1,811,055) (6,778,733)
------------- ------------ ------------- ------------ ------------ ------------
Net increase in shares
outstanding $ 141,592,267 $ 11,468,754 $ 5,018,926 $ 90,639,770 $ 7,208,051 $ 5,637,457
============= ============ ============= ============ ============ ============
Class C Shares Class Q Shares
---------------------------------------------- --------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------ ------------ ------------
Worldwide Growth Fund
(Number of Shares)
Shares sold 3,546,660 316,937 1,258,419 1,816,105 430,631 350,299
Shares issued as reinvestments
of dividends 554,745 -- 117,737 85,463 -- 4,352
Shares redeemed (797,116) (195,915) (1,224,596) (873,920) (180,058) (89,828)
------------- ------------ ------------- ------------ ------------ ------------
Net increase in shares
outstanding 3,304,289 121,022 151,560 1,027,648 250,573 264,823
============= ============ ============= ============ ============ ============
Worldwide Growth Fund ($)
Shares sold $ 103,794,801 $ 7,199,228 $ 23,846,842 $ 60,334,275 $ 11,187,418 $ 7,773,616
Shares issued as reinvestments
of dividends 14,207,022 -- 2,145,255 2,513,469 -- 89,521
Shares redeemed (22,853,219) (4,443,951) (22,854,997) (30,258,824) (4,610,453) (1,884,358)
------------- ------------ ------------- ------------ ------------ ------------
Net increase in shares
outstanding $ 95,148,604 $ 2,755,277 $ 3,137,100 $ 32,588,920 $ 6,576,965 $ 5,978,779
============= ============ ============= ============ ============ ============
</TABLE>
97
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
International Core Growth
Fund (Number of Shares)
Shares sold 5,045,863 1,699,541 4,111,884 458,137 47,812 317,938
Shares issued as reinvestments
of dividends 33,304 -- 5,819 30,801 -- 2,484
Shares redeemed (4,770,319) (2,264,636) (3,641,067) (215,896) (33,706) (168,120)
------------- ------------ ------------ ------------ ----------- ------------
Net increase (decrease)
in shares outstanding 308,848 (565,095) 476,636 273,042 14,106 152,302
============= ============ ============ ============ =========== ============
International Core
Growth Fund ($)
Shares sold $ 121,096,575 $ 30,866,314 $ 72,899,494 $ 11,335,788 $ 888,899 $ 5,553,372
Shares issued as reinvestments
of dividends 740,357 -- 109,877 689,313 -- 47,437
Shares redeemed (114,696,068) (41,080,307) (65,603,216) (5,138,991) (610,199) (2,893,130)
------------- ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 7,140,864 $(10,213,993) $ 7,406,155 $ 6,886,110 $ 278,700 $ 2,707,679
============= ============ ============ ============ =========== ============
Class C Shares Class Q Shares
---------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------ ------------ ----------- ------------
International Core Growth
Fund (Number of Shares)
Shares sold 1,618,402 113,784 455,651 780,577 93,649 581,442
Shares issued as reinvestments
of dividends 33,214 -- 1,471 24,738 -- 1,463
Shares redeemed (1,158,306) (69,740) (82,349) (615,038) (228,977) (67,954)
------------- ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 493,310 44,044 374,773 190,277 (135,328) 514,951
============= ============ ============ ============ =========== ============
International Core
Growth Fund ($)
Shares sold $ 39,015,970 $ 2,117,597 $ 7,964,267 $ 20,639,997 $ 1,771,267 $ 10,297,873
Shares issued as reinvestments
of dividends 745,659 -- 28,148 572,187 -- 31,169
Shares redeemed (27,691,220) (1,298,517) (1,412,367) (16,620,923) (4,253,651) (1,185,061)
------------- ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 12,070,409 $ 819,080 $ 6,580,048 $ 4,591,261 $(2,482,384) $ 9,143,981
============= ============ ============ ============ =========== ============
</TABLE>
98
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------- ---------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
International SmallCap
Growth Fund
(Number of Shares)
Shares sold 18,367,774 1,367,921 4,953,991 2,668,131 98,528 574,326
Shares issued as reinvestments
of dividends 169,910 -- 41,096 85,395 -- 21,611
Shares redeemed (13,311,135) (997,179) (4,370,199) (465,407) (55,682) (472,298)
------------- ------------ ------------- ------------- ------------ ------------
Net increase in shares
outstanding 5,226,549 370,742 624,888 2,288,119 42,846 123,639
============= ============ ============= ============= ============ ============
International SmallCap
Growth Fund ($)
Shares sold $ 753,445,372 $ 30,182,958 $ 101,529,799 $ 110,600,703 $ 2,333,350 $ 12,177,504
Shares issued as reinvestments
of dividends 5,544,302 -- 811,876 2,953,812 -- 452,596
Shares redeemed (552,362,495) (22,024,759) (90,418,518) (20,315,971) (1,302,925) (9,959,007)
------------- ------------ ------------- ------------- ------------ ------------
Net increase in shares
outstanding $ 206,627,179 $ 8,158,199 $ 11,923,157 $ 93,238,544 $ 1,030,425 $ 2,671,093
============= ============ ============= ============= ============ ============
Class C Shares Class Q Shares
---------------------------------------------- ---------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------- ------------- ------------ ------------
International SmallCap
Growth Fund
(Number of Shares)
Shares sold 4,361,314 146,271 660,257 6,375,425 529,877 1,567,046
Shares issued as reinvestments
of dividends 80,888 -- 13,435 154,058 -- 12,918
Shares redeemed (1,600,661) (34,123) (464,252) (4,450,408) (269,090) (563,058)
------------- ------------ ------------- ------------- ------------ ------------
Net increase in shares
outstanding 2,841,541 112,148 209,440 2,079,075 260,787 1,016,906
============= ============ ============= ============= ============ ============
International SmallCap
Growth Fund ($)
Shares sold $ 174,228,168 $ 3,168,229 $ 12,933,840 $ 267,585,482 $ 12,505,725 $ 32,536,160
Shares issued as reinvestments
of dividends 2,568,991 -- 258,146 4,781,312 -- 249,737
Shares redeemed (63,584,070) (740,072) (9,055,952) (196,319,048) (6,328,290) (11,408,948)
------------- ------------ ------------- ------------- ------------ ------------
Net increase in shares
outstanding $ 113,213,089 $ 2,428,157 $ 4,136,034 $ 76,047,746 $ 6,177,435 $ 21,376,949
============= ============ ============= ============= ============ ============
</TABLE>
99
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------- --------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Countries Fund
(Number of Shares)
Shares sold 7,123,710 1,064,600 3,262,352 261,876 82,535 382,174
Shares issued as reinvestments
of dividends -- -- 17,479 -- -- 7,286
Shares redeemed (6,583,130) (1,382,928) (3,852,081) (320,122) (168,473) (951,609)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding 540,580 (318,328) (572,250) (58,246) (85,938) (562,149)
============= ============ ============ ============ ============ ============
Emerging Countries Fund ($)
Shares sold $ 142,495,750 $ 16,015,629 $ 45,426,994 $ 5,287,628 $ 1,322,669 $ 5,698,657
Shares issued as reinvestments
of dividends -- -- 277,913 -- -- 118,138
Shares redeemed (131,430,829) (20,693,691) (51,942,286) (6,237,718) (2,572,889) (12,756,398)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding $ 11,064,921 $ (4,678,062) $ (6,237,379) $ (950,090) $ (1,250,220) $ (6,939,603)
============= ============ ============ ============ ============ ============
Class C Shares Class Q Shares
--------------------------------------------- --------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------- ------------ ------------ ------------ ------------ ------------
Emerging Countries Fund
(Number of Shares)
Shares sold 395,139 116,572 521,678 4,383,749 1,208,239 4,616,946
Shares issued as reinvestments
of dividends -- -- 5,264 -- -- 36,438
Shares redeemed (363,300) (99,525) (1,239,995) (3,235,471) (459,541) (3,431,547)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding 31,839 17,047 (713,053) 1,148,278 748,698 1,221,837
============= ============ ============ ============ ============ ============
Emerging Countries Fund ($)
Shares sold $ 7,854,682 $ 1,744,612 $ 7,326,720 $ 94,747,678 $ 19,053,123 $ 65,385,070
Shares issued as reinvestments
of dividends -- -- 82,205 -- -- 593,577
Shares redeemed (6,755,539) (1,481,896) (16,381,157) (67,344,187) (7,234,180) (45,346,860)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding $ 1,099,143 $ 262,716 $ (8,972,232) $ 27,403,491 $(11,818,943) $ 20,631,787
============= ============ ============ ============ ============ ============
</TABLE>
100
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class M Shares
----------------------------- ---------------------------- ---------------------------
Year Ended June 30, Year Ended June 30, Year Ended June 30,
----------------------------- ---------------------------- ---------------------------
2000 1999 2000 1999 2000 1999
------------ ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Asia-Pacific Equity Fund
(Number of Shares)
Shares sold 9,625,972 25,333,718 2,243,981 2,652,841 2,025,542 692,204
Shares issued as reinvestment
of dividends -- -- -- -- -- --
Shares redeemed (10,000,540) (25,985,521) (2,335,887) (2,886,015) (2,226,145) (927,629)
------------ ------------- ------------ ------------ ------------ -----------
Net decrease in shares outstanding (374,568) (651,803) (91,906) (233,174) (200,603) (235,425)
============ ============= ============ ============ ============ ===========
Asia-Pacific Equity Fund ($)
Shares sold $ 71,934,635 $ 120,602,739 $ 16,295,675 $ 13,490,585 $ 15,526,895 $ 3,734,225
Shares issued as reinvestment of
dividends -- -- -- -- -- --
Shares redeemed (75,845,503) (124,586,962) (17,125,978) (14,427,377) (17,704,044) (4,867,780)
------------ ------------- ------------ ------------ ------------ -----------
Net decrease in shares outstanding $ (3,910,868) $ (3,984,223) $ (830,303) $ (936,792) $ (2,177,149) $(1,133,555)
============ ============= ============ ============ ============ ===========
Class A Shares Class B Shares
---------------------------- ----------------------------
Year Ended June 30, Year Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Government Securities Income
Fund (Number of Shares)
Shares sold 6,308,160 1,780,718 776,377 2,303,127
Shares issued in merger 2,562,644 -- 1,997,672 --
Shares issued as reinvestment
of dividends 64,916 63,214 33,839 26,259
Shares redeemed (6,095,948) (1,977,689) (983,135) (1,570,331)
------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding 2,839,772 (133,757) 1,824,753 759,055
============ ============ ============ ============
Government Securities
Income Fund ($)
Shares sold $ 74,777,810 $ 22,807,064 $ 9,254,431 $ 29,433,691
Shares issued in merger 30,325,611 -- 23,574,822 --
Shares issued as reinvestment
of dividends 773,501 802,923 401,442 332,080
Shares redeemed (72,308,346) (25,148,449) (11,700,469) (19,941,959)
------------ ------------ ------------ ------------
Net decrease in shares
outstanding $ 33,568,576 $ (1,538,462) $ 21,530,226 $ 9,823,812
============ ============ ============ ============
Class C Class M
--------------------------- ------------------------
Year Ended June 1, 1999 Year Ended June 30,
June 30, to ------------------------
2000 June 30, 1999 2000 1999
----------- ------------- --------- -----------
Government Securities Income
Fund (Number of Shares)
Shares sold 674,348 34,375 28,709 136,108
Shares issued in merger 135,166 -- -- --
Shares issued as reinvestment
of dividends 2,322 -- 1,916 2,551
Shares redeemed (641,939) (33,817) (48,662) (95,188)
----------- --------- --------- -----------
Net increase (decrease) in
shares outstanding 169,897 558 (18,037) 43,471
=========== ========= ========= ===========
Government Securities
Income Fund ($)
Shares sold $ 8,182,795 $ 421,428 $ 345,778 $ 1,751,439
Shares issued in merger 1,611,381 -- -- --
Shares issued as reinvestment
of dividends 27,745 -- 22,982 32,362
Shares redeemed (7,762,416) (414,258) (581,080) (1,210,771)
----------- --------- --------- -----------
Net decrease in shares
outstanding $ 2,059,505 $ 7,170 $(212,320) $ 573,030
=========== ========= ========= ===========
</TABLE>
Class T Shares Class Q Shares
-------------- --------------
Year Ended Year Ended
June 30, June 30,
2000 2000
-------------- --------------
Government Securities Income Fund
(Number of Shares)
Shares sold 116 1,851
Shares issued in merger 2,165,118 --
Shares issued as reinvestment of dividends 15,202 4
Shares redeemed (255,997) (36)
------------ --------
Net increase in shares outstanding 1,924,439 1,819
============ ========
Government Securities
Income Fund ($)
Shares sold $ 1,046 $ 21,936
Shares issued in merger 25,550,874 --
Shares issued as reinvestment of dividends 178,704 50
Shares redeemed (3,016,129) (418)
------------ --------
Net increase in shares outstanding $ 22,714,495 $ 21,568
============ ========
101
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------ -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999(1) 2000 1999 1999(1)
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Strategic Income Fund
(Number of Shares)
Shares sold 604,669 1,744,498 646,153 235,490 65,960 595,169
Shares issued in merger -- -- 175,454 -- -- 259,694
Shares issued as reinvestment
of dividends 11,483 1,712 5,664 16,764 3,737 12,860
Shares redeemed (607,655) (1,797,320) (381,014) (333,238) (137,015) (341,358)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in
shares outstanding 8,497 (51,110) 446,257 (80,984) (67,318) 526,365
============ ============ =========== =========== =========== ===========
Strategic Income Fund ($)
Shares sold $ 7,329,922 $ 22,358,564 $ 8,383,952 $ 2,807,321 $ 827,887 $ 7,617,290
Shares issued in merger -- -- 2,260,055 -- -- 3,265,737
Shares issued as reinvestment
of dividends 139,358 21,991 73,691 199,456 47,004 163,532
Shares redeemed (7,363,256) (23,052,137) (4,961,848) (3,971,439) (1,710,716) (4,353,363)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in
shares outstanding $ 106,024 $ (671,582) $ 5,755,850 $ (964,662) $ (835,825) $ 6,693,196
============ ============ =========== =========== =========== ===========
Class C Shares Class Q Shares
------------------------------------------ -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999(1) 2000 1999 1999(1)
----------- ------------ ----------- ----------- ----------- -----------
Strategic Income Fund
(Number of Shares)
Shares sold 594,925 72,888 533,457 5,652 816 1,004
Shares issued in merger -- -- 342,089 -- -- 23,390
Shares issued as reinvestment
of dividends 11,584 2,829 7,510 1,233 168 1,220
Shares redeemed (905,931) (77,064) (262,520) (1,293) (12,262) (36)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in
shares outstanding (299,422) (1,347) 620,536 5,592 (11,278) 25,578
============ ============ =========== =========== =========== ===========
Strategic Income Fund ($)
Shares sold $ 7,361,851 $ 952,054 $ 7,079,809 $ 64,150 $ 10,030 $ 12,500
Shares issued in merger -- -- 4,459,907 -- -- 286,028
Shares issued as reinvestment
of dividends 143,424 37,021 99,886 14,212 2,037 15,045
Shares redeemed (11,234,101) (1,006,028) (3,482,921) (14,990) (151,748) (399)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in
shares outstanding $ (3,728,826) $ (16,953) $ 8,156,681 $ 63,372 $ (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,
------------------------------ -----------------------------
2000 1999 2000 1999
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
High Yield Fund
(Number of Shares)
Shares sold 18,403,831 23,077,399 10,007,643 28,533,861
Shares issued as reinvestment
of dividends 992,628 1,012,788 1,441,815 1,285,173
Shares redeemed (24,529,807) (16,689,544) (15,933,643) (7,951,333)
------------- ------------- ------------ -------------
Net increase (decrease) in
shares outstanding (5,133,348) 7,400,643 (4,484,185) 21,867,701
============= ============= ============ =============
High Yield Fund ($)
Shares sold $ 97,912,317 $ 146,786,361 $ 55,282,605 $ 177,876,596
Shares issued as reinvestment
of dividends 5,460,638 6,265,752 7,894,426 7,911,056
Shares redeemed (131,398,105) (106,793,532) (86,943,865) (48,182,705)
------------- ------------- ------------ -------------
Net increase (decrease) in
shares outstanding $ (28,025,160) $ 46,258,581 $(23,766,834) $ 137,604,947
============= ============= ============ =============
Class C Shares Class M Shares
----------------------------- -----------------------------
Year Ended June 1, 1999 Year Ended June 30,
June 30, to -----------------------------
2000 June 30, 1999 2000 1999
------------- -------------- ------------- ------------
High Yield Fund
(Number of Shares)
Shares sold 2,837,111 93,124 127,747 2,189,902
Shares issued as reinvestment
of dividends 28,522 -- 188,400 196,691
Shares redeemed (1,778,397) -- (1,858,983) (1,173,862)
------------ -------- ------------ ------------
Net increase (decrease) in
shares outstanding 1,087,236 93,124 (1,542,836) 1,212,731
============ ======== ============ ============
High Yield Fund ($)
Shares sold $ 15,174,843 $549,513 $ 705,631 $ 13,575,288
Shares issued as reinvestment
of dividends 153,864 58 1,036,966 1,217,509
Shares redeemed (9,243,746) -- (10,086,399) (7,119,713)
------------ -------- ------------ ------------
Net increase (decrease) in
shares outstanding $ 6,084,961 $549,571 $ (8,343,802) $ 7,673,084
============ ======== ============ ============
</TABLE>
102
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Class Q Shares
----------------------------
Year Ended June 17, 1999
June 30, to
2000 June 30, 1999
---------- -------------
High Yield Fund
(Number of Shares)
Shares sold -- 30
Shares issued as reinvestment of dividends -- --
Shares redeemed -- --
----
Net increase in shares outstanding -- 30
=== ====
High Yield Fund ($)
Shares sold -- $ 5
Shares issued as reinvestment of dividends 2 --
Shares redeemed -- --
--- ----
Net increase in shares outstanding 2 $ 5
=== ====
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
High Yield Fund II
(Number of Shares)
Shares sold 2,024,176 126,155 2,218,475 696,890 191,304 3,516,788
Shares issued in merger 1,920,197 -- -- 6,815,662 -- --
Shares issued as reinvestments
of dividends 85,848 13,470 68,528 173,796 20,903 90,997
Shares redeemed (2,296,078) (175,029) (1,169,064) (1,757,346) (279,006) (622,273)
------------ ----------- ------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding 1,734,143 (35,404) 1,117,939 5,929,002 (66,799) 2,985,512
============ =========== ============ ============ =========== ============
High Yield Fund II ($)
Shares sold $ 22,289,353 $ 1,487,541 $ 27,084,111 $ 7,778,149 $ 2,244,780 $ 42,704,286
Shares issued in merger 21,258,924 -- -- 75,437,662 -- --
Shares issued as reinvestments
of dividends 948,687 158,555 807,769 1,923,761 246,357 1,044,170
Shares redeemed (25,459,352) (2,045,836) (14,038,415) (19,459,549) (3,269,300) (7,281,798)
------------ ----------- ------------ ------------ ----------- ------------
Net increase (decrease) in
shares outstanding $ 19,037,612 $ (399,740) $ 13,853,465 $ 65,680,023 $ (778,163) $ 36,466,658
============ =========== ============ ============ =========== ============
</TABLE>
103
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Class Q Shares
-------------------------------------------- ------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
High Yield Fund II
(Number of Shares)
Shares sold 835,807 91,597 1,848,332 1,176,601 21,272 668,988
Shares issued in merger 876,081 -- -- -- -- --
Shares issued as reinvestments
of dividends 60,087 11,731 67,635 38,331 7,915 23,106
Shares redeemed (1,223,652) (310,405) (468,704) (857,666) (307,466) (179,780)
------------ ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in
shares outstanding 548,323 (207,077) 1,447,263 357,266 (278,279) 512,314
============ =========== ============ ============ =========== ===========
High Yield Fund II ($)
Shares sold $ 9,284,852 $ 1,078,810 $ 22,778,726 $ 12,941,570 $ 249,643 $ 7,770,126
Shares issued in merger 9,698,640 -- -- -- -- --
Shares issued as reinvestments
of dividends 667,948 138,399 775,897 431,200 93,356 271,659
Shares redeemed (13,540,976) (3,633,914) (5,466,380) (9,622,674) (3,614,065) (2,101,039)
------------ ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in
shares outstanding $ 6,110,464 $(2,416,705) $ 18,088,243 $ 3,750,096 $(3,271,066) $ 5,940,746
============ =========== ============ ============ =========== ===========
</TABLE>
Class T Shares
--------------
Period Ended
June 30,
2000
--------------
High Yield Fund II
(Number of Shares)
Shares sold 42,193
Shares issued in merger 3,237,823
Shares issued as reinvestments of dividends 45,794
Shares redeemed (426,380)
---------
Net increase in shares outstanding 2,899,430
=========
High Yield Fund II ($)
Shares sold $ 467,407
Shares issued in merger 35,837,128
Shares issued as reinvestment of dividends 495,594
Shares redeemed (4,680,068)
------------
Net increase in shares outstanding $ 32,120,061
============
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
---------------- --------------- ---------------
Period Ended Period Ended
June 30, June 30,
2000(1) 2000(2)
---------------- ---------------------------------
<S> <C> <C> <C>
Money Market Fund (Number of Shares)
Shares sold 1,169,128,592 61,428,458 63,807,062
Shares issued as reinvestment of dividends 401,613 197,336 62,389
Shares redeemed (1,094,099,819) (49,590,590) (58,438,711)
--------------- ------------ ------------
Net increase in shares outstanding 75,430,386 12,035,204 5,430,740
=============== ============ ============
Money Market Fund ($)
Shares sold $ 1,169,128,592 $ 61,428,458 $ 63,807,062
Shares issued as reinvestment of dividends 401,613 197,336 62,389
Shares redeemed (1,094,099,819) (49,590,590) (58,438,711)
--------------- ------------ ------------
Net increase in shares outstanding $ 75,430,386 $ 12,035,204 $ 5,430,740
=============== ============ ============
</TABLE>
----------
(1) Commenced operations on November 24, 1999.
(2) Commenced operations on July 12, 1999.
104
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------ ------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund
(Number of Shares)
Shares sold 462,023 69,501 371,709 236,780 62,785 128,292
Shares issued in merger 3,669,160 -- -- 2,263,054 -- --
Shares issued as reinvestments of
dividends 120,353 1,015 68,457 87,982 554 29,941
Shares redeemed (523,820) (70,425) (281,697) (386,298) (12,468) (73,515)
------------ ----------- ----------- ------------ ----------- -----------
Net increase in shares outstanding 3,727,716 91 158,469 2,201,518 50,871 84,718
============ =========== =========== ============ =========== ===========
Balanced Fund ($)
Shares sold $ 7,288,215 $ 1,354,890 $ 7,068,981 $ 4,171,242 $ 1,288,434 $ 2,447,844
Shares issued in merger 57,648,201 -- -- 38,096,820 -- --
Shares issued as reinvestments of
dividends 1,895,528 19,370 1,216,578 1,483,448 11,321 566,865
Shares redeemed (8,162,726) (1,361,704) (5,289,069) (6,483,178) (256,849) (1,364,447)
------------ ----------- ----------- ------------ ----------- -----------
Net increase in shares outstanding $ 58,669,218 $ 12,556 $ 2,996,490 $ 37,268,332 $ 1,042,906 $ 1,650,262
============ =========== =========== ============ =========== ===========
Class C Shares Class Q Shares
------------------------------------------ ------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ----------- ------------ ----------- -----------
Balanced Fund
(Number of Shares)
Shares sold 168,630 17,557 184,748 4,284 1,351 1,105
Shares issued in merger 813,022 -- -- -- -- --
Shares issued as reinvestments of
dividends 235,394 519 210,474 2,693 42 1,173
Shares redeemed (579,424) (47,391) (259,419) (1,565) (781) (1,882)
------------ ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in shares
outstanding 637,622 (29,315) 135,803 5,412 612 396
============ =========== =========== ============ =========== ===========
Balanced Fund ($)
Shares sold $ 2,578,680 $ 324,318 $ 3,201,753 $ 66,184 $ 25,940 $ 19,907
Shares issued in merger 12,280,463 -- -- -- -- --
Shares issued as reinvestments of
dividends 3,561,673 9,545 3,603,550 42,058 798 20,611
Shares redeemed (8,869,902) (878,533) (4,681,019) (24,419) (14,926) (34,726)
------------ ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in shares
outstanding $ 9,550,914 $ (544,670) $ 2,124,284 $ 83,823 $ 11,812 $ 5,792
============ =========== =========== ============ =========== ===========
</TABLE>
105
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Class T Shares
--------------
Period Ended
June 30,
2000
--------------
Balanced Fund (Number of Shares)
Shares sold 1,889
Shares issued in merger 737,757
Shares issued as reinvestments of dividends --
Shares redeemed (59,256)
-----------
Net increase in shares outstanding 680,390
===========
Balanced Fund ($)
Shares sold $ 11,145
Shares issued in merger 12,419,589
Shares issued as reinvestment of dividends 7
Shares redeemed (946,072)
-----------
Net increase in shares outstanding $11,484,669
===========
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Convertible Fund
(Number of Shares)
Shares sold 2,765,285 240,854 1,235,038 2,212,800 377,405 1,107,458
Shares issued as reinvestments
of dividends 432,032 8,766 84,764 446,940 4,334 36,617
Shares redeemed (1,602,580) (106,071) (795,095) (721,161) (155,682) (468,699)
------------ ----------- ------------ ------------ ----------- ------------
Net increase in shares outstanding 1,594,737 143,549 524,707 1,938,579 226,057 675,376
============ =========== ============ ============ =========== ============
Convertible Fund ($)
Shares sold $ 74,411,486 $ 5,446,752 $ 22,826,352 $ 62,613,451 $ 9,316,686 $ 22,988,795
Shares issued as reinvestments
of dividends 10,028,609 201,806 1,677,136 11,247,841 108,485 774,835
Shares redeemed (41,141,454) (2,398,688) (14,627,285) (20,328,894) (3,833,777) (9,912,927)
------------ ----------- ------------ ------------ ----------- ------------
Net increase in shares outstanding $ 43,298,641 $ 3,249,870 $ 9,876,203 $ 53,532,398 $ 5,591,394 $ 13,850,703
============ =========== ============ ============ =========== ============
Class C Shares Class Q Shares
------------------------------------------- -------------------------------------------
Year 3 Months Year Year 3 Months Year
Ended Ended Ended Ended Ended Ended
June 30, June 30, March 31, June 30, June 30, March 31,
2000 1999 1999 2000 1999 1999
------------ ----------- ------------ ------------ ----------- ------------
Convertible Fund
(Number of Shares)
Shares sold 1,543,879 204,264 84,820 1,566,620 393,267 423,276
Shares issued as reinvestments
of dividends 594,205 3,236 110,911 144,983 3,568 16,065
Shares redeemed (827,109) (276,138) (881,082) (398,796) (29,839) (410,737)
------------ ----------- ------------ ------------ ----------- ------------
Net increase (decrease) in shares
outstanding 1,310,975 (68,638) 114,649 1,312,807 366,996 28,604
============ =========== ============ ============ =========== ============
Convertible Fund ($)
Shares sold $ 41,908,144 $ 4,732,365 $ 17,299,957 $ 41,114,380 $ 8,618,236 $ 8,043,910
Shares issued as reinvestments
of dividends 14,012,886 75,700 2,256,244 3,277,417 79,431 304,178
Shares redeemed (22,139,549) (6,363,756) (17,113,435) (10,241,903) (655,742) (7,680,884)
------------ ----------- ------------ ------------ ----------- ------------
Net increase (decrease) in shares
outstanding $ 33,781,481 $(1,555,691) $ 2,442,766 $ 34,149,894 $ 8,041,925 $ 667,204
============ =========== ============ ============ =========== ============
</TABLE>
106
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
NOTE 11 -- CUSTODIAL AGREEMENT
State Street Kansas City ("SSKC") (formerly Investors Fiduciary Trust Company)
and State Street Boston ("SSB") serve as the Funds' custodian and recordkeeper.
