<PAGE>
Pilgrim America
Bank and Thrift Fund
[ART]
Semi-Annual Report
June 30, 1996
<PAGE>
Pilgrim America Bank and Thrift Fund
Semi-Annual Report
June 30, 1996
____ . ____
Table of Contents
Letter to Shareholders..................................... 4
Shareholder Letter Footnotes............................... 7
Additional Information..................................... 8
Portfolio of Investments................................... 10
Statement of Assets and Liabilities........................ 12
Statement of Operations.................................... 13
Statements of Changes in Net Assets........................ 14
Financial Highlights....................................... 15
Notes to Financial Statements.............................. 16
____ . ____
Pilgrim America Funds
3
<PAGE>
Pilgrim America Bank and Thrift Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
This year it has been harder to make money in the bank and thrift sector than it
was last year. The Pilgrim America Bank and Thrift Fund's (the "Fund") net asset
value rose a respectable 6.4%/1/ in the first six months of the year versus an
8.1% gain in the S&P Major Regional Bank Index (the "MRBI")/2/, a 10.1% gain in
the Standard & Poor's 500 Index (the "S&P")/3/ and an 11.7% increase in the Dow
Jones Industrial Average Index (the "Dow"). In the most recent quarter, our net
asset value rose 1.6%/1/ versus a decline in the MRBI of 0.39%, recovering some
of our underperformance versus this index. We almost matched the 1.76% gain in
the Dow in the quarter, but trailed the 4.5% gain achieved by the S&P.
The thrift goodwill lawsuit that we discussed in our first quarter report
resulted in a favorable ruling by the U.S. Supreme Court. This ruling initially
resulted in an increase in the price of the thrifts with exposure to the
goodwill suits. However, most of the thrift stocks with goodwill claims gave up
their gains in reaction to an appellate court decision in a related case in
which the court overturned a lost income award. These stocks also reacted to the
likelihood that the Fed will raise interest rates because the employment numbers
have been very strong. While I do not expect large awards and while I believe
that it will take a considerable amount of time before any awards are
forthcoming, I also believe that at current price levels investors are paying
very little for these potential awards in the thrifts that we own.
The consolidation pace has slowed considerably this year as some of the bigger
banks are busy digesting last year's acquisitions. While this activity is down,
I do not believe that it is out. Nevertheless, we benefited in the quarter from
the proposed acquisition of Mountain Parks Financial Corp. by Community First.
Pilgrim America Funds
4
<PAGE>
Pilgrim America Bank and Thrift Fund
Early earnings releases are providing no surprises so far for the quarter ending
June 30, 1996. Loan growth is slowing, loss provisions have increased, credit
card losses continue to rise, some margins are improving, capital is still more
than adequate and the banks and thrifts continue to buy back their stock. Credit
quality other than for consumers is still good. Generally, bank and thrift
stocks appear to be reasonably valued and some of the banks and thrifts that we
own look like bargains. In addition, the market price of Fund shares is
approximately 20% below the per share net asset value.
Our trading activity has picked up somewhat this year. In the second quarter we
added to our positions in Corestates Financial Corp., InterWest Bancorp, Inc.,
Commercial Federal Corp., BankNorth Group, Inc., Union Planters Corp., Standard
Federal Bank, Mountain Parks Financial Corp. and Peoples Heritage Financial
Group. We traded some Bank of New York by adding to this position and later
selling the equivalent amount at a profit. We participated in the new issue of
Associated First Capital and sold it when it appreciated substantially shortly
after it became a public company.
New positions were established in MacFrugals Bargains Closeouts, Ugly Duckling
Corp. (both of these are not banks and are discussed below), TCF Financial
Corp., Western Bank of Puerto Rico and Eldorado Bancorp.
We reduced positions in Today's Bancorp, Inc., Regions Financial Corp., First
Financial Bankshare and BSB Bancorp as these positions reached our price
objectives. Our entire position in Wells Fargo was sold for the same reason, but
also because we had a low comfort level with the Company's aggressive lending
policies. We also finished selling our position in Oriental Bank because we were
not comfortable with their level of non-performing assets and the relatively low
loss reserves that they maintain even though their non-performing assets are
above average.