Custody fees paid to SSKC or SSB are reduced by an earnings credit based on the
cash balances held by SSKC or SSB for each of the Funds.
NOTE 12 -- SUBSEQUENT EVENTS
On May 1, 2000, ReliaStar Financial Corp. (NYSE:RLR), the indirect parent
company of Pilgrim Investments, Inc., Adviser to the Funds, and Pilgrim
Securities, Inc., Distributor to the Funds, entered into an agreement under
which it will be acquired by ING Groep N.V. (NYSE:ING). ING Groep N.V. is a
global financial institution active in the field of insurance, banking, and
asset management in more than 60 countries, with almost 90,000 employees.
Completion of the acquisition is contingent upon, among other things, approval
by the Directors/Trustees of the Pilgrim Funds and certain shareholder and
regulatory approvals. The closing of the acquisition is expected to occur during
the third quarter of 2000.
On July 31, 2000 Pilgrim Investments, Inc. notified Nicholas-Applegate Capital
Management ("NACM") of its intention to terminate NACM as sub-advisor to the
Convertible Fund, LargeCap Growth Fund, Worldwide Growth Fund, International
Core Growth Fund and Emerging Countries Fund effective September 30, 2000.
Beginning October 1, 2000, Pilgrim Investments, Inc. will advise the Funds
directly.
Subsequent to June 30, 2000, the following funds declared dividends from net
investment income of:
Per Share
Amount Payable Date Record Date
------ ------------ -----------
MagnaCap Fund
Class A $ 0.0415 August 3, 2000 July 31, 2000
Class B 0.0041 August 3, 2000 July 31, 2000
Class C 0.0041 August 3, 2000 July 31, 2000
Class M 0.0055 August 3, 2000 July 31, 2000
Class Q 0.0434 August 3, 2000 July 31, 2000
Government Securities
Income Fund
Class A $ 0.0615 July 6, 2000 June 30, 2000
Class B 0.0542 July 6, 2000 June 30, 2000
Class C 0.0542 July 6, 2000 June 30, 2000
Class M 0.0564 July 6, 2000 June 30, 2000
Class Q 0.0615 July 6, 2000 June 30, 2000
Class T 0.0564 July 6, 2000 June 30, 2000
Class A 0.0600 August 3, 2000 July 31, 2000
Class B 0.0540 August 3, 2000 July 31, 2000
Class C 0.0540 August 3, 2000 July 31, 2000
Class M 0.0560 August 3, 2000 July 31, 2000
Class Q 0.0610 August 3, 2000 July 31, 2000
Class T 0.0570 August 3, 2000 July 31, 2000
Strategic Income Fund
Class A 0.0717 July 6, 2000 June 30, 2000
Class B 0.0679 July 6, 2000 June 30, 2000
Class C 0.0676 July 6, 2000 June 30, 2000
Class Q 0.0729 July 6, 2000 June 30, 2000
Class A 0.0715 August 3, 2000 July 31, 2000
Class B 0.0693 August 3, 2000 July 31, 2000
Class C 0.0687 August 3, 2000 July 31, 2000
Class Q 0.0731 August 3, 2000 July 31, 2000
High Yield Fund
Class A 0.0500 July 6, 2000 June 30, 2000
Class B 0.0470 July 6, 2000 June 30, 2000
Class C 0.0470 July 6, 2000 June 30, 2000
Class M 0.0480 July 6, 2000 June 30, 2000
Class Q 0.0510 July 6, 2000 June 30, 2000
Class A 0.0500 August 3, 2000 July 31, 2000
Class B 0.0470 August 3, 2000 July 31, 2000
Class C 0.0470 August 3, 2000 July 31, 2000
Class M 0.0480 August 3, 2000 July 31, 2000
Class Q 0.0510 August 3, 2000 July 31, 2000
High Yield Fund II (*)
Class A 0.1020 July 3, 2000 Daily
Class B 0.0960 July 3, 2000 Daily
Class C 0.0960 July 3, 2000 Daily
Class Q 0.1030 July 3, 2000 Daily
Class T 0.0990 July 3, 2000 Daily
Class A 0.1050 August 1, 2000 Daily
Class B 0.0990 August 1, 2000 Daily
Class C 0.0990 August 1, 2000 Daily
Class Q 0.1060 August 1, 2000 Daily
Class T 0.1020 August 1, 2000 Daily
107
<PAGE>
-------
Pilgrim
Funds
-------
NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Per Share
Amount Payable Date Record Date
------ ------------ -----------
Money Market Fund (*)
Class A $ 0.0043 July 3, 2000 Daily
Class B 0.0037 July 3, 2000 Daily
Class C 0.0037 July 3, 2000 Daily
Class A 0.0042 August 1, 2000 Daily
Class B 0.0036 August 1, 2000 Daily
Class C 0.0036 August 1, 2000 Daily
Balanced Fund
Class A 0.1279 July 6, 2000 June 30, 2000
Class B 0.0932 July 6, 2000 June 30, 2000
Class C 0.0808 July 6, 2000 June 30, 2000
Class Q 0.1239 July 6, 2000 June 30, 2000
Class T 0.1105 July 6, 2000 June 30, 2000
Convertible Fund
Class A $ 0.1266 July 6, 2000 June 30, 2000
Class B 0.0788 July 6, 2000 June 30, 2000
Class C 0.0822 July 6, 2000 June 30, 2000
Class Q 0.1335 July 6, 2000 June 30, 2000
----------
(*) Per Share Amount Indicates Monthly Cumulative Income.
108
<PAGE>
Pilgrim
MagnaCap
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 97.44%
Banks: 5.82%
50,000 Bank of America Corp. $2,150,000
35,000 Bank of New York Co., Inc. 1,627,500
90,000 Chase Manhattan Corp. 4,145,625
99,200 Comerica, Inc. 4,451,600
40,000 Fifth Third Bancorp 2,530,000
100,000 Fleet Boston Financial Corp. 3,400,000
125,000 UnionBanCal Corp. 2,320,312
95,000 Wells Fargo & Co. 3,681,250
----------
24,306,287
----------
Beverages: 3.81%
100,000 Anheuser-Busch Companies, Inc. 7,468,750
190,000 PepsiCo, Inc. 8,443,125
----------
15,911,875
----------
Chemicals: 2.21%
70,030 Du Pont (E.I.) de
Nemours & Co. 3,063,813
165,100 Praxair, Inc. 6,180,931
----------
9,244,744
----------
Commercial Services: 1.29%
205,000 Equifax, Inc. 5,381,250
----------
Computers: 7.49%
100,000 @ Cisco Systems, Inc. 6,356,250
180,000 Compaq Computer Corp. 4,601,250
97,000 @ Computer Sciences Corp. 7,244,688
49,500 Hewlett-Packard Co. 6,181,312
76,000 @ Sun Microsystems, Inc. 6,911,250
----------
31,294,750
----------
Diversified Financial Services: 4.54%
150,000 Alliance Capital Management Holdings 7,115,625
97,500 Citigroup, Inc. 5,874,375
60,000 Fannie Mae 3,131,250
70,000 Freddie Mac 2,835,000
----------
18,956,250
----------
Electric: 2.46%
120,000 Duke Energy Co. 6,765,000
150,000 Southern Co. 3,496,875
----------
10,261,875
----------
Electronics: 2.90%
18,879 @ Agilent Technologies, Inc. $1,392,326
105,000 Parker Hannifin Corp. 3,596,250
170,000 @ Solectron Corp. 7,118,750
----------
12,107,326
----------
Food: 2.20%
100,000 Heinz (H.J.) Co 4,375,000
250,000 Sara Lee Corp. 4,828,125
----------
9,203,125
----------
Healthcare-Products: 4.99%
137,000 Baxter Int'l, Inc. 9,632,812
27,400 @ Edwards Lifesciences Corp. 506,900
105,000 Johnson & Johnson 10,696,875
----------
20,836,587
----------
Household Products/Wares: 1.58%
98,500 Avery-Dennison Corp. 6,611,813
----------
Insurance: 6.88%
250,000 Aflac, Inc. 11,484,375
65,000 American General Corp. 3,965,000
69,687 American Int'l Group 8,188,223
48,800 Marsh & McLennan Cos. 5,096,550
----------
28,734,148
----------
Leisure Time: 0.72%
155,000 Carnival Corp. 3,022,500
----------
Machinery-Diversified: 1.16%
120,000 Dover Corp. 4,867,500
----------
Media: 2.33%
70,000 New York Times Co. 2,765,000
180,000 Walt Disney Co. 6,986,250
----------
9,751,250
----------
Mining: 0.48%
70,000 Alcoa, Inc. 2,030,000
----------
Miscellaneous Manufacturing: 5.48%
184,200 General Electric Co. 9,762,600
153,750 Honeywell Int'l, Inc. 5,179,453
167,500 @@ Tyco Int'l, Ltd. 7,935,313
----------
22,877,366
----------
Oil & Gas Producers: 4.91%
94,000 Chevron Corp. $7,972,375
191,413 Conoco, Inc. 4,701,582
101,933 @@ Total Fina Elf SA ADR 7,829,728
----------
20,503,685
----------
Oil & Gas Services: 2.65%
69,700 Halliburton Co. 3,288,969
104,000 Schlumberger Ltd. 7,761,000
----------
11,049,969
----------
Pharmaceuticals: 4.07%
132,000 Abbott Laboratories 5,882,250
72,600 Merck & Co., Inc. 5,562,975
110,000 Schering-Plough Corp. 5,555,000
----------
17,000,225
----------
Retail: 8.91%
100,000 @ Best Buy Co., Inc. 6,325,000
65,500 Home Depot, Inc. 3,270,906
63,000 Lowe's Cos. 2,586,938
300,000 McDonald's Corp. 9,881,250
52,000 Target Corp. 3,016,000
190,000 TJX Companies, Inc. 3,562,500
145,000 @ Tricon Global Restaurants, Inc. 4,096,250
77,500 Wal-Mart Stores, Inc. 4,465,937
----------
37,204,781
----------
Savings & Loans: 2.84%
242,865 Charter One Financial, Inc. 5,585,895
69,200 Golden West Financial Corp. 2,824,225
120,000 Washington Mutual, Inc. 3,465,000
----------
11,875,120
----------
Semiconductors: 2.77%
30,000 @ Altera Corp. 3,058,125
63,550 Intel Corp. 8,495,841
----------
11,553,966
----------
Software: 2.57%
166,000 Automatic Data
Processing 8,891,375
50,000 @ BMC Software, Inc. 1,824,219
----------
10,715,594
----------
See Accompanying Notes to Financial Statements
109
<PAGE>
--------
Pilgrim
MagnaCap
Fund
--------
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
Telecommunications: 11.17%
65,000 Alltel Corp. $ 4,025,937
130,000 AT&T Corp. 4,111,250
90,000 Bell Atlantic Corp. 4,573,125
30,000 GTE Corp. 1,867,500
160,000 @@ Nokia OYJ ADR 7,990,000
145,500 SBC Communications, Inc. 6,292,875
142,500 @ Tellabs, Inc. 9,752,344
175,000 @ Worldcom, Inc. 8,028,125
-----------
46,641,156
-----------
Tobacco: 1.21%
190,000 Philip Morris Companies, Inc. 5,046,875
-----------
Total Long-Term Investments (Cost $306,619,953) 406,990,017
-----------
SHORT-TERM INVESTMENTS: 3.23%
Commercial Paper: 3.23%
$13,471,000 General Electric, 6.800%, due 07/03/00 $ 13,465,911
-------------
Total Short-Term Investments
(Cost $13,465,911) 13,465,911
-------------
Total Investments in Securities
(Cost $320,085,864)* 100.67% $ 420,455,928
Other Assets and Liabilities-Net -0.67% (2,787,944)
------ -------------
Net Assets 100.00% $ 417,667,984
====== =============
----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 122,768,881
Gross Unrealized Depreciation (22,398,817)
-------------
Net Unrealized Appreciation $ 100,370,064
=============
See Accompanying Notes to Financial Statements
110
<PAGE>
Pilgrim
LargeCap
Leaders
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 97.15%
Auto Manufacturers: 1.20%
10,600 Ford Motor Co. $ 455,800
----------
Auto Parts & Equipment: 0.04%
1,388 @ Visteon Corp. 16,828
----------
Banks: 1.58%
12,950 Chase Manhattan Corp. 596,509
----------
Beverages: 4.78%
7,300 Anheuser-Busch Cos., Inc. 545,219
10,300 Coca-Cola Co. 591,606
15,100 PepsiCo, Inc. 671,006
----------
1,807,831
----------
Chemicals: 1.16%
9,994 Du Pont (E.I.) de Nemours & Co. 437,238
----------
Computers: 8.86%
8,900 @ Cisco Systems, Inc. 565,706
22,400 Compaq Computer Corp. 572,600
12,100 @ Dell Computer Corp. 596,681
4,000 Hewlett Packard Co. 499,500
4,800 International Business Machines 525,900
6,500 @ Sun Microsystems, Inc. 591,094
----------
3,351,481
----------
Cosmetics/Pesonal Care: 1.66%
10,500 Colgate-Palmolive Co. 628,688
----------
Diversified Financial Services: 7.45%
11,700 American Express Co. 609,863
8,150 Citigroup, Inc. 491,038
9,000 Fannie Mae 469,688
10,900 Freddie Mac 441,450
7,000 Merrill Lynch & Co., Inc. 804,425
----------
2,816,464
----------
Electric: 2.85%
10,500 Duke Energy Co. 591,938
20,900 Southern Co. 487,231
----------
1,079,169
----------
Electronics: 1.94%
1,526 @ Agilent Technologies, Inc. 112,493
14,800 @ Solectron Corp. 619,750
----------
732,243
----------
Food: 1.71%
14,300 @ Safeway, Inc. 645,288
----------
Forest Products & Paper: 1.19%
15,100 Int'l Paper Co. 450,169
----------
Healthcare-Products: 1.70%
6,300 Johnson & Johnson 641,813
----------
Home Furnishings: 1.22%
4,900 @@ Sony Corp. ADR 462,131
----------
Insurance: 4.62%
5,025 American Int'l Group 590,437
16,800 AXA Financial, Inc. 571,200
5,600 Marsh & McLennan Cos. 584,850
----------
1,746,487
----------
Internet: 1.24%
8,900 @ America Online, Inc. 469,475
----------
Leisure Time: 1.20%
23,200 Carnival Corp. 452,400
----------
Machinery-Diversified: 1.32%
13,500 Deere & Co. 499,500
----------
Media: 3.88%
12,100 @ Comcast Corp. 490,050
7,700 Gannett Co., Inc. 460,556
6,800 Time Warner, Inc. 516,800
----------
1,467,406
----------
Mining: 1.20%
15,600 Alcoa, Inc. 452,400
----------
Miscellaneous Manufacturing: 3.44%
12,300 General Electric Co. 651,900
13,700 @@ Tyco Int'l Ltd. 649,038
----------
1,300,938
----------
Oil & Gas Producers: 7.05%
11,000 Anadarko Petroleum Corp. 542,437
13,000 Burlington Resources Inc. 497,250
6,900 Chevron Corp. 585,206
6,600 Exxon Mobil Corp. 518,100
8,500 @@ Royal Dutch Petroleum Co. ADR 523,281
----------
2,666,274
----------
Oil & Gas Services: 1.58%
8,000 Schlumberger Ltd. 597,000
----------
Pharmaceuticals: 6.49%
14,900 Abbott Laboratories 663,981
8,100 Merck & Co., Inc. 620,663
13,600 @@ Novartis AG ADR 544,000
13,000 Pfizer, Inc. 624,000
----------
2,452,644
----------
Pipelines: 1.52%
8,900 Enron Corp. 574,050
----------
Retail: 9.97%
8,500 @ Best Buy Co., Inc. 537,625
4,200 Gap, Inc. 131,250
9,500 Home Depot, Inc. 474,406
14,400 McDonald's Corp. 474,300
17,100 Sears, Roebuck And Co. 557,887
8,300 Target Corp. 481,400
19,700 Walgreen Co. 634,094
8,300 Wal-Mart Stores, Inc. 478,287
----------
3,769,249
----------
Savings & Loans: 1.34%
17,500 Washington Mutual, Inc. 505,312
----------
Semiconductors: 2.99%
4,550 Intel Corp. 608,278
7,600 Texas Instruments, Inc. 522,025
----------
1,130,303
----------
Software: 1.40%
6,600 @ Microsoft Corp. 528,000
----------
Telecommunications: 7.61%
14,043 AT&T Corp. 444,110
8,720 Bell Atlantic Corp. 443,085
8,600 Lucent Technologies, Inc. 509,550
9,900 @@ Nokia OYJ ADR 494,381
11,600 SBC Communications, Inc. 501,700
10,600 @ Worldcom, Inc. 486,275
----------
2,879,101
----------
Tobacco: 1.60%
22,800 Philip Morris Cos., Inc. 605,625
----------
Transportation: 1.36%
13,500 @ FedEx Corp. 513,000
----------
Total Common Stock (Cost $32,068,401) 36,730,816
----------
Total Long-Term Investments (Cost $32,068,401) 36,730,816
----------
See Accompanying Notes to Financial Statements
111
<PAGE>
Pilgrim
LargeCap
Leaders
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal Market
Amount Value
------ -----------
SHORT-TERM INVESTMENTS: 5.59%
Repurchase Agreement: 5.59%
2,114,000 State Street Bank & Trust Repurchase Agreement
6.200% Due 07/03/2000 (Collateralized by U.S.
Treasury Bills, 12.500% Due 08/15/14, Market
Value $2,160,875) $ 2,114,000
-----------
Total Short-Term Investments (Cost $2,114,000) 2,114,000
-----------
Total Investments in Securities
(Cost $ 34,182,401)* 102.74% $38,844,816
Other Assets and Liabilities-Net -2.74% (1,036,830)
------ -----------
Net Assets 100.00% $37,807,986
====== ===========
----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 6,797,394
Gross Unrealized Depreciation (2,134,979)
-----------
Net Unrealized Appreciation $ 4,662,415
===========
See Accompanying Notes to Financial Statements
112
<PAGE>
Pilgrim
LargeCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
COMMON STOCKS: 99.28%
Biotechnology: 5.21%
249,100 @ Amgen, Inc. $17,499,275
109,500 @ Genentech, Inc. 18,834,000
-----------
36,333,275
-----------
Cellular Telecommunications: 3.14%
357,800 @ Nextel Communications, Inc. 21,892,888
-----------
Computers: 16.39%
363,900 @ Cisco Systems 23,130,394
411,000 @ Dell Computer Corp. 20,267,437
307,900 @ Oracle Corp. 25,882,844
274,100 @ Sun Microsystems 24,925,969
177,250 @ Veritas Software Corp. 20,032,020
-----------
114,238,664
-----------
Diversified Financial Services: 3.43%
396,400 Citigroup, Inc. 23,883,100
-----------
Fiber Optics: 12.09%
168,900 @ Ciena Corp. 28,153,518
109,300 Corning, Inc. 29,497,337
222,300 @ JDS Uniphase Corp. 26,648,213
-----------
84,299,068
-----------
Insurance: 2.75%
298,300 Aetna, Inc. 19,147,131
-----------
Lodging: 4.18%
907,300 MGM Grand, Inc. 29,147,013
-----------
Media: 10.73%
831,024 @ AT&T-Liberty Media Corp. 20,152,331
284,600 @ Cablevision Systems -- Class A 19,317,225
407,600 @ Infinity Broadcasting Corp. 14,851,925
299,400 @ Viacom, Inc. -- Class B 20,471,475
-----------
74,792,956
-----------
Oil & Gas Producers: 2.34%
467,500 Santa Fe Int'l Corp. 16,333,281
-----------
Oil & Gas Services: 3.14%
549,300 @ Weatherford Int'l, Inc. 21,869,006
-----------
Pipelines: 3.29%
355,100 Enron 22,903,950
-----------
Retail: 3.66%
442,400 Wal-Mart Stores, Inc. 25,493,300
-----------
Satellite Telecommunications: 2.89%
229,500 @ General Motors Corp. -- Class H 20,138,625
-----------
Semiconductor: 10.43%
273,100 @ Applied Materials, Inc. 24,749,687
219,700 Intel Corp. 29,371,144
270,500 Texas Instruments, Inc. 18,579,969
-----------
72,700,800
-----------
Software: 2.35%
92,903 @ VeriSign, Inc. 16,397,291
-----------
Telecommunication Services: 2.95%
413,700 @ Qwest Communications Int'l 20,555,719
-----------
Telecommunication Equipment: 6.80%
422,500 @@ Nokia Corp. ADR 21,098,595
385,700 Nortel Networks Corp. 26,324,025
-----------
47,422,620
-----------
Wireless Equipment: 3.51%
119,300 @ Aether Systems, Inc. 24,456,500
-----------
Total Common Stocks (Cost $528,923,735) 692,005,187
-----------
Total Long-Term Investments (Cost $528,923,735) 692,005,187
-----------
Principal
Amount Value
------ -------------
SHORT-TERM INVESTMENTS: 2.21%
Repurchase Agreement: 2.21%
$15,448,000 State Street Bank & Trust Repurchase Agreement,
6.200% due 07/03/00 (Collaterized by
$10,760,000 U.S. Treasury Notes, 12.500%
Due 08/15/14, Market Value $15,763,400) $ 15,448,000
-------------
Total Short-Term Investments (Cost $15,448,000) 15,448,000
-------------
Total Investments in Securities
(Cost $ 544,371,735)* 101.49% $ 707,453,187
Other Assets and Liabilities-Net -1.49% (10,415,435)
------ -------------
Net Assets 100.00% $ 697,037,752
====== =============
----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $544,405,561. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 165,434,558
Gross Unrealized Depreciation (2,386,932)
-------------
Net Unrealized Appreciation $ 163,047,626
=============
See Accompanying Notes to Financial Statements
113
<PAGE>
Pilgrim
MidCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
COMMON STOCKS: 93.55%
Banks: 3.53%
13,650 Commerce Bancshares, Inc. $ 406,087
32,000 North Fork Bancorp 484,000
11,900 UnionBanCal Corp. 220,894
-----------
1,110,981
-----------
Beverages: 1.93%
10,000 Coors (Adolph) 605,000
-----------
Chemicals: 3.17%
13,000 Rohm & Haas Co. 448,500
18,700 Sigma-Aldrich Corp. 546,975
-----------
995,475
-----------
Commercial Services: 5.67%
15,500 @ Convergys Corp. 804,062
20,000 Equifax, Inc. 525,000
14,000 H & R Block, Inc. 453,250
-----------
1,782,312
-----------
Distribution/Wholesale: 3.02%
9,600 Fastenal Co. 486,000
15,000 Grainger (W.W.), Inc. 462,187
-----------
948,187
-----------
Electric: 1.78%
22,000 Cinergy Corp. 559,625
-----------
Electrical Components & Equipment: 2.30%
17,700 @ American Power Conversion 722,381
-----------
Electronics: 4.51%
9,000 Johnson Controls, Inc. 461,813
10,800 @ Lernout & Hauspie Speech Products 475,875
14,000 Parker Hannifin Corp. 479,500
-----------
1,417,188
-----------
Environmental Control: 2.48%
48,700 @ Republic Services, Inc. 779,200
-----------
Forest Products & Paper: 2.67%
15,900 Mead Corp. 401,475
16,000 Willamette Industries 436,000
-----------
837,475
-----------
Hand/Machine Tools: 1.63%
19,200 Snap-On, Inc. 511,200
-----------
Healthcare-Products: 4.98%
9,000 Bausch & Lomb, Inc. 696,375
20,000 Mallinckrodt, Inc. 868,750
-----------
1,565,125
-----------
Healthcare-Services: 1.87%
8,100 @ Wellpoint Health Network 586,744
-----------
Home Furnishings: 1.53%
13,000 Maytag Corp. 479,375
-----------
Household Products/Wares: 2.50%
29,000 Dial Corp. 300,875
21,000 Fortune Brands, Inc. 484,312
-----------
785,187
-----------
Insurance: 1.57%
15,000 Nationwide Financial Services, Inc. 493,125
-----------
Leisure Time: 1.18%
20,000 Royal Caribbean Cruises, Ltd. 370,000
-----------
Lodging: 2.03%
19,600 Starwood Hotels & Resorts Worldwide 638,225
-----------
Media: 2.88%
13,000 @ Hispanic Broadcasting Corp. 430,625
12,000 New York Times Co. 474,000
-----------
904,625
-----------
Miscellaneous Manufacturing: 3.47%
19,000 Applied Power, Inc. -- Class A 636,500
23,000 Donaldson Co., Inc. 454,250
-----------
1,090,750
-----------
Oil & Gas Producers: 7.50%
7,500 Amerada Hess Corp. 463,125
7,500 Apache Corp. 441,094
8,500 Devon Energy Corp. 477,594
13,500 Helmerich & Payne, Inc. 504,563
13,500 Santa Fe Int'l Corp. 471,656
-----------
2,358,032
-----------
Pharmaceuticals: 2.00%
69,300 Omnicare, Inc. 628,031
-----------
Pipelines: 1.44%
8,900 El Paso Energy Corp. 453,344
-----------
Retail: 6.94%
17,000 @ B.J's Wholesale Club, Inc. 561,000
30,400 Blockbuster, Inc. 294,500
29,000 Ross Stores 494,813
22,700 @ Shopko Stores, Inc. 349,013
17,000 @ Tricon Global Restaurants 480,250
-----------
2,179,576
-----------
Savings & Loans: 2.89%
30,000 Charter One Financial, Inc. 690,000
31,000 Sovereign Bancorp, Inc. 217,969
-----------
907,969
-----------
Semiconductors: 3.35%
8,000 @ Lattice Semiconductor Corp. 553,000
8,800 @ National Semiconductor Corp. 499,400
-----------
1,052,400
-----------
Telecommunications: 14.73%
20,000 @ ADC Telecommunications, Inc. 1,677,500
19,000 @ Andrew Corp. 637,687
16,000 @ Broadwing, Inc. 415,000
13,000 Centurytel, Inc. 373,750
17,500 @ Crown Castle Int'l Corp. 638,750
10,896 Motorola, Inc. 316,665
13,000 @ PanAmSat Corp. 567,938
-----------
4,627,290
-----------
Total Common Stocks (Cost $28,747,624) 29,388,822
-----------
Total Long-Term Investments (Cost $28,747,624) 29,388,822
-----------
See Accompanying Notes to Financial Statements
114
<PAGE>
Pilgrim
MidCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal
Amount Value
------ -----------
SHORT-TERM INVESTMENTS: 10.29%
Repurchase Agreement: 10.29%
$3,232,000 State Stree Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $2,255,000 U.S.