As mentioned, recently we acquired shares in two non-bank and thrift companies.
The first is MacFrugals, a retailer that sells merchandise at 40%-70% off retail
prices. A lot of their merchandise are closeouts and a good portion of what they
merchandise changes monthly. Shopping here is an adventure. The second, Ugly
Duckling, sells used cars and finances these cars for customers who
Pilgrim America Funds
5
<PAGE>
Pilgrim America Bank and Thrift Fund
would have difficulty obtaining credit elsewhere. It also finances the customers
of other dealers whose credit quality might be a little better. This company is
not seasoned, but we believe that it has excellent growth prospects that the
market has not recognized yet. At this point we may continue to add other non-
bank and thrifts to the Fund but new names will be added slowly and only as
unusual opportunities arise.
The Fund's current policy is to maintain a 7.0% annual payout of net asset
value. On June 28, 1996, the Fund declared a $0.1667 per share net investment
income dividend and a $0.3821 per share long-term capital gains distribution
payable on July 18, 1996. If you are currently receiving cash distributions, you
may elect instead to have your distributions reinvested in additional shares of
the Fund by notifying your broker or contacting the transfer agent, Investors
Fiduciary Trust Company, P.O. Box 419541, Kansas City, MO 64141, (800) 548-4521.
Thank you for giving us the opportunity to help you achieve your investment
goals. As always, we welcome your comments and questions.
Sincerely,
/s/ Carl Dorf
Carl A. Dorf, C.F.A.
Vice President and Senior Portfolio Manager
Pilgrim America Group, Inc.
Pilgrim America Funds
6
<PAGE>
Pilgrim America Bank and Thrift Fund
- --------------------------------------------------------------------------------
SHAREHOLDER LETTER FOOTNOTES
- --------------------------------------------------------------------------------
(1) Total return calculated at net asset value and assuming reinvestment of all
distributions. Sales charges or commissions are not reflected in these total
returns.
Average annual total returns based on a net asset value basis, assuming
reinvestment of all distributions was 31.77%, 21.63% and 12.80% for the one,
five and ten year periods to June 30, 1996, respectively. Sales charges or
commissions are not reflected in these total returns.
Average annual total returns based on NYSE market prices, assuming
reinvestment of all distributions and no commissions were 24.30%, 15.30% and
9.96% for the one, five and ten year periods ended June 30, 1996,
respectively. Due to variances in investors' broker commission rates, market
returns are presented without the deduction of such commissions. Applying
the appropriate commissions will result in lower total returns at market.
(2) The S&P Major Regional Bank Index is a capitalization - weighted index
designed to measure the performance of the major regional banks within the
Standard & Poor's 500 Index.
(3) The S&P is an unmanaged index of 500 common stocks and is a generally
accepted measure of stock and market performance.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
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.
Pilgrim America Bank and Thrift Fund is a closed-end investment company listed
on the New York Stock Exchange (NYSE:PBS). The Fund's primary investment
objective is long-term capital appreciation, with income as a secondary
objective. The Fund seeks to achieve its objectives by investing primarily in
the equity securities of banks and thrifts.
Pilgrim America Funds
7
<PAGE>
Pilgrim America Bank and Thrift Fund
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
ANNUAL MEETING
A special meeting of shareholders was held at the offices of the Fund on March
15, 1996. A brief description of each matter voted upon as well as the voting
results are outlined below:
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
--------- ------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
I. Proposal for the election of Directors:
Mary A. Baldwin 7,755,372 706,451 - - 8,461,823
Al Burton 7,762,547 699,276 - - 8,461,823
Bruce S. Foerster 7,773,590 688,233 - - 8,461,823
Jock Patton 7,735,055 726,768 - - 8,461,823
Robert W. Stallings 7,748,577 713,246 - - 8.461.823
<CAPTION>
II. Approval of the following changes to the Fund's fundamental investment policies:
A. To amend the Fund's fundamental investment policy regarding investment in Pilgrim
America Bank and Thrift Fund, Inc.:
<S> <C> <C> <C> <C> <C>
7,753,493 449.221 259,109 - 8,461,823
<CAPTION>
B. To amend the Fund's fundamental investment restriction on investing more than
25% of its assets in the securities of any industry other than the Banking
industry:
<S> <C> <C> <C> <C> <C>
7,385,642 778,216 297,968 - 8,461,826
<CAPTION>
C. To eliminate the Fund's fundamental investment restriction regarding
investing in the securities of other investment companies:
<S> <C> <C> <C> <C> <C>
7,159,222 985,924 316,679 - 8,461,825
<CAPTION>
III. To approve an amendment of the Fund's restated articles of incorporation to
change the name of the Fund:
<S> <C> <C> <C> <C> <C>
7,548,963 575,784 337,087 - 8,461,834
</TABLE>
Pilgrim America Funds
8
<PAGE>
Pilgrim America Bank and Thrift Fund
<TABLE>
<CAPTION>
Shares
Shares voted against Shares Broker
voted for or withheld abstained non-vote Total
--------- ------------- --------- -------- ---------
IV. To determine that the Fund should remain a closed-end investment company:
<S> <C> <C> <C> <C> <C>
7,059,648 1,126,167 276,011 - 8,461,826
<CAPTION>
V. Ratification of KPMG Peat Marwick LLP as independent auditors for the Fund
for the year ending December 31,1996:
<S> <C> <C> <C> <C> <C>
8,135,226 103,077 223,523 - 8,461,826
<CAPTION>
Vl. Approval to transact such other business as may properly come before the
special meeting of shareholders or any adjournments thereof:
<S> <C> <C> <C> <C> <C>
7,734,405 259,167 468,254 - 8,461,826
</TABLE>
Pilgrim America Funds
9
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments as of June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
Market
Shares COMMON STOCKS: 97.3% Value
------ Banks: 95.7% ------
100,000 American Federal Bank (SC).................... $1,675,000
37,500 Bancorp Hawaii, Inc. (HI) .................... 1,350,000
87,000 Bank of Boston (MA).......................... 4,306,500
150,000 Bank of New York (NY)......................... 7,687,500
60,000 BankNorth Group, Inc. (VT).................... 2,055,000
62,000 BanPonce Corp. (PR)........................... 2,790,000
244,450 BSB Bancorp (NY).............................. 6,355,700
64,647 CB Bankshares (HI)............................ 2,012,138
154,000 Cenfed Financial Corp. (CA)................... 3,426,500
360,000 Charter One Financial, Inc. (OH).............. 12,555,000
280,000 Collective Bancorp (NJ)....................... 6,615,000
65,500 Columbia Bancorp (MD)......................... 1,228,125
369,000 Comerica, Inc. (MI)........................... 16,466,625
226,588 Commerce Bancshares, Inc. (MO)................ 7,732,316
102,000 Commercial Federal Corp. (NE)................. 3,901,500
63,000 Community Bank System, Inc.................... 1,960,875
130,000 Compass Bancshares, Inc. (NY)................. 4,257,500
293,758 Corestates Financial Corp. (AL)............... 11,309,683
7,600 Eldorado Bancorp (CA)......................... 115,900
111,750 Fidelity Financial Bankshares (VA)............ 1,536,562
45,000 First American Corp. (TN) .................... 1,895,625
45,882 First Financial Bancshares (TX)............... 1,697,634
1,100 First National Bank Anchorage (AK)............ 1,696,750
78,564 First of America Bank Corp. (MI).............. 3,515,739
245,625 First Security Corp. (UT) .................... 5,895,000
138,704 Fleet Financial Group, Inc. (RI).............. 6,033,624