Treasury Bonds, 12.500% Due 08/15/14 Market
Value $3,303,575) $ 3,232,000
-----------
Total Short-Term Investments (Cost $3,232,000) 3,232,000
-----------
Total Investments in Securities
(Cost $ 31,979,624)* 103.84% $32,620,822
Other Assets and Liabilities-Net -3.84% (1,205,352)
------ -----------
Net Assets 100.00% $31,415,470
====== ===========
----------
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $32,057,995. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 5,365,026
Gross Unrealized Depreciation (4,802,199)
-----------
Net Unrealized Appreciation $ 562,827
===========
See Accompanying Notes to Financial Statements
115
<PAGE>
Pilgrim
MidCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 99.82%
Biotechnology: 6.57%
49,400 @ Diacrin, Inc. $ 389,025
64,200 @ Enzon, Inc. 2,728,500
46,100 @ Genentech, Inc. 7,929,200
55,400 @ Idec Pharmaceuticals Corp. 6,499,113
51,800 @ Millennium Pharmaceuticals 5,795,125
74,000 @ PE Corp.-Celera Genomics 6,919,000
32,300 @ Protein Design Labs, Inc. 5,330,828
----------
35,590,791
----------
Commercial Services: 1.36%
44,500 @ Quanta Services, Inc. 2,447,500
171,600 @ Robert Half Int'l, Inc. 4,890,600
----------
7,338,100
----------
Computers: 6.70%
44,700 @ Brocade Communication Systems 8,201,752
37,900 @ Extreme Networks, Inc. 3,998,450
40,600 @ Sandisk Corp. 2,484,213
33,600 @ Silicon Storage Technology 2,967,300
29,500 @ Stratos Lightwave, Inc. 822,312
157,575 @ Veritas Software Corp. 17,808,437
----------
36,282,464
----------
Electric: 3.16%
133,400 @ AES Corp. 6,086,375
83,300 @ Calpine Corp. 5,476,975
127,900 Cinergy Corp. 3,253,456
123,100 Nisource, Inc. 2,292,738
----------
17,109,544
----------
Electrical Components & Equipment: 0.83%
39,600 @ Power-One, Inc. 4,511,925
----------
Electronics: 6.84%
94,000 @ Amphenol Corp. 6,221,625
106,600 @ Credence Systems Corp. 5,882,988
51,900 Millipore Corp. 3,911,962
103,500 Pe Corp.-PE Biosystems Group 6,818,062
66,500 Tektronix, Inc. 4,921,000
74,400 @ Waters Corp. 9,286,050
----------
37,041,687
----------
Food: 0.50%
72,500 Keebler Foods Co. $2,691,563
----------
Gas: 0.85%
150,300 Keyspan Corp. 4,621,725
----------
Healthcare Services: 1.52%
215,200 @ Community Health Systems 3,483,550
65,900 @ Quest Diagnostics 4,715,969
----------
8,199,519
----------
Media: 1.07%
61,800 @ Hispanic Broadcasting Corp. 2,047,125
36,100 @ Univision Communications 3,736,350
----------
5,783,475
----------
Oil & Gas Producers: 9.45%
94,900 Anadarko Petroleum Corp. 4,679,756
140,900 Apache 8,286,681
137,000 Devon Energy Corp. 7,697,688
241,400 Ensco Int'l, Inc. 8,645,136
183,400 EOG Resources, Inc. 6,143,900
192,600 @ Global Marine, Inc. 5,428,913
122,100 @ Nabors Industries, Inc. 5,074,781
171,100 @ Rowan Co. 5,197,163
----------
51,154,018
----------
Oil & Gas Services: 4.90%
140,000 Baker Hughes, Inc. 4,480,000
105,900 @ BJ Services Co. 6,618,750
166,100 @ Grant Prideco, Inc. 4,152,500
77,400 @ Smith Int'l, Inc. 5,635,688
141,000 @ Weatherford Int'l, Inc. 5,613,562
----------
26,500,500
----------
Pharmaceuticals: 7.09%
113,000 @ Celgene Corp. 6,652,875
51,600 @ Cephalon, Inc. 3,089,550
77,400 @ COR Therapeutics, Inc. 6,603,187
65,600 @ Forest Laboratories - Class A 6,625,600
61,900 @ King Pharmaceuticals, Inc. 2,715,863
81,400 @ Sepracor, Inc. 9,818,875
27,200 @ Vertex Pharmaceuticals, Inc. 2,866,200
----------
38,372,150
----------
Pipelines: 2.74%
111,400 El Paso Energy Corp. 5,674,438
75,700 Equitable Resources, Inc. 3,652,525
158,700 Kinder Morgan, Inc. 5,485,068
----------
14,812,031
----------
Retail: 4.72%
131,400 @ Dollar Tree Stores, Inc. 5,198,512
81,600 @ Kohls Corp. 4,539,000
13,500 @ Linens 'N Things, Inc. 366,188
93,600 Nordstrom, Inc. 2,258,100
130,300 @ Starbucks Corp. 4,975,831
71,700 Talbots, Inc. 3,939,019
228,700 TJX Cos., Inc. 4,288,125
----------
25,564,775
----------
Semiconductors: 15.31%
145,400 @ Analog Devices 11,050,400
76,600 @ Applied Micro Circuits Corp. 7,564,250
44,700 @ Broadcom Corp. 9,786,506
65,300 @ Conexant Systems, Inc. 3,175,212
108,800 @ Integrated Device Technology, Inc. 6,514,400
146,500 @ Lam Research Group 5,493,750
165,000 @ LSI Logic, Inc. 8,930,625
86,600 @ Maxim Integrated
Products 5,883,388
48,500 @ PMC-Sierra, Inc. 8,617,842
@@
52,800 @ Qlogic Corp. 3,488,100
85,800 @ Teradyne, Inc. 6,306,300
22,300 @ Triquint Semiconductor, Inc. 2,133,831
47,800 @ Xilinx, Inc. 3,946,488
----------
82,891,092
----------
Software: 14.62%
30,400 @ Alteon Websystems, Inc. 3,041,900
92,400 @ Broadvision, Inc. 4,695,075
47,900 @ Clarent Corp. 3,424,850
76,300 @ Macromedia, Inc. 7,377,256
84,500 @ Mercury Interactive Corp. 8,175,375
57,000 @ Micromuse, Inc. 9,432,609
67,200 @ Siebel Systems, Inc. 10,991,400
63,400 @ Universal Access, Inc. 1,553,300
140,683 @ Verisign, Inc. 24,830,440
72,400 @ Vignette Corp. 3,765,931
30,500 @ Vitria Technology, Inc. 1,864,312
----------
79,152,448
----------
See Accompanying Notes to Financial Statements
116
<PAGE>
Pilgrim
MidCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
Telecommunications: 11.59%
55,800 @ Comverse Technology, Inc. $ 5,189,400
154,200 @ Crown Castle Int'l Corp. 5,628,300
46,700 @ Digital Lightwave, Inc. 4,693,350
79,800 @ Echostar Communications 2,642,128
138,000 @ JDS Uniphase Corp. 16,542,750
197,100 @ Mcleod USA, Inc. 4,077,506
155,400 @ Metromedia Fiber Networks, Inc. 6,167,438
179,200 @ Nextel Communications, Inc. 10,964,800
88,800 @ Nextlink Communications 3,368,850
54,100 @ Time Warner Telecom -- Class A 3,482,687
-----------
62,757,209
-----------
Total Common Stocks (Cost $355,479,830) 540,375,016
-----------
Total Long-Term Investments (Cost $355,479,830) 540,375,016
-----------
Principal
Amount Value
------ ------------
SHORT-TERM INVESTMENTS: 1.00%
Repurchase Agreement: 1.00%
$5,417,000 State Street Bank & Trust Repurchase Agreement,
6.200%, Due 07/03/00 (Collaterized by
$3,775,000 U.S. Treasury Bonds 12.500%, Due
08/15/14, Market Value $5,530,375) $ 5,417,000
------------
Total Short-Term Investments (Cost $5,417,000) 5,417,000
------------
Total Investments in Securities
(Cost $360,896,830)* 100.82% $545,792,016
Other Assets and Liabilities-Net -0.82% (4,435,423)
------ ------------
Net Assets 100.00% $541,356,593
====== ============
----------
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $361,548,419. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $189,757,372
Gross Unrealized Depreciation (5,513,775)
------------
Net Unrealized Appreciation $184,243,597
============
See Accompanying Notes to Financial Statements
117
<PAGE>
Pilgrim
SmallCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 98.68%
Advertising: 0.30%
40,600 @ Getty Images, Inc. $1,504,738
----------
Airlines: 0.10%
14,200 Skywest, Inc. 526,288
----------
Apparel: 0.74%
70,900 Russell Corp. 1,418,000
32,800 @ Timberland Co. 2,322,650
----------
3,740,650
----------
Biotechnology: 6.95%
39,500 @ Aclara BioSciences, Inc. 2,012,031
86,000 @ Charles River Laboratories Int'l 1,908,125
45,600 @ Diacrin, Inc. 359,100
33,400 @ Genome Therapeutics Corp. 1,016,613
58,900 @ Incyte Genomics, Inc. 4,840,844
40,200 @ Invitrogen Corp. 3,023,166
38,700 @ Maxygen 2,196,830
45,700 @ Millennium Pharmaceuticals 5,112,688
900 @ Myriad Genetics, Inc. 133,270
18,500 @ Orchid BioSciences, Inc. 702,422
33,300 @ Protein Design Labs, Inc. 5,492,939
34,400 @ Sequenom, Inc. 1,560,900
245,400 @ Texas Biotech Corp. 4,662,600
49,650 @ Visible Genetics, Inc. 2,240,456
@@
----------
35,261,984
----------
Chemicals: 0.12%
16,700 Spartech Corp. 450,900
3,600 @ Symyx Technologies 153,394
----------
604,294
----------
Commercial Services: 3.56%
71,200 @ Aurora Biosciences Corp. 4,854,950
54,200 @ First Health Group Corp. 1,778,438
19,750 @ Forrester Research, Inc. 1,438,047
107,700 @ Heidrick & Struggles, Inc. 6,798,563
43,600 @ Korn/Ferry Int'l 1,381,575
36,600 @ On Assignment, Inc. 1,116,300
22,800 @ Teletech Holdings, Inc. 708,225
----------
18,076,098
----------
Computer Data Security: 1.26%
64,800 @ ISS Group, Inc. 6,397,988
----------
Computers: 1.96%
35,200 @ Affiliated Computer Services, Inc. 1,163,800
117,800 @ Manhattan Associates, Inc. 2,945,000
25,100 @ M-Systems Flash Disk Pioneers 1,954,663
@@
27,800 @ Silicon Storage Technology, Inc. 2,455,087
26,800 @ Stratos Lightwave, Inc. 747,050
32,300 @ Technology Solutions Co. 199,855
2,800 @ Turnstone Systems, Inc. 463,881
----------
9,929,336
----------
Diversified Financial Services: 0.76%
31,200 Dain Rauscher Corp. 2,059,200
35,600 @@ London Pacific Group, Ltd. 462,800
53,250 Metris Co., Inc. 1,337,906
----------
3,859,906
----------
Electric: 0.90%
132,700 Kansas City Power & Light 2,985,750
87,300 @ NRG Energy, Inc. 1,593,225
----------
4,578,975
----------
Electrical Components & Equipment: 1.06%
6,200 @ Capstone Turbine Corp. 279,387
44,550 @ Power-One, Inc. 5,075,916
----------
5,355,303
----------
Electronics: 5.16%
37,400 @ Amphenol Corp. 2,475,413
51,000 @ Credence Systems Corp. 2,814,562
49,400 @ DSP Group, Inc. 2,766,400
57,800 @ Electro Scientific Industries, Inc. 2,545,006
29,624 @ Flextronics Int'l Ltd. 2,034,799
@@
46,800 @ Kent Electronics Corp. 1,395,224
36,700 @ Microchip Technology, Inc. 2,138,348
32,900 @ Molecular Devices Corp. 2,276,269
79,300 @ Packard Biosciences 1,348,100
13,700 @ Photon Dynamics, Inc. 1,023,219
151,300 @ Therma-Wave, Inc. 3,375,881
42,900 @ Varian, Inc. 1,978,763
----------
26,171,984
----------
Engineering & Construction: 0.32%
35,025 @ Dycom Industries, Inc. 1,611,150
----------
Entertainment: 1.09%
86,600 @ Macrovision Corp. 5,535,634
----------
Enterprise Software Service: 2.31%
56,050 @ Business Objects SA 4,939,406
@@
87,700 @ Manugistics Group, Inc. 4,099,975
49,800 @ Symantec Corp. 2,686,088
----------
11,725,469
----------
Environmental Control: 0.02%
5,700 @ Waste Connections, Inc. 112,575
----------
Food: 0.21%
29,800 @ Hain Celestial Group, Inc. 1,093,288
----------
Healthcare-Products: 1.01%
144,400 @ Edwards Lifesciences Corp. 2,671,400
81,500 @ Kensey Nash Corp. 906,688
39,600 @ Resmed, Inc. 1,059,300
10,000 @ Zoll Medical Corp. 490,000
----------
5,127,388
----------
Healthcare Services: 7.01%
194,600 @ Community Health Systems, Inc. 3,150,088
65,300 @ Coventry Health Care, Inc. 870,327
63,000 @ Laboratory Corp. of America Holdings 4,858,875
185,800 @ LifePoint Hospitals, Inc. 4,134,050
103,100 @ Oxford Health Plans 2,455,069
127,900 @ Province Healthcare Co. 4,620,387
69,800 @ Quest Diagnostics, Inc. 4,995,063
237,300 @ Triad Hospitals, Inc. 5,739,694
92,100 @ Trigon Healthcare, Inc. 4,748,906
----------
35,572,459
----------
Insurance: 0.90%
21,400 @@ PartnerRe, Ltd. 758,363
73,400 Radian Group, Inc. 3,798,450
----------
4,556,813
----------
Internet: 0.46%
2,800 @ Digital Insight Corp. 95,200
50,400 @ Navisite, Inc. 2,107,350
6,800 @ Vicinity Corp. 133,450
----------
2,336,000
----------
See Accompanying Notes to Financial Statements
118
<PAGE>
Pilgrim
SmallCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
Investment Companies: 0.10%
21,100 American Capital Strategies Ltd. $ 503,763
----------
Machinery-Diversified: 2.48%
34,000 @ Advanced Energy Industries 2,003,875
35,600 @ Asyst Technologies, Inc. 1,219,300
16,400 @ Brooks Automation, Inc. 1,048,575
22,400 @ Gasonics Int'l Corp. 883,400
45,100 @ Kulicke & Soffa Industries 2,677,813
39,800 @ PRI Automation, Inc. 2,602,547
18,000 @ Semitool, Inc. 311,625
120,900 Stewart & Stevenson Services 1,821,056
----------
12,568,191
----------
Media: 1.37%
57,000 @ Emmis Communications Corp. 2,358,375
69,200 @ Pegasus Communications Corp. 3,395,125
53,870 @ Saga Communications, Inc. 1,185,140
----------
6,938,640
----------
Metal Fabricate/Hardware: 0.05%
8,612 @ Maverick Tube Corp. 250,825
----------
Oil Field Machinery & Equipment: 2.00%
88,600 @ Drill-Quip 4,142,050
69,500 @ National-Oilwell, Inc. 2,284,813
20,900 @ Smith Int'l, Inc. 1,521,781
66,200 @ Universal Compression Holdings 2,217,700
----------
10,166,344
----------
Oil & Gas Producers: 8.60%
88,100 @ Atwood Oceanics $3,909,438
78,700 @ BJ Services Co. 4,918,750
219,600 Cross Timbers Oil Co. 4,858,650
126,400 @ Global Industries, Ltd. 2,385,800
91,700 @ HS Resources, Inc. 2,751,000
285,000 @ Key Energy Group 2,743,125
45,000 @ Louis Dreyfus Natural Gas 1,409,062
125,600 @ Marine Drilling Co., Inc. 3,516,800
36,647 @ Nabors Industries, Inc. 1,523,141
56,600 @ Newfield Exploration Co. 2,214,475
121,200 @@@ Precision Drilling Corp. 4,681,350
153,150 @ Pride Int'l, Inc. 3,790,462
90,300 @ Spinnaker Exploration Co. 2,313,938
31,600 @ Stone Energy Corp. 1,888,100
18,600 @ UTI Energy Corp. 746,325
----------
43,650,416
----------
Pharmaceuticals: 8.91%
19,200 @ Abgenix, Inc. 2,301,300
68,400 @ Alkermes, Inc. 3,223,350
48,700 Alpharma, Inc. 3,031,575
65,950 @ Cephalon, Inc. 3,948,756
49,600 @ COR Therapeutics, Inc. 4,231,500
59,800 @ Cubist Pharmaceuticals, Inc. 2,945,150
17,900 @ ImClone Systems 1,368,231
41,600 @ Intrabiotics Pharmaceuticals, Inc. 1,110,200
134,825 Jones Pharma, Inc. 5,384,573
23,700 @ Pharmacopeia, Inc. 1,099,088
74,400 @ Syncor Int'l Corp. 5,356,800
63,700 @ Trimeris, Inc. 4,455,019
37,900 @ United Therapeutics Corp. 4,107,412
25,000 @ Vertex Pharmaceuticals, Inc. 2,634,375
----------
45,197,329
----------
Pipelines: 0.11%
27,500 Western Gas Resources, Inc. 577,500
----------
REITS: 0.56%
53,000 @ Pinnacle Holdings, Inc. 2,862,000
----------
Retail: 5.57%
35,500 @ AnnTaylor Stores Corp. 1,175,938
21,200 @ CDW Computer Centers, Inc. 1,325,000
64,900 @ Factory 2-U Stores, Inc. 2,454,031
37,525 @ Insight Enterprises, Inc. 2,225,702
37,900 @ Jack in the Box, Inc. 933,288
26,800 @ Krispy Kreme Doughnuts, Inc. 1,969,800
4,200 @ Linens 'N Things, Inc. 113,925
109,900 @ Michaels Stores, Inc. 5,034,794
226,300 @ MSC Industrial Direct Co. 4,738,156
123,800 @ Pacific Sunwear of California 2,321,250
66,800 Talbots, Inc. 3,669,825
90,400 @ Too, Inc. 2,299,550
----------
28,261,259
----------
Semiconductors: 12.93%
75,600 @ Alpha Industries 3,331,125
83,900 @ ATMI, Inc. 3,901,350
77,800 @ Cypress Semiconductor Corp. 3,287,050
66,500 @ Exar Corp. 5,797,969
24,900 @ Fairchild Semiconductor Int'l 1,008,450
35,100 @ Globespan, Inc. 4,284,942
16,800 Helix Technology Corp. 655,200
44,100 @ Integrated Device Technology Industries 2,640,488
40,300 @ International Rectifier Corp. 2,256,799
60,200 @ Kopin Corp. 4,168,850
96,200 @ Lam Research Corp. 3,607,500
120,200 @ Micrel, Inc. 5,221,187
60,500 @ Qlogic Corp. 3,996,781
3,600 @ Quantum Effect Devices, Inc. 205,200
93,700 @ Quicklogic Corp. 2,084,825
17,900 @ Rudolph Technologies, Inc. 693,625
28,600 @ Semtech Corp. 2,187,453
34,100 @ Three-Five Systems, Inc. 2,011,900
61,500 @ Transwitch Corp. 4,747,031
18,800 @ Triquint Semiconductor, Inc. 1,798,925
69,000 @ Varian Semiconductor Equipment 4,334,062
57,200 @ Virata Corp. 3,410,550
----------
65,631,262
----------
See Accompanying Notes to Financial Statements
119
<PAGE>
Pilgrim
SmallCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
Software: 11.30%
30,800 @ AppNet, Inc. $ 1,108,800
13,100 @ Art Technology Group, Inc. 1,322,281
32,500 @ Caminus Corp. 796,250
28,400 @ Clarent Corp. 2,030,600
50,000 @ Documentum, Inc. 4,468,750
33,000 @ Exchange Applications, Inc. 878,624
65,800 @ Extensity, Inc. 2,253,650
31,600 @ Globix Corp. 926,275
9,800 @ Keynote Systems, Inc. 691,512
32,950 @ Macromedia, Inc. 3,185,853
118,200 @ Mercury Interactive Corp. 11,435,850
6,900 @ Metasolv Software, Inc. 303,600
13,300 @ Micromuse, Inc. 2,200,942
33,900 @ Netopia, Inc. 1,364,475
48,300 @ Numerical Technologies, Inc. 2,348,588
127,700 @ Open Market, Inc. 1,763,856
91,200 @ OTG Software, Inc. 2,604,900
71,900 @ PC-Tel, Inc. 2,732,200
4,400 @ Quest Software, Inc. 243,650
7,300 @ Retek, Inc. 233,600
53,300 Reynolds & Reynolds Co. 972,725
4,600 @ Scient Corp. 202,975
121,000 @ Serena Software, Inc. 5,494,155
53,300 @ SmartForce Plc ADR 2,558,400
@@
17,650 @ Software.Com, Inc. 2,292,294
29,300 @ Universal Access, Inc. 717,850
14,200 @ Webmethods, Inc. 2,232,062
-----------
57,364,717
-----------
Telecommunication: 7.84%
23,263 @ ADC Telecommunications, Inc. $ 1,951,184
37,400 @ Advanced Fibre Communication 1,694,687
2,200 @ Airgate PCS, Inc. 115,637
7,700 @ Airnet Communications Corp. 201,163
4,500 @ Alamosa PCS Holdings, Inc. 93,938
51,700 @ American Tower Corp. 2,155,243
81,100 @ Aspect Communications Corp. 3,188,244
9,100 @ Choice One Communications, Inc. 371,394
49,500 @@@ Clearnet Communications, Inc. 1,374,398
76,700 @ Digital Lightwave, Inc. 7,708,350
8,500 @ Digital Microwave Corp. 324,063
32,800 @ Ditech Communications Corp. 3,101,650
24,700 @ Inet Technologies, Inc. 1,339,975
16,100 @ Leap Wireless Int'l, Inc 756,700
11,700 @ Natural Microsystems Corp. 1,315,519
46,711 @ Nextlink Communications 1,772,092
11,250 @ Pac-West Telecomm, Inc. 225,000
20,700 @ SDL, Inc. 5,903,380
141,100 @ I3 Mobile, Inc. 2,592,713
20,200 @ Proxim, Inc. 1,999,169
8,800 @ Viasat, Inc. 477,400
21,000 @ Western Wireless 1,144,500
-----------
39,806,399
-----------
Transportation: 0.66%
22,950 @ Forward Air Corp. 918,000
41,800 Expeditors Int'l Washington 1,985,500
31,700 @ Swift Transportation Co., Inc. 443,800
-----------
3,347,300
-----------
Total Common Stocks (Cost $314,463,131) 500,804,265
-----------
Total Long-Term Investments
(Cost $314,463,131) 500,804,265
-----------
SHORT-TERM INVESTMENTS: 2.68%
Repurchase Agreement: 2.68%
$13,629,000 State Street Bank & Trust Repurchase Agreement
6.200% due 07/03/04 (Collateraized by
$9,490,000 U.S. Treasury Bonds, 12.500%
Due 08/15/14, Market Value $13,902,850) $ 13,629,000
------------
Total Short-Term Investments (Cost $13,629,000) 13,629,000
------------
Total Investments in Securities (Cost
$ 328,092,131)* 101.36% $514,433,265
Other Assets and Liabilities - Net -1.36% (6,914,010)
------ ------------
Net Assets 100.00% $507,519,255
====== ============
----------
@ Non-income producing security
@@ Foreign issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $329,821,029. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $192,503,082
Gross Unrealized Depreciation (7,890,846)
------------
Net Unrealized Appreciation $184,612,236
============
See Accompanying Notes to Financial Statements
120
<PAGE>
Pilgrim
Bank and
Thrift Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
COMMON STOCKS: 98.73%
Automotive: 1.08%
556,300 @ Keystone Automotive Industries, Inc. $ 3,859,332
-----------
Banks: 51.16%
180,200 Alabama National Bancorp (AL) 3,570,213
165,300 Bank Of The Ozarks (AR) 2,706,788
1,150,200 Banknorth Group, Inc. (ME) 17,612,438
96,500 Bay Bancshares, Inc. (TX) 1,495,750
355,475 BSB Bancorp Inc. (NY) 7,131,717
53,000 CCBT Financial Companies, Inc. (MA) 833,094
108,600 CNBT Bankshares, Inc. (TX) 1,452,525
30,000 Columbia Bancorp (MD) 270,000
520,500 Comerica, Inc. (MI) 23,357,438
122,749 Commerce Bancshares, Inc. (MO) 3,651,783
188,700 Community Bank Systems, Inc. (NY) 4,186,781
192,824 Community First Bankshares, Inc. (ND) 3,145,441
187,500 Financial Institutions, Inc. (NY) 2,625,000
491,360 Fleet Boston Financial Group, Inc. (MA) 16,706,240
322,647 Hudson United Bancorp (NJ) 7,239,392
163,604 Independent Bank Corp. (MI) 2,218,879
525,800 KeyCorp (OH) 9,267,225
200,000 Lamar Capital Corp. (MS) 1,637,500
209,100 National City Bancorp (MN) 3,031,950
771,400 National City Corp. (OH) 13,162,012
90,134 North Dallas Bank & Trust Co. (TX) 2,625,153
305,600 North Fork Bancorp (NY) 4,622,200
84,300 North Valley Bancorp (CA) 885,150
7,000 @ Northern Empire Bancshares (CA) 103,906
44,000 Oak Hill Financial, Inc. (OH) 616,000
887,900 Pacific Century Financial Corp. (HI) 12,985,537
240,000 Prosperity Bancshares, Inc. (TX) 3,870,000
20,400 @ Six Rivers National Bank (CA) 272,850
200,000 - Southwest Bancorp (OK) 3,225,000
125,300 Summit Bancorp (NJ) 3,085,512
166,900 Summit Bancshares Inc (TX) 2,879,025
62,500 Three Rivers Bancorp, Inc. (PA) 410,156
38,000 Trico Bancshares (CA) 627,000
306,500 UCBH Holdings, Inc. (CA) 8,179,719
721,700 UnionBanCal Corp. (CA) 13,396,556
-----------
183,085,930
-----------
Construction: 2.80%
655,375 D.R. Horton, Inc. 8,888,523
342,500 @ Schuff Steel Co. 1,113,125
-----------
10,001,648
-----------
Finance: 5.00%
375,000 @- Int'l Aircraft Investors 2,039,062
360,900 Liberty Financial Group 7,917,244
47,600 @ National Discount Broker 1,517,250
304,550 Sea Containers, Ltd. 6,433,619
-----------
17,907,175
-----------
Insurance: 0.59%
177,000 @- 21st Century Holding Co. 885,000
156,500 @ American Safety Insurance Group 655,344
756,500 Reliance Group Holdings 567,375
-----------
2,107,719
-----------
Retail: 4.17%
323,106 @ Consolidated Stores Corp. 3,877,272
108,000 @ Jo-Ann Stores, Inc. Class A 756,000
79,600 @ Jo-Ann Stores, Inc. Class B 606,950
223,500 Ross Stores, Inc. 3,813,469
522,000 @ Ugly Duckling Corp. 3,686,625
240,900 @ United Auto Group, Inc. 2,198,212
-----------
14,938,528
-----------
Securities Related Business: 4.53%
124,440 Alliance Capital Management $ 5,903,123
573,400 Tucker Anthony Sutro Corp. 10,321,200
-----------
16,224,323
-----------
Thrifts: 29.40%
236,500 Astoria Financial Corp. (NY) 6,089,875
1,564,257 Charter One Financial, Inc. (OH) 35,977,911
1,014,737 Commercial Federal Corp. (NE) 15,791,845
144,100 First Mutual Bancshares, Inc. (WA) 1,441,000
280,000 Golden West Financial Corp. (CA) 11,427,500
198,000 Highland Bancorp, Inc. (CA) 4,826,250
48,700 Seacoast Financial Services Corp. (MA) 4,631,250
152,500 Timberland Bancorp (WA) 1,648,906
810,650 Washington Mutual, Inc. (WA) 23,407,519
-----------
105,242,056
-----------
Total Common Stocks (Cost $411,395,142) 353,366,711
-----------
Total Long-Term Investments (cost $411,395,142) 353,366,711
See Accompanying Notes to Financial Statements
121
<PAGE>
Pilgrim
Bank and
Thrift Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal
Amount Value
------ ------------
Repurchase Agreement: 0.99%
$3,552,000 State Street Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $2,475,000 U.S.