208,404 Home Interstate Bancorp (CA).................. 2,969,757
110,460 Independent Bank Corp. (MI)................... 3,120,495
55,000 InterWest Bancorp, Inc. (WA).................. 1,313,125
239,400 Keycorp (OH).................................. 9,276,750
13,337 Laurel Capital Group, Inc. (PA)............... 201,722
280,000 Mercantile Bankshares Corp. (MD).............. 7,140,000
84,500(a) Mountain Parks Financial Corp. (CO)........... 2,281,500
386,200 National City Corp. (OH)...................... 13,565,275
42,694 North Dallas Bank & Trust (TX)................ 1,387,555
84,000 One Valley Bancorp, Inc. (WV)................. 2,898,000
137,000 Peoples Heritage Financial Group (ME)......... 2,791,375
72,700 Regions Financial Corp. (AL).................. 3,398,725
360,000 Roosevelt Financial Group, Inc. (MO).......... 6,930,000
160,000 Security First Corp. (OH) .................... 2,280,000
290,575(a)(b) Security Shares, Inc. (TX).................... 2,179,313
See Accompanying Notes to Financial Statements
Pilgrim America Funds
10
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments as of June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<S> <C> <C>
Banks (continued)
71,400 Southern National Corp. (NC)................................................... $ 2,266,950
55,000 Southtrust Corp. (AL).......................................................... 1,546,875
88,200 Standard Federal Bank (MI)..................................................... 3,395,700
288,750 Sterling Bancshares, Inc. (TX.................................................. 4,006,406
122,200 Summit Bancshares, Inc. (TX)................................................... 2,107,950
35,100 TCF Financial Corp. (MN)....................................................... 1,167,075
46,950 Today's Bancorp, Inc. (IL)..................................................... 1,396,763
45,500 U.S. Bancorp (OR).............................................................. 1,643,687
164,600 Union Planters Corp. (TN)...................................................... 4,999,725
108,036 Vallicorp Holdings, Inc. (CA).................................................. 1,836,612
9,500 West Coast Bancorp (OR)........................................................ 180,500
70,000 Westernbank of Puerto Rico..................................................... 1,085,000
84,000 Zions Bancorp (UT)............................................................. 6,111,000
-------------
Total Banks............................................................... 213,549,631
-------------
Industrials: 1.6%
114,200(a) MacFrugal's Bargains Close-Out................................................. 2,027,050
165,000(a) Ugly Duckling Corp............................................................. 1,526,250
-------------
Total Industrials......................................................... 3,553,300
-------------
Total Common Stocks (Cost $131,415,903).............................. 217,102,931
-------------
<CAPTION>
Principal
Amount SHORT-TERM INVESTMENTS: 2.4% Value
------ -----
<S> <C> <C>
$5,381,000 Lehman Securities Repurchase Agreement, 5.350%, Due 07/01/96 (Collateralized
by $5,910,000 U.S. Treasury Bonds, 6.250% Due 08/15/23)................... 5,381,000
-------------
Total Short-Term Investments (Cost $5,381,000)....................... 5,381,000
-------------
Total Investments in Securities (Cost $136,796,903)................ 99.7% 222,483,931
Cash and other assets in excess of liabilities..................... 30.0% 598,454
---------- -------------
Total Net Assets......................................... 100.0% $223,082,385
========== =============
- -------------------
Cost for federal income tax purposes is $136,796,903. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation....................................................... $ 85,968,396
Gross Unrealized Depreciation....................................................... (281,368)
-------------
Net Unrealized Appreciation.................................................. $ 85,687,028
=============
</TABLE>
(a) Non-income producing security
(b) Affiliated company and a direct placement security restricted as to
resale. It has been fair valued by the Board of Directors. See Note 3 of
the financial statements for additional information.
See Accompanying Notes to Financial Statements
Pilgrim America Funds
11
<PAGE>
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1996 (Unaundited)
- -------------------------------------------------------------------------------
================================================================================
ASSETS:
Investments in securities, at value
Unaffiliated Issuers (Cost $129,745,097) .......... $214,923,618
Affiliated Issuers (Cost $1,670,806)............... 2,179,313
Short-term securities at amortized cost.................... 5,381,000
Cash....................................................... 148,822
Receivables:
Dividends and interest............................. 545,482
Securities sold.................................... 322,000
--------------
Total assets ............................. 223,500,235
--------------
LIABILITIES:
Securities purchased....................................... 76,632
Payable to affiliate....................................... 138,907
Accrued expenses........................................... 202,311
--------------
Total liabilities.......................... 417,850
--------------
NET ASSETS (equivalent to $15.78 per share based on
14,141,241 shares outstanding............................ $223,082,385
==============
Net Assets consist of:
Paid-in capital.................................... $119,431,703
Undistributed net investment income................ 2,373,690
Accumulated net realized gain on investments....... 15,589,964
Net unrealized appreciation of investments......... 85,687,028
--------------
Net assets................................. $223,082,385
=============
See Accompanying Notes to Financial Statements
Pilgrim America Funds
12
<PAGE>
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1996 (Unaundited)
- -------------------------------------------------------------------------------
================================================================================
Income:
Dividends (net of foreign withholding taxes of $5,577)..... $ 3,229,372
Interest................................................... 147,141
------------
Total investment income................................... 3,376,513
------------
Expenses:
Investment management fees ................................ 820,319
Recordkeeping and pricing fees............................. 32,580
Transfer agent and registrar fees.......................... 28,261
Reports to shareholders.................................... 27,975
Custodian fees............................................. 21,614
Professional fees.......................................... 18,806
Miscellaneous expense...................................... 18,548
Directors fees............................................. 9,447
Insurance expense.......................................... 2,587
Amortization of organization expenses ..................... 1,376
------------
Total expenses .................................... 981,513
------------
Less: Earnings credits............................. (281)
------------
Net expenses ...................................... 981,232
------------
Net investment income...................... 2,395,281
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized gain on investments........................... 17,391,894
Net change in unrealized appreciation of investments....... (6,457,865)
------------
Net gain on investments............................ 10,934,029
------------
Net increase in net assets resulting from
operations............................. $ 13,329,310
============
See Accompanying Notes To Financial Statements
Pilgrim America Funds
13
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year
June 30, Ended
1996 December 31,
(Unaudited) 1995
------------ ------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income................................................. $ 2,395,28$ $ 4,339,520
Net realized gain on investments...................................... 17,391,894 10,039,472
Net change in unrealized appreciation of investments.................. (6,457,865) 57,607,407
------------ ------------
Net increase in net assets resulting from operations.......... 13,329,310 71,986,399
------------ ------------
Distributions to shareholders:
Distributions from net investment income.............................. - (4,339,520)
Distributions in excess of net investment income...................... - (477,369)
Distributions from capital gains...................................... - (9,123,342)
------------ ------------
Total distributions........................................... - (13,940,231)
------------ ------------
Capital share transactions:
Net increase in net assets resulting from the net change in the number
of outstanding shares (a)
------------ ------------
Total increase in net assets.................................. 13,329,310 58,046,168
------------ ------------
Net assets:
Beginning of period................................................... 209,753,075 151,706,907
------------ ------------
End of period (including undistributed net investment income and
distributions in excess of net investment income of
$2,373,690 and $(21,591), respectively)....................... $223,082,385 $209,753,075
============ ============
</TABLE>
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
----------------------- -----------------------
Shares Value Shares Value
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares issued in payment of distributions
from net investment income and capital gains... - - (149,065) $(1,737,877)
Shares repurchased..................................... - - 149,065 1,737,877
-------- ----------- -------- -----------
Net increase................................... - $ - - $ -
======== =========== ======== ===========