Treasury Notes, 12.500% Due 08/15/14, Market
Value $3,625,875) $ 3,552,000
Total Short-Term Investments (Cost $3,552,000) 3,552,000
------------
Total Investments in Securities
(Cost $ 414,947,142)* 99.72% $356,918,711
Other Assets and Liabilites-Net 0.28% 1,011,110
------ ------------
Net Assets 100.00% $357,929,821
====== ============
----------
@ Non-income producing security
- Company in which there is any direct or indirect ownership of 5% or more of
the outstanding voting securities.
* Cost for federal income tax purposes is $414,956,568. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 45,658,725
Gross Unrealized Depreciation (103,696,582)
-------------
Net Unrealized Depreciation $ (58,037,857)
=============
See Accompanying Notes to Financial Statements
122
<PAGE>
Pilgrim
Worldwide
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 96.55%
AUSTRALIA: 0.34%
41,700 News Corp., LTD. ADR $2,272,650
----------
Total Australia 2,272,650
----------
BELGIUM: 0.47%
58,900 Fortis (B) 1,713,946
32,000 @ Lernout & Hauspie Speech Products 1,410,000
----------
Total Belgium 3,123,946
----------
BRAZIL: 0.77%
65,800 Petroleo Brasileiro SA ADR 1,987,917
60,211 Tele Norte Leste Participacoes ADR 1,422,485
17,000 Telecomunicacoes Brasileiras SA ADR 1,651,125
----------
Total Brazil 5,061,527
----------
CANADA: 5.72%
167,200 Abitibi-Consolidated, Inc. 1,567,500
138,800 @ Anderson Exploration, Ltd. 2,522,784
21,000 @ Ballard Power Systems, Inc. 1,886,062
42,600 @ Biovail Corp. 2,361,637
68,700 Bombardier, Inc. 1,866,041
19,400 @ C-Mac Industries, Inc. 917,568
33,000 Magna Int'l, Inc. 1,550,777
278,300 Nortel Networks Corp. 18,993,975
73,500 @ Precision Drilling Corp. 2,838,937
42,000 @ QLT, Inc. 3,247,125
----------
Total Canada 37,752,406
----------
CHINA: 0.27%
5,000 @ PetroChina Co., Ltd. ADR 104,687
8,000,000 @ PetroChina Co., Ltd. 1,662,498
----------
Total China 1,767,185
----------
DENMARK: 0.35%
34,600 Tele Danmark AS 2,328,595
----------
Total Denmark 2,328,595
----------
FINLAND: 3.17%
43,200 Helsingin Puhelin OYJ 4,231,536
283,800 Nokia OYJ ADR 14,172,262
55,000 Sonera Group OYJ 2,507,281
----------
Total Finland 20,911,079
----------
FRANCE: 5.98%
48,300 Accor SA 1,979,589
82,600 Alcatel SA 5,417,560
61,700 Alstom 1,667,600
44,100 Aventis SA 3,218,718
16,500 Axa 2,599,171
3,626 @ Bouygues SA 2,423,220
17,300 Groupe Danone 2,295,767
40,000 Lagardere S.C.A. 3,055,040
83,800 Rhodia SA 1,408,068
74,000 Societe Television Francaise 1 5,157,289
63,800 ST Microelectronics NV 4,095,162
26,770 Total Fina Elf SA 4,104,505
23,600 Vivendi (EX-Generale des Eaux) 2,082,984
----------
Total France 39,504,673
----------
GERMANY: 2.43%
69,900 Deutsche Lufthansa AG 1,631,635
71,500 Dresdner Bank AG 2,894,268
45,800 EM.TV & Merchandising AG 2,710,966
41,700 @ Infineon Technologies AG 3,399,859
7,400 @ Intershop Communications AG 3,384,030
13,500 Siemens AG 2,020,909
----------
Total Germany 16,041,667
----------
HONG KONG: 0.45%
107,800 Hutchison Whampoa 1,355,192
830,000 @ Pacific Century CyberWorks, Ltd. 1,639,664
----------
Total Hong Kong 2,994,856
----------
ISRAEL: 0.68%
80,500 Teva Pharmaceutical ADR 4,462,719
----------
Total Israel 4,462,719
----------
ITALY: 1.18%
279,600 Alleanza Assicurazioni SPA 3,723,731
298,400 ENI SPA 1,723,539
1,706,000 @ Finmeccanica SPA 2,345,354
----------
Total Italy 7,792,624
----------
JAPAN: 8.58%
90,000 Daikin Industries, Ltd. $2,090,853
35,000 Fanuc, Ltd. 3,559,210
118,000 Fujitsu, Ltd. 4,081,429
518,000 Japan Airlines Co., Ltd. 1,967,429
7,100 Kyocera Corp. 1,203,798
371,000 Mitsubishi Electric Corp. 4,014,024
185,000 Mitsui Fudosan Co., Ltd. 2,005,089
88,000 NEC Corp. 2,761,793
185,000 Nippon Sheet Glass Co., Ltd. 2,570,001
250 Nippon Telegraph & Telephone Co., Ltd. 3,322,181
74,000 Nomura Securities Co., Ltd. 1,809,811
170 NTT Docomo, Inc. 4,598,275
104,000 Pioneer Corp. 4,048,066
19,200 Promise Co., Ltd. 1,516,385
19,900 Softbank Corp. 2,700,721
22,500 Sony Corp. 2,099,336
376,000 Toshiba Corp. 4,241,761
38,000 Toyoda Gosei Co., Ltd. 2,410,254
37,000 Toyota Motor Corp. 1,684,275
11,000 @ Trend Micro, Inc. 1,814,241
87,000 Yamato Transport Co., Ltd. 2,160,549
----------
Total Japan 56,659,481
----------
NETHERLANDS: 3.48%
130,800 @ ASM Lithography Holding NV 5,771,550
48,500 Heineken NV 2,951,813
35,800 Koninklijke Ahold NV 1,053,716
116,200 Koninklijke Philips Electronics NV 5,519,500
9,200 @ Qiagen NV 1,624,899
36,500 Randstad Holdings NV 1,350,304
70,600 Royal KPN NV 3,157,775
29,200 VNU NV 1,508,159
----------
Total Netherlands 22,937,716
----------
RUSSIA: 0.15%
19,400 Lukoll-Holding ADR 991,728
----------
Total Russia 991,728
----------
SINGAPORE: 0.65%
43,900 @ Flextronics Int'l, Ltd. 3,015,381
127,000 Singapore Airlines, Ltd. 1,257,499
----------
Total Singapore 4,272,880
----------
See Accompanying Notes to Financial Statements
123
<PAGE>
Pilgrim
Worldwide
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ ------------
SOUTH KOREA: 0.73%
64,720 Korea Electric Power Corp. $ 2,008,307
8,410 Samsung Electronics 2,783,157
------------
Total South Korea 4,791,464
------------
SPAIN: 1.57%
274,400 Altadis SA 4,215,092
145,700 Endesa SA 2,822,335
501 @ Telefonica SA ADR 32,095
154,500 @ Telefonica SA 3,318,776
------------
Total Spain 10,388,298
------------
SWEDEN: 3.34%
107,200 Europolitan Holdings AB 1,330,884
38,200 @ NetCom AB 2, 2,819,524
303,900 Nordic Baltic Holding AB 2,291,310
163,400 Skandia Forsakrings AB 4,316,576
176,000 Svenska Handelsbanken AB 2,554,195
326,700 Telefonaktiebolaget LM Ericsson AB ADR 6,534,000
235,400 @ Telia AB 2,215,215
------------
Total Sweden 22,061,704
------------
SWITZERLAND: 0.76%
800 Nestle SA 1,601,177
23,400 UBS AG 3,428,309
------------
Total Switzerland 5,029,486
------------
UNITED KINGDOM: 8.29%
133,800 @ ARM Holdings PLC ADR 4,398,675
55,800 AstraZeneca PLC 2,605,540
395,143 BAE Systems PLC 2,461,815
422,600 BG Group PLC 2,723,998
558,500 Billiton PLC 2,256,327
444,600 British Airways PLC 2,558,034
144,600 Cable & Wireless PLC 2,454,872
949,400 Centrica PLC 3,146,016
60,600 @ Colt Telecom Group PLC 2,012,680
51,000 @ Energis PLC 1,901,422
670,200 Invensys PLC 2,512,382
135,000 Logica PLC 3,231,528
329,400 Marconi PLC 4,278,894
58,600 Pearson PLC 1,839,854
29,700 Reuters Group PLC ADR 2,968,144
618,171 Rolls-Royce PLC 2,209,775
148,000 Royal Bank of Scotland Group PLC 2,467,805
292,600 Sainsbury (J) PLC 1,323,772
481,600 Shell Transport & Trading Co. 4,051,622
815,731 Vodafone AirTouch PLC 3,307,877
------------
Total United Kingdom 54,711,032
UNITED STATES: 47.19%
55,600 @ Aether Systems, Inc. $ 11,398,000
138,400 Aetna, Inc. 8,883,550
64,300 @ Amdocs, Ltd. 4,935,025
114,700 @ Amgen, Inc. 8,057,675
128,000 @ Applied Materials, Inc. 11,600,000
436,780 @ AT&T - Liberty Media Group 10,591,915
105,900 @ Cablevision Systems Corp. 7,187,962
79,200 @ Ciena Corp. 13,201,650
167,900 @ Cisco Systems, Inc. 10,672,144
185,300 Citigroup, Inc. 11,164,325
49,800 Corning, Inc. 13,439,775
187,900 @ Dell Computer Corp. 9,265,819
166,000 Enron Corp. 10,707,000
50,200 @ Genentech, Inc 8,634,400
106,800 @ Hughes Electronics Corp. 9,371,700
189,100 @ Infinity Broadcasting Corp. 6,890,331
102,400 Intel Corp. 13,689,600
103,500 @ JDS Uniphase Corp. 12,407,062
395,300 MGM Grand, Inc. 12,699,012
178,400 @ Nextel Communications, Inc. 10,915,850
142,900 @ Oracle Corp. 12,012,531
188,400 @ Qwest Communications Int'l 9,361,125
257,700 Santa Fe Int'l Corp. 9,461,075
38,700 Schlumberger, Ltd. 2,887,987
129,300 @ Sun Microsystems, Inc. 11,758,219
126,600 Texas Instruments, Inc. 8,695,838
53,875 @ VeriSign, Inc. 9,508,938
82,200 @ Veritas Software Corp. 9,289,884
139,500 @ Viacom, Inc. 9,538,313
206,500 Wal-Mart Stores, Inc. 11,899,563
287,000 @ Weatherford Int'l, Inc. 11,426,188
------------
Total United States 311,552,456
------------
Total Common Stocks (Cost $513,051,880) 637,410,172
------------
PREFERRED STOCKS: 0.26%
BRAZIL: 0.26%
193,648 Banco Bradesco SA $ 1,685,761
------------
Total Brazil 1,685,761
------------
Total Preferred Stocks (Cost $1,558,209) 1,685,761
------------
Total Long-Term Investments (Cost $514,610,089) $639,095,933
------------
SHORT-TERM INVESTMENTS: 4.13%
Repurchase Agreements: 4.13%
$27,281,000 State Street Repurchase Agreement, 6.20% due
07/03/00 (Collateralized by $22,220,000 U.S.
Treasury Bonds, 8.125% Market Value $27,830,550,
Due 08/15/21) $ 27,281,000
-------------
Total Short-Term Investments (Cost $27,281,000) 27,281,000
-------------
Total Investments in Securities
(Cost $ 541,891,089)* 100.94% $ 666,376,933
Other Assets and Liabilities-Net -0.94% (6,197,663)
------ -------------
Net Assets 100.00% $ 660,179,270
====== =============
----------
@ Non-income producing security
ADR American Depository Receipt
* Cost for federal income tax purposes is $543,295,122. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 135,547,277
Gross Unrealized Depreciation (12,465,466)
-------------
Net Unrealized Appreciation $ 123,081,811
-------------
See Accompanying Notes to Financial Statements
124
<PAGE>
Pilgrim
Worldwide
Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Aerospace/Defense 1.06%
Airlines 1.12
Auto Manufacturers 0.26
Auto Parts & Equipment 0.60
Banks 2.32
Biotechnology 2.77
Beverages 0.45
Building Materials 0.71
Cellular Telecommunication 3.05
Chemicals 0.21
Commercial Services 0.52
Computers 10.01
Diversified Financial Services 2.45
Electric 0.73
Electrical 1.67
Components & Equipment Electronics 2.79
Energy-Alternate Sources 0.29
Engineering & Construction 0.37
Fiber Optics 5.91
Food 0.95
Forest & Paper 0.24
Gas 0.89
Holding Companies-Diversified 0.67
Home Furnishing 0.93
Insurance 2.96
Internet 0.41
Lodging 2.22
Machinery-Diversified 0.25
Media 7.68
Mining 0.34
Miscellaneous Manufacturing 0.97
Oil & Gas Producers 4.46
Oil & Gas Services 2.17
Pharmaceuticals 2.41
Pipelines 1.62
Real Estate 0.30
Retail 1.80
Satellite Telecommunications 1.42
Semiconductors 6.95
Software 2.48
Telecommunications Equipment 7.48
Telecommunications Services 4.27
Telephone-Integrated 2.73
Telephone-Local 0.22
Tobacco 0.64
Transportation 0.33
Wireless Equipment 1.73
Short-Term Investments 4.13
Other Assets and Liabilities, Net -0.94
------
NET ASSETS 100.00%
======
The Worldwide Growth Fund had the following outstanding forward foreign currency
exchange contracts as of June 30, 2000:
Settlement Currency to Currency to Unrealized Appreciation/
Date Receive Deliver (Depreciation)
---- ------- ------- --------------
7/3/00 720,007 $686,527 $ 864
(EUR) (USD)
7/3/00 $693,804 463,618 (7,696)
(USD) (GBP)
7/5/00 $224,961 150,224 (2,344)
(USD) (GBP)
-------
$(9,176)
=======
See Accompanying Notes to Financial Statements
125
<PAGE>
Pilgrim
International
Core Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
COMMON STOCKS: 94.36%
AUSTRALIA: 0.53%
8,600 News Corp., Ltd. ADR $ 468,700
----------
Total Australia 468,700
----------
BELGIUM: 0.95%
15,500 Fortis (B) 451,038
8,800 @ Lernout & Hauspie Speech Products 387,750
----------
Total Belgium 838,788
----------
BRAZIL: 1.54%
17,400 Petroleo Brasileiro SA ADR 525,680
16,868 Tele Norte Leste Participacoes ADR 398,507
4,400 Telecomunicacoes Brasileiras SA ADR 427,350
----------
Total Brazil 1,351,537
----------
CANADA: 6.93%
43,100 Abitibi-Consolidated, Inc. 404,062
31,200 @ Anderson Exploration, Ltd. 567,081
5,600 @ Ballard Power Systems, Inc. 502,950
12,100 @ Biovail Corp. 670,794
5,100 @ C-Mac Industries, Inc. 241,216
8,900 Magna Int'l, Inc. 418,240
24,400 Nortel Networks Corp. 1,665,300
19,500 @ Precision Drilling Corp. 753,188
11,200 @ QLT, Inc. 865,900
----------
Total Canada 6,088,731
----------
CHINA: 0.52%
2,180,000 @ PetroChina Co., Ltd. 453,031
----------
Total China 453,031
----------
DENMARK: 0.84%
11,000 Tele Danmark AS 740,305
----------
Total Denmark 740,305
----------
FINLAND: 3.44%
9,500 Helsingin Puhelin OYJ 930,546
28,000 Nokia OYJ ADR 1,398,250
15,200 Sonera OYJ 692,921
----------
Total Finland 3,021,717
----------
FRANCE: 12.26%
13,000 Accor SA 532,808
21,500 Alcatel SA 1,410,140
16,900 Alstom 456,766
11,700 Aventis SA 853,946
4,700 Axa 740,370
853 @ Bouygues SA 570,051
4,600 Groupe Danone 610,435
10,500 Lagardere S.C.A. 801,948
27,400 Rhodia SA 460,394
20,000 Societe Television Francaise 1 1,393,862
16,600 ST Microelectronics NV 1,065,513
7,074 Total Fina Elf SA 1,084,620
8,900 Vivendi (EX-Generale des Eaux) 785,532
----------
Total France 10,766,385
----------
GERMANY: 5.43%
18,500 Deutsche Lufthansa AG 431,835
18,400 Dresdner Bank AG 744,819
10,400 EM.TV & Merchandising AG 615,591
6,600 @ Epcos AG 669,168
11,200 @ Infineon Technologies AG 913,152
1,900 @ Intershop Communications AG 868,872
3,500 Siemens AG 523,939
----------
Total Germany 4,767,376
----------
HONG KONG: 0.93%
30,800 Hutchison Whampoa 387,198
218,000 @ Pacific Century CyberWorks, Ltd. 430,659
----------
Total Hong Kong 817,857
----------
ISRAEL: 1.41%
22,300 Teva Pharmaceutical ADR 1,236,256
----------
Total Israel 1,236,256
----------
ITALY: 2.63%
75,000 Alleanza Assicurazioni SPA 998,855
79,000 ENI SPA 456,299
619,600 @ Finmeccanica SPA 851,806
----------
Total Italy 2,306,960
----------
JAPAN: 18.20%
29,000 Daikin Industries, Ltd. 673,719
9,600 Fanuc, Ltd. 976,241
32,000 Fujitsu, Ltd. 1,106,828
135,000 Japan Airlines Co., Ltd. 512,747
1,900 Kyocera Corp. 322,143
100,000 Mitsubishi Electric Corp. 1,081,947
48,000 Mitsui Fudosan Co., Ltd. 520,239
34,000 NEC Corp. 1,067,056
71,000 @ Nippon Sheet Glass Co., Ltd. 986,325
66 @ Nippon Telegraph & Telephone Corp. 877,056
20,000 Nomura Securities Co., Ltd. 489,138
45 @ NTT Docomo, Inc. 1,217,191
28,000 Pioneer Corp. 1,089,864
5,000 Promise Co., Ltd. 394,892
5,400 Softbank Corp. 732,859
2,700 Sony Corp. ADR 254,644
3,500 Sony Corp. 326,563
101,000 @ Toshiba Corp. 1,139,409
11,000 Toyoda Gosei Co, Ltd. 697,705
10,000 Toyota Motor Corp. 455,209
3,000 @ Trend Micro, Inc. 494,793
23,000 Yamato Transport Co., Ltd. 571,180
----------
Total Japan 15,987,748
----------
NETHERLANDS: 6.63%
29,400 @ ASM Lithography Holding NV 1,297,275
12,800 Heineken NV 779,035
9,500 Koninklijke Ahold NV 279,617
31,300 Koninklijke Philips Electronics 1,486,750
2,400 @ Qiagen NV 423,887
10,000 Randstad Holdings NV 369,946
18,400 Royal KPN NV 822,990
7,100 VNU NV 366,710
----------
Total Netherlands 5,826,210
----------
RUSSIA: 0.35%
6,000 Lukoil-Holding ADR 306,720
----------
Total Russia 306,720
----------
See Accompanying Notes to Financial Statements
126
<PAGE>
Pilgrim
International
Core Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ----------
SINGAPORE: 1.10%
9,300 @ Flextronics Int'l, Ltd. $ 638,794
33,000 Singapore Airlines, Ltd. 326,751
----------
Total Singapore 965,545
----------
SOUTH KOREA: 1.45%
17,720 Korea Electric Power Corp. 549,864
2,200 Samsung Electronics 728,055
----------
Total South Korea 1,277,919
----------
SPAIN: 3.13%
73,900 Altadis SA 1,135,187
38,300 Endesa SA 741,904
40,400 Telefonica SA 867,822
----------
Total Spain 2,744,913
----------
SWEDEN: 6.29%
28,000 Europolitan Holdings AB 347,619
8,100 @ NetCom AB 597,857
83,700 Nordic Baltic Holding AB 631,071
36,400 Skandia Forsakrings AB 961,587
47,700 Svenska Handelsbanken AB 692,245
85,800 Telefonaktiebolaget LM Ericsson AB ADR 1,716,000
61,600 @ Telia AB 579,683
----------
Total Sweden 5,526,062
----------
SWITZERLAND: 1.52%
200 Nestle SA 400,294
6,400 UBS AG 937,657
----------
Total Switzerland 1,337,951
----------
UNITED KINGDOM: 15.92%
90,500 @ ARM Holdings PLC $ 964,711
14,800 AstraZeneca PLC 691,075
87,698 BAE Systems PLC 546,377
96,900 BG Group PLC 624,599
113,300 Billiton PLC 457,729
117,700 British Airways PLC 677,194
37,900 Cable & Wireless PLC 643,428
270,800 Centrica PLC 897,347
15,300 @ Colt Telecom Group PLC 508,152
13,400 @# Energis PLC 499,589
189,200 Invensys PLC 709,255
29,700 Logica PLC 710,936
85,500 Marconi PLC 1,110,642
16,100 Pearson PLC 505,489
8,700 Reuters Group PLC ADR 869,456
167,104 Rolls-Royce PLC 597,347
40,400 Royal Bank of Scotland Group PLC 673,644
80,500 Sainsbury (J) PLC 364,196
127,500 Shell Transport & Trading Co. 1,072,637
213,115 Vodafone AirTouch PLC 864,204
----------
Total United Kingdom 13,988,007
----------
UNITED STATES: 2.36%
11,800 @ Amdocs, Ltd. 905,650
14,100 Santa Fe Int'l Corp. 492,619
9,000 Schlumberger, Ltd. 671,625
----------
Total United States 2,069,894
----------
Total Common Stocks (Cost $70,576,905) 82,888,612
----------
PREFERRED STOCKS: 0.50%
BRAZIL: 0.50%
50,903,100 Banco Bradesco SA 440,305
----------
Total Brazil 440,305
----------
Total Preferred Stocks (Cost $411,032) 440,305
----------
Total Long-Term Investments (Cost $70,987,937) 83,328,917
----------
Principal
Amount Value
------ -----------
SHORT-TERM INVESTMENTS: 4.60%
Repurchase Agreement: 4.60%
$4,042,000 State Street Repurchase Agreement, 6.20% due
07/03/00 (Collateralized by $3,625,000 U.S.