</TABLE>
See Accompanyiong Notes to Financial Statements
Pilgrim America Funds
14
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1996 Year Ended December 31,
--------------------------------------------------------------------------------------
(Unaudited) 1995(a) 1994 1993 1992 1991 1990 1989 1988 1987
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value,
beginning of period........ $14.83 $10.73 $ 1.87 $12.46 $10.12 $ 7.49 $10.26 $ 9.54 $ 8.17 $ 9.09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income...... 0.17 0.31 0.26 0.26 0.22 0.24 0.31 0.30 0.31 0.22
Net realized and
unrealized gain
(loss) on investments.... 0.78 4.78 (0.53) 0.75 2.93 3.33 (2.20) 1.50 1.43 (0.87)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................. 0.95 5.09 (0.27) 1.01 3.15 3.57 (1.89) 1.80 1.74 (0.65)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Net investment income...... -- 0.31 0.22 0.26 0.22 0.24 0.31 0.31 0.37 0.22
In excess of net
investment income....... -- 0.03 -- -- -- -- -- -- -- --
Realized capital gains..... -- 0.65 0.65 0.73 0.47 -- -- 0.44 -- 0.05
Paid-in capital............ -- -- -- -- 0.12 0.70 0.57 0.33 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.......... -- 0.99 0.87 0.99 0.81 0.94 0.88 1.08 0.37 0.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Other:
Reduction in net asset
value from rights
offering................... -- -- -- (0.61) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period.............. $15.78 $14.83 $10.73 $11.87 $12.46 $10.12 $ 7.49 $10.26 $ 9.54 $ 8.17
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Closing market price,
end of period.............. $12.63 $12.88 $ 9.13 $10.88 $11.63 $ 9.50 $ 7.13 $ 9.13 $ 7.75 $ 6.25
Total Investment
Return(b).................. (1.94)% 52.81% (8.85)% 1.95%(c) 31.53% 47.52% (12.45)% 32.25% 30.17% (17.79)%
Ratios/Supplemental Data
Net assets, end of period
(millions)................. $ 223 $ 210 $ 152 $ 168 $ 141 $ 101 $ 75 $ 103 $ 96 $ 82
Ratios to average net assets:
Expenses................... 1.04%(d) 1.05% 1.28% 0.91% 1.24% 1.31% 1.29% 1.26% 1.18% 1.13%
Net investment income...... 2.08%(d) 2.37% 2.13% 2.08% 2.00% 2.68% 3.59% 4.15% 3.28% 2.31%
Portfolio turnover rate...... 14%(e) 13% 14% 20% 20% 31% 46% 63% 43% 76%
</TABLE>
- ----------------------------------------
(a) On April 7, 1995, the Investment Manager acquired the rights to manage the
Fund and certain other mutual funds previously managed by Pilgrim
Management Corporation.
(b) Total return calculated at market value without deduction of sales
commissions and assuming reinvestment of all dividends and distributions
during the period. Total return figures for less than one year are not
annualized.
(c) Calculation of total return excludes the effect of the per share dilution
resulting from the Rights Offering as the total account value of a fully
subscribed shareholder was minimally impacted.
(d) Annualized.
(e) Non-annualized. On an annualized basis the portfolio turnover rate would be
28%.
See Accompanying Notes to Financial Statements
Pilgrim America Funds
15
<PAGE>
- --------------------------------------------------------------------------------
Notes To Financial Statements (Unaudited)
June 30, 1996
- --------------------------------------------------------------------------------
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Pilgrim America Bank and Thrift Fund, Inc.("The Fund", formerly Pilgrim Regional
BankShares prior to April 8, 1996) is registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end, management investment
company. The investment objective of the Fund is to invest at least 65% of its
total assets in equity securities of regional banks and their holding companies
with consolidated assets of less than $1 billion state-charted banks, thrift
institutions and savings accounts of mutual thrifts. The following is a summary
of the significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Security Valuation. Investments in 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
asked prices. 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 pokicies 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 or losses are reported on
the basis of identified cost of securities delivered. Interest income is
recorded on an accrual basis and dividend income is recorded on the ex-
dividend date.
C. Federal Income Taxes. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required.
D. Distribution to Shareholders. The Fund records distributions to its
shareholders on the ex-date. 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, organization costs and other timing 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 realized capital
gains. To the extent they exceed net investment income and net realized
capital gains for tax purposes, they are reported as tax return of capital.
E. Dividend Reinvestments. Pursuant to the Automatic Dividend Reinvestment
Plan, Investors Fiduciary Trust Co., the Plan Agent, may purchase, from time
to time, shares of the Fund's common stock on the open market to satisfy
dividend reinvestments. Such shares will be purchased only when the closing
sale or bid price, plus commission, is less than the net asset value per
share of the stock. If the market price plus commissions is equal to or
exceeds the net asset value, new shares valued at the net asset value most
recently calculated will be issued.
F. Deferred Organization Expenses. All expenses incurred in connection with
the organization and registration of the Fund under the Investment Company
Act of 1940 and the Securities Act of 1933 were paid by the Fund. These
organization expenses are being amortized over a period of ten years from
the effective date of its registration.