Treasury Bonds, 7.500% Due 11/15/16, Market
Value $4,127,969) $ 4,042,000
-----------
Total Short-Term Investments (Cost $4,042,000) 4,042,000
-----------
Total Investments in Securities
(Cost $ 75,029,937)* 99.46% $87,370,917
Other Assets and Liabilities-Net 0.54% 475,861
------ -----------
Net Assets 100.00% $87,846,778
====== ===========
----------
@ Non-income producing security
ADR American Depository Receipt
# 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 $75,442,633. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $15,006,650
Gross Unrealized Depreciation (3,078,366)
-----------
Net Unrealized Appreciation $11,928,284
===========
See Accompanying Notes to Financial Statements
127
<PAGE>
Pilgrim
International
Core Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Aerospace/Defense 2.27%
Airlines 2.22
Auto Manufacturers 0.52
Auto Parts & Equipment 1.27
Banks 4.69
Beverages 0.89
Biotechnology 0.48
Building Materials 1.77
Chemicals 0.53
Commercial Services 1.32
Computers 3.55
Diversified Financial Services 1.52
Electric 1.47
Electrical Components & Equipment 3.36
Electronics 6.59
Energy-Alternate Sources 0.57
Engineering & Construction 0.77
Food 1.88
Forest Products & Paper 0.46
Gas 1.73
Holding Companies-Diversified 1.35
Home Furnishings 1.90
Insurance 3.07
Internet 0.83
Lodging 0.61
Machinery 0.52
Media 4.80
Mining 0.52
Miscellaneous Manufacturing 1.41
Oil & Gas Producers 6.50
Oil & Gas Services 0.77
Pharmaceuticals 4.92
Real Estate 0.59
Semiconductors 3.35
Software 2.04
Telecommunications 21.88
Tobacco 1.29
Transportation 0.65
Short-Term Investments 4.60
Other Assets and Liabilities, Net 0.54
------
NET ASSETS 100.00%
======
The International Core Growth Fund had the following outstanding forward foreign
currency exchange contracts as of June 30, 2000:
Settlement Currency to Currency to Unrealized Appreciation/
Date Receive Deliver (Depreciation)
---- ------- ------- --------------
7/3/00 439,143 $418,503 $ 747
(EUR) (USD)
7/3/00 $190,042 126,991 (2,108)
(USD) (GBP)
7/5/00 $ 62,320 41,616 (649)
(USD) (GBP)
-------
$(2,010)
=======
See Accompanying Notes to Financial Statements
128
<PAGE>
Pilgrim
International
SmallCap Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ -----------
COMMON STOCKS: 88.02%
AUSTRALIA: 0.12%
277,500 @ Protel Int'l, Ltd. $ 829,794
-----------
Total Australia 829,794
-----------
AUSTRIA: 0.48%
45,400 @ Austria Technologie & Systemtec 3,424,127
-----------
Total Austria 3,424,127
-----------
CANADA: 7.51%
409,200 @ Anderson Exploration, Ltd. 7,437,486
82,100 @ Canadian Hunter Exploration, Ltd 1,744,625
75,400 @ Certicom Corp. 2,567,675
50,886 @ Certicom Corp. 3,484,896
162,600 @ C-Mac Industries, Inc. 7,690,540
211,800 @ Cognos, Inc. 8,763,225
563,700 Petro-Canada, Ltd. 10,531,287
89,200 @ QLT, Inc. 6,896,275
95,100 @ RIO Alto Exploration, Ltd. 1,741,358
69,100 @ Visible Genetics, Inc. 3,118,138
-----------
Total Canada 53,975,505
-----------
DENMARK: 1.95%
63,800 @ ISS A/S 4,857,019
249,600 Vestas Wind Systems AS 9,165,551
-----------
Total Denmark 14,022,570
-----------
FINLAND: 1.00%
226,000 Perlos OYJ 7,141,729
-----------
Total Finland 7,141,729
-----------
FRANCE: 7.92%
326,200 @ Air France 5,636,759
23,500 Altran Technologies SA 4,601,511
8,426 @ Bouygues SA 5,631,012
53,000 @ Business Objects SA ADR 4,670,625
37,600 Coflexip Stena Offshore 4,558,883
17,600 @ Devoteam SA 1,779,408
45,600 Galeries Lafayette 9,251,043
24,500 Hermes Int'l 3,309,706
91,493 @ Integra SA 814,087
133,000 M6-Metropole Television 8,075,616
175,100 Rhodia SA 2,942,156
50,900 @ Wavecom SA ADR 5,599,000
-----------
Total France 56,869,806
-----------
GERMANY: 12.62%
12,700 @ ADVA AG Optical Networking 7,165,692
96,600 Aixtron 13,086,588
39,000 CE Consumer Electronic AG 5,249,895
56,700 DePfa Deutsche Pfandbriefbank A 5,765,004
113,000 EM.TV & Merchandising AG 6,688,628
744,000 FAG Kugelfischer Georg Schaefer AG 5,483,491
10,700 @ Intershop Communications AG 4,893,124
25,900 @ Intertainment AG 1,743,234
176,480 Kamps AG 5,610,566
374,000 @ Senator Entertainment AG 7,480,361
82,700 SGL Carbon 5,487,281
160,200 Singulus Technologies 9,757,760
35,000 Software AG 3,191,085
81,800 @ Suess Microtec 3,061,303
59,100 @ Telegate AG 5,980,814
-----------
Total Germany 90,644,826
-----------
HONG KONG: 0.64%
3,044,000 Giordano Int'l, Ltd. 4,627,208
-----------
Total Hong Kong 4,627,208
-----------
INDONESIA: 0.00%
500 PT Jaya Real Property 43
-----------
Total Indonesia 43
-----------
IRELAND: 0.43%
1,086,500 @ Parthus Technologies 3,066,029
-----------
Total Ireland 3,066,029
-----------
ISRAEL: 1.73%
87,400 @ Batm Advanced Communications, Ltd. 7,627,227
62,400 @ Nice Systems, Ltd. ADR 4,816,500
-----------
Total Israel 12,443,727
-----------
ITALY: 3.03%
371,400 ACEA SPA 5,917,867
515,500 Class Editori SPA 7,549,548
1,400,900 Saipem SPA 8,292,123
-----------
Total Italy 21,759,538
-----------
JAPAN: 20.64%
1,211,000 @ All Nippon Airways Co., Ltd. 3,401,140
391,000 Alps Electric Co., Ltd. 7,259,507
444,000 Asahi Breweries, Ltd. 5,310,174
804,000 Citizen Watch Co., Ltd. 7,759,258
171,000 Credit Saison Co., Ltd. 3,964,563
355,000 Daiichi Pharmaceutical Co., Ltd. 9,000,047
948,000 Fujikura, Ltd. 6,298,855
337,000 Fukuyama Transporting Co., Ltd. 2,112,106
53,000 Hirose Electric Co., Ltd. 8,246,831
707,000 Hitachi Cable, Ltd. 7,815,947
1,322,000 Komatsu, Ltd. 9,294,680
1,384,000 Kubota Corp. 5,021,818
151,400 Meitec Corp. 5,992,932
1,040,000 Mitsukoshi, Ltd. 4,606,758
775,000 NGK Insulators, Ltd. 9,597,569
333,000 Nippon Electric Glass Co., Ltd. 7,689,082
132,000 Nitto Denko Corp. 5,088,168
1,006,000 OKI Electric Industry Co., Ltd. 7,821,969
83,000 Ono Pharmaceutical Co., Ltd. 3,559,210
574,000 Sapporo Breweries, Ltd. 2,342,416
1,599,000 Sumitomo Osaka Cement Co., Ltd. 9,463,946
373,000 The Bank of Fukuoka, Ltd. 2,538,109
718,000 The Bank of Yokohama, Ltd. 3,214,269
808,000 The Toyo Trust & Banking Co., Ltd. 2,726,205
172,000 Ushio, Inc. 4,733,425
284,000 Yaskawa Electric Corp. 3,391,245
-----------
Total Japan 148,250,229
-----------
MEXICO: 0.20%
370,922 @ Corp Interamericana de Entretenmiento SA 1,450,386
-----------
Total Mexico 1,450,386
-----------
NETHERLANDS: 3.04%
233,200 @ ASM Int'l NV 6,179,800
207,100 @ BE Semiconductor Industries NV 3,232,695
42,600 @ Meta4 NV 351,797
216,300 Unique Int'l NV 5,183,191
164,600 @ VersaTel Telecom Int'l NV 6,914,319
-----------
Total Netherlands 21,861,802
-----------
See Accompanying Notes to Financial Statements
129
<PAGE>
Pilgrim
International
SmallCap Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
------ -------------
NORWAY: 2.89%
453,400 @ Frontline, Ltd. $ 5,548,278
196,400 @ Petroleum Geo-Services ASA 3,353,254
320,400 Schibsted ASA 5,937,137
224,300 Tomra Systems ASA 5,947,002
------------
Total Norway 20,785,671
------------
SINGAPORE: 0.59%
480,376 Datacraft Asia, Ltd. 4,227,309
------------
Total Singapore 4,227,309
------------
SOUTH KOREA: 0.65%
366,520 Hyundai Motor Co. 4,700,555
------------
Total South Korea 4,700,555
------------
SPAIN: 0.57%
108,100 Acciona SA 4,117,802
------------
Total Spain 4,117,802
------------
SWEDEN: 3.06%
817,500 Enea Data AB 5,561,224
173,200 @ Modern Times Group AB 8,247,619
187,200 Nobel Biocare AB 4,138,776
72,100 @ Ortivus AB 241,151
72,400 @# Pyrosequencing AB 837,279
402,000 @ Telelogic AB 2,962,585
------------
Total Sweden 21,988,634
------------
SWITZERLAND: 6.21%
1,000 Ascom Holding AG 3,218,292
18,000 Gretag Imaging Group 3,464,721
569 @ Kudelski SA 7,157,408
5,180 Logitech Int'l SA 3,686,618
8,800 SEZ Holding AG 8,053,945
3,900 Straumann Holding AG 5,857,292
3,120 Synthes-Stratec, Inc. 1,422,963
6,100 Tecan Group AG 5,837,124
21,700 Unaxis Holding AG 5,892,908
------------
Total Switzerland 44,591,271
------------
TAIWAN: 0.52%
147,271 Macronix Int'l ADR 3,764,620
------------
Total Taiwan 3,764,620
------------
UNITED KINGDOM: 11.53%
63,500 @ ARM Holdings PLC ADR 2,087,562
302,500 @ ARM Holdings PLC 3,224,586
40,700 @ Autonomy Corporation PLC 4,924,700
455,000 @ Baltimore Technologies PLC 3,476,725
923,800 Barratt Developments PLC 3,655,252
122,500 @ Capital Radio PLC 2,859,097
594,700 @ Celltech Group PLC 11,490,964
1,641,100 Cookson Group PLC 5,475,342
189,400 Dialog Semiconductor, Ltd. 9,945,110
630,500 @ Eidos PLC 4,579,246
24,600 @ Future Network PLC (The) 292,195
444,200 Hanson PLC 3,162,320
305,900 Matalan PLC 2,383,715
530,600 Pace Micro Technology PLC 7,667,226
415,500 @ Psion PLC 4,001,631
1,015,500 Safeway PLC 3,948,941
278,000 Smiths Industries PLC 3,598,591
922,600 Spirent PLC 6,037,640
------------
Total United Kingdom 82,810,843
------------
UNITED STATES: 0.69%
110,900 @ OpenTV Corp. 4,976,638
------------
Total United States 4,976,638
------------
Total Common Stocks (Cost $533,160,361) 632,330,662
------------
PREFERRED STOCKS: 1.79%
GERMANY: 1.79%
26,000 Marschollek Lautenschlaeger 12,895,133
------------
Total Preferred Stocks (Cost $10,731,362) 12,895,133
------------
RIGHTS: 0.00%
GERMANY: 0.00%
25,900 @ Intertainment AG 1,484
------------
Total Rights (Cost $0) 1,484
------------
Total Long-Term Investments (Cost $543,891,723) 645,227,279
------------
Principal
Amount Value
--------- -------------
SHORT-TERM INVESTMENTS: 9.32%
Repurchase Agreements: 9.32%
$66,960,000 State Street Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $53,100,000 U.S.
Treasury Bonds, 8.500% Due 02/15/20, Market
Value $68,299,875) $ 66,960,000
------------
Total Short-Term Investments
(Cost $66,960,000) 66,960,000
------------
Total Investments in Securities
(Cost $610,851,723)* 99.13% $712,187,279
Other Assets and Liabilities-Net 0.87% 6,231,781
------ ------------
Net Assets 100.00% $718,419,060
====== ============
@ Non-income producing security
ADR American Depository Receipt
# 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 $611,757,668. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $133,278,996
Gross Unrealized Depreciation (32,849,385)
------------
Net Unrealized Appreciation $100,429,611
============
See Accompanying Notes to Financial Statements
130
<PAGE>
Pilgrim
International
SmallCap Growth
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Airlines 1.26%
Apparel 0.46
Auto Manufacturers 0.66
Banks 1.98
Beverages 1.06
Biotechnology 0.43
Building Materials 1.76
Chemicals 1.17
Commercial Services 1.65
Computers 5.18
Diversified Financial Services 2.35
Electrical Components & Equipment 4.97
Electrics 0.82
Electronics 9.25
Engineering & Construction 2.51
Entertainment 0.20
Environmental Control 0.83
Food 1.33
Healthcare Products 2.55
Machinery-Construction & Mining 1.29
Machinery-Diversified 2.48
Media 6.80
Miscellaneous Manufacturing 2.51
Oil & Gas Producers 2.99
Oil & Gas Services 2.26
Pharmaceuticals 4.31
Retail 3.98
Semiconductors 8.75
Software 5.59
Telecommunications 7.36
Transportation 1.07
Short-Term Investments 9.32
Other Assets and Liabilities, Net 0.87
------
NET ASSETS 100.00%
======
The International SmallCap Growth Fund had the following outstanding forward
foreign currency exchange contracts as of June 30, 2000:
Settlement Currency to Currency to Unrealized Appreciation/
Date Receive Deliver (Depreciation)
---- ------- ------- --------------
7/3/00 $ 189,824 199,185 $ (339)
(USD) (EUR)
7/31/00 $ 515,855 545,994 (5,405)
(USD) (EUR)
7/31/00 $ 491,185 519,882 (5,147)
(USD) (EUR)
7/3/00 $ 526,613 347,512 (209)
(USD) (GBP)
7/3/00 162,609 $ 245,946 98
(GBP) (USD)
7/5/00 279,690 $ 418,835 (4,363)
(GBP) (USD)
7/5/00 1,626,504 $ 2,462,202 1,139
(GBP) (USD)
7/3/00 $ 154,377 16,309,924 662
(USD) (JPY)
7/5/00 $ 165,903 1,745,298 1,415
(USD) (JPY)
---------
$ (12,149)
=========
See Accompanying Notes to Financial Statements
131
<PAGE>
Pilgrim
Emerging
Countries
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
------ ------------
COMMON STOCKS: 93.97%
BRAZIL: 6.77%
41,300 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR $ 1,326,762
199,600 Embratel Participacoes SA ADR 4,715,550
43,600 Globo Cabo SA ADR 604,950
29,200 Tele Celular Sul Participacoes ADR 1,321,300
113,610 Tele Norte Leste Participacoes ADR 2,684,028
26,600 Telecomunicacoes Brasileiras SA ADR 2,583,525
47,500 Telesp Celular Participacoes SA ADR 2,131,563
65,100 Unibanco - Uniao de Bancos Brasilieros GDR 1,871,625
------------
Total Brazil 17,239,303
------------
CHINA: 1.87%
17,377,000 @ PetroChina Co., Ltd. 3,611,153
5,801,000 Yizheng Chemical Fibre Co. 1,153,428
------------
Total China 4,764,581
------------
CZECH REPUBLIC: 1.40%
115,800 @ Cesky Telecom AS GDR 1,945,440
36,480 @# Ceske Radiokomunikace GDR 1,623,360
------------
Total Czech Republic 3,568,800
------------
EGYPT: 0.73%
45,500 # Al-Ahram Beverages Co. GDR 786,272
33,200 @ Mobinil-Eqyptian Mobile Services 1,080,464
------------
Total Egypt 1,866,736
------------
HONG KONG: 5.20%
1,043,400 @ China Mobile (Hong Kong), Ltd. 9,201,943
73,000 @ China Unicom ADR 1,551,250
1,036,000 Giordano Int'l, Ltd. 1,574,832
936,000 Legend Holdings, Ltd. 906,523
------------
Total Hong Kong 13,234,548
------------
HUNGARY: 1.11%
23,300 EGIS Rt. 974,842
53,900 Matav Rt. ADR 1,856,181
------------
Total Hungary 2,831,023
------------
INDIA: 6.69%
40,400 Himachal Futuristic Communications, Ltd. 1,284,747
34,180 @ Infosys Technologies, Ltd. 6,368,159
54,900 NIIT, Ltd. 2,717,765
485,000 @ Reliance Industries, Ltd. 3,702,945
44,300 Satyam Computer Services, Ltd. 2,958,922
------------
Total India 17,032,538
------------
ISRAEL: 6.28%
671,900 Bank Hapoalim, Ltd. 1,948,395
24,100 @ Check Point Software Technologies, Ltd. 5,103,175
16,300 @ Gilat Satellite Networks, Ltd. 1,130,812
25,200 @ M-Systems Flash Disk Pioneers, Ltd. 1,962,450
31,300 @ Orckit Communications, Ltd. 942,913
88,400 Teva Pharmaceutical ADR 4,900,675
------------
Total Israel 15,988,420
------------
MALAYSIA: 3.87%
502,000 AMMB Holdings Berhad 1,677,737
612,000 Malayan Banking Berhad 2,480,211
1,743,000 Tenaga Nasional Berhad 5,687,684
------------
Total Malaysia 9,845,632
------------
MEXICO: 15.70%
128,700 Coca-Cola Femsa SA ADR 2,429,213
1,494,430 @ Corp. Interamericana de Entretenmiento SA 5,843,546
28,100 Fomento Economico Mexicano SA ADR de CV 1,210,056
1,178,000 @ Grupo Financiero Banamex Accival SA de CV 4,953,199
127,200 Grupo Radio Centro SA ADR de CV 1,446,900
44,700 Grupo Televisa SA GDR 3,081,506
234,931 Telefonos de Mexico SA ADR 13,420,433
325,000 TV Azteca SA de CV ADR 4,285,938
526,000 TV Azteca SA de CV 430,587
1,212,000 @ Wal-Mart De Mexico SA de CV 2,843,510
------------
Total Mexico 39,944,888
------------
POLAND: 0.96%
21,200 Prokom Software SA 1,110,050
25,500 Softbank SA GDR 1,323,353
------------
Total Poland 2,433,403
------------
RUSSIA: 2.56%
26,000 @ Golden Telecom, Inc. 773,500
68,700 Lukoil-Holding ADR 3,511,944
157,800 Surgutneftegaz ADR 2,102,685
6,000 @ Vimpelcom ADR 132,750
------------
Total Russia 6,520,879
------------
SINGAPORE: 4.43%
37,600 @ Chartered Semiconductor Manufacturing, Ltd. ADR 3,384,000
897,624 Datacraft Asia, Ltd. 7,899,091
------------
Total Singapore 11,283,091
------------
SOUTH AFRICA: 2.78%
376,565 Dimension Data Holdings, Ltd. 3,113,530
75,500 Impala Platinum Holdings, Ltd. 2,806,352
240,300 M-Cell, Ltd. 1,163,427
------------
Total South Africa 7,083,309
------------
SOUTH KOREA: 16.51%
249,720 Korea Electric Power Corp. 7,748,985
58,780 Korea Telecom Corp. 5,176,741
23,610 @ Korea Telecom Freetel 1,573,259
123,000 Pohang Iron & Steel Co. ADR 2,952,000
52,981 Samsung Electronics 17,533,229
21,450 SK Telecom Co., Ltd. 7,021,591
------------
Total South Korea 42,005,805
------------
TAIWAN: 11.55%
435,600 Hon Hai Precision Industry 3,941,312
764 Macronix Int'l ADR 19,517
896,090 @ Macronix Int'l 2,245,693
672,600 @ Systex Corp. 2,364,225
2,138,120 Taiwan Semiconductor Manufacturing Co. 10,159,985
3,313,600 United Microelectronics Corp., Ltd. 9,220,922
70,000 @ Via Technologies, Inc. 1,082,181
11,946 @# Winbond Electronics Corp. GDR 345,204
------------
Total Taiwan 29,379,039
------------
See Accompanying Notes to Financial Statements
132
<PAGE>
Pilgrim
Emerging
Countries
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
TURKEY: 4.01%
2,737,200 Arcelik AS $ 1,345,625
12,776,820 @ Dogan Yayin Holding AS 2,162,369
13,022,170 Hurriyet Gazetecilik ve Matbaaccilik AS 1,259,367
7,472,500 Tofas Turk Otomobil Fabrikasi AS 1,294,768
22,872,269 Turkiye Garanti Bankasi AS 2,764,956
455,400 @ Vestel Elektronik Sanayi ve Ticaret AS 1,376,297
------------
Total Turkey 10,203,382
------------
UNITED STATES: 1.55%
17,100 @ Amdocs, Ltd. 1,312,425
------------
171,600 @ Tricom SA ADR 2,627,625
Total United States 3,940,050
------------
Total Common Stocks (Cost $203,519,435) 239,165,427
------------
PREFERRED STOCKS: 4.95%
BRAZIL: 4.95%
250,663 Banco Bradesco SA 2,182,097
50,700 Companhia Vale do Rio Doce 1,430,901
62,599 Electropaulo Metropolitana 4,408,125
151,074 Petroleo Brasileiro SA 4,565,308
------------
Total Brazil 12,586,431
------------
Total Preferred Stocks (Cost $8,295,911) 12,586,431
------------
Total Long-Term Investments (Cost $211,815,346) 251,751,858
------------
Principal
Amount Value
--------- ------------
SHORT-TERM INVESTMENTS: 0.48%
Repurchase Agreements: 0.48%
$1,218,000 State Street Repurchase Agreement, 6.20% due
07/03/00 (Collateralized by $1,120,000 U.S.
Treasury Bonds, 8.50% Due 05/15/16, Market
Value $1,247,400) $ 1,218,000
------------
Total Short-Term Investments (Cost $1,218,000) 1,218,000
------------
Total Investments in Securities
(Cost $ 213,033,346)* 99.40% $252,969,858
Other Assets and Liabilities-Net 0.60% 1,524,101
------ ------------
Net Assets 100.00% $254,493,959
====== ============
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
ADR American Depository Receipt
GDR Global Depository Receipt
* Cost for federal income tax purposes is $214,075,987. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 48,878,486
Gross Unrealized Depreciation (9,984,615)
------------
Net Unrealized Appreciation $ 38,893,871
============
See Accompanying Notes to Financial Statements
133
<PAGE>
Pilgrim
Emerging
Countries
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Appliances 0.53%
Auto Manufacturers 0.51
Banks 5.08
Beverages 1.26
Cellular Telecom 5.91
Chemicals 1.91
Computers 5.28
Diversified Financial Service 1.95
Electric 7.01
Electrical Components & Equipment 6.89
Electronics 1.55
Entertainment 2.30
Food 0.52
Holding Companies-Diversified 0.47
Home Furnishings 0.54
Iron/Steel 1.16
Media 5.21
Mining 1.66
Oil & Gas Producers 5.42
Pharmaceuticals 2.31
Retail 1.74
Semiconductors 10.40
Software 5.69
Telecommunication Equipment 3.98
Telecommunication Services 8.64
Telecommunications 0.44
Telephone-Integrated 7.66
Telephone-Local 1.05
Telephone-Long Distance 1.85
Short-Term Investments 0.48
Other Assets and Liabilities, Net 0.60
------
NET ASSETS 100.00%
======
The Emerging Countries Fund had the following outstanding forward foreign
currency exchange contracts as of June 30, 2000:
Settlement Currency to Currency to Unrealized Appreciation/
Date Receive Deliver (Depreciation)
---- ------- ------- --------------
7/3/00 $1,298,806 10,125,230 $ (50)
(USD) (HKD)
See Accompanying Notes to Financial Statements
134
<PAGE>
Pilgrim
Asia-Pacific
Equity
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
COMMON STOCKS: 98.66%
CHINA: 1.00%
400,000 Great Wall Technology Co. $ 277,083
------------
Total China 277,083
------------
HONG KONG: 31.30%
100,000 ASM Pacific Technology 374,575
150,000 Bank of East Asia Hkd 350,202
420,000 Cable & Wireless Hong Kong Telecom, Ltd. 923,995
120,000 Cheung Kong Holdings 1,327,689
2,500,000 China National Aviation 455,391
150,000 @ China Telecom 1,322,878
140,000 Citic Pacific, Ltd. 732,730
70,000 Dao Heng Bank Group 309,794
95,700 Hutchison Whampoa 1,203,079
750,000 JCG Holdings, Ltd. 375,216
750,000 NG Fung Hong, Ltd. 401,674
250,000 @ Pacific Century Cyberworks, Ltd. 493,875
60,000 Television Broadcasts, Ltd. 400,231
------------
Total Hong Kong 8,671,329
------------
INDONESIA: 0.77%
781,428 Matahari Putra Prima 66,961
90,000 PT Gudang Garam 145,501
------------
Total Indonesia 212,462
------------
MALAYSIA: 5.69%
80,000 Genting Berhad 294,737
85,000 Malayan Bank Berhad 344,473
103,000 Resorts World Berhad 281,895
90,000 Telekom Malaysia Berhad 310,263
106,000 Tenaga Nasional Berhad 345,895
------------
Total Malaysia 1,577,263
------------
PHILIPPINES: 0.26%
40,000 Bank of Philippine Islands 72,139
------------
Total Philippines 72,139
------------
SINGAPORE: 12.08%
33,000 @ Chartered Semiconductor 288,535
100,035 DBS Group Holdings, Ltd. 1,285,916
52,000 @ Pacific Century Regoinal Developments, Ltd. 710,596
60,000 Singapore Airlines, Ltd. 594,094
200,000 Singapore Telecommunication 292,994
68,000 @ ST Assembly Test Service 174,823
------------
Total Singapore 3,346,958
------------
SOUTH KOREA: 20.17%
25,000 H&CB 585,189
15,000 @ Hyundai Electronics 295,957
25,000 Korea Electric Power 775,767
20,000 Korea Telecom Corp. 967,500
3,000 Pohang Iron & Steel 254,524
7,200 Samsung Electronics Co. 2,382,727
1,000 SK Telecom Co., Ltd. 327,347
------------
Total South Korea 5,589,011
------------
TAIWAN: 25.03%
58,934 Acer Inc. GDR 552,506
85,490 Asustek Computer, Inc. GDR 784,367
21,415 China Steel Corp. GDR 291,779
25,360 @ Far Eastern Textile GDR 318,268
30,890 @ Hon Hai Precision Industry Co., Ltd. GDR 772,250
30,327 Ritek Corp. GDR 241,100
53,100 @ Siliconware Precision ADR 491,175
22,390 Synnex Technolgoy 481,385
61,478 @ Taiwan Semiconductor ADR 2,382,288
21,550 @ Winbond Electronic Corp GDR 619,563
------------
Total Taiwan 6,934,681
------------
THAILAND: 2.35%
27,500 @ Advanced Information Services 342,565
7,500 @ Siam Cement Public Co. 140,906
200,000 @ Thai Farmers Bank 168,475
------------
Total Thailand 651,946
------------
Total Common Stocks (Cost $24,195,851) 27,332,872
------------
PREFERRED STOCK: 0.76%
THAILAND: 0.76%
410,000 Siam Commercial Bank 209,317
------------
Total Thailand 209,317
------------
Total Preferred Stocks (Cost $332,368) 209,317
------------
Number of
Warrants Value
---------- ------------
WARRANTS: 0.12%
THAILAND: 0.12%
274,000 @ Siam Commercial Bank $ 32,174
------------
Total Warrants (Cost $0) 32,174
------------
Total Investments in Securities
(Cost $24,528,219)* 99.54% $ 27,574,363
Other Assets and Liabilities-Net 0.46% 128,017
------ ------------
Net Assets 100.00% $ 27,702,380
====== ============
@ Non-income producing security
ADR American Depository Receipt
GDR Global Depository Receipt
* Cost for federal income tax purposes is $24,898,181. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 4,358,985
Gross Unrealized Depreciation (1,682,803)
------------
Net Unrealized Appreciation $ 2,676,182
============
See Accompanying Notes to Financial Statements
135
<PAGE>
Pilgrim
Asia-Pacific
Equity
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Percentage of
Industry Net Assets
-------- ----------
Airlines 2.15%
Apparel 1.15
Banks 11.79
Building Materials 0.51
Computers 4.73
Diversified Financial Services 2.80
Electric 13.34
Electronics 2.83
Food 1.78
Hand/Machine Tools 1.35
Holding Companies-Diversified 8.06
Iron/Steel 5.30
Leisure Time 2.08
Media 1.45
Real Estate 6.76
Retail 1.45
Semiconductors 15.64
Software 3.44
Telecommunications 10.82
Tobacco 2.11
Other Assets and Liabilities, Net 0.46
------
NET ASSETS 100.00%
======
The Asia Pacific Fund had the following outstanding forward foreign currency
exchange contracts as of June 30, 2000:
Settlement Currency to Currency to Unrealized Appreciation/
Date Receive Deliver (Depreciation)
---- ------- ------- --------------
7/5/00 $ 11,967 104,953,345 $ (24)
(USD) Indonesian Rupiah (IDR)
7/6/00 $ 47,513 416,724,314 (99)
(USD) Indonesian Rupiah (IDR)
7/3/00 $203,530 353,735 (1,296)
(USD) Singapore Dollar (SGD)
--------
$ (1,419)
========
See Accompanying Notes to Financial Statements
136
<PAGE>
Pilgrim
Government
Securities Income
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Principal Market
Amount Rate Maturity Value
------ ---- -------- ------------
U.S. GOVERNMENT SECURITIES: 94.55%
Federal Home Loan Mortgage Corporation: 37.52%
$ 19,983,920 FHLMC 6.500% 2016- $ 19,184,255
2019
5,824,121 FHLMC 7.000% 2014- 5,687,559
2029
3,000,000 FHLMC 7.375% 2003 3,028,710
10,354,045 FHLMC 7.500% 2014- 10,281,068
2030
3,443,717 FHLMC 8.000% 2030 3,463,071
133,372 FHLMC 8.500% 2017 135,539
164,797 FHLMC 9.000% 2006- 168,625
2021
502,705 FHLMC 9.500% 2005- 520,915
2014
59,686 FHLMC 9.905% 2020 62,677
------------
42,532,419
------------
Federal National Mortgage Association: 34.98%
$ 3,595,896 FNMA 6.000% 2014 3,397,007
3,952,656 FNMA 6.160% 2006 3,748,229
3,698,976 FNMA 6.350% 2004 3,600,144
17,253,256 FNMA 6.500% 2014- 16,395,822
2028
2,087,149 FNMA 7.500% 2028 2,059,118
236,339 FNMA 8.000% 2023 239,244
5,023,507 FNMA 8.500% 2009- 5,096,030
2021
2,997,329 FNMA 9.000% 2007- 3,041,829
2017
280,301 FNMA 9.250% 2009- 290,369
2016
94,025 FNMA 9.750% 2008 97,193
575,158 FNMA 10.000% 2017- 605,788
2020
271,728 FNMA 11.000% 2017 282,979
398,536 FNMA 11.500% 2019 435,899
35,015 FNMA 12.000% 2007 36,541
69,535 FNMA 12.500% 2017 74,218
236,781 FNMA 13.500% 2017 260,914
------------
39,661,324
------------
Government National Mortgage Association: 20.31%
10,925,175 GNMA 6.500% 2026- $ 10,343,989
2029
3,823,531 GNMA 7.000% 2016- 3,731,252
2026
7,275,843 GNMA 7.500% 2023- 7,229,249
2028
658,520 GNMA 8.000% 2023- 667,004
2024
599,988 GNMA 9.000% 2013- 626,025
2022
347,097 GNMA 9.250% 2016- 360,991
2021
56,495 GNMA 13.000% 2014 63,588
------------
23,022,098
------------
Total U.S. Government Securities
(Cost $106,969,038) 105,215,841
------------
COLLATERALIZED MORTGAGE OBLIGATIONS:
Mortgage -- Commercial: 1.74%
1,985,494 Small Business Investment
Cos., 8.017%, due
02/10/10 $ 1,970,913
------------
Total CMO's (Cost $1,985,494) 1,970,913
------------
Total Long-Term Investments (Cost $108,954,532) 107,186,754
------------
Principal
Amount Value
------------- ------------
SHORT-TERM INVESTMENTS: 4.11%
Repurchase Agreement: 4.11%
$4,658,000 State Street Bank & Trust 6.200% due 07/03/00
(Collateralized by $4,695,000 U.S. Treasury
Notes, 5.500% Due 07/31/01 Market Value
$4,753,688) $ 4,658,000
------------
Total Short-Term Investments (Cost $4,658,000) 4,658,000
------------
Total Investments in Securities
(Cost $ 113,612,532)* 98.66% $111,844,754
Other Assets and Liabilities-Net 1.34% 1,520,378
------ ------------
Net Assets 100.00% $113,365,132
====== ============
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 204,097
Gross Unrealized Depreciation (1,971,875)
------------
Net Unrealized Depreciation $ (1,767,778)
============
See Accompanying Notes to Financial Statements
137
<PAGE>
Pilgrim
Strategic
Income
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Principal Value
---------- ------------
CORPORATE BONDS: 36.93%
Banks: 3.02%
$ 200,000 Wachovia Corp., 6.605%, due 10/01/25 $ 195,400
155,000 @@ Banco Santander-Chile, 6.500%, due 11/01/05 148,105
------------
343,505
------------
Broadcasting, Radio & Television: 1.11%
220,000 + CD Radio, Inc., 0/15.000% due 12/01/2007 126,500
------------
Cable And DBS: 5.00%
1,000,000 + Charter Communications Holdings, 0/11.750%,
due 01/15/10 568,750
------------
Communications - Internet: 4.23%
250,000 Exodus Communications, 11.625%, due 7/15/10 250,625
250,000 # Psinet Inc., 11.000%, due 8/01/09 231,250
------------
481,875
------------
Communications - Wireless: 4.10%
375,000 + Crown Castle Int'l Corp. 0/11.250%, due 8/01/11 234,375
500,000 + Winstar Communications Inc., 0/14.750%,
due 04/15/10 232,500
------------
466,875
------------
Communications - Wireline: 10.14%
500,000 + Pinnacle Holdings, Inc., 0/10.000%, due 03/15/08 345,000
500,000 + ICG Services, Inc., 0/10.000%, due 02/15/2008 260,000
250,000 # Globenet Communications Group, Ltd., 13.000%,
due 07/15/07 252,188
450,000 #+ United Pan-Europe Communications, 0/12.500%,
due 08/01/09 226,125
100,000 Global Telesystems Group, Inc., 9.875%,
due 02/15/05 71,000
------------
1,154,313
------------
Financial - Other Services: 0.46%
60,000 # Cerro Negro Finance, Ltd., 7.330%, due 12/01/09 51,937
------------
Retail - Discount: 2.58%
300,000 Wal-Mart Stores, 6.875%, due 08/10/09 293,358
------------
Semiconductor/Electronic Components: 1.69%
200,000 Motorola, Inc., 6.500%, due 09/01/25 192,849
------------
Telecom Services: 1.55%
200,000 Lucent Technologies, 6.450%, due 03/15/29 176,642
------------
Transportation (Air, Bus, Rail): 2.10%
$ 250,000 Atlas Air, Inc., 9.250%, due 04/15/08 238,750
------------
Utilities: 0.95%
100,000 # East Coast Power LLC, 7.536%, due 06/30/17 89,500
20,000 Enersis S.A., 6.600%, due 12/01/26 19,020
------------
108,520
------------
Total Corporate Bonds (Cost $4,405,371) 4,203,874
------------
U.S. TREASURY OBLIGATIONS: 24.23%
900,000 U.S. Treasury Bond, 6.000%, due 08/15/04 891,558
400,000 U.S. Treasury Bond, 6.000%, due 08/15/09 396,812
800,000 U.S. Treasury Note, 6.125%, due 08/15/29 808,000
600,000 U.S. Treasury Note, 7.250%, due 05/15/16 661,314
------------
2,757,684
------------
Total U.S. Treasury Obligations
(Cost $2,728,924) 2,757,684
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 19.49%
Federal Home Loan Mortgage Corporation: 6.98%
184,617 5.500%, due 1/1/14 171,635
95,821 5.500%, due 2/1/14 89,083
471,883 7.000%, due 6/1/29 456,986
15,614 9.000%, due 6/1/06 16,234
40,848 9.500%, due 11/1/05 42,750
16,417 10.000%, due 10/1/03 17,212
------------
793,900
------------
Federal National Mortgage Association: 12.47%
87,931 6.500%, due 2/1/09 85,183
750,000 7.125%, due 2/15/05 750,375
500,000 7.250%, due 1/15/10 503,700
20,974 9.500%, due 5/1/07 21,950
18,460 9.500%, due 6/1/05 19,320
18,018 9.500%, due 7/1/06 18,857
18,399 10.000%, due 10/1/05 19,870
------------
1,418,755
------------
Government National Mortgage Association: 0.04%
3,606 8.500%, due 2/15/21 3,729
678 11.500%, due 7/15/13 752
422 11.500%, due 2/15/13 438
------------
4,919
------------
Total U.S. Government Agency Obligations
(Cost $2,244,844) 2,217,574
------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET-BACKED SECURITIES: 7.68%
Mortgage -- Commercial: 4.25%
288,304 GMCC 1999 C-3 A1A 6.974%, due 5/15/08 283,790
210,000 Allied Capital Commercial Mortgage, 1998 1 C,
6.710%, due 12/25/04 199,974
------------
483,764
------------
Mortgage -- Residential: 3.43%
300,000 Emergent Home Equity Loan Trust 7.080%,
due 12/15/28 292,477
100,000 Saxon Asset Securities Trust 1999 1 AF3,
6.170%, due 08/25/21 97,399
------------
389,876
------------
Total CMO's and Asset Backed Securities
(Cost $885,971) 873,640
------------
See Accompanying Notes to Financial Statements
138
<PAGE>
Pilgrim
Strategic
Income
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
PREFERRED STOCK: 2.48%
Communications -- Internet: 2.48%
2,853 @ Nextlink Communications 13.500%, due 06/01/10 $ 282,150
------------
Total Preferred Stock (Cost $240,842) 282,150
------------
MUTUAL FUNDS: 5.03%
Investment Companies: 5.03%
64,500 ++ Pilgrim Prime Rate Trust $ 572,438
------------
Total Mutual Funds (Cost $610,654) 572,438
------------
Total Long-Term Investments:
(Cost $11,116,606) 10,907,360
------------
Principal
Amount Value
---------- ------------
SHORT-TERM INVESTMENTS: 2.54%
Repurchase Agreements: 2.54%
$ 289,000 State Street Repurchase Agreement, 6.200% Due
07/03/00 (Collateralized by $205,000 U.S.
Treasury Notes, 12.500% Due 08/15/14, Market
Value $300,325) $ 289,000
------------
Total Short-Term Investments (Cost $289,000) 289,000
------------
Total Investments in Securities
(Cost $ 11,405,606)* 98.38% $ 11,196,360
Other Assets and Liabilities-Net 1.62% 183,824
------ ------------
Net Assets 100.00% $ 11,380,184
====== ============
----------
++ Related party.
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
+ Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.
@@ Foreign Issuer
* Cost for federal income tax purposes is $11,419,727. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 114,810
Gross Unrealized Depreciation (338,177)
------------
Net Unrealized Depreciation $ (223,367)
============
See Accompanying Notes to Financial Statements
139
<PAGE>
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Principal Value
---------- ------------
CORPORATE BONDS: 92.92%
Automotive: 2.94%
$5,000,000 Holly Performance, 12.250%, due 09/15/07 $ 3,800,000
7,000,000 JH Heafner Co., 10.000%, due 05/15/08 5,145,000
------------
8,945,000
------------
Broadcasting: 0.61%
2,000,000 CD Radio, Inc., 14.500%, due 05/15/09 1,850,000
------------
Business Services: 3.91%
6,250,000 Allied Waste North America, 10.000%,
due 08/01/09 5,250,000
6,000,000 Primark Corp., 9.250%, due 12/15/08 6,630,000
------------
11,880,000
------------
Cable & DBS: 8.54%
4,000,000 Charter Communications Holdings, 8.625%,
due 04/01/09 3,535,000
6,000,000 Coaxial Communications, 10.000%, due08/15/06 5,715,000
2,000,000 Echostar DBS Corp., 9.375%, due 02/01/09 1,930,000
5,000,000 Pegasus Communications Corp., 9.750%,
due 12/01/06 4,837,500
6,000,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 6,187,500
4,250,000 # Xm Satellite Radio Inc., 14.000%, 03/15/10 3,761,250
------------
25,966,250
------------
Communications -- Internet: 7.55%
$3,000,000 # Colo.com, 13.875%, due 03/15/10 3,240,000
3,000,000 # Exodus Communications, 11.250%, due 07/01/08 3,022,500
3,000,000 Exodus Communications, 11.625%, due 07/15/10 2,985,000
4,000,000 Globix Corp., 12.500%, due 02/01/10 3,300,000
7,000,000 Northpoint Communications Group, Inc.,
12.875%, due 02/15/09 5,075,000
2,500,000 PSI, Inc., 11.000%, due 08/01/09 2,325,000
4,250,000 Rhythms Netconnection, 12.750%, due 04/15/09 3,017,500
------------
22,965,000
------------
Communications -- Wireless: 1.89%
6,000,000 Nextel Communications, 9.375%, due 11/15/09 5,760,000
------------
Communications -- Wireline: 22.05%
$5,000,000 @@# Flag Telecom Holding, Ltd., 11.625%,
due 03/30/10 4,875,000
7,000,000 @@ Global Crossing Holding, Ltd., 9.500%,
due 11/15/09 6,790,000
8,000,000 @@ Globenet Communications Group, Ltd., 13.000%,
due 07/15/07 8,110,000
7,000,000 Hyperion Telecom, 12.000%, due 11/01/07 6,615,000
7,000,000 Level 3 Communications, 9.125%, due 05/01/08 6,317,500
7,000,000 # Madison River, 13.250%, due 03/01/10 6,335,000
7,000,000 Metromedia Fiber Network, 10.000%, due 11/15/08 6,930,000
6,000,000 # MGC Communications, Inc., 13.000%, due 04/01/10 5,670,000
6,000,000 Nextlink Communications, 10.750%, due 11/15/08 5,940,000
5,790,000 Northeast Optic Network, 12.750%, due 08/15/08 5,558,400
4,000,000 Williams Communication Group, Inc., 10.875%,
due 10/01/08 3,930,000
------------
67,070,900
------------
Consumer Product: 2.74%
4,000,000 Bell Sports, Inc., 11.000%, due 08/15/08 4,000,000
6,000,000 Drypers Corp., 10.250%, due 06/15/07 3,900,000
4,000,000 Styling Technology Corp., 10.875%, due 07/01/08 420,000
------------
8,320,000
------------
Containers, Packaging, Glass: 1.51%
7,000,000 Russell - Stanley, 10.875%, due 02/15/09 4,585,000
------------
Electronics: 1.09%
6,000,000 Merisel, Inc., 12.500%, due 12/31/04 3,330,000
------------
See Accompanying Notes to Financial Statements
140
<PAGE>
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Principal Value
---------- ------------
Entertainment & Leisure: 5.35%
$5,000,000 Epic Resorts, LLC/Cap.,13.000%, due 6/15/05 $ 2,275,000
5,000,000 Hollywood Entertainment, 10.625%, due 08/15/04 4,312,500
5,000,000 @@ Intrawest Corp., 10.500%, due 02/01/10 5,125,000
5,000,000 Bally Total Fitness Holdings, 9.875%,
due 10/15/07 4,550,000
------------
16,262,500
------------
Equipment Rental: 1.60%
5,000,000 Penhall Int'l, 12.000%, due 08/01/06 4,875,000
------------
Finance, Insurance, Banking: 1.55%
5,000,000 MFN Financial Corp., 10.000%, due 03/23/01 4,725,000
------------
Food, Beverage, Tobacco: 3.41%
3,000,000 Imperial Holly Corp., 9.750%, due 12/15/07 510,000
5,000,000 Luigino's, Inc., 10.000%, due 02/01/06 4,025,000
7,000,000 Packaged Ice, Inc., 9.750%, due 02/01/05 5,845,000
------------
10,380,000
------------
Gaming & Lottery: 1.49%
2,500,000 # Park Place Entertainment, 9.375%, due 02/15/07 2,512,500
2,000,000 # Station Casinos, 9.875%, due 07/01/10 2,015,000
------------
4,527,500
------------
Health Care: 0.68%
5,650,000 Global Health Sciences, 11.000%, due 05/01/08 2,076,375
------------
Homebuilding, Building Materials: 3.27%
5,000,000 # Dayton Superior Corp., 13.000%, due 06/15/09 4,950,000
6,000,000 Juno Lighting, Inc., 11.875%, due 07/01/09 5,010,000
------------
9,960,000
------------
Machinery: 0.75%
$4,000,000 Aqua Chem, Inc., 11.250%, due 07/01/08 2,270,000
------------
Manufacturing: 1.41%
5,000,000 Transportation Manufacturing Operations,
11.250%, due 05/01/09 4,281,250
------------
Restaurants: 0.49%
3,000,000 Avado Brands, Inc., 11.750%, due 06/15/09 1,500,000
------------
Retail: 10.81%
6,000,000 Advance Stores Co., 10.250%, due 04/15/08 4,980,000
5,000,000 Ames Department Stores, 10.000%, due 04/15/06 3,050,000
6,000,000 Big 5 Corp., 10.875%, due 11/15/07 5,542,500
8,000,000 CSK Auto, Inc., 11.000%, due 11/01/06 7,160,000
3,000,000 Jo-Ann Stores, 10.375%, due 05/01/07 2,700,000
4,088,000 Tuesday Morning, 11.000%, due 12/15/07 4,077,780
6,000,000 Sonic Automotive, Inc., 11.000%, due 08/01/08 5,355,000
------------
32,865,280
------------
Steel: 0.24%
500,000 GS Technologies, 12.000%, due 09/01/04 178,125
1,500,000 GS Technologies, 12.250%, due 10/01/05 534,375
------------
712,500
------------
Textile and Apparel: 1.48%
5,000,000 Norton McNaughton, Inc., 12.500%, due 06/01/05 4,500,000
------------
Transportation (Air, Bus, Rail): 7.56%
$7,000,000 Amtran, Inc., 10.500%, due 08/01/04 6,492,500
5,000,000 Atlas Air, Inc., 9.250%, due 04/15/08 4,775,000
4,000,000 Budget Group, Inc., 9.125%, due 04/01/06 2,580,000
6,000,000 Railworks Corp., 11.500%, due 04/15/09 5,670,000
5,000,000 Worldwide Flight Service, 12.25%, due 08/15/07 3,475,000
------------
22,992,500
------------
Total Corporate Bonds (Cost $326,385,636) 282,600,055
------------
Market
Shares Value
---------- ------------
COMMON STOCK: 1.01%
48,250 Cable & DBS: 0.25%
Canadian Satellite Communications 766,131
------------
77,440 Communications -- Internet: 0.75%
Globix Corp. 2,269,960
------------
600 Communications -- Wireline: 0.01%
MGC Communications, Inc. 35,963
------------
Total Common Stock (Cost $404,369) 3,072,054
------------
Number of Market
Warrants Value
---------- ------------
WARRANTS: 0.00%
Entertainment & Leisure: 0.00%
5,000 @ Epic Resorts 50
------------
Transportation (Air, Bus, Rail): 0.00%
5,000 @ Worldwide Flight 50
------------
Total Warrants (Cost $20) 100
------------
Total Long -- Term Investments
(Cost $326,790,025) 285,672,209
------------
See Accompanying Notes to Financial Statements
141
<PAGE>
Pilgrim
High Yield
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal
Amount Value
---------- ------------
SHORT-TERM INVESTMENTS: 4.40%
Commercial Paper: 4.40%
$13,402,935 General Electric, 6.800%, due 07/03/00 $ 13,402,935
Total Short-Term Investments
(Cost $13,402,935) 13,402,935
------------
Total Investments in Securities
(Cost $ 340,192,960)* 98.33% $299,075,144
Securities Sold Short Globix
Corp., (4000 Shares) (0.04)% (117,250)
Other Assets and Liabilities-Net 1.71% 5,189,782
------ ------------
Net Assets 100.00% $304,147,676
====== ============
----------
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
* Cost for federal income tax purposes is $340,795,460. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 4,179,924
Gross Unrealized Depreciation (45,900,240)
------------
Net Unrealized Depreciation $(41,720,316)
============
See Accompanying Notes to Financial Statements
142
<PAGE>
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Principal Market
Amount Value
---------- ------------
CORPORATE BONDS: 85.20%
Broadcasting, Radio, and Television: 5.36%
5,240,000 + CD Radio, Inc., 15.000%, due 12/01/07 $ 3,013,000
2,900,000 Capstar Broadcasting Partners, 9.250%,
due 07/01/07 2,972,500
1,000,000 Chancellor Media Corp., 8.125%, due 12/15/07 1,011,250
2,800,000 Sinclair Broadcasting Group, Inc., 8.750%,
due 12/15/07 2,478,000
1,250,000 Sinclair Broadcasting Group, Inc., 10.000%,
due 09/30/05 1,200,000
------------
10,674,750
------------
Business Services: 1.90%
4,500,000 Allied Waste North America, Inc., 10.000%,
08/01/09 3,780,000
------------
Cable & DBS: 11.23%
3,000,000 + Charter Communications Holdings, 0/9.920%%,
due 04/01/11 1,710,000
8,000,000 + Charter Communications Holdings, 0/11.750%,
due 01/15/10 4,590,000
4,500,000 Echostar DBS Corp., 9.250%, due 02/01/06 4,398,750
5,500,000 + NTL, Inc., 0/9.750%, due 04/01/08 3,451,250
1,110,000 Pegasus Communications Corp., 9.625%,
due 10/15/05 1,076,700
1,000,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 1,031,250
1,340,000 United Int'l Holdings, Inc., 10.750%,
due 02/15/08 944,700
2,600,000 @@+ United Pan Europe Communications, 0/12.500%,
due 08/01/09 1,319,500
2,500,000 @@ United Pan Europe Communications, 13.750%,
due 02/01/10 1,187,500
3,000,000 # XM Satellite Radio, Inc., 14.000%, due 03/15/10 2,655,000
------------
22,364,650
------------
Communications -- Internet: 7.87%
3,000,000 # Colo.com, 13.875%, due 03/15/10 3,240,000
4,000,000 # Exodus Communications, Inc., 11.625%,
due 07/15/10 4,000,000
5,000,000 Globix Corp., 12.500%, due 02/01/10 4,125,000
3,000,000 Northpoint Communications Group, Inc.,
12.875%, due 02/15/10 2,175,000
1,000,000 PSI Net, Inc., 11.000%, due 08/01/09 930,000
3,000,000 Rhythms Netconnections, Inc., 1.000%,
due 05/15/08 1,200,000
------------
15,670,000
------------
Communications -- Wireless: 9.00%
8,000,000 + Alamosa Holdings, Inc., 0/12.975%, due 2/15/10 4,200,000
2,250,000 + Crown Castle Int'l Corp., 0/11.250%,
due 08/01/11 1,417,500
7,500,000 + Nextel Communications, Inc., 0/9.950%,
due 02/15/08 5,531,250
3,000,000 + Pinnacle Holdings, Inc., 0/10.000%,
due 03/15/08 2,085,000
1,600,000 #+ Ubiquitel Operating Co., 0/14.000%,
due 04/15/10 934,000
7,998,000 #+ Winstar Communications, Inc., 0/14.750%,
due 04/15/10 3,759,060
------------
17,926,810
------------
Communications -- Wireline: 17.43%
5,500,000 @@+ Call Net Enterprises, Inc., 0/12.975%,
due 08/15/08 2,145,000
4,000,000 Century Communications Corp., 0.000%,
due 01/15/08 1,660,000
1,780,000 @@+ Completel Europe NV, 0/14.000%,
due 02/15/09 898,900
3,500,000 @@ Global Crossing Holdings, Ltd., 9.500%,
due 11/15/09 3,395,000
1,535,000 Global Telesystems, Inc., 9.875%, due 02/15/05 1,097,525
2,000,000 @@ Globenet Communications Group, 13.000%,
due 07/15/07 2,027,500
9,000,000 ICG Services, Inc., 10.000%, due 02/15/08 4,725,000
6,500,000 # Level 3 Communications, Inc., 12.875%,
due 03/15/10 3,591,250
2,000,000 # MGC Communications, Inc., 13.000%, due 04/01/10 1,890,000
5,000,000 + Nextlink Communications, Inc., 0/12.250%,
due 06/01/09 3,100,000
5,000,000 @@ Versatel Telecommunications Int'l NV, 11.875%,
due 07/15/09 4,950,000
3,000,000 + Viatel, Inc., 0/12.500%, due 04/15/08 1,365,000
2,500,000 Viatel, Inc., 11.500%, due 03/15/09 1,912,500
2,000,000 Williams Communications Group, 10.875%,
due 10/01/09 1,965,000
------------
34,722,675
------------
Consumer Products: 2.29%
5,000,000 Simmons Co., 10.250%, due 03/15/09 4,462,500
1,000,000 Styling Technology Corp., 10.875%, due 07/01/08 105,000
------------
4,567,500
------------
See Accompanying Notes to Financial Statements
143
<PAGE>
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal Market
Amount Value
---------- ------------
Entertainment & Leisure: 2.75%
4,600,000 + Ascent Entertainment Group, Inc., 0/11.875%,
due 12/15/04 $ 3,749,000
2,000,000 Hollywood Entertainment Corp., 10.625%,
due 08/15/04 1,725,000
------------
5,474,000
------------
Finance, Insurance, Banking: 2.86%
2,000,000 Americo Life, Inc., 9.250%, due 06/01/05 1,890,000
3,750,000 MFN Financial Corp., 10.000%, due 03/23/01 3,543,750
500,000 @@# Westways Funding II, Ltd., 22.125%,
due 01/31/03 266,250
------------
5,700,000
------------
Food, Beverage, Tobacco: 6.81%
5,550,000 @@ Fage Dairy Industries SA, 9.000%, due 02/01/07 4,467,750
4,250,000 North Atlantic Trading, Inc., 11.000%
due 06/15/04 3,856,875
1,950,000 Packaged Ice, Inc., 9.750%, due 02/01/05 1,628,250
4,500,000 Standard Commercial Corp., 8.875%, due 08/01/05 3,622,500
------------
13,575,375
------------
Gaming & Lottery: 5.19%
2,000,000 Autotote Corp., 10.875%, due 08/01/04 2,090,000
2,500,000 Coast Hotels & Casinos, Inc., 9.500%,
due 04/01/09 2,387,500
1,500,000 # Park Place Entertainment Corp., 9.375%,
due 02/15/07 1,507,500
4,000,000 Penn National Gaming, Inc., 10.625%,
due 12/15/04 4,360,000
------------
10,345,000
------------
Health Care: 1.68%
650,000 Global Health Sciences, Inc., 11.000%,
due 05/01/08 238,875
2,300,000 Health Insurance Plan of Greater NY, 11.250%,
due 07/01/10 1,426,000
5,941,463 @X Intracel, 1.000%, due 03/20/10 1,425,951
300,000 @X Intracel, 1.000%, due 03/20/10 72,000
184,074 @X Intracel, 11.500%, due 03/25/10 184,074
------------
3,346,900
------------
Hotels, Motels, and Inns: 0.99%
2,000,000 Courtyard Marriott II, Ltd. Partnership,
10.750%, due 02/01/08 1,965,000
------------
Oil & Gas: 1.41%
4,500,000 @@ Northern Offshore ASA, 10.000%, due 05/15/05 2,812,500
------------
Paper & Forest Products: 0.88%
2,250,000 @@ Doman Industries, Ltd., 8.750%, due 03/15/04 1,755,000
------------
Restaurants: 0.75%
2,500,000 Romacorp, Inc., 12.000%, due 07/01/06 1,500,000
------------
Shipping: 0.37%
3,750,000 @@ Equimar Shipholdings, Ltd., 9.875%,
due 07/01/07 738,000
------------
Steel: 0.81%
4,500,000 GS Technologies Operations, Inc., 12.250%,
due 10/01/05 1,603,125
------------
Supermarket: 2.79%
5,000,000 Fleming Companies, Inc., 10.500%, due 12/01/04 4,500,000
4,250,000 Richmont Marketing Specialists, 10.125%,
due 12/15/07 1,062,500
------------
5,562,500
------------
Transportation (Air, Bus, Rail): 2.83%
3,000,000 Amtran, Inc., 10.500%, due 08/01/04 2,782,500
2,000,000 Atlas Air, Inc., 9.250%, due 04/15/08 1,910,000
1,000,000 Railworks Corp., 11.500%, due 04/15/09 945,000
------------
5,637,500
------------
Total Corporate Bonds (Cost $195,348,379) 169,721,285
------------
Market
Shares Value
---------- ------------
COMMON STOCK: 3.07%
Communications - Internet: 0.28%
19,008 @ Globix Corp. $ 557,172
------------
Communications - Wireline: 2.79%
89,000 @@@ Completel Europe NV 907,800
10,500 @ Global Crossing, Ltd. 2,337,563
23,340 @ Nextlink Communications, Inc. 2,301,908
------------
5,547,271
------------
Health Care: 0.00%
16,926 @X Intracel Corp. 4,232
------------
Total Common Stock (Cost $5,478,954) 6,108,675
------------
PREFERRED STOCK: 1.87%
Communications - Wireline: 1.87%
41,287 Adelphia Business Solutions $ 3,726,195
------------
Finance, Insurance, Banking: 0.00%
19,000 @ Superior National Capital Trust I 190
------------
Total Preferred Stock (Cost $5,600,000) 3,726,385
------------
See Accompanying Notes to Financial Statements
144
<PAGE>
Pilgrim
High Yield
Fund II
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Warrants Value
---------- ------------
WARRANTS: 0.00%
Communications -- Internet: 0.00%
1,000 @ Unifi Communications, Inc. $ --
------------
Oil & Gas: 0.00%
1,500,000 @ Mexico (UTD Mex ST) --
------------
Retail: 0.00%
4,999 @ Dairy Mart Convenience Stores 2,998
100 @ Electronic Retailing Systems Int'l --
------------
2,998
------------
Total Warrants (Cost $0) 2,998
------------
Total Long-Term Investments (Cost $206,427,333) 179,559,343
------------
Principal
Amount Value
---------- ------------
SHORT-TERM INVESTMENTS: 10.79%
Repurchase Agreement: 10.79%
$21,501,000 State Street Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $4,605,000 U.S.