Pilgrim America Funds
16
<PAGE>
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Notes To Financial Statements (Unaudited)
June 30, 1996
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G. Use of Estimates. Management of the Fund has made certain estimates and
assumptions relating to the reporting of assets and liabilities to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
H. Repurchase Agreement. The Repurchase Agreement held at June 30, 1996 was
entered on June 28, 1996 and matures on July 1, 1996. The Fund's custodian
takes possession of the collateral pledged for investments in repurchase
agreements. The underlying collateral is valued daily on a mark-to-mark
basis to ensure that the value, including accrued interest, is at least
equal to the repurchase price. In the event of default of the obligations
to repurchase, the Fund has the right to liqidate the collateraland apply
the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to
the agreement, realization and/or retention of the collateral may be
subject to legal proceedings.
NOTE 2 - INVESTMENTS
For the year ended June 30, 1996, the cost of purchases and the proceeds from
the sale of securities, excluding short-term notes, were $28,787,884 and
$36,101,977 respectively.
NOTE 3 - INVESTMENT IN AFFILIATE
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 the Fund. At June 30, 1996, the Fund had the following holdings in
affiliated companies:
Security Shares, Inc.
----------------------
September 19, 1994 to
Acquisition Dates September 28, 1994
Shares Held 290,575
Cost $1,670,806
Market Value $2,179,313
Percent of Net Assets 0.98%
There was no dividend income from affiliates during the six months ended June
30, 1996.
NOTE 4 - CAPITAL STOCK
At June 30, 1996 the authorized capital consisted of 50,000,000 shares of $.001
par value common stock.
NOTE 5- INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an investment management agreement with Pilgrim America
Investments, Inc. (the "Manager"), a wholly owned subsidiary of Pilgrim America
Group, Inc. to provide investment management and administrative services.
Pursuant to this Investment Management Agreement, the Manager furnishes all
investment advice, office space and salaries of personnel needed by the Fund,
except those involved with portfolio trading activity (up to a maximum of
$15,000 per annum). As compensation for its services, the Manager is paid a
monthly fee at an annual rate of 1% on the first $30 million of average weekly
net assets for the Fund, 0.75% of the next $95 million of average weekly net
assets and 0.70% on average weekly net assets in excess of $125 million. At
June 30,1996 the Fund owed the Manager $138,907 for investment management and
administrative services.
Pilgrim America Funds
17
<PAGE>
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Notes To Financial Statements (Unaudited)
June 30, 1996
- --------------------------------------------------------------------------------
================================================================================
NOTE 6-CUSTODIAL AGREEMENT
Investors Fiduciary Trust Company ("IFTC") serves as the Fund's custodian and
recordkeeper. Custody fees paid to IFTC are reduced by earnings credits based
on the cash balances held by IFTC for the Fund. For the six months ended June
30, 1996, the Fund received earnings credits of $281.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (UNAUDITED)
The Fund offers a Dividend Reinvestment and Cash Purchase Plan which enables
investors to conveniently add to their holdings at reduced costs. Should you
desire further information concerning this plan, please contact the Shareholder
Servicing Agent at (800) 548-4521.
18
<PAGE>
INVESTMENT MANAGER
Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004-4424
SHAREHOLDER SERVICING AGENT
Investors Fiduciary Trust Company
P.O. Box 419541
Kansas City, Missouri 64141
1-800-548-4521
TRANSFER AGENT
Investors Fiduciary Trust Company
P.O. Box 419541
Kansas City, Missouri 64141
<PAGE>
Pilgrim America Funds
Masters Series
--------------
Pilgrim America Masters
Asia-Pacific Equity Fund
Pilgrim America Masters
MidCap Value Fund
Pilgrim America Masters
LargeCap Value Fund
Elite Series
------------
Pilgrim America
MagnaCap Fund
Pilgrim America
High Yield Fund
Pilgrim Government
Securities Income Fund
[ART]
Pilgrim America
Funds
"Out goal is for every investor to have a successful investment experience."
Prospectus containing more complete information regarding the funds, including
charges and expenses, may be obtained by calling PILGRIM AMERICA SECURITIES,
INC. DISTRIBUTOR at 1-800-334-3444. Please read the prospectuses carefully
before you invest or send money.
16-SS-061296 082996