Treasury Notes, 6.375% Due 11/15/04 Market
Value $4,735,552) $ 21,501,000
------------
Total Short-Term Investments (Cost $4,639,000) 21,501,000
------------
Total Investments in Securities
(Cost $ 227,928,333)* 100.93% $201,060,343
Other Assets and Liabilities-Net -0.93% (1,851,292)
------ ------------
Net Assets 100.00% $199,209,051
====== =============
----------
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
+ Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.
X Market value determined by Pilgrim Valuation Committee appointed by the
Funds Board of Directors.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 2,880,170
Gross Unrealized Depreciation (29,748,160)
------------
Net Unrealized Depreciation $(26,867,990)
============
See Accompanying Notes to Financial Statements
145
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
COMMON STOCKS: 48.63%
Auto Manufacturers: 0.55%
18,200 Ford Motor Co. $ 782,600
------------
Auto Parts & Equipment: 0.01%
1,440 @ Visteon Corp 17,463
------------
Banks: 0.91%
27,900 Chase Manhattan Corp. 1,285,144
------------
Beverages: 1.96%
10,200 Anheuser-Busch Cos., Inc. 761,813
20,300 Coca-Cola Co. 1,165,981
18,900 PepsiCo, Inc. 839,869
------------
2,767,663
------------
Chemicals: 0.54%
17,459 Du Pont (E.I.) de Nemours & Co. 763,831
------------
Computers: 4.68%
14,000 @ Cisco Systems, Inc. 889,875
28,700 Compaq Computer Corp. 733,644
16,700 @ Dell Computer Corp. 823,519
22,400 @ EMC Corp. 1,723,400
6,600 Hewlett-Packard Co. 824,175
7,500 International Business Machines 821,719
9,000 @ Sun Microsystems, Inc. 818,437
------------
6,634,769
------------
Cosmetics/Personal Care: 0.64%
15,755 Kimberly-Clark Corp. 903,943
------------
Diversified Financial Service: 3.36%
15,000 American Express Co. 781,875
13,700 Citigroup, Inc. 825,425
14,500 Fannie Mae 756,719
19,600 Freddie Mac 793,800
7,500 J.P. Morgan & Co. 825,937
6,750 Merrill Lynch & Co. 776,250
------------
4,760,006
------------
Electric: 1.67%
12,200 @ Calpine Corp. 802,150
14,300 Duke Energy Corp. 806,162
32,700 Southern Co. 762,319
------------
2,370,631
------------
Electronics: 0.69%
2,021 @ Agilent Technologies Inc 149,049
19,900 @ Solectron Corp. 833,312
------------
982,361
------------
Engineering & Construction: 0.00%
3,500 @ Kaiser Group Int'l, Inc. 137
------------
Food: 0.58%
18,200 @ Safeway, Inc. 821,275
------------
Forest Products & Paper: 0.56%
26,600 International Paper Co. 793,012
------------
Healthcare-Products: 0.59%
14,814 @X Intracel Corp. 3,704
8,100 Johnson & Johnson 825,187
------------
828,891
------------
Home Furnishings: 0.71%
10,600 Sony Corp. 999,713
------------
Insurance: 1.61%
6,707 American Int'l Group 788,072
21,100 AXA Financial, Inc. 717,400
7,400 Marsh & McLennan Cos. 772,838
------------
2,278,310
------------
Leisure Time: 0.56%
41,000 Carnival Corp. 799,500
------------
Machinery-Diversified: 0.71%
27,100 Deere & Co. 1,002,700
------------
Media: 2.96%
11,346 @ Clear Channel Communications 850,950
20,000 @ Comcast Corp. 810,000
13,300 Gannett Co., Inc. 795,506
11,600 Time Warner, Inc. 881,600
12,500 @ Viacom, Inc. 852,344
------------
4,190,400
------------
Mining: 0.57%
27,700 Alcoa, Inc. 803,300
------------
Miscellaneous
Manufacturing: 1.34%
20,500 General Electric Co. 1,086,500
17,100 Tyco Int'l, Ltd. 810,113
------------
1,896,613
------------
Oil & Gas Producers: 3.00%
19,000 Anadarko Petroleum Corp. 936,937
25,000 Burlington Resources, Inc. 956,250
9,900 Chevron Corp. 839,644
9,162 Exxon Mobil Corp. 719,217
13,000 Royal Dutch Petroleum Co. 800,312
------------
4,252,360
------------
Oil & Gas Services: 0.57%
10,900 Schlumberger, Ltd. 813,412
------------
Pharmaceuticals: 1.82%
18,700 Abbott Laboratories 833,319
11,100 Merck & Co., Inc. 850,537
18,675 Pfizer, Inc. 896,400
------------
2,580,256
------------
Pipelines: 1.18%
17,000 EL Paso Energy Corp. 865,937
12,500 Enron Corp. 806,250
------------
1,672,187
------------
Retail: 4.04%
18,000 @ Best Buy Co., Inc. 1,138,500
16,700 Home Depot, Inc. 833,956
11,150 @X International Fast Food Corp. 4,571
10,900 McDonald's Corp. 359,019
23,300 Sears, Roebuck And Co. 760,163
15,800 Target Corp. 916,400
27,100 Walgreen Co. 872,281
14,500 Wal-Mart Stores, Inc. 835,563
------------
5,720,453
------------
Savings & Loans: 0.64%
31,500 Washington Mutual, Inc. 909,562
------------
Semiconductors: 2.91%
9,300 Intel Corp. 1,243,294
16,600 @ LSI Logic Corp. 898,475
30,839 @ Taiwan Semiconductor Manufacturing 1,195,011
11,400 Texas Instruments, Inc. 783,038
------------
4,119,818
------------
See Accompanying Notes to Financial Statements
146
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
Software: 1.76%
15,400 @ America Online, Inc. $ 812,350
17,300 First Data Corp. 858,513
10,300 @ Microsoft Corp. 824,000
------------
2,494,863
------------
Telecommunications: 6.38%
24,407 AT&T Corp. 771,871
20,100 Bellsouth Corp. 856,763
14,474 Canadian Satellite Communications 234,713
31,525 @ Global Crossing, Ltd. 829,501
13,400 GTE Corp. 834,150
14,500 Lucent Technologies, Inc. 859,125
16,600 Nokia OYJ 828,963
17,300 @ Qwest Communications Int'l 859,594
22,912 @ RCN Corp. 581,392
17,772 SBC Communications, Inc. 768,639
15,100 @ Verizon Communications 767,269
18,300 @ Worldcom, Inc. 839,514
------------
9,031,493
------------
Tobacco: 0.57%
30,400 Philip Morris Cos., Inc. 807,500
------------
Transportation: 0.56%
20,900 @ FedEx Corp. 794,200
------------
Total Common Stock (Cost $59,369,986) 68,878,366
------------
Market
Principal Value
---------- ------------
CORPORATE BONDS: 18.25%
Airlines: 0.80%
$ 250,000 Atlas Air, Inc., 9.250%, due 04/15/08 238,750
974,862 Continental Airlines, 6.545%, due 02/02/19 887,821
------------
1,126,571
------------
Banks: 1.29%
1,095,000 @@ Banco Santander Chile, 6.500%, due 11/01/05 1,047,674
800,000 Wachovia Corp., 6.605%, due 10/01/25 782,715
------------
1,830,389
------------
Beverages: 0.28%
500,000 @@ Fage Dairy Industries SA,9.000%, due 02/01/07 402,500
------------
Building Materials: 1.04%
750,000 # Dayton Superior Corp., 13.000%, due 06/15/09 738,750
750,000 Penhall Int'l Corp., 12.000%, due 08/01/06 731,250
------------
1,470,000
------------
Computers: 0.58%
750,000 Globix Corp., 12.500%, due 02/01/10 618,750
500,000 + Rhythms Netconnections, Inc., 0/13.500%,
due 05/15/08 200,000
------------
818,750
------------
Diversified Financial Service: 2.84%
160,000 @@ Amvescap PLC, 6.375%, due 05/15/03 152,698
100,000 #@@ Cerro Negro Financial, Ltd., 7.330%,
due 12/01/09 86,728
2,600,000 Fleet Financial Group, Inc., 7.190%,
due 10/02/12 2,429,968
1,000,000 Ford Motor Credit Co., 7.875%, due 06/15/10 999,820
500,000 + Pinnacle Holdings, Inc., 0/10.000%,
due 03/15/08 347,500
------------
4,016,714
------------
Entertainment: 0.20%
350,000 + Ascent Entertainment Group, Inc., 0/11.875%,
due 12/15/04 285,250
------------
Environmental Control: 0.30%
500,000 Allied Waste North America, Inc., 10.000%,
due 08/01/09 420,000
------------
Healthcare-Products: 0.08%
300,000 Global Health Sciences, Inc., 11.000%,
due 05/01/08 110,250
------------
Lodging: 0.53%
750,000 Park Place Entertainment Corp., 9.375%,
due 02/15/07 753,750
------------
Media: 1.30%
220,000 + CD Radio, Inc., 0/15.000%, due 12/01/07 126,500
500,000 Charter Communication Holdings LLC, 8.625%,
due 04/01/09 441,875
1,000,000 + Charter Communications Holdings LLC, 0/11.750%,
due 01/15/10 573,750
450,000 @@+ United Pan Europe Communications NV, 0/12.500%,
due 08/01/09 228,375
1,000,000 @@+ United Pan Europe Communications NV, 0/13.750%,
due 02/01/10 475,000
------------
1,845,500
------------
Oil & Gas Producers: 1.21%
200,000 Deeptech Int'l, 12.00%, due 12/15/00 200,051
541,673 #@@ Hurricane Hydrocarbons, 16.000%, due 12/31/01 516,620
1,000,000 Occidental Petroleum Corp., 7.650%, due 12/15/06 995,490
------------
1,712,161
------------
Pharmaceuticals: 1.23%
1,700,000 American Home Products Corp., 7.900%,
due 02/15/05 1,748,736
------------
See Accompanying Notes to Financial Statements
147
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Principal Value
---------- ------------
Retail: 0.64%
$ 250,000 Hollywood Entertainment Corp., 10.625%,
due 08/15/04 $ 215,625
700,000 Wal Mart Stores, Inc., 6.875%, due 08/10/09 686,252
------------
901,877
------------
Semiconductors: 0.57%
840,000 Motorola, Inc., 6.500%, due 09/01/25 811,009
------------
Software: 1.02%
750,000 Exodus Communications, Inc., 11.625%,
due 07/15/10 750,000
250,000 PSI Net, Inc., 11.000%, due 08/01/09 232,500
500,000 PSI Net, Inc., 10.000%, due 02/15/05 462,500
------------
1,445,000
------------
Telecommunications: 4.20%
500,000 Alamosa Holdings, Inc., 0/12.875%, due 02/15/10 262,500
1,000,000 @@ Call Net Enterprises, Inc., 0/8.940%,
due 08/15/08 390,000
750,000 # Colo. Com, 13.875%, due 03/15/10 810,000
375,000 Crown Castle Int'l Corp., 0/11.250%,
due 08/01/11 236,250
750,000 @@ Global Crossing Holdings, Ltd., 9.500%,
due 11/15/09 727,500
50,000 Global Telesystems, Inc., 9.875%, due 02/15/05 35,750
250,000 @@ Globenet Communications Group, 13.000%,
due 07/15/07 252,500
500,000 ICG Services, Inc., 0/10.000%, due 02/15/08 262,500
800,000 Lucent Technologies, Inc., 6.450%, due 03/15/29 708,707
500,000 Nextel Communications, 9.375%, due 11/15/09 480,000
2,000,000 # SA Telecommunications, Inc., 10.000%,
due 08/15/06 0
1,500,000 @@ Star Choice Communications, 13.000%,
due 12/15/05 1,546,875
500,000 # Winstar Communications, Inc., 0/14.750%,
due 04/15/10 235,000
------------
5,947,582
------------
Transportation: 0.14%
1,000,000 @@ Equimar Shipholdings, Ltd., 9.875%,
due 07/01/07 196,800
------------
Total Corporate Bonds (Cost $29,285,396) 25,842,839
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 8.54%
Federal Home Loan Mortgage Corporation: 2.60%
2,000,000 5.125%, due 10/15/08 1,744,336
1,054,955 5.500%, due 01/01/14 979,124
528,995 6.000%, due 04/01/14 501,223
471,883 7.000%, due 06/01/29 456,250
------------
3,680,933
------------
Federal National Mortgage Corporation: 5.94%
2,482,938 6.350%, due 01/01/04 2,416,597
1,779,054 6.500%, due 06/01/14 1,714,563
2,250,000 7.125%, due 02/15/05 2,259,135
2,000,000 7.250%, due 01/15/10 2,019,766
------------
8,410,061
------------
Total U.S. Government Agency Obligations
(Cost $12,443,852) 12,090,994
------------
U.S. TREASURY OBLIGATIONS: 13.79%
U.S. Treasury Bonds: 6.99%
4,900,000 6.125%, due 08/15/29 4,949,000
4,500,000 7.250%, due 05/15/16 4,959,855
------------
9,908,855
------------
U.S. Treasury Notes: 6.80%
7,100,000 6.000%, due 08/15/09 7,043,413
2,500,000 6.500%, due 02/15/10 2,585,938
------------
9,629,351
------------
Total U.S. Treasury Obligations
(Cost $19,399,830) 19,538,206
------------
COLLATERALIZED MORTGAGE OBLIGATIONS: 1.80%
Mortgage - Commercial: 1.16%
530,608 # Criimi Mae CMBS Corp., 1998-1 A1, 5.697%,
due 10/20/01 503,937
1,153,214 GMAC Commercial Mortgage Securities, Inc.,
1999-C3 A1A, 6.974%, due 05/15/08 1,135,160
------------
1,639,097
------------
See Accompanying Notes to Financial Statements
148
<PAGE>
Pilgrim
Balanced
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Market
Principal Value
---------- ------------
Mortgage - Residential: 0.64%
$700,000 Emergent Home Equity Loan Trust, 1997-4 A5,
7.080%, due 12/15/28 $ 682,447
240,000 Saxon Asset Securities Trust, 1999-2 AF4,
6.445%, due 08/25/26 227,267
------------
909,714
------------
Total Collateralized Mortgage Obligations
(Cost $2,579,548) 2,548,811
------------
Market
Shares Value
---------- ------------
PREFERRED STOCK: 1.17%
Food: 0.01%
13,251 @X International Fastfood Corp., 0/3.000% 20,009
------------
Media: 0.96%
13,610 & Paxson Communications Corp., 12.500% 1,364,403
------------
Telecommunications: 0.20%
2,850 Nextlink Communications Series B, 13.500% 281,081
------------
Total Preferred Stock (Cost $2,846,954) 1,665,493
------------
MUTUAL FUNDS: 2.68%
Investment Companies: 2.68%
428,000 ++ Pilgrim Prime Rate Trust (Cost $3,810,826) 3,798,500
------------
Market
Contracts Value
---------- ------------
WARRANTS: 0.00%
Miscellaneous Manufacturing: 0.01%
500 Packaged Ice, Inc. $ 17,625
------------
Telecommunications: 0.00%
500 Iridium World Communications 5
1,000 Unifi Communications, Inc. 0
------------
5
------------
Total Warrants (Cost $50,508) 17,630
------------
Total Long-term Investments (Cost $129,786,900) 134,380,839
------------
Principal
Amount Value
---------- ------------
SHORT-TERM INVESTMENTS: 4.68%
Repurchase Agreements: 4.68%
$6,624,000 State Street Bank & Trust Repurchase Agreement,
6.200% due 07/03/00 (Collateralized by
$6,325,000 U.S. Treasury Notes, 7.875% Due
11/15/04, Market Value $6,759,844) $ 6,624,000
------------
Total Short-Term Investments (Cost $6,624,000) 6,624,000
------------
Total Investments in Securities
(Cost $ 136,410,900)* 99.55% $141,004,839
Other Assets and Liabilities-Net 0.45% 634,455
------ ------------
Net Assets 100.00% $141,639,294
====== =============
----------
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
+ Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.
++ Related party
& Payment in-kind security
@@ Foreign Issuer
X Market value determined by Pilgrim Valuation Committee appointed by the
Funds Board of Directors.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 13,788,468
Gross Unrealized Depreciation (9,194,529)
------------
Net Unrealized Appreciation $ 4,593,939
============
See Accompanying Notes to Financial Statements
149
<PAGE>
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000
--------------------------------------------------------------------------------
Market
Shares Value
---------- ------------
CONVERTIBLE PREFERRED STOCKS: 22.55%
Diversified Financial Services: 2.22%
205,491 Decs Trust V, 7.250%, due 08/15/02 $ 6,716,987
26,845 Morgan Stanley Group, Inc., 6.000%,
due 07/31/00, (CSCO) 4,041,850
------------
10,758,837
------------
Electric: 5.40%
212,462 AES Trust VII, 6.000%, due 05/15/08 12,455,585
77,260 Calpine Capital Trust, 5.750%, due 11/01/04 9,242,228
60,895 Calpine Capital Trust II, 5.500%, due 02/01/05 4,414,888
------------
26,112,701
------------
Insurance: 1.55%
108,750 Metlife Capital Trust I, 8.000%, due 05/15/05 7,503,750
------------
Media: 1.36%
35,211 Emmis Communication Corp., A 6.250% 2,042,238
15,099 United Global Communications, 7.000% 932,363
80,397 United Global Communications, Series D 7.000% 3,577,667
------------
6,552,268
------------
Oil & Gas Services: 1.68%
175,461 Weatherford Int'l, Inc., 5.000%, due 11/01/27 8,115,071
------------
Oil & Gas Producers: 1.52%
52,546 Coastal Corp., 5.580%, due 08/16/02 1,674,904
161,774 Coastal Corp., 6.625%, due 08/16/02 5,662,090
------------
7,336,994
------------
Packaging & Containers: 0.72%
69,242 Sealed Air Corp., A 2.000%, due 04/01/18 3,505,376
------------
Pharmaceuticals: 1.79%
3,239 Cephalon, Inc., 7.250% 549,011
47,913 Cephalon, Inc., 7.250% 8,121,254
------------
8,670,265
------------
Software: 0.61%
55,987 # Psinet, Inc., 7.000% 1,910,556
21,270 Psinet, Inc., Series C 6.750% 1,039,571
------------
2,950,127
------------
Telecommunications: 5.70%
11,291 @@# Global Crossing, Ltd., 6.375% 2,482,627
154 @@ Global Crossing, Ltd., 6.375%, due 04/15/02 12,031
38,883 @@ Global Crossing, Ltd., 6.750% 3,037,734
11,516 Mcleodusa, Inc., 6.750% 6,352,514
88,194 # Qwest Trends Trust, 5.750%, due 11/17/03 7,066,544
23,645 Voicestream Wireless, 7.000% 4,031,473
75,077 Winstar Communications, Inc., Series D 7.000% 4,209,042
6,718 & Winstar Communications, Inc., Series A 6.000% 362,772
------------
27,554,737
------------
Total Convertible Preferred Stock
(Cost $85,962,543) 109,060,126
------------
Principal Market
Amount Value
---------- ------------
CONVERTIBLE CORPORATE BONDS: 71.69%
Advertising: 3.49%
$3,074,000 # Interpublic Group, Inc. 1.870%, due 06/01/06 $ 2,974,095
3,992,000 Interpublic Group, Inc. 1.870%, due 06/01/06 3,862,260
3,113,000 Lamar Advertising Co., 5.250%, due 09/15/06 3,502,125
3,545,000 Omnicom Group, Inc., 2.250%, due 01/06/13 6,513,937
------------
16,852,417
------------
Biotechnology: 2.92%
8,015,000 Affymetrix, Inc., 4.750%, due 02/15/07 6,161,531
2,566,000 Millennium Pharmaceutical, 5.500%, due 01/15/07 3,832,963
2,765,000 Millennium Pharmaceutical, 5.500%, due 01/15/07 4,130,219
------------
14,124,713
------------
Computers: 8.64%
1,828,000 Comverse Technology, Inc., 4.500%, due 07/01/05 7,878,680
194,000 Comverse Technology, Inc., 4.500%, due 07/01/05 836,140
10,247,000 @ Hewlett-Packard Co., 0.000%, due 10/14/17 9,683,415
7,853,000 Juniper Networks, Inc., 4.750%, due 03/15/07 8,589,218
3,829,000 # Redback Networks, 5.000%, due 04/01/07 4,264,549
963,000 Veritas Software Corp., 1.856%, due 08/13/2006 3,218,226
617,000 Veritas Software Corp., 5.250%, due 11/01/2004 7,303,738
------------
41,773,966
------------
Commercial Services: 0.94%
1,747,000 Mail-Well, Inc., 5.000%, due 11/01/02 1,434,724
2,889,000 Quebecor World, Inc., 6.000%, due 10/01/07 3,098,453
------------
4,533,177
------------
See Accompanying Notes to Financial Statements
150
<PAGE>
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal Market
Amount Value
---------- ------------
Diversified Financial Services: 2.08%
$7,379,000 @@ Elan Finance Corp., Ltd., 0.000%, due 12/14/18 $ 5,386,670
1,494,000 @ Morgan Stanley Dean Witter, 0.000%, due 07/29/05 4,653,766
------------
10,040,436
------------
Electronics: 6.33%
4,438,000 Credence Systems Corp., 5.250%, due 09/15/02 6,099,263
3,898,000 Cymer, Inc., 3.500%, due 08/06/04 4,419,358
1,499,000 Oak Industries, 4.875%, due 03/01/08 8,544,300
3,320,000 Sanmina Corp., 4.250%, due 05/01/04 6,640,000
572,000 Sanmina Corp., 4.250%, due 05/01/04 1,144,000
5,063,000 @ Solectron Corp., 0.000%, due 01/27/19 3,215,005
3,000 @ Solectron Corp., 0.000%, due 01/27/19 2,036
833,000 @ Solectron Corp., 0.000%, due 01/27/20 565,399
------------
30,629,361
------------
Healthcare -- Products: 0.67%
$4,084,000 @ Alza Corp, 0.000%, due 07/14/14 3,256,990
------------
Healthcare Services: 0.86%
8,757,000 # Universal Health Svcs, 0.426%, due 06/23/20 4,137,682
------------
Media: 5.18%
2,151,000 AT&T Corp. -- Liberty Media, 4.000%,
due 11/15/29 3,108,195
3,101,000 # AT&T Corp. -- Liberty Media, 4.000%,
due 11/15/29 4,480,945
3,650,000 Clear Channel Communications, 1.500%,
due 12/01/02 3,581,563
5,446,000 Clear Channel Communications, 2.625%,
due 04/01/03 7,045,763
6,181,000 News America Holdings, 0.000%, due 03/11/13 6,853,184
------------
25,069,650
------------
Oil & Gas Producers: 5.64%
10,578,000 @ Anadarko Petroleum Corp., 0.000%, due 03/07/20 6,955,035
3,565,000 Devon Energy Corp., 4.900%, due 08/15/08 3,449,137
2,665,000 Diamond Offshore Drilling, 3.750%, due 02/15/07 1,255,881
6,267,000 # Diamond Offshore Drilling, 0.000%, due 06/06/20 6,564,683
5,551,000 Kerr-Mcgee Corp., 5.250%, due 02/15/10 6,418,344
4,354,000 @ Transocean Sedco Forex, 0.000%, due 05/24/20 2,612,400
------------
27,255,480
------------
Pharmaceuticals: 3.72%
5,296,000 Alpharma, Inc., 3.000%, due 06/01/06 10,181,560
8,671,000 Roche Holdings, Inc., 0.000%, due 01/19/15 7,825,577
------------
18,007,137
------------
Retail: 1.14%
9,566,000 @# Kohls Corp., 0.000%, due 06/12/20 5,512,407
------------
Semiconductors: 10.52%
3,197,000 Amkor Technologies, Inc., 5.000%, due 03/15/07 2,881,296
5,150,000 @@ ASM Lithography Holding, 4.250%, due 11/30/04 6,991,125
4,969,000 @ Atmel Corp., 0.000%, due 04/21/18 5,403,787
612,000 @ Atmel Corp., 0.000%, due 04/21/18 665,550
347,000 Conexant Systems, Inc., 4.000%, due 02/01/07 272,829
5,946,000 Conexant Systems, Inc., 4.000%, due 02/01/07 4,675,043
6,229,000 Cypress Semiconductor, 4.000%, due 02/01/05 7,171,136
4,203,000 Lam Research Corp., 5.000%, due 09/01/02 5,710,826
8,704,000 LSI Logic Corp., A 4.000%, due 02/15/05 9,258,880
2,531,000 @@ ST Microelectronics NV, 0.000%, due 09/22/09 4,277,390
1,050,000 @@ ST Microelectronics NV, 0.000%, due 06/10/08 3,580,500
------------
50,888,362
------------
See Accompanying Notes to Financial Statements
151
<PAGE>
Pilgrim
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued)
--------------------------------------------------------------------------------
Principal Market
Amount Value
---------- ------------
Software: 12.04%
$21,688,000 @ America Online Inc., 0.000%, due 12/06/19 $ 10,925,330
4,274,000 @ Automatic Data Processing, 0.000%, due 02/20/12 6,020,997
17,000 Bea Systems, Inc., 4.000%, due 12/15/2006 26,499
4,288,000 Bea Systems, Inc., 4.000%, due 12/15/2006 6,683,920
121,000 Exodus Communications, 4.750%, due 07/15/08 173,030
3,395,000 Exodus Communications, 4.750%, due 07/15/08 4,854,850
4,438,000 I2 Technologies, Inc., 5.250%, due 12/15/06 6,795,688
4,887,000 # Mercury Interactive Corp., 4.750%, due 07/01/07 5,271,851
4,664,000 # Rational Software Corp., 5.000%, due 02/01/07 6,955,190
37,000 Siebel Systems, Inc., 5.500%, due 09/15/06 133,154
2,892,000 # Siebel Systems, Inc., 5.500%, due 09/15/06 10,407,585
------------
58,248,094
------------
Telecommunications: 7.53%
$ 7,026,000 American Tower Corp., 5.000%, due 02/15/10 7,148,954
3,678,000 Commscope, Inc., 4.000%, due 12/15/06 4,195,218
575,000 Commscope, Inc., 4.000%, due 12/15/06 655,859
5,557,000 Echostar Communications, 4.875%, due 01/01/07 5,279,150
4,931,000 Efficient Networks, Inc., 5.000%, due 03/15/05 3,581,139
40,000 Nextel Communications, 5.250%, due 01/15/10 41,650
9,961,000 Nextel Communications, 5.250%, due 01/15/10 10,371,890
6,546,000 # NTL, Inc., 5.750%, due 12/15/09 5,171,340
------------
36,445,200
------------
Total Convertible Corporate Bonds
(Cost $293,391,542) 346,775,072
------------
COMMON STOCK: 1.51%
Telecommunications: 1.51%
104,634 DECS Trust VI 7,292,330
------------
Total Commom Stock (Cost $4,200,068) 7,292,330
------------
Total Long-Term Investments (Cost $383,554,153) 463,127,528
------------
Principal
Amount Value
---------- ------------
SHORT-TERM INVESTMENTS: 4.76%
Repurchase Agreement: 4.76%
$23,043,000 State Stree Repurchase Agreement, 6.200% due
07/03/00 (Collateralized by $16,045,000 U.S.
Treasury Bonds, 12.500%, Due 08/15/2014
Market Value $23,505,925) $ 23,043,000
------------
Total Short-Term Investments (Cost $23,043,000) 23,043,000
------------
Total Investments in Securities
(Cost $ 406,597,153)* 100.51% $486,170,528
Other Assets and Liabilities-Net
-0.51% (2,490,323)
------ ------------
Net Assets 100.00% $483,680,205
====== ============
----------
@ Non-income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers.
@@ Foreign Issuer
& Payment-in-kind Security
* Cost for federal income tax purposes is $407,379,916. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 95,691,648
Gross Unrealized Depreciation (16,901,036)
------------
Net Unrealized Appreciation $ 78,790,612
============
See Accompanying Notes to Financial Statements
152
<PAGE>
SHAREHOLDER MEETINGS
--------------------------------------------------------------------------------
On March 24, 2000, a special meeting of the shareholders of the Pilgrim
Government Securities Fund (formerly Northstar Government Securities Fund) was
held. The shareholders approved the proposal to approve an Agreement and Plan of
Reorganization of the Pilgrim Government Securities Fund into Pilgrim Government
Securities Income Fund, Inc. The results of the vote are outlined below:
Shares Voted
Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained
---------------- ------------------- --------------- ----------------
7,259,987 279,187 -- 459,314
On March 24, 2000, a special meeting of the shareholders of the Pilgrim
Government Securities Income Fund, Inc. was held. The shareholders approved the
proposal to approve an Agreement and Plan of Reorganization of the Pilgrim
Government Securities Fund (formerly Northstar Government Securities Fund) into
Pilgrim Government Securities Income Fund, Inc. The results of the vote are
outlined below:
Shares Voted
Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained
---------------- ------------------- --------------- ----------------
1,402,805 26,247 -- 81,770
On March 24, 2000, a special meeting of the shareholders of the Pilgrim High
Yield Fund III (formerly Northstar High Yield Fund) was held. The shareholders
approved the proposal to approve an Agreement and Plan of Reorganization of
Pilgrim High Yield Fund III into the Pilgrim High Yield Fund II, a series of
Pilgrim Mutual Funds. The results of the vote are outlined below:
Shares Voted
Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained
---------------- ------------------- --------------- ----------------
12,977,413 171,887 -- 622,921
On March 24, 2000, a special meeting of the shareholders of the Pilgrim Income &
Growth Fund, a series of Pilgrim Mayflower Trust (formerly Northstar Income &
Growth Fund, a series of Northstar Trust) was held. The shareholders approved
the proposal to approve an Agreement and Plan of Reorganization of the Pilgrim
Income & Growth Fund into the Pilgrim Balanced Fund, a series of Pilgrim Mutual
Funds. The results of the vote are outlined below:
Shares Voted
Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained
---------------- ------------------- --------------- ----------------
5,116,669 60,104 -- 363,424
On March 24, 2000, a special meeting of the shareholders of the Pilgrim Balance
Sheet Opportunities Fund (formerly Northstar Balance Sheet Opportunities Fund)
was held. The shareholders approved the proposal to approve an Agreement and
Plan of Reorganization of the Pilgrim Balance Sheet Opportunities Fund into the
Pilgrim Balanced Fund, a series of Pilgrim Mutual Funds. The results of the vote
are outlined below:
Shares Voted
Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained
---------------- ------------------- --------------- ----------------
1,822,915 51,350 -- 98,749
See Accompanying Notes to Financial Statements
153
<PAGE>
-------
Pilgrim
Funds
-------
TAX INFORMATION (Unaudited)
--------------------------------------------------------------------------------
Dividends paid during the fiscal year ended June 30, 2000 were as follows:
Type Per Share Amount
---- ----------------
MagnaCap Fund
Class A NII $ 0.0510
Class M NII $ 0.0138
All Classes LTCG $ 1.7885
MidCap Value Fund
All Classes LTCG $ 0.0873
LargeCap Leaders Fund
All Classes STCG $ 0.7001
All Classes LTCG $ 1.3036
Asia-Pacific Equity Fund None
International Core Growth Fund
Class Q NII $ 0.0032
All Classes STCG $ 1.1551
International SmallCap Growth Fund
Class A STCG $ 0.9133
Class B STCG $ 0.9683
Class C STCG $ 0.8891
Class Q STCG $ 0.9645
Class A LTCG $ 1.1490
Class B LTCG $ 1.2182
Class C LTCG $ 1.1185
Class Q LTCG $ 1.2134
LargeCap Growth Fund
All Classes STCG $ 1.4129
All Classes LTCG $ 0.0646
MidCap Growth Fund
Class A STCG $ 2.8055
Class B STCG $ 3.3023
Class C STCG $ 2.5937
Class Q STCG $ 3.5497
Class A LTCG $ 4.2258
Class B LTCG $ 4.9741
Class C LTCG $ 3.9068
Class Q LTCG $ 5.3467
Bank & Thrift Fund
Class A NII $ 0.2531
Class B NII $ 0.0291
All Classes STCG $ 0.0194
All Classes LTCG $ 2.7078
Emerging Countries Fund None
SmallCap Growth Fund
Class A STCG $ 4.5879
Class B STCG $ 5.7726
Class C STCG $ 4.5145
Class Q STCG $ 5.0988
Class A LTCG $ 5.1421
Class B LTCG $ 6.4699
Class C LTCG $ 5.0599
Class Q LTCG $ 5.7147
Worldwide Growth Fund
Class A STCG $ 2.2311
Class B STCG $ 2.5147
Class C STCG $ 2.2355
Class Q STCG $ 2.5673
Class A LTCG $ 0.8414
Class B LTCG $ 0.9484
Class C LTCG $ 0.8431
Class Q LTCG $ 0.9682
High Yield Fund
Class A NII $ 0.6000
Class B NII $ 0.5590
Class C NII $ 0.5650
Class M NII $ 0.5720
Class Q NII $ 0.5992
Government Securities Income Fund
Class A NII $ 0.7440
Class B NII $ 0.6555
Class C NII $ 0.6647
Class M NII $ 0.6855
Class Q NII $ 0.1230
Class T NII $ 0.1124
High Yield Fund II
Class A NII $ 1.2005
Class B NII $ 1.1262
Class C NII $ 1.1262
Class Q NII $ 1.2078
Class T NII $ 0.3010
154
<PAGE>
-------
Pilgrim
Funds
-------
TAX INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
Type Per Share Amount
---- ----------------
Strategic Income Fund
Class A NII $ 0.9246
Class B NII $ 0.8755
Class C NII $ 0.8725
Class Q NII $ 0.9366
Balanced Growth Fund
Class A NII $ 0.3942
Class B NII $ 0.3322
Class C NII $ 0.3390
Class Q NII $ 0.4030
Class A STCG $ 1.4110
Class B STCG $ 1.5108
Class C STCG $ 1.3586
Class Q STCG $ 1.3971
Class A LTCG $ 2.2953
Class B LTCG $ 2.4577
Class C LTCG $ 2.2100
Class Q LTCG $ 2.2726
Convertible Fund
Class A NII $ 0.3240
Class B NII $ 0.1883
Class C NII $ 0.1915
Class Q NII $ 0.3470
Class A STCG $ 0.3502
Class B STCG $ 0.3811
Class C STCG $ 0.3575
Class Q STCG $ 0.3388
Class A LTCG $ 3.3374
Class B LTCG $ 3.6313
Class C LTCG $ 3.4071
Class Q LTCG $ 3.2288
NII -- Net investment income
STCG -- Short-term capital gain taxable as ordinary income
LTCG -- Long-term capital gain
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 2000 net investment income dividends that
qualify for the corporate dividend received deduction is 100%, 100%, 7% and 88%,
respectively, for the MagnaCap, Bank and Thrift, Strategic Income and
Convertible Funds.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investments in the Funds. In January 2001,
shareholders, excluding corporate shareholders, will receive an IRS Form 1099
DIV regarding the federal tax status of the dividends and distributions received
by you in calendar 2000.
155
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENT OF NET ASSETS -- JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Principal
Amount Value
-------------- ------------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT:
Domestic: 28.56%
$20,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00 $ 20,000,000
20,000,000 South Trust Bank, NA, 6.58%, 7/10/00 20,000,000
20,000,000 Wilmington Trust Co., 6.59%, 7/11/00 20,000,000
20,000,000 Comerica Bank, Detroit, 6.61%, 6/19/01 19,996,079
20,000,000 State Street Bank & Trust Co., Boston,
6.72%, 9/7/00 20,000,000
20,000,000 First Union National Bank, Charlotte,
6.69%, 9/19/00 20,000,000
------------
119,996,079
------------
Yankee: 52.37%
20,000,000 Dresdner Bank, 6.85%, 7/5/00 20,000,000
20,000,000 Credit Suisse First Boston, 6.57%, 7/10/00 20,000,027
20,000,000 Svenska Handelsbaken STO, 6.60%, 7/13/00 20,000,044
20,000,000 Societe Generale, Paris, 6.25%, 7/17/00 20,000,000
15,000,000 National Westminster Bank, 6.60%, 11/22/00 14,996,052
25,000,000 Deutsche Bank, AG, 6.75%, 8/23/00 25,000,000
25,000,000 Dexia Bank, 6.75%, 8/24/00 25,000,000
20,000,000 Commerzbank, AG, Frankfurt, 6.69%, 9/22/00 20,000,000
25,000,000 Rabobank, Nederland, NV, 6.52%, 1/24/01 24,994,713
30,000,000 Canadian INP Bank of Commerce, 6.65%, 2/12/01 29,991,342
------------
219,982,178
------------
Total Negotiable Bank Certificates of Deposit
(Cost $339,978,257) 339,978,257
------------
REPURCHASE AGREEMENTS: 15.95%
$67,000,000 Bear, Stearns & Co. Inc., 6.82%, 7/3/00
(collateralized by GNMA 6.375% due 2/20/23
valued at $5,205,874, FGLMC 7% due 9/15/29
valued at $33,762,240, FGLMC 7% due 12/1/26
valued at $ 33,153,084)
Total Repurchase Agreements (Cost $ 67,000,000) $ 67,000,000
------------
Total Investments (Cost $406,978,257) 96.88% 406,978,257
------ ------------
Assets, Less Other Liabilities 3.12% 13,106,917
------ ------------
Net Assets 100.00% $420,085,174
====== ============
Net asset value, offering and redemption price per share of each class based on
shares of beneficial interest $ .001 par value outstanding and equivalent to the
Net Assets of each Class:
275,498,735 shares Class A $ 1.00
============
9,158,259 shares Class B $ 1.00
============
41,063,616 shares Class C $ 1.00
============
94,364,564 shares Treasurer's Trust $ 1.00
============
See Accompanying Notes to Financial Statements
156
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENT OF NET ASSETS -- MAY 31, 2000
--------------------------------------------------------------------------------
Principal
Amount Value
-------------- ------------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT: 77.0%
Domestic: 18.1%
$20,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00 $ 20,000,000
20,000,000 Southtrust Bank, NA, 6.58%, 7/10/00 20,000,000
20,000,000 U.S. Bank, NA, 6.27%, 6/5/00 20,000,000
20,000,000 Wilmington Trust Co., 6.59%, 7/11/00 20,000,000
------------
80,000,000
------------
Yankee: 58.9%
20,000,000 Banque Nationale de Paris, 6.31%, 6/6/00 20,000,000
20,000,000 Bayerische Hypo-und Vereinbank, AG, 6.15%, 6/19/00 20,000,000
30,000,000 Canadian Imperial Bank of Commerce, 6.70%, 2/12/01 29,990,017
25,000,000 Commerzbank, AG, 6.15%, 6/15/00 25,000,000
15,000,000 Den Danske Bank, 6.46%, 6/14/00 15,000,000
25,000,000 Deutsche Bank, AG, 6.75%, 8/23/00 25,000,000
25,000,000 Dexia Bank, 6.75%, 8/24/00 25,000,000
35,000,000 National Westminster Bank, PLC, 6.30% -- 6.55%,
6/5/00 -- 11/22/00 34,995,094
25,000,000 Rabobank Nederland NV, 6.52%, 1/24/01 24,993,828
20,000,000 Societe Generale, 6.25%, 7/17/00 20,000,000
20,000,000 Toronto Dominion Bank, 6.14%, 6/15/00 20,000,000
------------
259,978,939
------------
Total Negotiable Bank Certificates of Deposit
(Cost $339,978,939) 339,978,939
------------
Euro Time Deposits: 9.1%
20,000,000 Chase Manhattan Bank, 6.81%, 6/1/00 20,000,000
20,000,000 Bank One, NA, 6.81%, 6/1/00 20,000,000
------------
Total Euro Time Deposits (Cost $ 40,000,000) 40,000,000
------------
Repurchase Agreements: 17.9%
79,000,000 Bear, Stearns & Co. Inc., 6.55%, 6/1/00,
(collateralized by FNMA 0% due 12/20/27 valued at
$4,983,308, FGRA 0% due 2/15/24 to 5/15/29 valued
at $60,275,057, GNMA 6.6875% to 7.50% due 9/16/27
to 4/15/30 valued at $ 16,657,243) 79,000,000
------------
Total Repurchase Agreements (Cost $ 79,000,000) $ 79,000,000
------------
Total Investments (Cost $458,978,939) 104% 458,978,939
Liabilities, Less Other Assets (4.0) (17,758,103)
----- ------------
Net Assets 100.0% $441,220,836
===== ============
Net asset value, offering and redemption price per share of each Class based on
shares of beneficial interest, $.001 par value outstanding and equivalent to the
Net Assets of each Class:
305,591,348 shares Class A $ 1.00
============
9,212,885 shares Class B $ 1.00
============
62,390,175 shares Treasurer's Trust $ 1.00
============
64,026,428 shares Class C $ 1.00
============
Glossary
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
FGRA -- Federal National Mortgage Association
("FNMA") Adjustable Rate Gold REMIC
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of Reserve Institutional Trust:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Primary
Institutional Fund (one of the funds comprising Reserve Institutional Trust)
(the "Fund") at May 31, 2000, and the results of its operations for the year
then ended and the changes in its net assets and the financial highlights for
the periods presented, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's managment; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at May 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 15, 2000
See Accompanying Notes to Financial Statements
157
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Year Ended
May 31,
2000
-----------
Interest Income (Note 1) $24,679,782
-----------
Expenses (Note 2)
Comprehensive fee 1,073,925
12b-1 fees (Class C) 152,058
Shareholder services fees:
Class B 22,568
Class C 152,058
Treasurer's Trust 671,456
Other operating expenses 674
-----------
Total Expenses before waivers 2,072,739
Less: expenses waived --
-----------
Net Expenses 2,072,739
-----------
Net Investment Income, representing
Net Increase in Net Assets from
Investment Operations $22,607,043
===========
See Accompanying Notes to Financial Statements
158
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Increase in Net Assets From Investment Operations:
Net investment income $ 22,607,043 $ 8,723,962
--------------- ---------------
Distributions to Shareholders From Net
Investment Income (Note 1):
Class A (9,444,752) (1,858,597)
Class B (599,849) (206,486)
Class C (9,577,370) (6,520,952)
Treasurer's Trust (2,985,072) (137,927)
--------------- ---------------
Total Dividends to Shareholders (22,607,043) (8,723,962)
--------------- ---------------
From Capital Share Transactions (at net asset
value of $1.00 per share):
Net proceeds from sale of shares 3,866,941,138 1,544,713,374
Dividends reinvested 22,607,043 8,723,962
Cost of shares redeemed (3,740,872,518) (1,447,380,639)
--------------- ---------------
Net increase derived from capital share
transactions and from investment operations 148,675,663 106,056,697
Net Assets:
Beginning of period 292,545,173 186,488,476
--------------- ---------------
End of period $ 441,220,836 $ 292,545,173
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements
159
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) Significant Accounting Policies:
The Primary Institutional Fund (the "Fund") which is a part of the Reserve
Institutional Trust (the "Trust") is registered under the Investment Company Act
of 1940 as a non diversified, open end investment company. The policies
summarized below are consistently followed in the preparation of its financial
statements in conformity with generally accepted accounting principles.
A. The Trust's authorized shares of beneficial interest are unlimited, and
currently are divided into four series (funds): Primary Institutional, which is
included in this report, U.S. Government Institutional, U.S. Treasury
Institutional and Interstate Tax Exempt Institutional Funds (collectively the
"Funds"). Additionally, each Fund is divided into five classes of shares with
similar investment objectives, but with different expense ratios.
B. Securities are valued at amortized cost, which approximates market value. The
amortized cost method values a security at cost at the time of purchase, and
thereafter assumes a constant amortization to maturity of any discount or
premium, irrespective of intervening changes in interest rates or market values.
The maturity of floating or variable rate instruments in which the Fund may
invest will be deemed to be, for floating rate instruments (1) the notice period
required before the Fund is entitled to receive payment of the principal amount
of the instrument; and for variable rate instruments the longer of (1) above or
(2) the period remaining until the instrument's next interest rate adjustment,
for purposes of Rule 2a-7 and for computing the portfolio's average weighted
life to maturity.
C. It is the policy of each Fund within the Trust to comply with Subchapter M of
the Internal Revenue Code and to distribute all of its taxable income to its
shareholders. Accordingly, no Federal income tax provision is required.
D. Security transactions are recorded on a trade date basis; interest income is
accrued daily and security premium or discount is amortized or accreted daily.
Net investment income is distributed to shareholders daily and automatically
reinvested in additional Fund shares.
E. Expenses are allocated based on the Fund's net assets and/or number of
shareholder accounts. Those expenses recognized as directly attributable to a
specific Fund within the Trust are charged to that Fund directly.
F. The Funds within the Trust may enter into repurchase agreements with
financial institutions and securities dealers who are deemed credit worthy
pursuant to guidelines established by the Fund's Board of Trustees. The Fund's
Investment Adviser will follow procedures intended to provide that all
repurchase agreements are at least 100% collateralized as to principal and
interest. The Fund custodian holds the underlying securities subject to
repurchase agreements.
(2) Management Fee and Other Transactions With Affiliates:
Pursuant to an Investment Management Agreement (the "Agreement") between Reserve
Management Company, Inc. ("RMCI") and the Fund, RMCI serves as the Fund's
Investment Adviser subject to the policies adopted by the Board of Trustees.
Under the Agreement, RMCI will furnish continuous investment advisory and
management services to the Funds.
RMCI receives a fee of 0.25% per year of the average daily net assets of the
Fund. RMCI pays all employee and customary operating expenses of the Fund.
Excluded from the definition of customary operating expenses are interest,
taxes, brokerage fees, extraordinary legal and accounting fees and expenses, and
the fees of the disinterested Trustees, for which the Fund pays its direct or
allocated share. The Fund's operating expenses are limited to an annual rate of
.25% for Class A, .45% for Class B and .60% for Treasurer's Trust of each Class'
average daily net assets.
Distribution Assistance and Shareholder Services:
Pursuant to a Plan of Distribution, the Fund makes payments to firms for
distribution assistance and administrative services provided to shareholders of
Class C and D at an annual rate of .25% and .50%, respectively. To date, no
payments have been made by Class D since it has yet to begin operations. In
addition, under the Plan, shareholders of Class B, C, D and Treasurer's Trust
may make payments to firms (including RMCI) providing shareholder services,
160
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------
including maintaining shareholder accounts, responding to shareholder inquiries
and providing certain other services, at an annual rate of .20%, .25%, .25% and
.25%, respectively.
(3) Management's Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the dates of the
financial statements and the reported amounts of income and expenses during the
reporting periods. Actual results could differ from those estimates.
(4) Composition of Net Assets:
At May 31, 2000, the composition of the Fund's net assets was as follows:
Par Value $ 441,221
Paid-in-Capital 440,779,615
-------------
Net Assets $ 441,220,836
=============
(5) Capital Share Transactions:
For the year ended May 31, 2000 and May 31, 1999, the capital share transactions
of the Fund were as follows:
<TABLE>
<CAPTION>
Year ended May 31, 2000:
--------------------------------------------------------------------
Treasurer's
Class A Class B Trust Class C
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sold 1,943,164,267 27,677,033 1,566,404,143 329,695,695
Reinvested 9,444,752 599,849 9,577,370 2,985,072
Redeemed (1,722,819,032) (23,287,360) (1,667,671,186) (327,094,940)
-------------- -------------- -------------- --------------
Net Increase (Decrease) 229,789,987 4,989,522 (91,689,673) 5,585,827
============== ============== ============== ==============
Year ended May 31, 1999:
--------------------------------------------------------------------
Treasurer's
Class A Class B Trust Class C
-------------- -------------- -------------- --------------
Sold 591,162,085 10,331,062 876,047,357 67,172,870
Reinvested 1,858,597 206,486 6,520,952 137,928
Redeemed (521,631,338) (16,690,430) (900,188,675) (8,870,196)
-------------- -------------- -------------- --------------
Net Increase (Decrease) 71,389,344 (6,152,882) (17,620,366) 58,440,602
============== ============== ============== ==============
</TABLE>
161
<PAGE>
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------
(6) Financial Highlights:
Contained below is per share operating performance data for a share of
beneficial interest outstanding for the periods as indicated.
<TABLE>
<CAPTION>
Class A Class B
------------------------------ ----------------------------------------
Fiscal Year Fiscal Year
Ended May 31, Ended May 31,
------- ------- ------- ------- ------- ------- -------
2000 1999 1998(a) 2000 1999 1998 1997(b)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Net investment income from investment
operations .0572 .0509 .0332 .0549 .0488 .0529 .0179
Less dividends from net investment
income (.0572) (.0509) (.0332) (.0549) (.0488) (.0529) (.0179)
------- ------- ------- ------- ------- ------- -------
Net asset value at end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= ======= =======
Total Return 5.72% 5.09% 5.49%(d) 5.49% 4.88% 5.29% 4.95%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (millions) $ 305.6 $ 75.8 $ 4.4 $ 9.2 $ 4.2 $ 10.4 $ 2.0
Ratio of expenses to average net assets .25% .25% .25%(d) .48% .45% .45% .50%(d)(e)
Ratio of net investment income to
average net assets 5.69% 4.79% 5.35%(d) 5.29% 4.79% 5.16% 4.81%(d)(e)
Treasurer's Trust Class C
---------------------------------------- -------------------------
Fiscal Year
Fiscal Year Ended
Ended May 31, May 31,
---------------------------------------- -------------------------
2000 1999 1998(c) 2000 1999(f)
---------- ----------- ----------- ---------- -----------
Net asset value at beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Net investment income from investment operations .0532 .0470 .0322 .0516 .0036
Less dividends from net investment income (.0532) (.0470) (.0322) (.0516) (.0036)
---------- ----------- ----------- ---------- -----------
Net asset value at end of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== =========== =========== ========== ===========
Total Return 5.32% 4.70% 5.13%(d) 5.16% 4.11%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (millions) $ 62.4 $ 154.1 $ 171.7 $ 64.0 $ 58.4
Ratio of expenses to average net assets .60% .60% .60%(d) .75% .75%(d)
Ratio of net investment income to average net assets 4.99% 4.59% 5.00%(d) 4.91% 4.12%(d)
</TABLE>
----------
(a) From October 23, 1997 (Commencement of Operations) to May 31, 1998.
(b) From January 21, 1997 (Commencement of Operations) to May 31, 1997.
(c) From October 15, 1997 (Commencement of Operations) to May 31, 1998.
(d) Annualized.
(e) Due to the voluntary waiver of certain expenses by RMCI, the net expense
ratio and net investment income amounted to 48% and 4.83%, respectively,
for the period ended May 31, 1997.
(f) From April 30, 1999 (Commencement of Operations) to May 31, 1999.
162
<PAGE>
Investment Manager
Pilgrim Investments, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Administrator
Pilgrim Group, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Transfer Agent
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
Custodians
State Street Kansas City
801 Pennsylvania
Kansas City, Missouri 64105
State Street
One Heritage Drive
Noah Quincy, Massachusetts 02171
Brown Brothers Harriman
40 Water Street
Boston, Massachusetts 02109-3661
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Independent Auditors
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling Pilgrim Securities, Inc.
Distributor at 1-800-334-3444. Please read the prospectus carefully before you
invest or send money.
PFANN063000
